Identifying / changing lots for a security sale


D

Dilip Barman

I use Quicken Deluxe 98 (I tried upgrading a year or two ago and found
the newer version I tried to be annoying with advertising and less
easy to use; I wonder if things have improved?) and am looking at a
stock sale I made in 2003. How can I view the lots that the sale is
associated with and possibly change these lots? In other words, if I
sold 100 shares @ $10 of a security on 6/1/03, how can I find out
which shares were sold and possibly change them - i.e., maybe 10
shares bought 1/1/02 @ $8, 80 shares bought 1/1/01 @ $2, and 10 shares
bought 1/1/99 @ $.75 ? Thanks.

--Dilip
 
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R

R. C. White

Hi, Dilip.

No matter which Quicken version you get, there will be a learning curve and
getting-acquainted period. All that just goes with the territory. Most of
us hate EVERY new version until we've used it for a while - and learned how
to turn off advertising and other new annoyances. I moved up from Q2002
Deluxe to Q2004 Basic several months ago; I still find some things I liked
better about earlier versions, but I'm comfy with Q4 now.

The handling of lots of securities has been pretty good in Quicken for
several versions now - if you take the time to handle it correctly. Just be
sure to record the purchases, splits, etc., and - especially - the sales in
chronological order. When recording the Sale transaction, choose to
"Specify Lots"; how we do this has changed slightly over Q versions, but it
has always been available, as I recall. Generally, just start with the
oldest lot and select shares until all that lot is sold, then move to the
next lot. Be sure ALL the lot is gone before moving to the next; sometimes
a tiny fractional share will remain, especially if there has been a stock
split in your past, so let Quicken decide the precise number of fractional
shares in the lot.

Of course, the IRS has its own rules about how you must select the lots to
be sold BEFORE you tell your broker to sell from THIS lot. You can't sell
first and then let Quicken DECIDE which shares were sold. YOU decide which
shares TO SELL, and then tell Quicken which shares you sold. If you don't
specify lots when you call the broker, the IRS assumes that you sold your
oldest shares first. This is what accountants (and brokers) call the FIFO
(First In, First Out) method. If you made the election the FIRST time you
sold, you may choose LIFO (Last In, First Out) and record the sale of your
newest shares first. And, if you specify to your broker in advance, you may
pick and choose which shares to sell. With the proper planning, you can
choose shares with the highest cost or the lowest, or those that qualify for
long-term or short-term treatment, whichever fits your current tax situation
best. That's called the "specific identification" method. But, YOU must
choose; you can't allow Quicken to do it for you unless you are happy with
FIFO.

At least, that's how it was the last time I looked, but I've been retired
for over a decade. Check with your own CPA for the current rules.

RC
 
D

Dilip Barman

Thanks for the detailed response, R.C. I do put the cost basis in
carefully but now just want to view how I sold those shares and
possibly change which shares I did sell, as I may have made a mistake
(I use the system of specific lots, not LIFO or FIFO). If I delete the
sale transaction, can I start again, with whatever shares were
allocated to that sale restored to the pool of available shares?
Thanks!

--Dilip
 
R

R. C. White

Hi, Dilip.

Yes, I believe you can, but you may need to edit other transactions, too, or
delete and re-enter them, depending on how straightforward is the history
for that particular stock. A simple one-buy/one-sell holding should present
no problems. But several purchases and sales of a single security, perhaps
interspersed with splits and/or acquisitions, could be a nightmare requiring
full deletion and strict chronological re-entry of the entire history of
that holding.

One thing to watch out for is the per-share cost/basis. Be sure that you
enter the total price and number of shares for each transaction; let Quicken
compute the per-share amount. And make sure that Quicken always has the
right number of fractional shares after any transaction. A 3-for-2 split,
for example, can foul up the number of fractional shares, which might
include a tiny fraction involving more decimal places than appear on your
screen. If you let Q calculate the fractions for the split, but you force
the exact number of shares on a subsequent sale of some of the shares, a
tiny fraction may remain unsold, per Q. Or Q may accuse you of trying to
sell more shares than you own. (For example, you may be trying to sell 10
shares when Q thinks you have only 9.99999999999 shares, which would appear
as 10.000 shares in any screen where it is rounded to 3 decimal points.) Q
might even offer to create a short sale for that illusory fraction.

A simple example: You buy 300 shares of ABC for $1,000. You and I know
that your cost is $3.33 1/3 per share; Q calculates it as $3.33333333 and
displays $3.333. You then sell 100 of those shares. Your "real" basis in
the shares sold is $333.33 1/3, but Q can't display that. If you force the
basis to $333.33, your answer is close enough. Your basis in the 200
remaining shares will be the original $1000 less $333.33, or $666.67, which
Q will show as $666.67. Your true basis should still be $3.33 1/3 per
share, but $666.67 / 200 is $333.335. That obviously is not enough to worry
humans, but it can confuse Q. If you then sell another 100 shares, again
forcing your cost to $333.33, Q will know that you still have 100 shares,
but will show the basis as $333.34 ($1,000 - $333.33 - $333.33) - again, not
significant to humans, but enough to confuse Q. A final sale of $100 shares
costing $333.33 will leave Q with 0 shares, but a remaining cost of $0.01.

One simple solution to this is to let Q calculate the remaining basis in the
final lot by simply choosing that entire lot after clicking Specify Lots.
But this was, after all, a simple example. Real life produces more
complicated scenarios. You'll just have to think through each situation as
you come to it.

RC
 
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D

Dilip Barman

Thanks, RC, for your comments. Let me illustrate the situation and
see if this helps:

Transactions over 10+ years for stock ABC

....
1/4/1992 Buy 5 shares @ 95
1/15/1992 Buy 2 shares @ 92
....
6/30/2003 Buy 1 share @ 123
....

there are few if any sales - and the few ones did have specific
(non-LIFO / non-FIFO) lots identified. Now I sold 100 shares on, say,
7/1/2003; I can't remember how the lots were allocated or if they were
allocated they way I had wanted them to be - how can I look at what
Quicken did in terms of identifying the specific lots? Can I delete
that sale in Quicken (there were more purchases but no more sales
since then) and re-enter it for the same date, ensuring that the
correct lots are specified? Thanks!

Dilip
 

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