Fwd: US tax with foreign stocks advance portfolio

Thu Dec 21 11:19:23 EST 2017

Hi Christopher,

I think I have understood how we can deal with Gnucash several currencies.
It is a little bit weird but I get what I want to see on the Advanced
Portfolio.
So the main point here is to *not follow the Purchasing foreign stocks from
the GnuCash guide if you want to track the correct cost basis*. I am not
saying the example is wrong, only that is not valid if you want to track
the cost basis
The example uses the secondary currency to input the stock purchases
instead of the primary currency. And the Advanced Portfolio only use one
exchange ratio for basis and value. The key here is to input all the
purchase in the main currency, so the Advanced Portflio only has to
exchange the value but not the basis.

Attached is my test file.

Gnucash takes the security currency (in my case DXIBX.MC) for the
transaction from the parent account. In my case Investment/Brockerage
Account/Stock. But, and this is important, the currency is set up on the
first transaction. Only on the first transaction.
In my case, Investment/Brockerage Account/Stock is USD because I want the
cost basis in USD. This account is in USD for the first stock purchase, and
that is the way GnuCash understand that this account is in USD. After the
first transaction (450/10/4500), if I change the Investment/Brockerage
Account/Stock to EUR, the first transaction and each following
transaction, *for
the cost basis purposes*, will remain in USD. *Repeat: Only for the cost
basis purposes*. There is some weird interaction when I change the currency
of the opening balance and  Investment/Brockerage Account/Stock to EUR.
Some parts remain in EUR and some in USD.

And what happens with the stock value? First thing is to delete from the
price editor any stock price added by Gnucash for each transaction in USD
if we want to value the stock in EUR. And then provide the
required information for the stock prices in EUR and the EUR/USD exchange.

Sorry if the description is confusing.  I hope we can prepare a guide with
the correct instructions that can help anyone facing these issues.

On Thu, Dec 21, 2017 at 2:41 AM, Christopher Lam <christopher.lck at gmail.com>
wrote:

> Hi Ignacio
>
> I agree there are limitations with exchange rate valuation.
>
> I note you were using the Advanced Portfolio report. Some issues also
> apply to the other reports with currency conversion
>
> I can see two issues here:
>
> 1. options for exchange rates are:
>
>  a) locked on to report date
>  b) locked on to the most recent rate available
>  c) weighted average (not sure what this means)
>  c) average rate (not sure what this means)
>
> I think there's an old mechanism to calculate according to exact rate
> obtained for the transaction. I recall there was an issue with performance
> in the past. Perhaps we can investigate further, but no promises here.
>
> Moreover, let's say I own 1 share of AAPL. The price is $1000. The
> company decides to a 10:1 stock split. I receive 9 additional shares, and
> the price is now $100. My net worth hasn't changed but the charts cannot
> handle the new price and the new stock quantity smoothly.
>
> 2. your question mentions US tax with foreign stocks.
>
> I assume you are a US resident and hold foreign stocks. Let's assume it's
> GSK in London. There are now two rates applicable - GSK-GBP and GBP-USD. I'm
> not 100% sure about how it calculates GSK -> GBP -> USD. What to do when
> some price data is missing?
>
> I think occasionally the GSK is subsequently valued to 0 USD which is
> unsatisfactory.
>
> Further discussion welcome!
>
> On 21 Dec 2017 10:32 AM, "Ignacio Fernandez Ortega" <nfernan at gmail.com>
> wrote:
>
>> I am going to respond to myself just to keep this information if someone
>> ask the same question in the future.
>>
>> No, it seems there is no way. Advance portfolio applies always the same
>> exchange rate to basis and value. (I am trying to understand the trading
>> option but I am not sure it is going to help me)
>> The other way to do it is buying the stock (initial and additional
>> purchases) and keeping the price list for this security using the Gnucash
>> main currency. In my case $.
>> That's the only way to keep the cost basis with the original exchange
>> rate,
>> basically deleting the exchange.
>>
>> Pros: the advance portfolio is updated and you only use one currency
>> Cons: forget about the automatic download of quotes. You have to do it
>> manually.
>>
>> If your portfolio only has 2 stocks probably is fine but with 10 stocks
>> and
>> several purchases and dividends every week it is a lot of work.
>>
>> I wish I could understand the program to fix the advance portfolio format
>> but I think in my case it could make sense to have a spreadsheet.
>>
>> Thanks
>>
>>
>> ***********************
>>
>> Hi,
>>
>> Question about how Gnucash handles the foreign stocks. My Gnucah main
>> currency is dollar but I have some stocks in EUR.
>> Gnucash is updating the basis cost in dollar every time I update the EUR/$
>> exchange rate in the Advance Portfolio report.
>> However, IRS requires comparing the selling price with cost basis with the
>> exchange rate at each specific date.
>> https://www.irs.gov/individuals/international-taxpayers/fore
>> ign-currency-and-currency-exchange-rates
>>
>> Is there a way to keep the cost basis with fixed exchange rate?
>>
>> Thanks
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