Incorrect Cost Basis Calculations - Redux

mhmllm's Avatar


31 Dec, 2009 01:00 AM

I've given up waiting for Quicken and recently downloaded iBank's trial version. So far, I like what I see, but I have a question about how Moneydance tracks cash dividends (from investments).

Example: XYZ Stock pays monthly cash dividends that are NOT reinvested. All cash dividends paid out REDUCE the Cost Basis of the security. EXAMPLE: buy 1 share XYZ for $100... cost basis is $100/share. XYZ pays $10 cash dividend (not reinvested) cost basis is $90. HOWEVER, Moneydance calculates the new cost basis at $100.

Am I missing something? Is there a work-around? If anyone has a solution, please share it with me as I do NOT want to return to Quicken...EVER.

Mark (MD New User)

  1. 1 Posted by mhmllm on 31 Dec, 2009 01:17 AM

    mhmllm's Avatar

    I think I had too much wine prior to my initial post. Cash dividends, to the best of my knowledge, neither increase nor decrease the cost basis of a security.

    What I intended to comment on was the ROI (return on investment) calculations, not the cost basis. Money dance doesn't consider cash dividends when calculating ROIs. This is a problem that I would like to see fixed in future updates.

    Sorry for the confusion.


  2. 2 Posted by gordon.potter on 31 Dec, 2009 01:18 AM

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    Mark I don't know where you got the idea a dividend from a stock changes your basis. While some people may believe that, the IRS does not. And I would strongly suggest your $10 dividend be reported as income - As of January 1, 2010 I assure you the IRS will get your name, your taxpayer ID number and the amount of dividends on which you need to pay taxes.


  3. 3 Posted by mhmllm on 31 Dec, 2009 01:27 AM

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    You are absolutely correct. I just posted an update to my original post explaining my confusion. I was stating cost basis when I really meant ROI Calculations. MD doesn't include cash dividends when calculating ROI.

    Thanks for keeping me straight.



  4. 4 Posted by gordon.potter on 31 Dec, 2009 03:18 AM

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    ROI calculations are very complex as soon as events start happening at any time other than either annual dates or when the investment is terminated. Specificly each dividend has to treated separately to a NPV at the final date (or the initial date). Than all the individual events at the final (or initial date) are totaled. Finally that total is entered into an interest calculation for the period. If per chance you want to have the kind of interest calculation commonly used by banks, that is daily compounding.

    If you want to get a flavor for the complexity, try to set up an ROI calculation is a spreadsheet. Then compare your calculation with the actual ROI that you get from Quicken.

    I do not dispute Quicken gives you a number named ROI, but you need be very careful when comparing ROI from location #1 to ROI from any other source.

    Personally, if MD does not provide an ROI, in some senses I feel they are doing investors a favor.


  5. 5 Posted by Brian on 03 Jan, 2010 03:55 PM

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    Actually, I think Moneydance needs an ROI function. This is essential for evaluating the performance of investments. I just now realized that they are showing %change rather than ROI and that is rather misleading. Why would I care what the %change is on a dividend yielding stock or bond? What I really care about is the return from that investment. Both Quicken and Money (and every brokerage site I've ever used showed ROI).

  6. 6 Posted by Brian Adler on 04 Jan, 2010 06:08 PM

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    Brian, Mark, and Gordon,

    We are working to update and upgrade our reporting. As part of this we will be adding ROI (I believe possibly as part of the portfolio view).

    Stay tuned and please let us know if you have any concerns with how the number is calculated once it is complete,


    Moneydance Support

  7. 7 Posted by Brian Adler on 04 Jan, 2010 06:13 PM

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    I suspect that cash dividends will not be included in ROI calculations. I agree with Gordon that ROI can become extremely complex and that the MD's calculation will be more basic. But it may be that we can add cash dividends to the calculation. I will research it further.


  8. 8 Posted by mhmllm on 04 Jan, 2010 10:55 PM

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    Thanks Brian!

  9. Angie Rauscher closed this discussion on 01 Mar, 2010 04:54 PM.

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