Budgets - Including income/loss from Securities Sales

Ploooplooo

Hi All! Despite being a long time Quicken user, I never looked at the Budgets tab until just now when I saw @Quicken Janean's solicitation for a survey (I was too late). Out of curiosity I only now took a look at it and am intrigued. Being retired, all of my income is from interest, dividends and capital gains. The latter of those, capital gains, is very topical now since many people are rolling T-Bills which technically is interest income from a tax perspective, but is seen as a gain in accounting software. Anyway, I cannot figure out how to get net realized gains/losses to appear in the Budgets. Can someone guide me on this? Also, is there a way in Budgets to exclude categories that are all zeros from appearing in the display? Thanks!

Tom Young

"many people are rolling T-Bills which technically is interest income from a tax perspective, but is seen as a gain in accounting software."

"Windows" person here so the "Mac" aspect isn't in my wheelhouse bet since I am an accountant I feel like I should respond to this statement.

It seems like you're buying T-Bills at a discount and then, when the T-Bill matures you're using the maturity amount (original purchase + interest income) as the "proceeds" of a sale of the T-Bill at it's original basis. Ergo, "capital gain" results. I'm certain plenty of folks using Win Quicken do the same, either because of the way the maturity is downloaded or because it seems like the only obvious way to account for the situation.

When Win Quicken people ask about this problem (interest being recorded as capital gain) they typical answer is "split that maturity into two parts: "sell" the bond in the amount of the original purchase with no resulting gain or loss, and then separately enter an interest income transaction for the actual amount of interest earned." Typically that requires that you delete whatever "maturity" download you receive from the broker and then making your own two manual entries.

If you can do the same in the Mac version of Quicken (I'd expect that you could) then that kills two birds with one stone; your accounting in Quicken reflects the "real world" and that income will show up in your Budgets.

jacobs

I agree with what @Tom Young posted. I don't download transactions in the account that has T-bills, so it's pretty easy for me to enter the sale and the interest income separately. Here's the purchase of a 3-month T-bill:

and then the redemption, selling the shares for the same amount as the purchase price and the interest income in a separate transaction:

Doing it this way, as Tom wrote, there's no bogus capital gain reported in Quicken.

Ploooplooo

Thanks @Tom Young and @jacobs. I agree that splitting the transaction is an easy work-around to record T-Bill interest in Quicken and that using such a work-around gets the interest into the Budgets tab. I do also buy/sell stocks and futures creating income/losses that affect my budgeting.

So I'm led to believe that there is no way to have capital gains/losses flow through to the Budgets tab. Is this correct?

Thanks

Tom Young

Within Windows Quicken I have no problem budgeting for realized capital gains and seeing both "budget" and "actual" numbers side by side. I just make sure that Category (_RlzdGain) is selected for budgeting.

Also, by customizing the Current Budget report I can omit lines that show $0 budget and $0 actual.

@jacobs will have to give the answers for Mac Quicken.

Ploooplooo

@Tom Young, When I sell an equity position the category is automatically populated with "Investments:Sell" and I don't think it can be modified. How do you in Windows set the category to "_RlzdGain"?

Tom Young

"When I sell an equity position the category is automatically populated with "Investments:Sell" and I don't think it can be modified."

Q Win may work differently - probably does - than Q Mac. In Q Win, in and Investment Account, there's a column in the Transaction List (Register) titled "Action" and it's the Action that's attached to a transaction that determines the Category. So a "Div" Action results in a Category of "_DivInc", an "IntInc" Action results in a Category of "_IntInc", and a "Sold" Action creates a gain or loss associated with the Category "_RlzdGain."

Generally a downloaded transaction into the Transaction List can be modified, but if it can't then your course of action is to delete the downloaded transaction and create your own transaction or transactions*, and that's what I do. (If I'm remembering correctly a maturity of a bond held at Schwab comes down into the transaction list as a "Deposit" action, and in the full maturity amount, That doesn't work to remove the bond from your Quicken Account, so that would be a transaction that I'd simply delete and them create the maturity with an Action of Sold and recognize the interest with an Action of IntInc.,

Ploooplooo

Right. My priority is to have accounting of transactions accurately represented so it matches what my brokerages have. Quicken's reporting doesn't deal with investments very well, so I will continue to supplement it with spreadsheet rather than bastardize the transaction register. Quicken does have a good "Schedule D" report proving that it can accurately handle capital gains, unfortunately that doesn't branch out to places like Budgets.

jacobs

@Ploooplooo In Quicken Mac, investment-type transacitons are locked down pretty tightly to prevent users from doing things wrong. Similar to what @Tom Young describes for Quicken Windows, in Quicken Mac it's the "Type" for each transaction which automatically determines the Category. When you sell a security, Quicken assigns it a category of "Investments:Sell", but that transaction could result in short-term capital gains, long-term capital gains, or both. There is no "Realized Gain" transaction when you sell a security; Quicken calculates realized gains for tax reports on the fly based on when each of the lots which have been sold were purchased.

(It actually isn't necessary, or even helpful in my opinion, to have the Category column visible in investment registers. The default "Description/Category" column shows things like Investments:Interest Income or Investments:Dividend Income for cash transactions, while showing the number of shares and share price for Buy, Sell and Reinvested Dividends transactions. Capital Gains or Realized Gains never show as a Category for a transaction.)

So going back to your original question: I don't believe there is any way to show realized gains of any kind (e.g. long- or short-term capital gains) in the budget at this time. That's because there is no category you can select in Edit Budget for Realized Gains. Here's the list of Quicken's default/required/un-editable Investment categories:

But only a small subset of those categories can be selected for inclusion in a budget:

I can't explain why it is this way, other than that the other investment categories need to be calculated on the fly for reporting, and they didn't build the ability to constantly calculate those values into the budget.

My hope is that when the developers revamp the budget section of the program, they will create a way to include things like long- and short-term capital gains into the budget, since these can be important pieces of a user's overall annual budget process.

jacobs

Hmmm, now that I’m re-reading this thread, I think I got caught up in the nuts and bolts and lost sight of the big picture. Specifically: I wonder whether capital gains belong in a Quicken budget. For a business profit and loss statement, yes. For tax purposes, yes. But if the focus of a Quicken budget is cash flow oriented, then probably not.

Realized gains/losses don’t put money in your pocket, while other investment activities like dividends and interest do. When you sell shares of a security, it’s more like a transfer transaction, transforming a stock or other security into cash — a trade of assets which doesn’t change your net worth. Tracking the capital gains are important for tax purposes, but not for tracking your income minus expenses.

So returning to your original post, your concern was tracking your gains from rolling over T-bills. If you record them as discussed above, then you’ll be getting the gains as interest income rather than as a capital gain, and interest (and dividend) income are things you can include in your budget.

Tom Young

""bastardize the transaction register"

I realized that I'd put an asterisk in my answer, intending to expand on the issue of making your own transactions in place of transactions downloaded from the broker, but didn't.

1st thing: Quicken is an ACCOUNTING program designed to help YOU do your accounting correctly, it can't do your accounting FOR YOU.

2nd thing: You can't rely on downloaded transactions from brokerages to do correct accounting. Brokers tend to focus downloads on "positions" in your portfolio and send things that try to get positions right; they are mainly focused on position changes and anything that "works" is OK, even if the accounting isn't. This warning is especially relevant with corporate actions like mergers, acquisitions, and the like. So if you want correct accounting the hard truth is that not infrequently you're going to have to ignore what they send you - delete it - and make your own series of entries that get the positions correctly stated AND get the accounting proper.

Going back to the download I described for a bond maturity: not only did it get the "positions" wrong - the bond didn't go away - it also doesn't get the accounting right, even though in the own system they capture the maturity properly, reporting the bond going away and the interest income earned.

So the hard truth is that if your "priority is to have accounting of transactions accurately represented "(in Quicken) then with Investment Accounts some "bastardization" of downloaded transactions is needed. In your case the maturity simply doesn't create a capital gain.

Ploooplooo

Thanks @jacobs and @Tom Young, but this is now becoming unproductive for me. I think the budget is geared toward wage earners and not really appropriate for people more actively trading. For what it's worth, I do think the broker downloads accurately represent transactions that took place, it's Quicken's downstream reporting that doesn't accommodate the specific tax treatment of certain types of securities - like T-Bills, but that is a philosophical discussion.

Thanks fellas!