share class conversions: Removed+Added vs Sold+Bought

Special K

If a fund I'm holding in a 401k is automatically converted to a different share class of the same fund (i.e. different ticker symbol), should I enter that as Removed+Added or Sold+Bought? Does it matter?

This happened in my 401k and I originally entered it as Removed+Added but the number of shares added by Quicken's automatically generated series of "Added" transactions doesn't quite match what is listed on Fidelity's website, plus Fidelity's statement just has a single "Exchange Out" transaction of the old fund, followed by a single "Exchange In" transaction into the new fund.

If this same event occurred in a taxable brokerage account, would the answer be different?

Tom Young

"If a fund I'm holding in a 401k is automatically converted to a different share class of the same fund (i.e. different ticker symbol), should I enter that as Removed+Added or Sold+Bought? Does it matter?"

Yes, it does matter, but whether it matters enough to make you switch is up to you.

Using Bought and Sold leaves behind all the the "lot-level" information of the old security and you end up with one lot, with one "date acquired", for the new security in their place. Quicken also calculates any gain or loss with that transaction. This gain or loss won't be included in a Capital Gains report because of the tax deferred nature of the Account, but any overall Spending Report that includes that Account will include that gain or loss as the Spending Reports use Generally Accepted Accounting Principals (GAAP) not Statutory (Federal Income Tax) accounting. Since capital gains and losses inside tax deferred Accounts aren't really important - money distributed out of such an account is all "ordinary" - and if you don't routinely use the performance metrics where lot level information is required, then this way of accounting for the conversion is just fine.

On the other hand if you use the Mutual Fund Conversion action for this scenario you preserve the lot-level information - each lot of the old security is replicated in the new security with the old date acquired and basis, (the resulting number of shares can be different if the conversion is not a 1-for-1 conversion, which sometimes happens with share class conversions), and there's no capital gain calculated, because there isn't any.