[GNC] When income is not income

[David Cousens]

Stan,

I personallywould regard the increase in Fair Market Value as an
increase in the fund, but I think it would be better to get the opinion
of a practising accountant in your jurisdiction. As your income from
the fund is taxable, it is likely that any income to the fund is
taxable but whether that is in your hands or the fund  manager's hands
will depend on the relevant legislation.

My case differs perhaps in that I get an annual statement detailing my
drawings and the increase in the fund from the investment returns after
tax paid by and the fees paid to the fund manager, so I feel quite
justified in posting that  as an increase in the basis of the fund as
it adds to any residual value my estate will receive on my death. I
record the income as a credit to non-taxable income and debit to the
asset account.

David






On Wed, 2025-07-02 at 14:50 -0700, Stan Brown (using GC 4.14) wrote:
> On 2025-07-02 13:32, David Cousens wrote:
> > Stan,
> > 
> > You seem to be thinking of basis as in "tax basis", but there is a
> > more
> > general accounting meaning.  
> > 
> > The basis of an asset as Michael pointed out will initially be its
> > cost
> > of purchase together with any additions to its value. 
> 
> It's those additions I'm not clear on.  Here's a reprint of the
> questions I asked Michael; on that point:
> 
> > 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