Commission split buying stocks?

[Dave Reed]

On Tuesday 02 November 2004 17:23, David Harrison wrote:
> 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.


I'm in the U.S. The schedule D form does not have a place for entering
the commission - just the net basis and net sale. 

I agree that it really doesn't matter as long as you end up with the
correct answer. I'm just surprised by the suggestion to use the
Expense:Commissions account also since it appears to me to make it
more difficult to get the gain/loss correct for your taxes. If you did
that for both sales and purchases, you couldn't just look at your
commission expense account and get the correct amount for that year
(since some of the commissions might be the basis for stocks you
bought this year but did not sell yet). And on the US tax form, you
want the correct commission for each sale (not just the total of your
commissions) so that it matches the 1099 form your broker sends you.

Dave