[GNC] When income is not income

[Stan Brown (using GC 4.14)]

Just a reminder: please include the list in replies.

On 2025-07-02 13:50, Michael or Penny Novack wrote:
> The basis of an asset is the amount at which it enters the books.
> 
> Now about the annuity being a strange sort of asset in that it
> disappears at a conditional event, cannot be left to beneficiaries (well
> that would be meaningless). But you are wrong about its "sale".
> 
> The ASSET in this case is a contractual right, the right for you (or
> somebody else) to receive periodic "rents" until a certain condition is
> met. That right CAN be sold, seized by a court order, etc.
> 
> There are OTHER possible "funny assets".  Since many people on this list
> seem to be accounting for holdings in securities, how are you handling
> "options"?

That's easy: I'm not. For me, all derivatives violate the sleep-at-night
principle of investing. My portfolio is mostly low-expense index funds.

> Here these could be bought/sold but also could be exercised
> or expire unused. Those accounting for businesses, especially when
> bought or sold, will likely be dealing with intangible assets like
> goodwill and "no compete" covenants.
> 
> Even very tangible assets like a house might be subject to conditions
> (You can't sell of leave in a will a "life tenancy")

Those examples were helpful, showing that an annuity can share some
properties with other finds of "funny assets".

So initially I show the account balance for that annuity asset as what I
paid for it in June 2024. Does it stay that way, or do I adjust based on
annual statements?

Say in January 2025 I get my annual statement showing that a Fair Market
Value (FMV) that is more than I paid. Do I debit my annuity asset with
the difference and credit Accumulated Unrealized Gains/Losses?

Payments start in June 2025, so each month I debit Checking Account and
credit Annuity Income as you suggested.

In January 2026, let's say my annual statement shows an FMV that is
$7000 higher than (FMV a year earlier) minus (7 × monthly payments).
Again, do I debit the annuity asset $7,000 and credit Accumulated
Unrealized Gains/Losses. Or does the annuity asset just stay at the
amount I paid, until my death wipes it out?

Stan Brown
Tehachapi, CA, USA
https://BrownMath.com