S-Corp shares cost basis adjustment

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I have long term shares in an S-Corp reflected in Quicken. Federal and State tax liability for the S-Corp flows through to shareholders, and the shareholders pay their portion of income taxes on behalf of the S-Corp. This increases the shareholders cost basis.

Each year when the K-1 for the S-Corp arrives, I use the information to update a spreadsheet used to track the cost basis of the S-Corp shares.

I have not been able to find a method to duplicate this updating of the cost basis of the S-Corp shares annually in Quicken. As a result, When generating reports on gains/losses it is necessary to customize the reports to ignore the S-Corp shares so that the report is accurate, and then outside of Quicken add everything up to get an accurate picture of my tax situation.

IS there a way to track these basis changes in Quicken reasonably well? I have searched, and the solutions I have found address a one-time update of basis on the transaction that originally adds the shares to Quicken.

Thank you.

Best Answer

  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
    Answer ✓
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    For that type of transaction I have typically entered a series of 'cash' income transactions consistent with the K-1. Some might have been dividends, some interest, some Misc with a special category like business income, some might have had a 'non-taxable' category. They all added up to the applicable cost basis adjustment unless there was some actual cash disbursement. Then a RtrnCap transaction as a negative amount would increase the cost basis of the 'shares' owned of the Sub-S.

    In this case, I did not particularly care how the RtrnCap adjustment applied to multiple lots of the sub-S ownership. If that is important to you, you might need the Remove Shares / Add Shares approach.

    Another possible tweak is to use a RtrnCapX transaction where the transfer account is identified as the same account getting the transaction. Such a self-referencing transfer account makes the cash come from or go into thin air - otherwise unaccounted for. That way your income transactions do not need to balance with the cost basis adjustment.

Answers

  • NotACPA
    NotACPA SuperUser ✭✭✭✭✭
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    How are you currently recording those tax payments in Q?

    What Q product are you running, and what's the BUILD of that product? This info is at HELP, About Quicken.

    Q user since February, 1990. DOS Version 4
    Now running Quicken Windows Subscription, Business & Personal
    Retired "Certified Information Systems Auditor" & Bank Audit VP

  • Everett
    Everett Member ✭✭
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    The tax payments are categorized as Fed and State estimated payments.

    I'm using the premier subscription. When I get back to my office I'll update with the current build.

  • NotACPA
    NotACPA SuperUser ✭✭✭✭✭
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    When I recently had to adjust the basis of a security, the recommended (here) process was to REMOVE the shares at the current basis and add them back at the new basis. Using the date of the Payment(s) for both actions.

    Q user since February, 1990. DOS Version 4
    Now running Quicken Windows Subscription, Business & Personal
    Retired "Certified Information Systems Auditor" & Bank Audit VP

  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
    Answer ✓
    Options

    For that type of transaction I have typically entered a series of 'cash' income transactions consistent with the K-1. Some might have been dividends, some interest, some Misc with a special category like business income, some might have had a 'non-taxable' category. They all added up to the applicable cost basis adjustment unless there was some actual cash disbursement. Then a RtrnCap transaction as a negative amount would increase the cost basis of the 'shares' owned of the Sub-S.

    In this case, I did not particularly care how the RtrnCap adjustment applied to multiple lots of the sub-S ownership. If that is important to you, you might need the Remove Shares / Add Shares approach.

    Another possible tweak is to use a RtrnCapX transaction where the transfer account is identified as the same account getting the transaction. Such a self-referencing transfer account makes the cash come from or go into thin air - otherwise unaccounted for. That way your income transactions do not need to balance with the cost basis adjustment.

  • Everett
    Everett Member ✭✭
    Options

    q_lurker,

    Your suggestion sounds like exactly what I have been looking for and have not found anywhere else. I will give this a try. Thank you.