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Capital Gains Calculations for Canadians in QMAC

Stephen Fisher

I have been after Quicken for many years, to allow Canadians to calculate capital gains based in the average price, as our law requires, rather than LIFO or FIFO which seems to be the system in the USA. No luck with that btw. This is important for times when the stock is purchased over time rather than all at once (in which case of course the purchase price = average price) and/or when we sell only some of the shares.

I never looked at "Lots" because we don't use those. Till now.

It is theoretically possible however, by using several calculations in "Specify Lots" to actually have Quicken display accurate gains and cost base for Canadians. (If you have the energy), you can divide the fraction of your partial sale to each of the lots. So for example if you had bought 2 lots of 500 shares and then sold 600, Quicken, after the calculation, would treat you as still holding 200 shares in each of the lots, instead of forcing all of the gain into the first (FIFO) or last (LIFO) lot. On the Realized Gain screen in the portfolio view the correct cost bases would be displayed.

I thought this idea might be helpful to see countrymen.

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Quicken Mac

Reviewed

QMAC - Canada

Status: Reviewed

Comments

NotACPA

In QUS, I'm able to designate, at the Security level, that Q should "Use Average Cost", at least for Mutual Funds. Are you not able to do that in QCan?

Stephen Fisher

I just looked at it in QMAC, and indeed I see that mutual funds has that option. But individual shares do not. The only place we get an option is when we create a brokerage account we can select LIFO or FIFO for that account.

[I see you are a user since DOS. I started with the DOS version in the mid- 80s and managed to keep it running in a DOS window on my Windows computers until almost the late 20-teens. There is still a bunch of stuff I could do in DOS that I can't do in QMAC. I find the whole thing quite sad, but can't figure out how to escape it. ]

NotACPA

I haven't been able to find, in QWin US, any way to designate "Use Average Cost" for stocks … but then I don't recall that such is permitted in the US for stocks.

SO, it's not entirely surprising that such isn't available in QCan … but it certainly should be.

I've voted this up, but it almost seems to me to be a design flaw … something that should be there but isn't. I wouldn't call this a "bug", because it's working as intended … it's just that the intent is incomplete. It's an analysis/design error rather than a programming error/bug.

Have you tried reporting this to Q Support (via the link at the top of this page) to see what their reaction is?

jacobs

There is an existing Idea thread for Average/Adjusted Cost Basis in Quicken Mac with 76 votes, and it is marked as "Planned" by the developers:

https://community.quicken.com/discussion/7670157/cost-basis-adjusted-cost-basis-acb-9-legacy-votes

jacobs

This is not just a Canadian issue (as I wrote about in the thread linked above). The "Use average cost" checkbox in the security detail screen does NOT do what you think it does. It only has something to do with the Back Load percentage, but I can't remember exactly what. I've never had a back load exit fee on any mutual fund. A I don't understand Quicken's implementation because my understanding is that back load fees, when they exist, are typically not fixed percentages but have declining percentages the longer you own the security. I had this explained by a Quicken developer many years ago, but I cannot locate the discussion; it may have been in an old beta forum. My recollection is that the "Use average cost" checkbox deals with how Quicken calculates the back load fee, not how it calculates cost basis for the security itself. (I suspect this is the same for Quicken Windows as it is in Quicken Mac.)

What "Use average cost" on the Security screen does not do is make the individual security override the cost basis of the account it is held in, such that the security's capital gains are calculated on an average cost basis. Here's a simple demonstration, with easy round numbers to demonstrate this:

I created "Test Security" as a mutual fund and checked the box to "Use average cost":

I created a Test Brokerage account, which by default it set to FIFO. (I could have changed to LIFO, but it wouldn't matter for this demonstration.)

Now, I purchased 100 shares for my Test Security on three dates at three different prices, as shown here:

So in total, I've purchased 300 shares for $35,000. The average purchase price per share is thus $35,000 ÷ 300 = $116.67. And this is accurately shown on my Portfolio screen:

It shows my 300 shares, acquired for $35,000, with an average share cost of $116.67. So far, all straightforward and good.

So now, let's enter a sale today of 1 share at the current price of $150:

IF Quicken Mac were using Average Cost Basis, then we'd expect the cost basis of this share to be $116.67, and the capital gain to be $150.00 - $116.67 = $33.33.

But it's not. Here's the Capital Gains report showing the sale of the 1 share today:

It shows the cost basis was $100, and the gain was $50. Well, that's using FIFO: the first shares I purchased in 2020 were $100 per share. Quicken sold one share of that lot, and shows the $100 basis and the $50 gain, not the average cost basis of $116.67 and the $33.33 gain.

As a result, any US investor who holds mutual funds set to use Average Cost Basis — anyone who invests in Vanguard mutual funds, for example, which Vanguard defaults to using Average Cost Basis — cannot get Quicken to accurately calculate their cost basis and capital gains wen selling shares of those funds.

So Average Cost Basis functionality is needed for all Canadian users for all their investments, and is needed for US investors who hold mutual funds which use Average Cost Basis. I hope the Idea thread I linked above, which is marked as "Planned", will lead to a fix for this long-lingering problem.

(It would be interesting if a Quicken Windows user could repeat the same example to see if it handles cost basis the same as or differently from Quicken Mac.)