Non-taxable distribution (return of capital)
the.dawning.sky at gmail.com
Mon May 14 23:26:07 EDT 2007
On 5/14/07, Mark Johnson <mrj001 at shaw.ca> wrote:
> Dawning Sky wrote:
> > 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
> >> 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
> >> 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
> >> 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
> >> 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
> >> 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
> >> 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
> It is not simply income as the cost basis of the funds must be reduced.
> This must be tracked for capital gains purposes when the funds are sold.
> I have the same problem. The funds I have also do nasty things with
> capital gains distributions.
> I have found no way for gnucash to simultaneously track the cost basis
> and number of shares. I have given up trying to get gnucash to track
> the number of shares, and treat these funds the same way as the Degas
> painting example in the manual. (This is a pain in the neck when I want
> to update the unit price, but I can track the cost basis accurately.)
So the question becomes how to track the cost basis for stock or mutual
funds. Usually I let my broker take care of this for me. But if I want to
track it in Gnucash, I probably would utilize an equity account. It will
only track the total cost, not the cost per unit. Again, I'm not an
The following are the journal entries:
*General Journal* *Date* *Description* *Account* *Debit*
*Credit* 2007-05-01 Opening balance
2007-05-02 Buy Mutual Fund FBALX
Equity:FBALX Cost Offset
2007-05-13 Return of Capital
And this is the balance sheet
*Balance Sheet 2007-05-14*
*Assets * * *
FBALX <gnc-register:acct-guid=035f82a53374788ab10e1b9afc05fac5> 100
FBALX $900.00 *Total Assets * *$1,000.00 *
*Liabilities * * *
*Total Liabilities * *$0.00 *
*Equity * * *
Cost Offset <gnc-register:acct-guid=09700f2f6fbba528d4e29e4474668384>
000.00 *Unrealized Losses * *$100.00 * *Total
Equity * *$1,000.00 *
*Total Liabilities & Equity * *$1,000.00*
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