On 2016.05.22 15:04, Mitch Frazier wrote:
While entering a number of investment transactions recently I
realized that
KMM doesn't actually have a way to record the gain/loss on the sale
of an
investment. I was thinking about implementing something to solve
this but
wanted to pass the idea past the list first.
As a first step at a solution, I was going to add a couple more rows
to the
transaction detail in the investment register:
- A cost basis field. This would be an amount field that is
used to determine how much the cost of the investment is
reduced by the sale. Initially this field could be pre-filled
by the average cost (based on the number of shares being sold).
If the entire investment is sold, this field would be fixed
and not editable.
- A gain/loss field. This would be an splitable account field
for entering the category or categories for the gain/loss.
Splits are useful for allowing both short-term and long-term
gain/loss specifications on a transaction.
The current implementation "hides" the gain/loss because the balance
of an
investment shows as zero when the share value is zero, regardless of
the
amount the investment is sold for. Whereas, since the gain/loss is
not
recorded anywhere, the balance ought to be negative if the investment
was
sold for a gain and positive if sold for a loss.
Mitch
Unfortunately, I think that may be a bit simplistic. Once you have
sold all off an equity, its value is zero, since you don't have any of
it any more. When you do sell, the amount of the basis is not income -
it just gets back what you paid to acquire it. It is the difference
between that basis and the sale price which becomes the short or long
term capital gain or loss. If you actually buy the shares, that
purchase price is the cost. The only reason you would need to be able
to manually adjust this is if you "add" shares you bought before
tracking with KMM, or if the shares are swapped for a different equity,
in which case you "remove" all the original shares and "add" however,
many shares you get of the new equity. (In that case, hopefully KMM
should be able to do the conversion, so you still shouldn't need to do
it manually.) The cost basis just transfers from the old to the new.
I don't see how you get a cost basis by averaging anything.
I'm not certain about how to record the gain/loss, but I know I already
have category fields for short and long term gain and loss, and two
sets of each - one for taxable, one for tax deferred. So far, I only
use them where the broker designates a dividend (usually for a
reinvestment transaction) as a capital gain, but I don't see why it
won't also work for a sale, expect for needing a category to represent
the recapture of the original payment (cost basis). I suppose creating
a category of cost basis would make sense. When you buy, that's where
the purchase price goes. When you sell, the cost basis category is
reduced by the same, with the appropriate capital gains category
getting the difference from the actual sale price.
One complication is that if you acquire an equity through multiple
purchases, at different share prices, then when you sell, you do need
to designate which of those lots you are selling. While it generally
is taken that the oldest gets sold first, you may be allowed to
designate which. That would mean that not only the total value of the
cost basis needs to be tracked, but number and price of shares for each
purchase.
I do agree it would be great for KMM to be able to track this, as it
would allow tracking unrealized gain/loss instead of just current
value. I'm just not sure how much change would be needed in the core
data structures. However, it's certainly worth discussing, and I don't
think any developer will have time to address it until after the
conversion to KDE Frameworks is complete, and there is not yet any
definite timeline for that.
Jack
