2016-03-16 GnuCash IRC logs

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08:49:15 <Hinnerk> Hi. I have the follow accounting issue, maybe you could recommend me a best practice solution:
08:49:16 <Hinnerk> I have a unit linked insurance contract. Recently, I switched the underlying fund. Since I have the funds as securities in GnuCash, a gain was realized and booked accrodingly. However, as all securities remain within the insurance contract, I don't want the gain to appear in my P&L statement. What's the best way of countering the effect?
08:49:53 <Hinnerk> Note: This is private accounting only, I do not have to follow any standard than my own :)
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09:16:01 <warlord> Hinnerk: assign the value of the transfer to be the value of the original purchase (so there is no gain/loss)
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10:34:15 <Hinnerk> warlord: But then it doesn't fit my premiums paid?
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10:49:24 <warlord> Hinnerk: I dont understand.. If the value is X then transfer X. If the value is Y then transfer Y. If there is an UNREALIZED gain of X->Y and you don't want to record the gain then transfer X and understand that Y will be handled via the Commodity Price.
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11:07:15 <Hinnerk> warlord: Not sure, if I understand you right. Let's say I originally paid a premium of 100. The insurance company bought fund units for 100. When I told them to reallocate, the units had a market value of 110, so selling them realized a gain of 10, which gnucash is well aware of. Of the new fund units for 110 were bought. Which of the transactions do you recommend to change?
11:09:31 <warlord> Hinnerk: Honestly, I dont know. insurance in the US doens't work that way.
11:09:43 <warlord> "premiums" are an expense, not an asset
11:10:23 <warlord> Here's the question that will probably affect it: Are you taxed on that 10 increase now? Or are you taxes later? (or are you never taxed on the increase?)
11:14:50 <Hinnerk> taxed later.
11:14:51 <Hinnerk> well, the premium flows into a unitlinked contract, similar to maybe a 401k contract. so i don't see it as an expense, as I'm buying an asset.
11:15:38 <warlord> If it's taxed later then you need to keep track of the original basis, not the current value.
11:16:44 <Hinnerk> yes and now. I could lapse the contract, leading a payout of the units less taxation
11:16:48 <warlord> The current value is mostly irrelevant.
11:16:51 <Hinnerk> so i want to keep track of the mv
11:17:04 <warlord> MV is what the PriceDB is for.
11:18:22 <Hinnerk> yes and that's what i'm using. I have both funds as securities in my price db.
11:18:51 <Hinnerk> but i can't sell the old fund without realizing gains.
11:19:16 <warlord> So lets say you bought A for $100, then transfered to B when the MV was $110, but then you cancel the contract when the value of B is stll $110.. At that point you are still taxed at the $10 gain, right?
11:19:28 <Hinnerk> right.
11:19:57 <warlord> then you should record the "purchase" of B at $100, not $110, and record the $110 "value" in the PriceDB
11:21:02 <Hinnerk> yes, but when I sell A, the gain is recognized in gnucash. Or should I just fudge the sell price? That may be the right solution... change the sell price and the buy price of B both.
11:21:42 <warlord> Ignore the "price". Set the Sale (and purchase) value to your basis.
11:22:17 <warlord> e.g. Sell -12.345 shares of A for $100 total, Buy 13.456 shares of B for $100 total
11:22:25 <warlord> Ignore the actual price of A or B on the transfer date.
11:22:31 <Hinnerk> yes, that seems to make sense. I'll do that. Thank you for helping me to think it through.
11:22:38 <warlord> (although you're welcome to record that in the description and/or the PriceDB)
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11:28:51 <Hinnerk> argh, figuring out the proper price basis will be quite a bit of work. Some of those contracts are much older than my gnucash accounting... I will have to dig deep :)
11:29:34 <Hinnerk> but hey: at least I will have a bit more information about their performance afterwards, so there is some reward from it.
11:30:36 <warlord> Well, honestly, you should just use the GnuCash basis.
11:35:03 <Hinnerk> Yeah, on second thought that is just as good. It achieves my goal and is much less work.
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12:09:03 <Hinnerk> ok, thx and bye
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