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Posted by jo on January 16, 2008, 9:48 pm
Please log in for more thread options Great explanation for how this happens. Still not sure if there is a
better way to get my Quicken files to match the cost basis other than
picking, say, the last n dividend payments that collectively match the
Return of Principal and changing their category. It's not as pretty
as I'd like but I can't think of any other "adjusting" entry to make
that would tie into the specific security's cost, can't you?
jo
> Hi, Jo.
>
> Without knowing any of the details of the corporation involved, I can't be=
> specific, of course. =A0But many accounting determinations cannot be made
> until the corporation's year-end. =A0Estimates are recorded periodically
> during the year and, sometimes, dividends are declared based on these
> estimates. =A0When the books are closed after the year-end, the final
> calculations are made and it just might turn out that the profits were les=
s
> than the dividends that had been paid out. =A0If the company paid out $1
> million in dividends, but only $900,000 profits were realized, then where
> did the other $100,000 come from? =A0Must have been paid from borrowings o=
r
> from capital that had been previously paid in by stockholders, rather than=
> from earnings of the company. =A0(In a regular corporation, the dividends
> might have been paid from prior years' accumulated earnings, but mutual
> funds are not supposed to have any earnings carried over from year to year=
;
> they are supposed to pay out everything each year.)
>
> At any rate, some of the dividends that have already been paid and reporte=
d
> preliminarily as having come from profits, must have come from some source=
> other than profits, that is, a return of capital. =A0So an adjustment must=
be
> made, and it is very difficult, perhaps impossible, to assign it to any
> specific monthly dividend during the year. =A0It's just an adjustment to t=
he
> year's total dividends. =A0Sometimes a determination is made that a prior
> year's profit was miscalculated and amended reports are issued - and the
> shareholders must file amended returns.
>
> Since the shareholder is taxed only on the fund's profits, these additiona=
l
> amounts are not currently taxable to him/her, but reduces his/her basis in=
> the shares held. =A0When the shares are eventually sold, the gain will be
> larger because of the reduced basis. =A0If the return of capital is so lar=
ge
> that it exceeds the basis, then all such amounts received after the basis =
is
> reduced to zero are taxable gains.
>
> I hope this "generic" explanation helps a little. =A0But remember: =A0I've=
been
> retired a long time. =A0Check with your own CPA to be sure of the current
> rulings and accounting treatments.
>
> RC
> --
> R. C. White, CPA
> San Marcos, TX
> (Retired. =A0No longer licensed to practice public accounting.)
> r...@grandecom.net
> Microsoft Windows MVP
> (Currently running Quicken 2008 Deluxe in Vista Ultimate x64)
>
>
>
>
.
> >> : I'd like my Quicken (H&B 2006) records to match my brokerage
> >> : statements as much as possible (just humor me, ok?). When I sold a
> >> : security at the end of Dec 2007 I detected a discrepancy between the
> >> : cost basis in Quicken and the one indicated by my brokerage. I've
> >> : figured out that it happened at the end of 2006 when some dividends
> >> : were reclassified for tax purposes as ROP. Apparently there was no
> >> : transaction created at the brokerage, or at least not a downloaded
> >> : one, that accounted for that. By Jan of 06, my brokerage statement
> >> : reflects the new cost basis, and I'd like to make some kind of entry
> >> : back on Dec, 31, 2006, for instance, that would effect this change in=
> >> : Quicken. Just can't figure out how to do it. Any ideas?
> >> :
> >> : jo- Hide quoted text -
>
> - Show quoted text -
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