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Dividends Reclassified as Return of Capital

Bluesgorilla

I'm using Quicken Windows version R60.20. One of my holdings in a taxable brokerage account recalassified their 2024 dividends to 70% ordinary dividends and 30% Return of Capital.

Is there a simple way to reclassify dividends as ROC? I'm hoping to avoid deleting and re-entering my reinvest transacations….but I'm not seeing another way to handle this. Any recommendations from the community on best way to reflect this scenario?

EDIT: All the distributions for this security were reinvested, so I'm not sure the reclassification will really matter that much. Basis didn't change since I reinvested the funds but I would like to track my taxable distributions accurately.

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Accepted answers

q_lurker

While the total basis may not change, to be rigorous, the basis of each lot does. I’d be curious how the brokerage is handling it. Are the adjusting each lot?

Noting that right now your overall basis is too high and your taxable dividends for last year are too high, the simple (but inaccurate) step would be to enter two transactions (dated 12/31/24?) - a RtrnCap for that total amount putting cash into the account and a MiscExp for the same amount categorized to _DivInc removing the cash from the amount.

To be accurate IMO, you would need to edit each applicable ReinvDiv transaction to the 70% level (shares and dollars), and the add in a RtrnCap and a Bought for the 30% portion. OR you could convert to a Div at 70% dollars, RtrnCap at 30% dollars, and single Bought for 100%dollars and shares.

What the accurate way does is allocate the the RtrnCap adjustment to all prior lots and not to subsequently acquired lots.

Tom Young

What is typically done here, and I'm assuming that you're seeing this because you've received a 1099, is on 12/31/24 you make two entries for this security. The first entry is the return of capital dollar amount using the Return of Capital action. That increases cash in the Account. Then you make a NEGATIVE Dividend entry in the same amount. The corrects the cash and the amount of dividends received for the year.

All comments

q_lurker

While the total basis may not change, to be rigorous, the basis of each lot does. I’d be curious how the brokerage is handling it. Are the adjusting each lot?

What the accurate way does is allocate the the RtrnCap adjustment to all prior lots and not to subsequently acquired lots.

Tom Young

Bluesgorilla

Thank you @q_lurker and @Tom Young for the quick answers! Both were very helpful. I'll delete and re-enter the reinvestment transactions. I want to make sure I have accurate lot-level basis. I chatted with Fidelity and they said they would adjust the basis and incorporate the change when they release my 1099. I did not think to ask if they adjust each lot or just the total. I'll follow up with them.

Kind of annoying….this is Realty Income, a monthly payer….so 12 transactions to edit instead of 4.

mshiggins

Nice to "see" you, @Bluesgorilla ,

When I have had this occur in the past, I found deleting and re-entering each dividend payment yielded a better match for the adjusted cost basis than a single end-of-year adjustment did.

YMMV.

q_lurker

Nice to "see" you, @Bluesgorilla ,

Ditto. Too bad you lost you SU status whenever. These current mods might not appreciate your legacy, but some of us old-timers do.

Bluesgorilla

I'm kind of shocked you all still remember my user name :)

Crazy to think that I started at Intuit 25 years ago because I was a Quicken fanatic and wanted to work for the company that made it. I left Intuit earlier this month to pursue my EA certification with a goal of doing tax prep work 3-4 months a year and enjoying retirement the rest of the year.

mshiggins

Sounds like a solid retirement plan!

Tom Young

In my Quicken file I have securities that have hundreds of reinvested dividends. The attraction of keeping every single lot "correct" when a Return of Capital occurs is outweighed by the amount of work needed in Quicken to make that happen. The broker keeps all that detail and that information is readily available, so I'm content to make the correcting entry as a year end adjustment.