How do we handle --

Richard Wackerbarth
Fri, 28 Jul 2000 14:17:13 -0500

OK, I'll give up on expecting a clean interface to solve the "round-off" 
problem. I'm sure Bill will eventually get something that gives the right 

The problem that I am now encountering has to do with the cost basis of 
inventory (in particular equities).

Assume that, in January, I purchase 1000 shares of "Startup", a sub-S 
corporation, for $10 per share and that I pay $100 in commission. At this 
point, I have a basis of $10,100 and own 1000 shares.

In December, the company declares taxable income of $300 of which it plows 
back $200 into the operation and distributes $100. Which, fortunately is 
enough to cover the tax I have to pay. At this point, my basis is now $10,300.
I still own 1000 shares. I'm told that the stock is now worth $10.40 per 
share which gives an unrealized gain of $100.

In March, they decide to sell a major portion of the business.
They distribute $5000 as a return of capital. Although I have the money in 
the bank, I don't owe taxes on it. My basis is now $5,300. Unfortunately, the 
value of the stock also dropped :-( It is now quoted at $5.45 per share.

However, in April, I find someone to buy my stock for $5.50. I book a 
realized gain of $200 and put the money in the bank. I no longer own any of 
the stock.

Now, my question is "What gets posted for each of these transactions?"