Capital Gains Documentation

Thu Dec 15 11:36:53 EST 2016

Frankly, I think the wiki is a better place for that sort of information; the Guide already has enough appendices that would probably be better placed in the wiki as well.

David

> On Dec 15, 2016, at 8:03 PM, David Carlson <david.carlson.417 at gmail.com> wrote:
> 
> 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 <mailto: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 <mailto:chris.good at ozemail.com.au>> wrote:
> From: John Ralls [mailto:jralls at ceridwen.us <mailto:jralls at ceridwen.us>]
> Sent: Thursday, 15 December 2016 5:10 PM
> To: Chris Good <chris.good at ozemail.com.au <mailto:chris.good at ozemail.com.au>>
> Cc: gnucash-user at gnucash.org <mailto:gnucash-user at gnucash.org>; sunfish62 at yahoo.com <mailto: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 <mailto: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 <mailto:sunfish62 at yahoo.com>>
> To: GNU Cash User <gnucash-user at gnucash.org <mailto:gnucash-user at gnucash.org>>
> Subject: Capital Gains Documentation, Redux
> Message-ID: <1470DFA7-BE70-43B7-A11F-024F7C9B9398 at yahoo.com <mailto: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 <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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