Q. We have a number of portfolios that hold a stock that awarded a dividend of $5.06 per share. The price of the stock at the time was $20.00 per share. On some reports in Schwab PortfolioCenter, it appears these clients have a large loss, when in fact they have an overall gain, counting the price of the stock and the dividend. Is it advisable to alter the data in some way so that the unrealized loss doesn’t show up –since, in fact, it’s only “sorta” a loss?A. No, it is not advisable. Make sure you and your clients understand the difference between a tax gain/loss and a performance gain/loss, and keep the two measures separate. You can actually have a tax loss and a performance gain at the same time. Dividends create this situation.
Apparently in your case, the dividend reduced the share price below the original purchase price, creating an unrealized tax loss. But since that dividend is part of the investment return for that position, they have a performance gain. If there had been no dividend, the tax gain/loss and performance gain/loss would be the same.
When discussing performance, use performance reports. When discussing taxes, use tax reports. Keep the two separate, and be prepared to explain the difference.
There’s no need to alter the data, and I would strongly advise against it — especially if this is a taxable account and you provide your clients with tax information.
Need a quick answer? Ask a question and I’ll try to answer with a blog post.