R18.14 seems to have broken gain computation.
My Quicken just recently updated to R18.14 from R17.6. For all my securities I use average cost basis. In all previous versions when I sold a stock I would be asked whether to use average cost or select lots. That was somewhat annoying but I would select average cost and Quicken would select lots that resulted in a fair estimate of realized LONG TERM gain in the Tax Planner. With version R18.14 I am no longer asked which lots, which is great. HOWEVER, Quicken now sells off the most recent lots resulting in SHORT TERM gains for Tax Planner. This needs to be fixed.
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Answers
BUT, I think your understanding from before is inaccurate. When you selected Use Average Cost, Quicken would have (I believe) sold the first shares bought but computed the basis of those shares as an average of all shares bought. There was no lot selection involved on Quicken's part.
q_lurker: You are right about selecting oldest lots. I'm still running the previous version of Quicken (R17.6) on another computer that I am preventing from updating while I sort this out. So for the same sale it shows (in Tax Planner) a single lot with a buy date of the oldest lot. In R18.14 Tax Planner is showing , for the same sale, the 4 most recent purchases (reinvested divs) which results in the gain being classified as SHORT TERM. The actual gain computed is based on average cost. So you have pointed right at the problem. They are now using the dates and shares of the newest lots rather than the oldest.
BTW - I'm new to this group and I'm not sure if superusers work for Quicken or are just super users. How does this problem get flagged at Quicken as an issue?
I'll do what I can to flag it. This is a two-day old forum recently moved from a prior site, so some of the methodologies are still foggy.
Your best bet would probably be to contact Quicken support directly.
Do you have any stocks in your file that have a recent Sell transaction? I'm curious if you look at the sort of lots between your 2 versions if you notice they are sorted different. Today, when I accepted a Sell and was prompted for the lot I noticed the lot listing window was sorted in descending date order; I seem to remember that it had been sorted in ascending date order.
I didn't think anything of it at the time as it selected the right lots when I clicked First In strategy. Now that you bring up the issue with average cost funds, I wonder if the date order for lots was changed, if that somehow may have impacted a simplistic query code that assumed an ascending date order?
I have a money market fund tracked via average cost and I can also see what you describe in a Capital Gains Report, but when I look at the actual lots remaining for the fund in the Investing Tab, it looks like the lots are being depleted oldest first. If they were being depleted as the Cap Gains report suggests, I should not see the most recent reinvest purchases. Very strange! I'm confused, but you are on to something.
Adding- based on @A6mD8d comment below, I'll note in this example I intentionally selected the "First Shares In" strategy in the lots window. Often I'll just skip that window and let Quicken default to first in after clicking lot basis. That may not be the case now especially since the sort order in the window is reversed; the automatic selection may not be working correctly anymore for lot basis holdings.
The timing is unfortunate in that currently, Quicken's attention seems to be focused on their new Support website rather than actually providing support to users.
After generating a test file and getting feedback that Quicken did make a "sorting" change in R18-
The problem must be in the "sort" change when Quicken is left to automatically select holdings on which to base the gain. If in a Sell transaction, the user clicks the Specify Lots button and manually enters shares or clicks First In strategy, it calculates gain correctly. If you don't force the selection, the reports and tax planner queries (probably the same) calculate the gain on the most recent lots purchased (probably selected based on top of the sort table rather than by date). If you "Reset Selection" in lots window, the Sell gain returns to the error condition. Since average cost funds have no means to manually select lots, they cannot be forced to choose First In lots.
Note that the Investing tab view shows that the lots table is actually depleting oldest lots first (12/18/2015 Buys were for 100 shares) which shows a disconnect between the report/planner query result and whatever query generates the Investing tab view.

Above- ACME Holdings was forced to use Lot Selection "First In" strategy by clicking button. Below after Reset Selection button used to clear lots and then acknowledging Use First In window pop-up, ACME gain returns to error condition.But thanks for being the first one to identify this; it was not an easy one to pick up.