How do I determine cost basis for money market funds?

In quicken 2006, my money market account shows many 'enter cost' entries. When I click on one, I see a stack of entries waiting for cost basis info, mostly reinvested dividends but also the original
transfer in, and some transfers out. Should I just click 'estimate average costs' or is there some non-rocket science way of determining the cost basis.
Also, when money was been moved out of this account, it's been recorded by my online downloads with the brokerage. But of course that automated download does not record the transfer aspect, where it goes into another account. If I enter a transfer for the correct amount into the receiving account, it pulls down the MM account twice. I can't figure out how to enter the transfter into the MM account properly...
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1) What sort of Quicken account are you holding the MMF in? 2) Why isn't your MMF a constant $1 value? Which would mean that the cost basis would be $1/sh
db
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It's in a investment account, as near as I can tell. I don't know why the MMF is not a constant $1 value...all of the entries in this account were generated by downloads, except for the first original balance entry which I entered. I don't understand this stuff...I know MMF have 1$ share value normally. Maybe I just need to adjust that original balance entry?
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snipped-for-privacy@gmail.com wrote:

ok - just tell us exactly what you have - vs us just guessing -
with my Schwab investments, I have a sweep account that is setup as a linked cash account within my Quicken 2006... The investments show on the bottom as Investments, and the linked cash shows up top as a Cash Flow account
with my Vanguard, Fidelty accounts, they have MMF accounts that all look and act ok with the $1 price -
SO - which of these do you have, and how did you set it up within Quicken ?
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I'd tell you if I knew more. It's an edward jones account. I set it up as an investment account, I suppose, but I don't have a photographic memory that goes back years. It hangs around on the quicken menu area near my etrade stuff so I guess it's set up as an investment account. There is no special 'account' for this money market in quicken, any trx forit are listed along with any other trx for mutual funds etc that are in ed jones.
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Hi, Sackrifice.
As you probably know, there is a BIG distinction between a money market FUND and a money market ACCOUNT.
A money market account (MMA) is simply a checking or savings account that pays interest based on some formula derived from the current "money market". That's not what you are talking about, is it?
A money market fund (MMF) is a special type of mutual fund that invests only in "money market" instruments, such as commercial paper with a very short maturity. The fund buys these assets, collects interest for a short period, and then sells or redeems the assets, almost always at a profit that is essentially equivalent to interest for the period of ownership.
Like many other mutual funds, the net asset value of the MMF is calculated at the end of EVERY DAY. Unlike other mutual funds, the MMF declares a dividend EVERY DAY, equal to the increase in net asset value (interest and profits earned, minus the few expenses and rare losses). The dividend is payable not in cash but only in SHARES, with the shares valued at $1 each. So, if you had 1,000 shares yesterday and your share of today's profit is $5, you will receive an additional 5 shares and your balance will increase to 1,005 shares, worth $1,005. The fund has interest income; you have dividend income. Your fully taxable dividend income increases your "cost basis" by $5 as well, to $1,005. So, if you sell any or all of those 1,005 shares, your gain is zero.

...
How did you get the cost and share balance for this first entry? How did you enter it in Quicken?
How did you get those original shares? I would expect that you paid $1 per share for your initial purchase, and that you have recorded all your dividends in shares at $1 per share. And that all your redemptions (or sales) have been recorded using $1 per share as both cost and selling price, resulting in zero gain or loss. (Like most of us, you probably omitted reporting all these zero-gain sales. That's OK, because the tax code defines "gross income" as gains, not the whole proceeds of security sales.)
IF that first entry was at $1 per share and if all subsequent entries (purchases, sales and dividends) have been recorded at $1 per share, then your cost basis should always be $1 per share. If you show some other basis, I suspect that you suffer from what one of my clients called ESP (Error Some Place). Either start at the beginning and work forward, or start at the present and work backward, looking for any point in time when your recorded cost was other than $1 per share, and investigate how that value was calculated.
It is possible for your cost basis to be other than $1 per share, but those situations are rare.
RC
--
R. C. White, CPA
San Marcos, TX
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I was going to say it was a MMA but the actual title on the quicken trx is "MNY MKT FUND INVESTMENT SHARES"
I have never manually enter any values for the edward jones account. I simply let quicken connect to edward jones and it downloaded all this stuff. If I'd entered on my own I have some sense of what it all meant, but as it is, it's totally opaque.
There are trx for the mma (if that's what it is) about every month, like on 6/19/07 it bought shares at $1 and on 6/21/07 it reinvested dividends at $1/share.
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Your cost basis is $1, you buy, sell, reinvest at $1.00.
Oilcan
-----Original Message----- From: snipped-for-privacy@gmail.com [mailto: snipped-for-privacy@gmail.com] Posted At: Tuesday, October 07, 2008 11:16 PM Posted To: alt.comp.software.financial.quicken Conversation: How do I determine cost basis for money market funds? Subject: Re: How do I determine cost basis for money market funds?
I was going to say it was a MMA but the actual title on the quicken trx is "MNY MKT FUND INVESTMENT SHARES"
I have never manually enter any values for the edward jones account. I simply let quicken connect to edward jones and it downloaded all this stuff. If I'd entered on my own I have some sense of what it all meant, but as it is, it's totally opaque.
There are trx for the mma (if that's what it is) about every month, like on 6/19/07 it bought shares at $1 and on 6/21/07 it reinvested dividends at $1/share.
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Oilcan wrote:

Interestingly, today I updated my Fidelity Account, as I do every weekday, and noted a strange, first-time occurrence. My Municipal money market (core) account, always at $1/share as it should be, dropped (So showed Quicken) around $16K, even though Quicken shows, as it should, the same total today as it did yesterday, still at $1/share - quite an anomaly!
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Hi, sackrifice.

I know what you mean! That's why I've long resisted downloading transactions. The clerks or typists or whoever enters and codes the data at the broker's office simply don't use the same terminology that I do. And Jones does not use the same codes and names as Merrill Lynch. So I end up having to re-name many of the downloaded transactions anyhow. But I did weaken and started downloading sometime in 2008. The experience has been generally satisfactory - with some exceptions.
I also have an Edward Jones account. I never leave much cash there because the interest rate is only a fraction of 1%. In early 2008, I had a few hundred dollars there and received, for example, "Money Market Dividends - 22 days @3.69%" of $0.03 cents, paid in .03 shares of EDJ Money Market at $1 per share. In April 2008, they changed their handling of my cash, sold all 167 of my shares and put the $167 proceeds into my cash balance. For the year 2008, I'll have $0.34 of Money Market Dividends to report (rounded to $0, of course), and maybe a dollar or two of interest income on the cash balance.
I don't recall just when I started getting the downloaded transactions, but if I got any that said "MNY MKT FUND INVESTMENT SHARES", I must have renamed them to EDJ Money Market shares.
You probably received money market DIVIDENDS that were immediately reinvested in shares (just like I did), so those would not have added to your cash balance. If you also had a cash balance, you probably would have earned INTEREST on it at perhaps 0.20%. My cash balance has been so small that my latest statement shows no interest income at all.
There have been rare instances of money market funds whose value has slipped below $1 per share. In this month's economic climate, we might see others. I don't think we'll ever see the shares valued at more than $1 because of the daily declaration of dividends, which reduces the value to $1 each day. So I would be VERY surprised if your cost basis in your MMF shares were other than exactly $1.00 per share.
Since I've been retired for a few years and haven't kept up with developments, you should always check with your own CPA, rather than rely on my memory.
RC
--
R. C. White, CPA
San Marcos, TX
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