Stock trades and realized gains/losses

Herbert Thoma tma@iis.fhg.de
Sun Jan 12 22:22:18 CST 2003


Derek Atkins schrieb:
> 
> linas@linas.org (Linas Vepstas) writes:
> 
> > > 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
> > losses' line'.
> 
> So what you are saying is that if you ever DO realize the loss, you
> have to recapture that gain/loss and, in effect, "re-point" all those
> "unrealized loss" transactions to your realized-loss account...
> Meaning you need to know whether an "adjustment transaction" is for
> realized or unrealized gains/losses....  How, "special".
> 
> Obviously you cannot just change the account of the un-realized
> gains/losses, right?  So, you would need to add a new txn from
> unrealizedGL to realizedGL.  That's what I mean by "special".

Strange things indeed. I think the "home" user does not really need
this kind of adjustment, because he does not get anything for it
from the tax authorities (at least nothing in germany).

It is different for the business user. Here this adjustment may
reduce profit and so reduce taxes. May be this is the same as
depreciation of inventory?

 Herbert.

> > 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 ....
> 
> Sigh.  Can I go shoot someone now?
> 
> -derek
> 
> --
>        Derek Atkins, SB '93 MIT EE, SM '95 MIT Media Laboratory
>        Member, MIT Student Information Processing Board  (SIPB)
>        URL: http://web.mit.edu/warlord/    PP-ASEL-IA     N1NWH
>        warlord@MIT.EDU                        PGP key available

-- 
Herbert Thoma
FhG-IIS A, Studio Department
Am Weichselgarten 3, 91058 Erlangen, Germany
Phone: +49-9131-776-323
Fax:   +49-9131-776-399
email: tma@iis.fhg.de
www: http://www.iis.fhg.de/



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