Commission split buying stocks?

[David Harrison]

On Tue, 2 Nov 2004 18:01:18 -0400, Dave Reed <drlinux at columbus.rr.com> wrote:
> On Tuesday 02 November 2004 16:22, Derek Atkins 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.
> 
> 
> While I don't expect a definitive answer from the list saying what I'm
> doing is right for my taxes, I thought this was fairly common.
> 
> This appears to show I am calculating the basis and gain/loss correctly.
> 
> http://taxes.yahoo.com/guide/begin/capgains.html
> 
> Now it doesn't say that accountants would be happy with the way I'm
> entering it. I'm dangerous because I understand the basic concepts of
> double entry accounting and know a fair amount about tax issues for
> individuals but have not had formal training in either. I may end up
> with the correct result for my taxes, it's not the way a professional
> accountant would like to see the bookkeeping done.
> 

One of the most important things to remember when doing bookkeeping is
who is the end user of the reports.  If the only person using them is
you, then you can enter the transactions however you want.  The whole
point is to give you information in a useful format for making
decisions.  Now, if you had to provide statements to a bank or
shareholders, that's a different story.  There are definite rules you
need to follow.  This is called GAAP (Generally Accepted Accounting
Principles).

Another concern is reporting information correctly for taxes.  If your
record keeping provides the information you need to accurately report
your income and expenses for taxes, then you are doing it correctly.

The problem with giving you a definitive answer is I don't know
exactly what you are doing.  You would need to provide me with an
example of the entries you are making.  The basic rule, though, for
capital gains is proceeds of disposition (what you got for it) less
cost (what you paid for it - including commissions).  As long as you
can determine that, then you're OK.  From a quick read of the Yahoo!
page you link to, it sounds like you're alright.

Dave