> On May 21, 2017, at 2:24 AM, Chris Good <[email protected]> wrote: > > From: John Ralls [mailto:[email protected]] > Sent: Friday, 19 May 2017 1:33 AM > To: Chris Good <[email protected]> > Cc: GnuCash User Mailing List <[email protected]> > Subject: Re: Trial Balance does not include amount of Return of Capital > Investment splits > > >> On May 18, 2017, at 1:18 AM, Chris Good <[email protected] >> <mailto:[email protected]>> wrote: >> >> >> Hi John, >> >> (Sorry about wrong abbreviation RoT I used previously when I meant RoC) >> >> Thanks very much for your input. Interesting to hear about US tax law. >> Australian tax law seems similar, at least as far as recording in GnuCash is >> concerned, but not as complicated thankfully. >> >> My RoC transactions are actually to do with a stock split where the value of >> one stock is reduced, but not the no of shares, and a no of a different >> stock are created for the same value. In my very limited, inexpert >> investment experience, the Aust Tax Office has made a ruling shortly after >> the split, detailing what the cost of the shares involved should be. >> >> Using the RoC transaction to reduce the original shares works fine with the >> Advanced Portfolio Rpt, but not with the Trial Balance, which makes using >> the TB to validate the correct capital gain/loss value of other sales more >> complicated than it should be. >> >> I tried everything I could think of to add another pair of splits that >> adjusts Equity as you suggested, but could not find anything that ends up >> with the right figures in all accounts and a balancing Trial Balance. Could >> you please give more detail? >> >> As the RoC transaction seems to be a problem, I thought that instead of >> doing a ROC, I would sell all the stock at cost (so there is zero gain/loss) >> and then buy all for the new cost but this comes up with a TB I don't >> understand at all. E.g. >> >> (Trading Accounts not on, and only 1 currency used, GnuCash 2.6.16, Windows >> 10) >> >> Tx 1 01/07/2016 Opening Balance >> $1000 DR Assets:Current Assets:Bank1 >> $1000 CR Equity:Opening Balances >> >> Tx 2 01/08/2016 Tfr Bank to Brokerage >> $500 DR Assets:Investments:Brokerage1 >> $500 CR Assets:Current Assets:Bank1 >> >> Tx 3 02/08/2016 Buy 500 Stock1 for $1 Ea >> $500 DR Assets:Investments:Brokerage1:Stock1 (Shares 500, Price $1) >> $500 CR Assets:Investments:Brokerage1 >> >> Tx 4 03/08/2016 Dummy Return of Capital - Sell all at Cost >> $500 DR Assets:Current Assets:Bank1 >> $500 CR Assets:Investments:Brokerage1:Stock1 (Shares -500, Price $1) >> >> Tx 5 03/08/2016 Dummy Buy all shares at reduced cost >> $400 DR Assets:Investments:Brokerage1:Stock1 (Shares 500, Price $0.80) >> $400 DR Assets:Current Assets:Bank1 >> >> The Trial Balance as at 3/8/2016 (Commodities Price Source: Nearest in Time) >> shows: >> >> $600 DR Assets:Current Assets:Bank1 >> $500 DR Assets:Investments:Brokerage1:Stock1 Expected $400 >> $1000 CR Equity:Opening Balances >> $50 CR Unrealized Gains Expected $0 >> >> DR Total $1,100 >> CR Total $1,050 >> >> >> >> Am I misunderstanding? > > > > Chris, > > Selling and buying back is selling and buying back, it's not an RoC. Remember > that GnuCash can handle only one price per day, so the pricedb replaced the > price of your sale on 3/8 with the price of the buy, resulting in the Trial > Balance report seeing a capital loss on the sale when using the "Nearest in > Time" price source. Try doing the sale and buy-back on different days. > > To represent an actual Return of Capital you'd do something like > $400 DR Assets:Current Assets:Bank1 > $400 CR Assets:Investments:Brokerage1:Stock1 Memo: Return of Capital > $400 CR Assets:Investments:Brokerage1:Stock1 Memo: Reduction in basis 0 > shares, 0 price > $400 DR Income:Deferred Income:Reduction in basis of investments > > Spin-offs and mergers are not returns of capital: The only money you get back > is "cash in lieu" of fractional shares, and that's immediate income just as > if you'd sold the stock. Depending on how they're structured spin-offs and > mergers can either be immediately taxable (IIRC Baxter's spin off of Baxalta > was) or not (IIRC Abbot labs spin off of AbbVie was not). The shareholder > letter will tell you. In the former case it's correct to book that as a sale > of the original stock and buy of the two new stocks. The letter to > shareholders should tell you what prices to use. In the latter I generally > create the new stock account and commodity, use the split assistant to create > the new shares then edit the resulting transaction so that the new shares are > in the new stock's account. I wouldn't expect either the lots facility, the > trial balance report, or the APR to understand how to handle the transaction, > but I don't use any of those much. The trial balance report can be brought > back into balance with the same sort of shadow split pair that one uses for > capital gains, just book it to a deferred income account so that you know not > to pay taxes on it that year. I doubt that the lots facility has any hope of > being able to deal with that situation, and I have no idea about whether the > APR would be able to figure it out. > > Regards, > John Ralls > > > Hi John, > > Sticking with my attempt to record a return of capital by selling all the > stock at cost and buying it again at the effective new cost (as this is the > best way I can see to do this at the moment...) > > I tried putting TX 5 on a separate day (04/08/2016) so that there was a > separate price in the Price DB (verified) and this time the TB as at 4/8/2016 > correctly records the value of the stock as $400, but now > Equity: Unrealized Gains $50 CR > has changed to > Equity:Unrealized Losses $50 DR > so TB is still out by $50. It seems to be using Average Costing when > calculating gains/losses, but Nearest in Time as per report option for the > account balances. > > I do not understand why the TB has any options for Commodity Price Source. > Shouldn’t it always use the transaction values, converted to Report Currency > using tx exchange rate if needed? > I guess it’s because much of the code is shared with the Balance Sheet and it > wants to ensure Assets - Liabilites = Equity and it needs to account for > capital gains/losses from stock sales if they haven’t been recorded properly > because that affects stock asset value. > I guess if it didn’t do that, it wouldn’t be any use for finding incorrect > capital gains, although maybe the Balance Sheet should be used exclusively > for that. No doubt there are other reasons too… > > As an aside, how is the Start of Adjusting/Closing option on the General tab, > and the Adjusting/Closing Entries on the Entries tab in the report options > supposed to be used? I haven’t seen any documentation or discussion on that. > Also the Merchandising tab is a complete mystery to me. > > Sorry for all these questions. I will try to make it worthwhile by > documenting new found knowledge. > > Your suggestion for a Return of Capital transaction has 2 splits for the > stock account: > > $400 CR Assets:Investments:Brokerage1:Stock1 Memo: Return of Capital > $400 CR Assets:Investments:Brokerage1:Stock1 Memo: Reduction in basis 0 > shares, 0 price > > Isn’t this doubling up on the value? Should they both have 0 Shares, 0 Price? > > Regards, Chris Good
Chris, Sorry, I can't speak to why the TB report is the way it is. Like most of the reports it was written a long time ago and it's quite possible that things it depends on have changed underneath it. Yes, both Stock1 splits will be 0 shares, 0 price. Regards, John Ralls _______________________________________________ gnucash-user mailing list [email protected] https://lists.gnucash.org/mailman/listinfo/gnucash-user ----- Please remember to CC this list on all your replies. You can do this by using Reply-To-List or Reply-All.
