Stock trades and realized gains/losses
Sat Jan 11 05:47:11 CST 2003
On Fri, Jan 10, 2003 at 11:51:34PM -0500, Derek Atkins was heard to remark:
> > ?? The IRS in the United States forces you to do it this way, if you
> Question: when you do this aren't you by definition REALIZING the
Yes. My bad. I was still hyperventilating when I wrote that.
> You started to give an example with Enron, but you never finished it.
> Could you, please? To me, the fact that Enron stock went from
> $100/share to $1/share does not change the basis of your stock
It doesn't change the cost basis, but it is needed when preparing
a formal balance sheet for a business. You don't want to cavalerly
say 'gee, todays price for enron is x', you want to say 'we have
adjusted the book value of our enron holdings to reflect the reality
of the marketplace, and this adjustment is shown in the 'unrealized
The formality of creating an auditable transaction like this has
some real reporting advantages. Especially if we had some juicy
profits because enron later went up ;-> Ahh, yes, accounting ....
pub 1024D/01045933 2001-02-01 Linas Vepstas (Labas!) <firstname.lastname@example.org>
PGP Key fingerprint = 8305 2521 6000 0B5E 8984 3F54 64A9 9A82 0104 5933
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