I guess I'm confused. I just noticed because of a larger distribution than normal that a LT cap gain distribution from a mutual fund added the distribution amount to the cost basis. I would think my basis shouldn't change at all since I should be ending up with the same total market value - more shares yes but at a lower price which reduces the market value of each share. I haven't really added anything to the basis --- or have I?
Quicken is correct.
A capital gain distribution is a taxable event. As you will be paying tax on the distribution, your cost base needs to increase to avoid double taxation.
I agree the value of your shares hasn't changed (because the price drops in proportion to the distribution), but the tax-paid portion has increased.
At some point, you told you m/f company to reinvest distributions. Others decided to take the same distributions from the same fund in cash. With your reinvestments, you bought additional shares ... thus your cost basis increased by the amount of the distributions received.
The market value of the fund is unrelated to the cost basis.
db
The two answers you've already gotten are fine. But if you're still having trouble getting your mind around this, another way to approach it is as follows:
You originally bought mutual fund at at a total cost of X dollars. You were "given" Y dollars in the distribution, which you then used to buy more shares. So the total amount of money you have put out to buy shares is X+Y. It doesn't matter where the money for the Y purchase came from, it's still money used to buy stock in the fund.
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