Commission split buying stocks?

[David Harrison]

On Tue, 02 Nov 2004 16:22:24 -0500, Derek Atkins <warlord at mit.edu> wrote:
> Dave Reed <drlinux at columbus.rr.com> writes:
> 
> > I know this makes it easier to track exactly how much you've paid in
> > commissions and the exact prices you bought/sold at, but doesn't it
> > make your taxes more difficult. I always enter the price that includes
> > the affect of the commission since that is what affects your basis for
> > tax purposes.
> >
> > For the above example, I would say I sold the 10 shares at $8.005 a
> > share. The difference is usually not that much, but the above
> > commission is pretty large relative to the amount sold.
> >
> > Is what I'm doing wrong?
> 
> I think so, yes, but you'll have to ask an accountant.
> 

This is not an easy question to answer, because it depends on your
local tax laws.  Here's what I would do, based on Canadian tax laws
(and the layout of the forms):

Lets say you purchase 10 shares for $10 each and pay $5 commission. 
This would mean that the shares actually cost $10.50 each.  The entry
would look like this:

Asset:Shares       10   10.50     105.00
         Asset:Bank                                   105.00

Now, you sell the shares for $15 each, and pay another $5 commission.

Asset:Bank                               145.00
Expenses: commission                  5.00
Asset:Stock                                45.00
          Asset:Stock     -10   15                   150.00
          Income: Gain on sale                        45.00

When filling out the capital gains schedule in the T1 (personal income
tax return), you would enter proceeds of disposition $150, cost $105,
and commissions of $5.  This would give you a gain of $40 ($5 per
share less $10 commission).  This is the same as the concepts guide
example at http://www.gnucash.org/docs/v1.8/C/gnucash-guide/invest_sell1.html

As an alternative, you could do this:
Asset:Bank                               145.00
Income:Gain on sale                      5.00
Asset:Stock                                45.00
          Asset:Stock     -10   15                   150.00
          Income: Gain on sale                        45.00

The only difference is that the commission is posted to offset the
gain instead of to a separate expense account.  Either way works,
though.

Hope this helps

Dave