Capital Gains Documentation

[David Carlson]

The proper place for information that only a few need to read is a
bibliography or appendix.

David C

On Dec 15, 2016 4:35 AM, "David T. via gnucash-user" <
gnucash-user at gnucash.org> wrote:

> Chris,
> I interpreted John's remarks (the current ones, but also those in October)
> as indicating that these tactics would not be broadly applicable, and thus
> not appropriate in the docs.
> While interesting as a concept, I think we need to balance that with the
> need not to overwhelm the many with the needs of the few.
> David
>
>
>
>   On Thu, Dec 15, 2016 at 13:02, Chris Good<chris.good at ozemail.com.au>
> wrote:
> From: John Ralls [mailto:jralls at ceridwen.us]
> Sent: Thursday, 15 December 2016 5:10 PM
> To: Chris Good <chris.good at ozemail.com.au>
> Cc: gnucash-user at gnucash.org; sunfish62 at yahoo.com
> Subject: Re: Capital Gains Documentation
>
>
>
>
>
>
> On Dec 14, 2016, at 9:02 PM, Chris Good <chris.good at ozemail.com.au> wrote:
>
>
>
>
> Message: 2
> Date: Wed, 14 Dec 2016 21:02:18 +0500
> From: "David T." <sunfish62 at yahoo.com>
> To: GNU Cash User <gnucash-user at gnucash.org>
> Subject: Capital Gains Documentation, Redux
> Message-ID: <1470DFA7-BE70-43B7-A11F-024F7C9B9398 at yahoo.com>
> Content-Type: text/plain; charset=us-ascii
>
> Back in October, John Ralls raised the possibility of removing the Guide
> Chapter on Capital Gains as unnecessary. That discussion petered out after
>
>
> a
>
>
>
>
> bit of discussion, but it seems as if the chapter lives on. I propose
>
>
> having
>
>
>
>
> it
> removed now.
>
> David T.
>
>
>
> Hi David,
>
> IMHO there is some good stuff in there that should be kept. John had a
> suggestion for recording unrealised capital gains on your house as a
> commodity. I'm not sure of the implications of that but just for personal
> finances, I'm wondering what exactly the disadvantages would be of
> recording
>
> the unrealised gains in an Income:Unrealised Gains account as suggested by
> the
> guide?
>
> Wouldn't using a house commodity make it difficult to come up with a net
> worth that included your house? Even if this is only an estimate, it is
> useful to have.
>
> How would a business do it? If using Income:Unrealised Gains is not how it
> should be done in formal accounting, then we should change the
> documentation
>
> to be correct. It would be good if some accountants could give us the
> benefit of their experience.
>
>
>
>
> Chris,
>
>
>
> Not exactly. What I proposed was creating a commodity for your house and
> entering prices for that commodity in the price editor. Since GnuCash's net
> worth tools, including reports, the Accounts page, and the summary bar, use
> prices to calculate current value you'll get the price-based net worth
> you're looking for without the pain of mark-to-market accounting [1], which
> isn't somewhere you want to go unless you must.
>
>
>
> How would a business do it? Depends on the business and whether they
> either have a regulatory requirement (as do some banks and financial
> companies) or see some other advantage (as did, notoriously, Enron and
> Arthur Anderson) to use mark-to-market. Failing that, meaning most ordinary
> companies and all "natural persons" (actual people), assets are accounted
> for at (depreciated if appropriate) cost until disposal. Depreciation is
> generally a deductible expense only for businesses. Gains are booked as
> income (sometimes a special kind of income depending on the nature of the
> asset and the jurisdiction) only when the asset is disposed of.
>
>
>
> What's the problem with booking unrealized gains as income if you're not
> supposed to? It makes it harder to book the realized gains when you come to
> sell the asset because the tax man isn't interested in your unrealized gain
> income on which you didn't pay taxes: He wants to know what you originally
> paid, how much you depreciated the asset if you could and did, and how much
> you got paid when you disposed of it. If you've booked adjustments to the
> asset's value in the interim you'll have to undo all of those transactions
> to calculate the actual realized gain to pay your taxes. You'll also have
> an income account that you must remember to ignore when doing your taxes
> every year.
>
>
>
>
>
> Regards,
>
> John Ralls
>
>
>
> [1] https://en.wikipedia.org/wiki/Mark-to-market_accounting
>
>
>
> Hi John,
>
>
>
> Thanks. Great info which I think should go into the guide. I’ll add it to
> my list unless you want to do it David?
>
>
>
> Regards,
>
> Chris Good
>
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