Investment transaction fee

Where are the tax experts in this group when you need them? Perhaps the following fantasy will entertain you until an expert wakes up and posts the truth :-)

There are stock trading fees and there are account maintenance fees. AFAIK the former can be added to your stock cost basis, but I'm not sure. Even if it is true now, tax rules may have been different in the past. Account maintenance fees can never be added to your stock cost basis.

Perhaps in the past your missing "fee" field implemented the formulas "total cost = stock cost + fee + commission" and "cost basis = total cost - fee".

Back in the 1980's I was in several quarterly dividend reinvestment programs. There was one stock purchase per quarter, with the stock cost + fee + commission equaling the dividend. The above cost basis formula worked. The fee may have been mistaken for a stock trading fee but it was actually a quarterly service fee. I don't think I ever saw *any* trading fee in any accounts that I owned during that time period.

Now what does Quicken do when users have entered maintenance fees in the "fee" column in the past, and are now entering trading fees, which for tax purposes should be treated the same as commissions? It seems to me that they have to punt, especially now that stock trading fees, which were rare or non-existent in the past, have nowadays become ubiquitous.

My guess is that they first started ignoring the "fee" field so that users would start doing exactly what you did, namely add the fee(s) to the commission. Then, in a later Quicken release, when users were sufficiently doggie-trained, they may have deleted the now non-functional field.

The above fantasy seems to be consistent with your reported observations and my understanding of tax law. But we need a tax expert and a long-time Quicken user of the "fee" field to sort out fact from fantasy.

Hi, Jo.

Jerry's post jolted me out of me reverie, I guess. ;^}

Since it applied to each TRANSACTION, it would become a part of your cost basis for a buy, or a deduction from your sale proceeds for a sale. As Jerry said, this would be treated just like the commission on that buy/sell. Fixed or variable - doesn't matter, for tax purposes. Paid to the broker? Or to the SEC? Or to the NYSE? Doesn't matter. Still a part of your basis - or deduction from the selling price. Like you and Jerry, I just roll all these items into the "commission" box.

Jerry also mentioned:

Yes, it works, but the logic is backwards: Start with the dividend. The dividend was income; that provided the cash used to pay for the stock, including the fee and commission. So, dividend = (stock + fee + commission). Therefore, dividend = cost basis of the lot; divide by the number of shares to get the cost basis per share - if you want to know that.

Jerry's right again. Per-transaction fees/commissions/taxes/whatever become part of the tax basis. Account maintenance fees, usually based on time or other factors rather than per transaction, are investing expenses, which non-dealers cannot deduct except to the limited extent allowed (in some years) on Schedule A, Itemized Deductions.

Remember that I've been retired for several years, so check with your own CPA to be sure that I haven't forgotten, or misremembered - or that I missed a change in the rules.

RC

-- -- R. C. White, CPA San Marcos, TX snipped-for-privacy@grandecom.net Microsoft Windows MVP (2002-2010) Windows Live Mail 2011 (Build 15.4.3508.1109) in Win7 Ultimate x64 SP1

I remember in my previous Quicken version (2008 or 2009- can't find the box) there was a setup screen that allowed you to enter a fixed fee that was applied to each buy/sell investment transaction, independent from the variable commission. It never worked as far as I could tell, so I started manually adding it to the commission. Now I'm using Quicken 2010 and can't even find that screen, let alone determine if the feature now works. Does this ring any bells with anyone?

I don't think the original post was about what is/isn't part of the cost basis. I think the question is about a Q setup item that would assess a fee for each investment transaction.

Although not explicitly stated, I think Jo is asking for something that will automatically include a fee w/o user entry. In other words, the user enters the shares, the share price, & the commission, then the system auto-adds a transaction fee (that would probably be included in the cost basis).

I don't recall anything that does that. The closest thing I can think of would be Memorized Investment Transactions/Transaction Groups & I was never really happy with how those worked.

Anyone recall anything different?

I knew that :-) I was just trying to convince Jo that even if his "fee" field had ever existed, Intuit might have removed it because of its potential misuse - it's a place where some users might enter the wrong type of fee. But not being a tax expert I wasn't sure that my understanding of the two types of fees was correct. So I asked for a further response (1) from a tax expert to confirm *my* understanding [and RC responded - thanks RC!] and (2) from anyone who did, or didn't, remember the "fee" field Jo was talking about.

I'm reasonably convinced that field is gone now, regardless of whether or not it ever existed, and that we've confirmed beyond a reasonable doubt how we all live without it.

Thanks for responding to issue (2) and for clarifying that that issue is still open.

P.S. For some unknown reason my news reader (Windows Mail) butchers responses to some posts - my apologies.

Oops! Assuming the "e" key on your keyboard isn't sticking, my sincere apology, Jo, for not using a feminine or gender neutral pronoun.

"jo" wrote

The option to enter several "fees" that could be applied to investment transactions in a particular investment account - either as fixed amounts or percentages is still available. The choices of "fees" are: Fees, Commission, Load, and Penalties.

The choice to do that is selected with the "Options" button in the "Account Attributes" pane on the Overview tab of the specific investment account: see "Transaction Fee".

My recollection is the same as yours: it doesn't "work".

I'm not even sure how it could work: how could you have a "penalty" on every transaction, for example?

I couldn't find much info in Quicken Help, but perhaps the feature's only purpose is for you to record such information for reference.

Trust John P to always remember where every minute piece of data is configured in Quicken. It's right where he said it would if you edit the account and it's still set to $6 and it still doesn't work. It's annoying that I have to edit every buy/sell to add this in.

RC: I did know how to handle it... I just roll it into the commission. Thanks for the general discussion points.

Jerry: You would certainly not be the first person who writes my name as Joe or refers to me as "he". Sometimes it annoys me, sometimes I decide there are bigger issues to deal with in life.

Thanks all. I do wish this fee field would work. It doesn't get downloaded with my transactions, just the commission, so I have to remember it each time.

jo