Non-taxable distribution (return of capital)

[Dawning Sky]

On 5/14/07, Jimmy Kaplowitz <jimmy at kaplowitz.org> wrote:
> (Please CC me on replies since I'm not subscribed to the list, though if
> you forget I will try to remember to look at the archives.)
>
> Hi,
>
> I'm trying to properly account for a so-called non-taxable distribution,
> or return of capital, that some mutual funds of mine give to me
> periodically. They consist of, as I said, a return of capital I put into
> the mutual fund, reducing my cost basis in the fund and lowering the
> price per share but without reducing the number of shares I own or (in
> most cases) giving me any taxable income.
>
> In the gnucash-user archives from January 2005, I found instructions
> saying to credit the mutual fund account for the amount of the
> distribution in a 0-share transaction, and to debit the relevant cash
> amount for the same amount. This is accepted, however it causes my books
> not to balance for all dates on or after such a transaction. The assets
> no longer equal the liabilities plus equity; they grow on a daily basis,
> while the liabilities plus equity do not. In the trial balance, the
> debits also do not equal the credits. When I temporarily void those
> transactions, the books balance again. Something is wrong here.
>
> This isn't the usual stock sale split example in the FAQ, since no stock
> was sold. I have no idea how to fix this; please provide pointers.
> Thanks.
>
> - Jimmy Kaplowitz
> jimmy at kaplowitz.org
>
> P.S. - I'm using Gnucash 2.0.2, and am happy to upgrade to 2.0.5 if my
> problems are due to a bug that was fixed between the two versions.

I'm not an account, but I would suggest just treating the return as an
income (whether it is taxable or not is another issue).  The decrease
in value of the MF acount will play out by itself since the NAV is
reduced.

DS