Model Wash Sale of Schwab Mutual Fund

BSabolik

I've know this has been asked and answered but I don't believe any of the solutions are correct! I recently sold my second partial batch of USATX mutual funds with Schwab. Both sales incurred small disallowed losses due to reinvestment of dividends that USATX paid before and after the sale within the 30 day before and after period.

Schwab uses FIFO for lot handling and average cost accounting for mutual funds. Ideally we want to lower the cost of those first shares of the sale and raise the cost of the reinvested dividend shares but we also want those dividend shares to go out first on the next sale.

I understand how to do everything but controlling the allocation of shares on the next sale. Setting Quicken to average cost grays out the window allowing you to pick which shares each sale uses. Unchecking the average cost is in direct contrast to Schwab's accounting method but allows selection of lots for sales. Changing the dates ruins the past net worth calculations as well as just seems like a horrible idea.

I've used Quicken all my life (many years) they should be able to handle this with a check box and a few additional fields to allow the correct way to process disallowed loss wash sales. I'll come up with a less than optimal way to handle this but I hate that people think that because it is answered on this forum that Quicken doesn't need to work on this!

BSabolik

Here's my procedure to at least be able to balance to historical statements…

Procedure to Handle Disallowed Loss of USTAX Sales on Quicken

• Usually caused by reinvested dividends 30 days before a sale and 30 days after.
• Schwab uses FIFO for lot handling and average cost accounting.
• Quicken cannot fully support these transactions.
  • Cannot handle lowering the costs of the first out shares to zero the loss up to total shares reinvested
  • Cannot handle raising the costs of the dividends causing the wash sale while keeping balances of available to past statements.
  • Cannot handle pushing those lots to the top of the queue so they are sold next.
  • Goal: To balance cost basis with Schwab’s statements. There is no way to keep the lots in-sync! This means we cannot modify the dividends in the past month that contributed to the disallowed loss nor can we change dates of dividends!
• Therefore, we need to:
  • Change only the ReinvDiv’s from the current statement period to just Div’s.
  • Create a Buy for the # of shares from the “changed” ReinvDiv’s.
    • Set the total cost initially to the cost of the ReinvDiv’s.
    • Compare Quicken’s Cost Basis to the Schwab’s statement
    • The difference should be the disallowed loss.
    • Add this difference back into the total cost of the ReinvDiv’s
    • Double check that the Cost Basis is now in balance.
  • Fund the Buy with the amount equal to the Disallowed Loss and offset the entry to the category, “Disallowed Loss”. Set Payee to IRS indicate in memo it was from the wash sale due to the dividends and their dates.
  • Indicate on all related transactions that a disallowed loss is involved.