Brokerage Uses Avg Cost for Mutual Funds. If I do so, cost basis is wrong, so gains and losses don't

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Deborah Anderson
Deborah Anderson Member ✭✭
edited October 2018 in Investing (Windows)
My records are meticulous, it's just that average cost in Quicken doesn't agree with Ameritrade's average cost. Average cost should be average cost, right? So even though my cost basis is correct based on the actual purchase price, it's wrong if average cost is used. Sometimes it's off a few dollars, sometimes it's several thousand dollars. Oddly, it's not always wrong, but it's wrong more than it's right. I have fixed this for years by deselecting average cost and artificially selecting lots to get the gain or loss amount to agree with the 1099. I try to keep the lot selection as close to the actual lots sold on the 1099. But is there a correct way to do this? Obviously, at some point, I'm going to run into trouble when the remaining lots of a fund just don't agree with the gain or loss total I need to get. I would get through the taxes a lot faster if this just worked the way it should. I've asked Ameritrade if they would go back to FIFO, but they won't. I'm using Quicken 2016 Premier. Thanks in advance for your help.

Comments

  • NotACPA
    NotACPA SuperUser ✭✭✭✭✭
    edited October 2018
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    When you created the SECURITY in Q, did you set it to use Average Cost?  Such a determination can't be set at the time of the sale.

    Q user since February, 1990. DOS Version 4
    Now running Quicken Windows Subscription, Business & Personal
    Retired "Certified Information Systems Auditor" & Bank Audit VP

  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
    edited May 2018
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    I have not followed recent developments from the IRS on average cost approaches, but I do know that they used to recognize two systems -- 1) separate average cost values for long term positions and short term positions, and 2) one common average cost for both long and short term holdings.  Quicken only processed on that second basis. So if a brokerage was operating under the first scheme and Quicken under the second, some type of discrepancy would develop.  

    I would think your best bet would be to rely on the brokerage data for tax filing purposes and let Quicken be (hopefully) close .  The only step I can see you taking in Quicken would be to do a Remove Shares followed by an Add Shares where the Add brings in the holdings at their correct (per brokerage) average cost.  
  • Deborah Anderson
    Deborah Anderson Member ✭✭
    edited February 2017
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    NotACPA - QW HBRP 2019 said:

    When you created the SECURITY in Q, did you set it to use Average Cost?  Such a determination can't be set at the time of the sale.

    Probably not. Would it make a difference in Quicken if a mutual fund is initially set up as Average Cost? I can certainly change it back and forth later. But when it is set to Average Cost, that's when I get problems. Quicken's  Average Cost is not the same as Ameritrade's Average Cost. The only way I've found to fix this is to uncheck the Average Cost box and artificially select lots so my gain or loss agrees with my 1099.
  • carickdav
    carickdav Member ✭✭
    edited February 2017
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    q.lurker said:

    I have not followed recent developments from the IRS on average cost approaches, but I do know that they used to recognize two systems -- 1) separate average cost values for long term positions and short term positions, and 2) one common average cost for both long and short term holdings.  Quicken only processed on that second basis. So if a brokerage was operating under the first scheme and Quicken under the second, some type of discrepancy would develop.  

    I would think your best bet would be to rely on the brokerage data for tax filing purposes and let Quicken be (hopefully) close .  The only step I can see you taking in Quicken would be to do a Remove Shares followed by an Add Shares where the Add brings in the holdings at their correct (per brokerage) average cost.  

     The issue might be the covered shares vs non convered shares. I would ask your FI about this.
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