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Transaction fees and cost basis

BobW9886

When I enter a quarterly dividend reinvestments quicken only includes the amount invested in the cost basis. For example I received a $10.00 dividend. $9.50 was reinvested buying new shares and $.50 was taken as a transaction fee. Quicken only counts the $9.50 into the cost basis when it should be $10.00. I could just enter $10 in the amount invested, leave out the fee and let quicken calculate a higher share price. What counts for capital gain is total cost not cost per share. ???

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Comments

NotACPA

NO, you're misunderstanding the term "cost basis". Only the $9.50 was used to purchase add'l securities. The $0.50 is an expense … not an investment.

Tom Young

I'd say that most commonly fees associated with DRIP plans ARE included in the cost of the shares acquired. There might be instances where that's not the case I suppose, but, generally I'd say the full $10.00 is the cost in your example.

NotACPA

It largely depends upon how the FI managing the DRIP reported and manages it. I interpreted it as $10 downloaded as a Div and $9.50 used to buy the security with $0.50 as an expense.

BUT @BobW9886 will need to tell us what downloaded and what shows on the FI's website.

q_lurker

I consider this a bug (or shortcoming) in Quicken's handling of 'Commissions' on reinvestments which has been discussed before.

One way of handling this is as a Div received and a Buy shares with a commission.

Two transactions
- Div = $10
- Buy say 2 shares for $4.75 each + 0.50 commission
- Yields a cost basis of those two shares of $10. (RIGHT)
- The subsequent report by category shows _DivInc as $10.00 (RIGHT)

The other way is as a ReinvDiv, but there is no (obvious) way to get the same result

ReinvDiv $10 for 2 shares + 0.50 commission yields a $10.50 total cost on the Reinvestment form
Two Transactions
- ReinvDiv for 2 shares at $5.00 each
- MiscIncX transaction for $0.50 'paid as a fee' categorizing back to same account.
- The subsequent report by category shows _DivInc as $10.50 (WRONG)
- The cost basis of the 2 shares is $9.50 (RIGHT)

ReinvDiv $9.50 for 2 shares + 0.50 commission yields a $10 total cost on the Reinvestment form
Two Transactions
- ReinvDiv for 2 shares at $4.75 each
- MiscIncX transaction for $0.50 'paid as a fee' categorizing back to same account.
- The subsequent report by category shows _DivInc as $10.00 (RIGHT)
- The cost basis of the 2 shares is $9.50 (WRONG)

Without the commission, Div + Buy compared to Reinvestment yield the same result.

With a commission, the two approaches do not yield the same result.

My suggestion (short of Quicken changing) if the 'fee' truly is part of the cost basis is to either use the Div + Buy approach or skip the 'commission (fee) in the Reinv approach. FWIW, in all Buys and Sells, I skip the commission, use the correct number of shares and the correct total cost.

BobW9886

@q_lurker I understood most of your explaination. When I enter through the "reinvest-income reinvestment" tool it makes 2 entries in the register, 1 for the purchase of new shares and one for a misc expense. When I run a report for cost basis it does not include the misc expense as these as far as I can tell are not linked to the individual security. I have already started doing as you suggested, just entering the total dividend amount and ignoring the fee. It gives an inaccurate value for share price of the reinvestment but my only concern is cost basis for tax reporting when I sell.

@NotACPA . Not sure what you mean by "Fl". FYI I make manual entries, I do not download from the broakerage. Also a quicken user since the 1990's.

Thanks for the help.

q_lurker

When I run a report for cost basis it does not include the misc expense as these as far as I can tell are not linked to the individual security.

I see the MiscIncX associated to the security coming from the Commission field of the originating ReinvDiv transaction, but agree it does not feed into the cost basis of the security. If you go back to edit that ReinvDiv transaction, the 'Commission' field is blank - because the value has bee separated off to the MiscIncX transaction. As shown in the below snip, I am seeing the MiscIncX transaction report the Commission as an extra dividend. (This is from the first of the two ways I outlined above that one might try to report the Div amount and Commission on the Reinvestment form.)

The price/share on a transaction is not really material within Quicken. That is why the conventional wisdom it to make sure the number of shares and total price for buys and sells are correct and let the price/share fall where it may. That holds true for normal buys and sells where you are free to include or exclude the commission; either way Quicken gets the basis right. The problem is that the Reinvestment transactions do NOT handle the commission correctly.

FI is shorthand in this forum for Financial Institution.

NotACPA

FI means "Financial Institution". What shows at their website? Or in any statement you've received?