[GNC] Return of capital, lots & accurate gains

[Kalpesh Patel]

I was under the understanding that the effect of return of capital (RoC) is that the capital gains get postponed until when you sell the commodity, and that the cost basis gets reduced by it when RoC is distributed.

In the States, the financial servicer should not be sending a dividend statement, and re-characterize it as a RoC at another time - they are two different things and are treated differently for the tax purposes.

I normally go back to the original purchase transaction and readjust the cost basis for them. It does become a bit cumber some if multiple lots are involved but I believe that is the correct treatment of it. I welcome weigh in from pro's than I am. 


-----Original Message-----
From: Alton Brantley <alton.brantley at gmail.com> 
Sent: Saturday, March 29, 2025 1:40 PM
To: Gnucash Users <gnucash-user at gnucash.org>
Subject: Re: [GNC] Return of capital, lots & accurate gains

Here’s how I handle this:
During the year, these are mostly recorded as Income:Dividends. Occasionally they are explicitly listed as Assets:Return of Capital. 
When dividends are reclassified, I reduce Income:Dividends and increase Assets:ROC.
 Since the only time the ROC comes into play is upon sale of the stock, I just reduce outstanding ROC by the percentage of shares sold and add that amount as a Capital Gain for the transaction. 

Example for Company A:

Dividend increases cash asset

Dividend payment
Cash:           50
Dividend:A.         50

Reclassification to ROC of 50% of Dividends converts that to an Unrealized Capital Gain Dividend:A. 25
A:ROC                  25

So now, net dividend from A is 25 and I have an unrealized asset of 25

Assuming I have 200 shares of A and I sell 100 shares The sale produces a Realized Gain transaction for the lot which doesn’t capture the ROC, I add a transaction that takes 50% of the ROC and credits it as a Gain. 

Recapture of ROC
A:ROC.           12.50
RealizedGain.         12.5

Leaving the remaining A:ROC to be applied when the other shares are sold.
For different lots acquired at different times, I prorate the ROC over lots, so I have accounts like A:ROC:Lot 0 A.ROC:Lot 1 A.ROC:Lot 2 etc.


--Alton Brantley