2022-02-19 GnuCash IRC logs
00:04:47 <CDB-Man> That's effectively a sale and purchase
00:05:23 <CDB-Man> Sell the old stock, but instead of receiving cash, you receive shares
00:05:51 <CDB-Man> From a GNUcash perspective since you can't have 2 stocks in 1 transaction, you would go thru cash
00:06:08 <CDB-Man> Sell into cash, then spend all that cash to purchase the received shares
00:06:15 <CDB-Man> Achieves the same effect
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00:46:25 <chris> CDB-Man: thought as such, subsequent messages in same thread relate to whether CGT is realized or not.
00:46:33 <chris> CDB-Man: thought as such, subsequent messages in same thread relate to whether *CG is realized or not.
00:47:07 <CDB-Man> Unless otherwise provided for, a capital gain is likely realized
00:47:25 <chris> I'd wager that jralls agrees having 2 stocks in 1 txn is asking for trouble
00:47:34 <CDB-Man> In Canada, for tax purposes, there are certain instances where mergers do not generate capital gain for tax purposes
00:48:05 <CDB-Man> But from an IFRS perspective, a capital gain still likely occurred
00:51:47 <chris> My answer: "With a report-writer hat on, I can guarantee that there's a chance that portfolio reports are designed with >1 stock accounts in mind. Therefore I would recommend that a stock merger is recorded as two separate transactions -- (1) the original stock sale to 0-balance, recording capital gains in the process, as cash into the broker account. (2) the new stock purchase using
00:51:48 <chris> the cash to purchase new stock. This is very likely the cleanest record of a stock merger. There's an upcoming stock-transaction assistant being worked on which will assist creating stock transactions, and will not be able to handle a stock merge in 1 step."
00:52:07 <chris> s/there's a chance/there's a zero chance
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16:21:15 <jralls> @tell chris CDB-MAN jralls has quite a few transactions with two stocks in them. It's how he handles non-taxable mergers and spin-offs: Create shares if necessary then transfer them to the new stock's account.
16:21:15 <gncbot> jralls: The operation succeeded.
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16:26:56 <CDB-Man> That would get quite complex when recording the splits and ensuring proper (lack of) gain is reported
16:28:55 <CDB-Man> There would be 3 units in that transaction: the currency commodity + 2 stock commodities
16:29:00 <jralls> Why? It's usually only two splits, occasionally six if there's a cash-in-lieu.
16:29:42 <jralls> If there's no cash-in-lieu there's no currency, just shares.
16:30:01 <CDB-Man> Throw in a 4th currency when the transaction currency is the book currency
16:30:44 <CDB-Man> Well, even if there is no cash in lieu, it also depends whether there is a gain or not
16:30:45 <jralls> Not for me, I trade foreign stocks as ADRs.
16:31:24 <jralls> That was premise 1: No gain. That's pretty common for mergers and spin-offs in the US.
16:32:06 <CDB-Man> In your example of 2 stocks, if it was a share units only transaction, what happens to the debit value balance in the originating stock?
16:32:24 <CDB-Man> Need to move both units and cost basis
16:33:27 <CDB-Man> Even if there's no cash in lieu, it's more clear if the transaction floats the amount through cash or some other asset account to clearly have the basis documented in $
16:35:08 <jralls> GnuCash doesn't work like that. An account has a balance in whatever it's denominated in: USD, CAD, AAPL, FMAGX, whatever. So if ABC and DEF merge to form XYZ and my 100 shares of ABC turn into 47 shares of XYZ, it's a two-split transaction: CR ABC 100, DR XYZ 47.
16:35:51 <CDB-Man> If you did that, wouldn't your end up with an unrealized trading amount in ABC?
16:35:52 <jralls> When I eventually sell the XYZ I have to look back at the ABC account to determine the basis.
16:36:06 <CDB-Man> That's the problem, you're not transferring the basis
16:36:14 <CDB-Man> You should be transferring the basis
16:36:30 <jralls> I can't transfer the basis, GnuCash doesn't know anything about basis.
16:36:51 <CDB-Man> Yes you can, By floating it through cash or some other asset escrow
16:37:09 <CDB-Man> "sell" into cash with the debit to cash equal to the basis
16:37:17 <CDB-Man> Zero gain recorded
16:37:31 <CDB-Man> Then "buy" xyz using that cash
16:37:38 <CDB-Man> The basis is now properly transferred
16:38:21 <jralls> No it's not because that resets the acquisition date.
16:38:37 <CDB-Man> You can backdate the repurchase
16:38:49 <CDB-Man> This long and short term issue is a US only problem
16:41:01 <CDB-Man> From an IFRS perspective, the date of record would be the date of merger
16:41:08 <jralls> No, you can't backdate the purchase. If you do you have to also backdate the sale or the book is out of balance for the period between the purchase and the spin off.
16:41:19 <CDB-Man> Or more generally, from a non tax perspective
16:41:45 <CDB-Man> You can use an escrow account that will show a negative balance between the dates
16:42:18 <CDB-Man> It can be a contra account against the xyz stock
16:42:27 <CDB-Man> So that there's no net book impact
16:42:55 <CDB-Man> There's no out of balance or overstatement of assets
16:43:32 <jralls> Sounds a bit over-complicated for a personal book.
16:45:00 <CDB-Man> Again, this issue of acquisition dates isn't even a US issue, it's specifically a US tax issue. The code is complex, and so the solution is complex (what I suggested) or non ideal (what you mentioned re non transfer of the basis and having to look back)
16:46:14 <CDB-Man> The cleanest way and compliant with financial accounting (not necessarily any country's taxation) is to transfer the basis via a $0 gain sale
16:47:06 <CDB-Man> I understand GNUcash to be accounting software not taxation software... Taxation help is a "bonus"
16:47:48 <CDB-Man> When small business owners file tax returns, there is always a "book to tax" reconciliation
16:48:08 <CDB-Man> Reconcile the GAAP statements provided to the bank, vs the tax rules of the jurisdiction
16:48:21 <CDB-Man> Gets even more complicated for large Corps of course
16:48:30 <jralls> OK, but this isn't a small business and in general businesses trading stocks aren't small.
16:49:24 <CDB-Man> Well, I come back to the question: is GNUcash accounting or taxation software? And is the ambit general global alignment or USA specific tax code alignment
16:50:21 <CDB-Man> That you being in the USA and needing US internal revenue code differential procedures...
16:50:43 <CDB-Man> The more generalized guidance would be to transfer the basis
16:50:51 <jralls> GnuCash is accounting software that happens to have a tax-format export. But that's completely orthogonal to the question because GnuCash doesn't enforce *anY* rule for booking stock mergers.
16:51:04 <CDB-Man> And an annex to that guidance could be USA specific procedure
16:52:09 <CDB-Man> I would not suggest leading with USA specific guidance first
16:53:21 <CDB-Man> (having filed 1040s and 1120s professionally, of course I understand the USA implications)
16:53:44 <jralls> What does guidance have to do with anything? I'm not planning to write a book, nor even revise the section in the manual. I described how I handle mergers and splits in my book.
16:54:29 <CDB-Man> Well, I wasn't sure where you were going, and I'm also conscious that Chris will eventually read all this
16:55:23 <CDB-Man> As I suspect he may want to attempt to put some of this into the stock assistant
16:59:31 <CDB-Man> @tell chris take a read from https://lists.gnucash.org/logs/2022/02/19.html#T16:21:15 here onwards to see some discussion on stock merger recording
16:59:31 <gncbot> CDB-Man: The operation succeeded.
16:59:53 <jralls> I just pulled up an old split transaction from 2013 when Abbot Labs spun off Abvie. I neglected to remember that transaction currency has to be a currency and to have a price, so there's a price and a USD debit amount on the ABBV split and a no-shares, no-price credit for the same amount on the ABT split.
16:59:57 <jralls> Happy?
17:00:14 <CDB-Man> related question: in the channel topic at one point, we had a link to the public logs in there (instead of just the statement publicly logged channel), is it possible to put the link back in?
17:01:06 <CDB-Man> i THINK I understand the transaction, but I can't imagine it in my head from just the text description
17:02:16 *** jralls changes topic to "Free GPL Personal and Small Business Accounting || Moderated mode: To get a voice, register with NickServ and then re-join. || Please don't ask to ask, just ask and wait! (Possibly a few hours!!) || publicly-logged channel https://code.gnucash.org/logs|| latest stable: 4.9 || www.gnucash.org || wiki.gnucash.org/wiki/"
17:02:22 <jralls> How's that?
17:03:03 <jralls> Account Shares Price Credit Debit
17:03:30 <jralls> ABBV 1600 18.17 29081.66
17:03:43 <CDB-Man> if i weere to pitpick, a space could be inserted between "logs" and || as some clients may interpret the pipes to be part of the URL and clickable. otherwise looking good!
17:03:48 <jralls> ABT 29081.66
17:04:03 <CDB-Man> pitpick -> nitpick
17:04:21 *** jralls changes topic to "Free GPL Personal and Small Business Accounting || Moderated mode: To get a voice, register with NickServ and then re-join. || Please don't ask to ask, just ask and wait! (Possibly a few hours!!) || publicly-logged channel https://code.gnucash.org/logs || latest stable: 4.9 || www.gnucash.org || wiki.gnucash.org/wiki/"
17:05:22 <CDB-Man> hmm, so basis was removed from ABT, with a net creation of units of ABBV
17:05:35 <CDB-Man> which reduces the average basis per share of ABT
17:05:54 <CDB-Man> this makes sense to me in the case of a spinoff
17:17:58 <jralls> And a merger can be done the same way. Or not, GnuCash in general doesn't care though the APR will probably not be able to figure out the basis if you do it the no-currency way.
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17:33:05 <CDB-Man> well, with the merger, you would want to remove both $ and shares from the old stock account
17:34:08 <jralls> Right, so it would be ABC -100 5.00 500
17:34:54 <jralls> XYZ 47 10.63 500
17:35:14 <jralls> Didn't quite line up right, but I think you'll get the idea.
17:35:56 <jralls> $500 being the basis of ABC.
17:36:37 <CDB-Man> indeed
17:36:54 <CDB-Man> and you're saying gnucash can handle that without issue? (i've never tried)
17:37:06 <jralls> Yup.
17:37:54 <CDB-Man> also i see you have the debit and credit columns left-right reversed... personal preference?
17:39:03 <CDB-Man> referring to this: Account Shares Price Credit Debit
17:39:07 <jralls> Well, not so sure about "without issue". It works fine with trading accounts off, haven't tested with them on. I'm also not sure that the average cost calculation will handle it correctly and not report an unbalanced book.
17:39:44 <CDB-Man> i think (?) several years ago i tried it in a trading account book, and remember it imploding spectacularly
17:39:59 <jralls> No, brain fart when typing the header line. The splits have the right order, the header line is backwards.
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19:05:20 <minit> In the Accounts schema, what's "Placeholder"? It looks like a "1" might denote a root-like level (after the actual "Root Account"), like the root of Income, root of Expenses, etc?
19:06:09 <CDB-Man> Placeholder accounts cannot have transactions recorded into them
19:07:07 <CDB-Man> For example, I might have a placeholder called Utilities, and underneath I'll have cellphone, electricity, water, etc. So it forces you to create sub accounts for everything
19:07:19 <minit> Ah, perfect, thank you
19:08:43 <CDB-Man> To get around the potential of too many sub accounts, I always have a sub account named General or Miscellaneous
19:08:56 <CDB-Man> So that I don't have to create an account for a one off
19:13:44 <warlord> minit, placeholder effectively means "read only".
19:14:16 <minit> Ah, that makes sense too
19:22:29 <warlord> which is separate from "hidden" which means "not displayed in the Chart of Accounts".
19:22:46 <warlord> But you can still add transactions to hidden accounts, and Placeholder accounts are visible in the CoA.
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