[GNC] Accounting Question re Balance Sheet

[paul at kroitor.ca]

This isn't really a GnuCash question, but I thought I might ask you guys
anyway as there's a broad variety of skills and experience here.

 

Situation: a relative owns a house on a six acre property, plus several
adjacent properties she's collected over the years. Under Canadian tax
rules, the house and some of the lot it's on are tax exempt. The other
properties are taxable for capital gains. They will be sold over the next
years, one at a time to keep marginal rates down. There will also be
significant sales expenses (commissions, surveyors, .) associated with each
sale.

 

My question is about how to structure this tax and sales costs liabilities
in the Chart of Accounts, and thus the balance sheet. 

 

It seems to me sensible to have the properties in Assets*, and the expected
Sales Fees / Taxes in Liabilities*. Then when a property is sold, both
assets and liabilities are reduced by the expected values, and the
differences between the expected and actual values are booked as Income or
Expense (Net gain / loss on land sales?).

 

This approach makes the Balance Sheet reasonable every year, but the Income
Statement only shows the adjustment, not the total funds in and out due to
the sale.

 

I've tried some alternatives too, but not having the properties as assets
makes the Assets side of the balance sheet look silly, whereas not having
the expected taxes / sales costs in Liabilities means that a sale triggers a
huge, unexpected expense in the Income Statement without any corresponding
income to cover it.

 

Am I missing some cleverer way to do this? Is there a GAAP approach for
this? 

 

Thanks for any suggestions,

Paul

 

*I know "real" books keep only the book values of these assets and tax
liabilities, but as this is a person rather than a company, and the reports
need to make sense to a non-business person, we use current market values in
these accounts, and annually update the expectations.