What is the best way to record the transaction fees that some Dividend Reinvestment Plans (DRIPs) charge when dividends are reinvested so that I can track my tax basis when I sell the shares? I suspect the same issues would arise a "load" mutual fund.
An example may help frame the question. My apologies for the length of the email. To the extent it matters, I'm using 2010 Quicken Premier version R10.
Example -- Assume a monthly $100 investment in the Home Depot DRIP whose statements reflect that a $2.50 "investor paid" trading fee has been deducted from each monthly investment.
If my statement reflected a purchase of 2.7583 shares of Home Depot, my Quicken transaction would be "Buy Shares" reflecting 2.7583 shares purchased, $2.50 "commission", and $100 total investment, resulting in a $36.072943 price per share. ($99.50/2.7583) My basis for the
2.7583 shares is still $100, as I treat the $2.50 as I would a Merrill Lynch or E-Trade commission.But, if instead of purchasing a $100 of Home Depot stock, I reinvested a $100 dividend. I have been using the "Reinvestment" screen which is where I think I have a problem.
My reinvestment entries would be for $100 as the Amount and 2.7583 as the number of shares. The conundrum is what to do with Home Depot's $2.50 fee?
Recording it as a $2.50 commission bumps the transaction total to $102.50, which seems inaccurate in several respects: (i) Quicken creates a $2.50 "Miscellaneous Income" entry for my "commission" expense, (ii) Quicken bumps my purchase price per share to $36.254215 ($100/2.7583). But Quicken does reflect the anticipated additional $100 of basis.
Recording it as a negative ($2.50) commission drops the transaction total to $97.50 (my net reinvested dividend), but my basis still reflects the anticipated additional $100 of basis. My price per share remains $36.254215 ($100/2.7583), leading me to conclude that Quicken ignores the commission entry on the Reinvestment screen in calculating basis and price per share.
Running the Investment Transaction Report nets the $2.50 commisssion on the purchased shares with the ($2.50) commission on the reinvested shares, totalling $0 instead of the anticipated $5.
Recording the Amount as the net $97.50, 2.7583 shares and a $2.50 commission results in a $100 transaction total, a $97.50 basis and a $36.072943 price per share.
Deconstructing the transaction into a separate "Income" transaction to reflect the dividend distribution, followed by a Buy 2.7583 shares, pay a $2.50 commission out of the $100 received appears to generate the correct $100 income and $100 basis.
I think I have answered my question, but I'll ask anyway -- Am I missing something? Or do we have a situation?
Thanx for any insights or suggestions.