Tracking cost basis of shares

Richard Wackerbarth
Mon, 10 Jul 2000 07:51:37 -0500

On Mon, 10 July 2000, Dave Peticolas wrote:

> > While it's quite doable, it's not quite trivial if we want it done with a
> > reasonable degree of efficiency.

> Yes, and we should probably discuss it in the larger context of ...

> The recent ... patch is intended to be used ...

> have only mechanism, ...

> need to develop some policy.

Hey, guys! Does this suggest that we are approaching this problem from the 
wrong direction? Instead of implementing mechanisms, perhaps we should first 
determine NEED, then POLICY, and finally MECHANISM.

The Corvette, Lexus, and Ferrari are all great cars. But which one do you 

BTW, drop off this hay in the south pasture on your way to the 'Baja race.  

A few observations:
1) Basically we can view all of these "accounts" as inventories.
For example, a bank account is the inventory of "cents" stored in a 
particular bank account.
2) An inventory has three components "quantity", "cost", and "value".
3) Accounting principles require that we apportion the cost when we change 
the quantity. However, it is possible to change the cost or the value without 
affecting the quantity.
3) "Cost" and "Value" are not the same. The value is composed of two 
components, "basis" and "unrealized gain". Fluctuations in the quoted price 
affect the "unrealized gain" component, but not the "basis". Return of 
Capital affects the "basis", but generally not the momentary "unrealized 
4) Just because we CAN treat all "inventories" in one consistent manner does 
not necessarily mean that we SHOULD do so. The vast majority of transactions 
are in native currency and the ratio of value to quantity is constant.