[GNC] how to record tax credit for capital loss
R Losey
rlosey at gmail.com
Wed Jan 24 11:24:32 EST 2024
I also should add that I am not an accountant. Having said that...
I'd do like David said... since the category is called Capital "Gains", I'd
make it an Income category, with sub-categories for each broker (hopefully
there aren't too many), and maybe every year.
I say "maybe" because if you just record the gains/losses as they occur by
broker, you can see where you stand by the balance at the end of each year,
and there would be no need to.
But I'm puzzled at what you wrote: You wrote that the 2019 losses are "now
set in stone", but surely, the losses for 2019 are set in stone when 2019
ended, weren't they? Don't you mean that now that it's 2024, you can no
longer use losses from 2019 to offset new gains?
Anyway, using your example, you'd record a $10 loss on security A against
Capital Gains. It would show a negative balance. Then you'd record the sale
of security B with a $20 gain... that would make the Capital Gains show a
$10 balance. In the following year, if you sold security C for a $15 loss,
the Capital Gains balance would now by negative $5. One the capital gains
/ losses can no longer be used, you can zero out that year by transferring
the gain or loss to Equity... suppose 2019 shows a loss that you never got
to use of $20... you'd make an entry on 31 Dec 2023, with a credit of $20
to Capital Gain and a debit of $20 to Equity (because it's a loss). That
way your current state will show in the charts list, and you can open up
the Capital Gains account and check at the last entry for a year to see
where that year stands.
The online GnuCash document has examples of selling stock and recording the
gain/loss.
On Wed, Jan 24, 2024 at 9:54 AM Mattia Rizzolo <mattia at mapreri.org> wrote:
> Here we don't do LT/ST, but it's only possible to offset losses up to
> the end of the 4th year after the loss was realized. Meaning that 2019
> losses are now in stone. Besides, one offests losses by fist pickin the
> furtherst year first, so it's good to know how much is left to offset
> from each given year for each broker (it's common practice in Q4 to look
> at what's left over from 3-4 years before and evaluate what to do to not
> lose the credit).
>
> See the screenshot of what I got right now, for example.
> Wouldn't obtaining these numbers, by putting both losses and gains in
> the same bucket and then using the standard-provided reports, be
> unnecessarily hard?
>
>
> Again, note that I'm not using this to compute my own taxes, that's done
> by the brokers already (I'm nowhere near the volume where it would make
> sense for me to take over that "job" - which I could fwiw), but I do
> want my data to match theirs.
>
>
> On Wed, Jan 24, 2024 at 06:32:08PM +0300, David T. via gnucash-user wrote:
> > Likewise not an accountant.
> >
> > In the US (my tax authority), gains are taxed at two rates (long term
> and short term), and gains and losses offset each other. I maintain
> separate income accounts for short term and long term gains/losses (income
> accounts because I'm an optimist!). These are placed in parent accounts for
> the brokerage (since each broker sends its own tax reports). There's no
> need to separate by year, since a saved report gives me last year's data
> instantly.
> >
> > To summarize:
> >
> > Income
> > - Realized gains
> > - - Broker 1
> > - - - LT gains
> > - - - ST gains
> > - - Broker 2
> > - - - LT gains
> > - - - ST gains
> >
> > David T.
> >
> > On Jan 24, 2024, 5:22 PM, at 5:22 PM, Patrick James <
> patrickjames14 at comcast.net> wrote:
> > >Again keeping in mind that I am NOT a tax authority.
> > >
> > >Now that we're on the equity side, let's move forward with your
> > >tracking.
> > >
> > >I very much doubt that you need two separate accounts for the losses
> > >and gains; from what you're suggesting, you need to match some gains
> > >with some losses. I would match these in a single account "XXXX Capital
> > >Gains" where it is known that CR is "gain" (the expected/desired
> > >'normal' balance) and DR is "loss." Just labeling an account "Capital"
> > >is difficult when looking back/keeping track of what is what. And one
> > >need not label it "Capital Gain or Loss," as the "or loss" part is
> > >understood based on the balance in the account.
> > >
> > >Given what you are requesting, I'd have something like this:
> > >
> > >Capital Gain
> > >----2017 Broker 1
> > >----2017 Broker 2
> > >----2018 Broker 1
> > >----2018 Broker 2
> > >
> > >You would know what is best in terms of subaccounts.
> > >
> > >Then run reports if you need some specific information, which could
> > >include separating the losses from the gains based on the debits and
> > >credits.
> > >
> > >Keep in mind that I'm providing some ideas about how to use GNUCash as
> > >a tool, and I have no idea about your tax requirements.
> > >
> > >
> > >> On 01/24/2024 3:11 AM PST Mattia Rizzolo <mattia at mapreri.org> wrote:
> > >>
> > >>
> > >> Thank you Patrick for your suggestion!
> > >>
> > >> I see what you are suggesting here… Mh.
> > >>
> > >> It could easily become very messy as the rules for offsetting gains
> > >is
> > >> fairly annoying here: gains some financial instruments can offset
> > >losses
> > >> only from some other particular financial instruments (i.e., "gains"
> > >> from the dividends can *never* be offeset, or losses from stocks
> > >can't
> > >> be offset by gain on ETFs, etc)… Plus the fact that I'd need to
> > >split
> > >> losses by years and brokers… it's going to be annoying to have an
> > >> account clearly state the "correct" credit I'm due this way.
> > >>
> > >>
> > >> But I think you may have pointed me to the right direction, of
> > >keeping
> > >> everything within the equities, here is what I've done:
> > >> (yes, I realize that income/expenses are "the same thing")
> > >>
> > >> Expenses
> > >> |- Capital Loss
> > >> |- Broker 1
> > >> |- 2017
> > >> |- 2020
> > >> |- 2021
> > >> |- 2023
> > >> Income
> > >> |- Capital Gain
> > >>
> > >> So, I changed my losses to be posted against the proper "capital
> > >loss"
> > >> account instead of being a negative gain, and then I'm posting the
> > >> future gains as compensation of that loss (and only for the part that
> > >> can be compensated).
> > >> This way indeed the balance of the Broker1 account does match with
> > >what
> > >> the broker is showing me.
> > >>
> > >>
> > >> Do anybody believe I may be missing something out when recording
> > >capital
> > >> gains/losses this way?
> > >>
> > >>
> > >> On Tue, Jan 23, 2024 at 03:43:03PM -0800, Patrick James wrote:
> > >> > Let's start with your best bet is to work with your tax
> > >professional as to how best to keep track of what's needed for taxes.
> > >> >
> > >> > In the US, what you call a "credit" generally would not be an asset
> > >account. The "credit" would be a potential offset to some future gain,
> > >if there is any future gain, so I would leave all this over on the
> > >equity side.
> > >> >
> > >> > Day 0 Purchase:
> > >> >
> > >> > Stock (asset) $100DR
> > >> > Cash $100CR
> > >> > Purchase of 100 shares of Stock Y for $1 per share
> > >> >
> > >> > Day 365 Sale:
> > >> >
> > >> > Cash $90DR
> > >> > Capital Gain $10DR
> > >> > Stock (asset) $100CR
> > >> > Sale of 100 shares of Day 0 Stock Y for $0.90 per share.
> > >> >
> > >> > NOTE: One hopes that capital gains has a CR (gain) balance, rather
> > >than the DR balance above (loss).
> > >> >
> > >> > Later, if there was some sale for a gain, then the CR recorded to
> > >Capital Gain would offset some or all of the DR.
> > >> >
> > >> > Also note that matching the shares as I have done above is not
> > >always as simple as this single stock sale where all shares are
> > >purchased on a single day and the entire holding is sold a year later.
> > >> >
> > >> > Again, talk to your tax professional about how to best keep the
> > >records necessary for tax compliance.
> > >> >
> > >> >
> > >> > > On 01/23/2024 1:43 PM PST Mattia Rizzolo <mattia at mapreri.org>
> > >wrote:
> > >> > >
> > >> > >
> > >> > > Hello,
> > >> > >
> > >> > > I'd like some input on how to best record a tax credit due to
> > >capital
> > >> > > loss, and possibly the following usage of such credit.
> > >> > > Disclaimer: I'm not doing this for anything worth, it's a
> > >personal book
> > >> > > that nobody but me sees, so I can take a few liberties and not
> > >follow
> > >> > > whatever regulation to the letter. Besides, I have no formal
> > >education
> > >> > > on accounting.
> > >> > >
> > >> > >
> > >> > > The case is the following:
> > >> > >
> > >> > > 1 buy security A, cost $100
> > >> > > 2 buy security B, cost $100
> > >> > > 3 sell security A, get $90
> > >> > > 3a → record $10 loss
> > >> > > 3b → get a $10 tax credit on following capital gains
> > >> > > 4 sell security B, get $120
> > >> > > 4a → record $20 gain
> > >> > > 4b → offset $10 from 3b
> > >> > > 4c → pay tax on the remaining $10 (26%, $2.6 over here)
> > >> > >
> > >> > > I reckon all jurisdictions have something similar in concept, all
> > >with
> > >> > > their differences in details.
> > >> > >
> > >> > > This is a tad further complicated by the fact that each broker
> > >has its
> > >> > > own "bucket" of credits (can't comingle losses and gains across
> > >> > > different brokers). Also the credits expire after 4 years, so I
> > >should
> > >> > > record under which year they matured. As such, I expect an
> > >addition to
> > >> > > my CoA, such as:
> > >> > > Assets
> > >> > > |- Credits
> > >> > > |- Capital Loss credits
> > >> > > |- broker 1
> > >> > > |- 2020
> > >> > > |- 2021
> > >> > > |- 2022
> > >> > > |- 2023
> > >> > > |- 2024
> > >> > > |- broker 2
> > >> > > |- 2022
> > >> > > .....
> > >> > >
> > >> > >
> > >> > >
> > >> > > I've been using gnucash for ~3 years now, but I always
> > >procrastinated on
> > >> > > figuring out the 3b/4b steps, just posting the resulting net tax
> > >> > > transaction as computed by the broker.
> > >> > > For me it's really not obvious what's the opposing account from
> > >where
> > >> > > the money should come/go...
> > >> > > How do people do it here? :)
> > >> > >
> > >> > >
> > >> > > Thank you for all the hints!
> > >> > >
> > >> > > --
> > >> > > regards,
> > >> > > Mattia Rizzolo
> > >> > >
> > >> > > GPG Key: 66AE 2B4A FCCF 3F52 DA18 4D18 4B04 3FCD B944 4540
> > >.''`.
> > >> > > More about me: https://mapreri.org :
> > >:' :
> > >> > > Launchpad user: https://launchpad.net/~mapreri
> > >`. `'`
> > >> > > Debian QA page: https://qa.debian.org/developer.php?login=mattia
> > >`-
> > >> > > _______________________________________________
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> > >> > > gnucash-user at gnucash.org
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> > >>
> > >> --
> > >> regards,
> > >> Mattia Rizzolo
> > >>
> > >> GPG Key: 66AE 2B4A FCCF 3F52 DA18 4D18 4B04 3FCD B944 4540
> > >.''`.
> > >> More about me: https://mapreri.org : :'
> > >:
> > >> Launchpad user: https://launchpad.net/~mapreri `.
> > >`'`
> > >> Debian QA page: https://qa.debian.org/developer.php?login=mattia `-
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> --
> regards,
> Mattia Rizzolo
>
> GPG Key: 66AE 2B4A FCCF 3F52 DA18 4D18 4B04 3FCD B944 4540 .''`.
> More about me: https://mapreri.org : :' :
> Launchpad user: https://launchpad.net/~mapreri `. `'`
> Debian QA page: https://qa.debian.org/developer.php?login=mattia `-
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--
_________________________________
Richard Losey
rlosey at gmail.com
Micah 6:8
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