Lots and Capital Gains Discussion

[Emily Zora]

OK. I have more to think about. Making lots identifiable would mean you
could have splits from multiple accounts assigned to one lot.
I noticed too that in the current scrub implementation, say you buy 100 and
then sell 50, you end up with two lots (lot 0: 50 closed, lot 1: 50 open)
instead of one lot (lot 0: 100 start/50 left open). When originally
developed, was it important to have a lot have one input and one output
split? This creates extra splits in the account which may be confusing.

Regards,
Emily

On Wed, Dec 30, 2015 at 9:20 PM John Ralls <jralls at ceridwen.us> wrote:

>
> > On Dec 30, 2015, at 1:55 AM, Emily Zora <milliehandshrimp at gmail.com>
> wrote:
> >
> > Hi all. I've been working a lot with bitcoin lately and I've noticed some
> > deficiencies in the way lots and capital gains are handled, particularly
> > when multiple wallets (accounts) are involved. From my googling, this
> > appears to be an acknowledged problem. Before taking a stab at trying to
> > fix, I wanted to get some input from y'all.
> >
> > Using a FIFO policy, say I bought 1 btc in wallet #1 two years ago, 1 btc
> > in wallet #2 one year ago, and today I sell the 1 btc from wallet #2, if
> > I'm not mistaken, the cost basis and acquisition date for the sale should
> > be the purchase in wallet #1 two years ago, not the purchase in wallet #2
> > last year. However, with current implementation, the purchase from the
> same
> > wallet as the sale would be used.
> >
> > Options to fix it: 1) track lots by commodity rather than account. 2)
> allow
> > lot tracking at a common parent account. 3) Keep the current
> implementation
> > and search for other accounts in the same commodity and kinda hack it to
> > work.
> >
> > Another issue: Wash Sales, transfers and acquisition date
> >
> > When there is a wash sale according to US tax law, no capital loss is
> > allowed for the recent sale, instead the loss is added to the cost basis
> of
> > the new purchase and the acquisition date is adjusted by the days
> > previously held.
> >
> > With current implementation, a lot does not track its acquisition date.
> > Instead, you use the earliest split. This is also a problem with
> transfers
> > between accounts, as the earliest split will be later than the
> acquisition.
> > Propose adding an acquisition date field to lot.
> >
> > Let me know your thoughts.
>
> If we're going to offer the option to consider lots across accounts for
> basis policy it should be up to the user but that in most cases it should
> be per-account. I'm not an accountant or enrolled agent, but my
> understanding is that the IRS expects you to apply your selected basis
> policy (FIFO, LIFO, average cost, or designated lot) per account, not per
> asset.
>
> Consider the analogous case where you own shares of XYZ in two accounts:
> If you sell the shares from one of the accounts the broker will report on
> your 1099-B the basis and period for the shares in that account without
> reference to the other account, even if it does happen to be at the same
> broker.
>
> We need to ask our European colleagues about the wash sale rule — which
> says that if you buy a like asset (most commonly means shares of the same
> stock) within 30 days of selling at a loss you don't get to book the loss
> but instead increase your basis in the new shares — do your tax laws have
> such a provision?
>
> I'm pretty sure that that *is* a case where the IRS would expect you to
> consider multiple accounts: If you sell XYZ at a loss from broker A's
> account and buy it a few days later in broker B's account, neither will
> know that you've got a wash sale and it won't show on your 1099-B, but the
> IRS will object if they catch you.
>
> It might anyway be venturing too much into tax accounting for GnuCash to
> implement that.
>
> Rather than simply adding a date field to the Lot class I think we need a
> way to maintain lot identity through a transfer. That would require a more
> fundamental change in the way lots are handled within GnuCash so that a lot
> is always created when buying an asset that should be managed with lots
> (lot-able for brevity) and explicitly linking lots and splits. What's
> lot-able may depend on its intended use as well as what it is: For example,
> currency wouldn't normally be lot-able, but if one does forex trading where
> the sole reason for holding the currency is to make capital gains then it
> might become lot-able. That would be a question for one's tax accountant.
>
> Regards,
> John Ralls
>
>