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Posted by John Gregory on April 20, 2006, 1:21 pm
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R.C.... Wow! You've given me a lot to digest in both your replies. I
appreciate it. I'll address the one about the tax refund after I noodle a
bit more but right now I'd like to focus on this issue concerning that
commission.
I understand all you've explained. In "the real world" I received a concrete
stock dividend which I recorded in Quick using the wizard. All was well. It
appeared GM gave me "a gift" when I read the statement "company paid" next
to the $0.12 commission entry. I knew the most important elements of the
entry were the number of shares received - and they were accurate - plus the
amount I paid ... which was clearly stated on the statement as "Total
Dividend Paid". But then came the 1099-DIV. The sum total of all those
"Total Dividend Paid" entries was shy from the box 1a "Total Ordinary
Dividends" of the 1099-DIV. That means, I was out of balance when these
figures got transferred to TT. (Fact is... it's happened every year for
years and I simply ignored it and made manual adjustments in TT. I've simply
reached the stage - and have the time - to say "I'm not gonna' settle for
that anymore. That's why I'm automated. Find the right way to make this
happen.)
Which brings me to the last part of your memo where you demonstrate the
hypothetical entries. I understand what you've done (my "Cash" for this
transaction is called "Stocks" and serves as an account to hold all stocks I
personally hold... hold he certificates). What your example doesn't
demonstrate is that gift commission. That "gift" isn't really a gift; I'm
taxed for it.
Now the solution I described just before you answered involved that wizard
again. If you review, I simply added the commission to the commission line,
left the total dividends as reported on the GM statements, then let the
Quicken program make the entries. It made two each time. It did what you
described and correctly made an entry to record the reinvestment of the
divided (so my cost and shares are correct) but then it then created an
entry for the commission by labeling it "Miscellaneous" and placing it in
the "_DivInc" category (Dividend Income). The resulting transaction shows a
negative 12 cents in red next to the name of the stock in the register (one
line down from the reinvested dividend entry) indicating the 12 cents were
removed from the account. The cash remaining is the same as prior to the
dual-entry reinvestment act which was done using just one wizard.
I hope I described this well enough. All seems to be in order. I would just
like to make sure I'm not in for any surprises as I go down the road
handling similar stocks the same way (with regard to "free commissions"). I
really appreciate your help. Please comment. I'll look at the tax refund
issue next. That's a tad more involved. I'm the one responsible fro making
the deposit in '06; the IRS gave it to me in the Fall of '05. I drag my feet
for some unexplained reason when it comes to preparing these taxes.
> Hi, John.
>
> As we say so often here...
>
> First, understand what happened "in the real world".
>
> Second, record that in Quicken.
>
> Trying to do the second before the first will get you confused just about
> every time.
>
> And reinvested dividends are actually two transactions: (1) Received a
> dividend. (2) Bought more shares.
>
> The two transactions often are collapsed into one, but it's easier to
> follow what happened if you make two entries.
>
> First: Record the receipt of the dividend. You didn't get cash, so it's
> hard to see what account to use - and it really doesn't matter because the
> next entry is going to wipe out whatever you enter this time, so let's
> just use Cash.
>
> Second, record purchase of new shares, using the proceeds from the
> dividend. The important thing here is not the price per share. The two
> important factors are actual number of shares and actual cost to you.
>
> If you try to record the purchase of the shares BEFORE you record the
> dividend, you get confused - like you have been.
>
> For a quick example, let's make up some numbers:
>
> You hold 100 shares and get a $0.60 per share dividend = $60.00.
>
> Shares are worth $25 dollars today, so you get 2.4 new shares. The
> commission might normally be $2.40, but you don't have to pay it, so it
> doesn't matter. Even if the commission were $240, you only had to pay $60
> for 2.4 shares, so that's what you record.
>
> So (pardon the accountant-speak - and the formatting):
> 1st transaction:
> Debit Cash $60.00
> Credit Dividend Income $60.00
>
> 2nd transaction:
> Debit Stock (2.4 new shares) $60.00
> Credit Cash $60.00
>
> After the two transactions, the Cash account will be back where it
> started. The net result:
> Debit Stock (2.4 new shares) $60.00
> Credit Dividend Income $60.00
>
> Since we know how it's going to end up, and since the Cash entries have no
> lasting effect, we can simply condense the two transactions into the last
> one.
>
> To take this a step further, if you bought 100 shares for $2500 and paid a
> $100 commission, your total cost would be $2600. That $2600 would be your
> basis in the 100 shares, including the commission. Your basis is what it
> actually cost you, including any commission, transaction tax or other
> expense, to get ownership of the shares.
>
> RC
> --
> R. C. White, CPA
> (Retired - no longer licensed to practice)
> San Marcos, TX
> rc@grandecom.net
>
>>I moved on tot he next statement, entered the dividend and number of
>>shares bought for reinvestment using the wizard but this time included
>>that commission the company paid ($0.12). I ended up with two entries. The
>>first properly reinvested the dividend with a ReinvDiv action and the
>>second showed up as an MiscIncX action entry. There's a -$0.12 in red in
>>the Description space but my cash in the account is in balance. When I
>>view that entry under Edit, I see the amount of the commission in the
>>"Miscellaneous" space and the category identified as "_DivInc". Checking
>>back on the reinvestment entry I made, I find the commission I record has
>>been removed.
>>
>> The net effect seems to be that the reinvestment was made properly, no
>> commission was recorded with that entry (even though I entered it), and a
>> new MiscIncX entry was made automatically forcing that commission to be
>> reported as income. That makes my tax records agree now with the 1099DIV
>> (Dividend Income shows the amount reinvest PLUS that small commission as
>> a separate entry on the same day). But I'm a little concerned about that
>> read -$0.12.
>>
>> Have I entered this correctly?
>>
>>
>>> On second thought... I can't just add those commissions to the dividend
>>> figure; they won't agree with the statements. Perhaps I should make a
>>> separate entry for "Inc - (Income, Dividends, etc)" in the amount of the
>>> commission, then list the commission in the appropriate box of the
>>> wizard. That would zero the two out but would also create a record of
>>> having received the commission as "income" so it agrees with the
>>> 1099-Div.
>>>
>>> Would that do the trick?
>>>
>>>> You bought shares with no commission. Just enter what you paid. You
>>>> could ask a similar question about posting the benefit of buying a
>>>> shirt at 50% off.
>>>>
>>>> Tom
>>>>
>>>> John Gregory wrote:
>>>>> I have a few shares of GM whose dividends are simply being reinvested.
>>>>> I noticed the statements are showing that the company pays the
>>>>> commission. How do I properly post that benefit.unearned income. gift.
>>>>> whatever it is. I can't inflate the dividend on the wizard I use to
>>>>> post the transaction... or can I? Just inflate the divided by the
>>>>> amount of the commission then post the commission? But that leaves the
>>>>> cost per share slightly distorted. The true cost was only the amount
>>>>> of the real dividend.
>
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