[GNC] Dealing with mutual funds

[sunfish62 at yahoo.com]

According to H&R Block, determining your basis involves "generally the purchase price plus any commissions or fees paid."

So, unless I'm missing something, no, your brokerage *won't* report a gain in this example, since gains are calculated against your basis, and not the price. And basis includes fees. 

⁣David T. ​

On Nov 5, 2024, 11:13 PM, at 11:13 PM, R Losey <rlosey at gmail.com> wrote:
>A very interesting way to look at it; I agree that many exchange
>services
>have a "worse" rate because it includes their fee; others show a "good"
>rate, but tack on fees. And clearly, if there is no fee shown in a
>receipt,
>one cannot enter calculate it.
>
>Although your statements about the stock are true as far as they go, I
>would have thought that if you purchase a stock at $9.50/share, that is
>the
>"price".  Your "cost" is actually $10/share.  My understanding is that
>if
>you sell it for $9.75/share, the brokerage will report that you have a
>gain
>of $0.25/share, and one will be liable for applicable taxes on capital
>gains.  "Price" and "cost" are not the same thing.
>
>
>On Mon, Nov 4, 2024 at 10:23 PM sunfish62 at yahoo.com
><sunfish62 at yahoo.com>
>wrote:
>
>> Note: I am not an accountant, and am based in the US, whose laws will
>> differ from Switzerland's.
>>
>> I agree that the Dividends account belongs under Income.
>>
>> As an overview, Richard, I'd point out that if you buy something for
>1000,
>> and 10 of the cost is for tax (or delivery, or service charges, or
>> whatever), your cost is still 1000. While it may be interesting to
>identify
>> those specifics, for personal books, it is a lot of work that has
>little
>> benefit.
>>
>> In specific:
>>
>> Many forex outfits I encounter don't even tell you their fees. They
>simply
>> tell you the final exchange rate you receive. To track the fees,
>you'd have
>> to know the inner workings of each firm and calculate them yourself
>(or
>> know the rate they are getting, and calculate the difference) .
>Personally,
>> it's not important information for the amount of work involved. (This
>is
>> similar to the recurring discussion about mortgage payments that do
>not
>> match)
>>
>> Similarly, with the stock, you can say that you bought that stock at
>9.50
>> a share, but if you don't recoup the service charge, you'll still
>lose
>> money when you sell at 9.75 a share. Moreover, in GnuCash, if you use
>the
>> lot feature to manage capital gains, it will mis-calculate the gains
>if you
>> track the service fees separately. At least, that was my experience
>when I
>> used the lot feature some years back.  (I stopped using it for
>various
>> reasons)
>>
>> And a final note: GnuCash never stores the exchange rate. It
>calculates it
>> from the two (actual) amounts include in the transaction. Focusing on
>the
>> number there (and whether it matches what the broker says the share
>price
>> is) will result in dissatisfied experiences since it never matches.
>>
>> David T.
>> On Nov 5, 2024, at 3:59 AM, R Losey <rlosey at gmail.com> wrote:
>>>
>>> Hello.
>>>
>>> I don't think that the "USD Dividends" would be under IBKR - that
>should be
>>> somewhere else, probably under "Income" somewhere. When you are paid
>a
>>> dividend, it either goes into the "Cash" fund, or else it is
>reinvested and
>>> more stock is purchased.  If the dividends are invested, you'd have
>a
>>> "purchase" of that stock.  For example, if you received $100 in
>dividends
>>> and it purchased 5 shares of VT stock (using simple numbers to keep
>it
>>> easy), you have a transaction in IBKR-VT that purchased 5 shares for
>$100
>>> and the "other" account would be an income account -- for me, it
>goes in
>>> "Income:Investment Income:Taxable:Dividends".
>>>
>>> Other comments -- see below, but I do want to note (as others have)
>that I
>>> am not an accountant.
>>>
>>>
>>> On Sun, Nov 3, 2024 at 4:25 AM Boniforti Flavio
><boniforti.f at gmail.com>
>>> wrote:
>>>
>>>  Hi Richard.
>>>>  I think I was already going that route -->
>>>>  [image: image.png]
>>>>
>>>>  As of now, I have just put all the CHF Cash in that account.
>>>>  As I've added CHF in 5-6 different transactions and in between
>those I
>>>>  have also converted to USD and bought VT stocks, would I need to
>zero the
>>>>  "CHF Cash" account, then add each CHF wire transfer transaction
>>>>  individually?
>>>
>>>
>>>
>>> If each wire transaction is separate, there is the chance that the
>exchange
>>> rate would be different, so I would enter them as different
>transactions.
>>>
>>> But unless you take all of the funds from the CHF Cash account, it
>doesn't
>>> need to be zeroed.  Assuming that there is $1000 in CHF Cash and
>$1000 in
>>> USD Cash, you could remove any or all of the CHF Cash, and then add
>the
>>> appropriate USD amount to the USD Cash account.
>>>
>>> Next, you would have a transaction for the purchase of VT stock,
>with the
>>> funds comes from the USD Cash account.
>>>
>>>
>>>
>>>  And then for each currency conversion I did, create the according
>>>>  transaction between "CHF Cash" and "USD Cash" accounts, after
>which I would
>>>>  add the VT purchase transactions - right?
>>>
>>>
>>>
>>> That sounds right to me.
>>>
>>>
>>>
>>>  If I do it like that, I could "hide" the ForEx trading fees by
>simply
>>>>  adjusting the conversion rate (like if I had converted CHF 1'000.-
>and I
>>>>  got USD 1'140.- and paid 1 USD fees, I could just "ignore" the fee
>and
>>>>  adjust the conversion rate so that it gives CHF 1000 --> USD
>1140). Would
>>>>  that work?
>>>
>>>
>>>
>>> It may "work" but it would probably be more accurate to have a split
>>> transaction with that shows the CHF 1'000 decreasing by 1'000 and
>then the
>>> USD account going up by 1'141 with a USD 1 decrease assigned to the
>account
>>> where you track the exchange fees. That way the CHF-to-USD rate
>would be
>>> correct, and you could see what you are paying for exchange rates.
>>>
>>>
>>>
>>> | Would this process also work when buying VT stocks? In that case,
>I buy a
>>> fixed amount of VT stocks at the VT price, and I could
>>> | "hide" the fees by adjusting the stock unit price?!
>>>
>>> Again, I suppose you **could** do that, but I usually put the fees
>in
>>> separately. If I spend $1000 purchasing a stock that is worth $998,
>the
>>> other $2 is assigned to my account for Investment Fees
>>> ("Expenses:Investment:Fees")
>>>
>>>
>>>
>>>  What's not clear to me at this point is: if I will have 1000 VT
>stocks,
>>>>  where will the actual value be reflected/calculated? Is it
>depending on
>>>>  manual retrieving the VT quotes via Finance::Quote?
>>>
>>>
>>>
>>> Yes, if you are getting quotes via the stock quote your VT value
>will
>>> reflect the last price update you retrieve. It will NOT change your
>>> transaction.  However, by "hiding" the fee as you propose, it will
>look
>>> like you've lost money when you have not. See the following example:
>>>
>>> You spend $100 to purchase 10 shares of VT, but there is a fee of
>$5.  The
>>> reality is that you paid $95 for those 10 shares, or $9.50 a
>share...
>>> however, by "hiding" the fee in the price, it looks as if you paid
>>> $10/share.  The next day, the price goes up to $9.75 -- you have
>actually
>>> gained $2.50 ($0.25 gain on 10 shares); however, in GnuCash, it will
>look
>>> like the price has "dropped" from $10 to $9.75 and that you have
>lost $0.25
>>> per share).
>>>
>>>
>>>
>>>  Thanks,
>>>>  F.
>>>
>>>
>>>
>>> I hope this is helpful...
>>>
>>>
>>>
>>>
>>>>  Am Mo., 21. Okt. 2024 um 19:32 Uhr schrieb R Losey
><rlosey at gmail.com>:
>>>>
>>>>
>>>>>  --
>>>>> ------------------------------
>>>>>
>>>>>  Richard Losey
>>>>>  rlosey at gmail.com
>>>>>  Micah 6:8
>>>>
>>>>
>>>>
>>>>
>
>-- 
>_________________________________
>Richard Losey
>rlosey at gmail.com
>Micah 6:8