[GNC] how to record tax credit for capital loss

[Patrick James]

Let's start with your best bet is to work with your tax professional as to how best to keep track of what's needed for taxes.

In the US, what you call a "credit" generally would not be an asset account. The "credit" would be a potential offset to some future gain, if there is any future gain, so I would leave all this over on the equity side.

Day 0 Purchase:

Stock (asset) $100DR
Cash $100CR
Purchase of 100 shares of Stock Y for $1 per share

Day 365 Sale:

Cash $90DR
Capital Gain $10DR
Stock (asset) $100CR
Sale of 100 shares of Day 0 Stock Y for $0.90 per share.

NOTE: One hopes that capital gains has a CR (gain) balance, rather than the DR balance above (loss).

Later, if there was some sale for a gain, then the CR recorded to Capital Gain would offset some or all of the DR.

Also note that matching the shares as I have done above is not always as simple as this single stock sale where all shares are purchased on a single day and the entire holding is sold a year later.

Again, talk to your tax professional about how to best keep the records necessary for tax compliance.


> On 01/23/2024 1:43 PM PST Mattia Rizzolo <mattia at mapreri.org> wrote:
> 
>  
> Hello,
> 
> I'd like some input on how to best record a tax credit due to capital
> loss, and possibly the following usage of such credit.
> Disclaimer: I'm not doing this for anything worth, it's a personal book
> that nobody but me sees, so I can take a few liberties and not follow
> whatever regulation to the letter.  Besides, I have no formal education
> on accounting.
> 
> 
> The case is the following:
> 
> 1 buy security A, cost $100
> 2 buy security B, cost $100
> 3 sell security A, get $90
> 3a → record $10 loss
> 3b → get a $10 tax credit on following capital gains
> 4 sell security B, get $120
> 4a → record $20 gain
> 4b → offset $10 from 3b
> 4c → pay tax on the remaining $10 (26%, $2.6 over here)
> 
> I reckon all jurisdictions have something similar in concept, all with
> their differences in details.
> 
> This is a tad further complicated by the fact that each broker has its
> own "bucket" of credits (can't comingle losses and gains across
> different brokers).  Also the credits expire after 4 years, so I should
> record under which year they matured.  As such, I expect an addition to
> my CoA, such as:
>     Assets
>       |- Credits
>             |- Capital Loss credits
>                     |- broker 1
>                          |- 2020
>                          |- 2021
>                          |- 2022
>                          |- 2023
>                          |- 2024
>                     |- broker 2
>                          |- 2022
>                          .....
> 
> 
> 
> I've been using gnucash for ~3 years now, but I always procrastinated on
> figuring out the 3b/4b steps, just posting the resulting net tax
> transaction as computed by the broker.
> For me it's really not obvious what's the opposing account from where
> the money should come/go...
> How do people do it here? :)
> 
> 
> Thank you for all the hints!
> 
> -- 
> regards,
>                         Mattia Rizzolo
> 
> GPG Key: 66AE 2B4A FCCF 3F52 DA18  4D18 4B04 3FCD B944 4540      .''`.
> More about me:  https://mapreri.org                             : :'  :
> Launchpad user: https://launchpad.net/~mapreri                  `. `'`
> Debian QA page: https://qa.debian.org/developer.php?login=mattia  `-
> _______________________________________________
> gnucash-user mailing list
> gnucash-user at gnucash.org
> To update your subscription preferences or to unsubscribe:
> https://lists.gnucash.org/mailman/listinfo/gnucash-user
> -----
> Please remember to CC this list on all your replies.
> You can do this by using Reply-To-List or Reply-All.