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Chapter 6 - Activity
Activity in Capital Gainz refers to buying shares, selling shares, or
recording distributions. From the Activity Menu, you can:
o Buy Shares - record purchases.
o Sell Shares - record sales.
o Distributions - record distributions.
Use the Esc key to return to the Main Menu.
6.1 Common Options and Screens
6.1.1 Fraction-to-Decimal Table
When entering data in the Buy Shares or Sell Shares Form, the
Fraction-to-Decimal Table displays decimal equivalents for fractions.
6.1.2 Local Security Lookup
The Local Security Lookup Table is brought up if you enter an invalid
security symbol. For each local security in the current portfolio:
o The local security's Symbol and Name.
o The current number of Open Shares.
o The dates of the Last Buy, Sell, and Distribution.
If you entered an invalid security symbol, the cursor is positioned on the
closest matching symbol. Listed function keys are:
o Enter:Select - select the highlighted local security, inserting its
symbol into the calling form's Local Symbol field.
o Ins:Add - define a new local security.
o F2:Change - change the highlighted local security.
o Del:Delete - delete the highlighted local security.
o Esc:Exit - leave the table without selecting a local security.
Chapter 7 tells how to add, change, and delete local securities.
Capital Gainz Users Manual 6-1
6.1.3 Auto Calc On/Off
The Buy Shares, Sell Shares, and Distribution Forms all let you turn
off automatic calculations with the Calc On/Off option. When you turn off
automatic calculations, you can enter 0 as the value in fields and Capital
Gainz will not change it based on other entries.
6.1.4 Calculate Load/Commission/Discount
===>>> The Calc Load/Comm option on the Buy Shares and Sell Shares Forms
pops up a form used to determine commissions, mutual fund loads, or
purchase discounts.
The first field in this form indicates whether you are entering a
LOAD, a COMM (commission), or a DISC (discount). The default on entry is:
o COMM: If the shares times price is less than the amount, or the security
is not a mutual fund.
o LOAD: If the shares times price equals the amount, and the security is a
mutual fund.
If you entered a commission value before invoking this function, Capital
Gainz assumes that you want to see the commission or load percentage.
The Calculate Load/Commission/Discount Form:
o Shows and accepts the Before Amount and Price, which are the amount and
price prior to calculating the load, commission, or discount. The Before
Commission is also displayed, but is always 0.
o Accepts the Load percentage if calculating a load, or the Discount
percentage if calculating a discount. For loads on purchases, the front-
end load percentage associated with the local security is displayed. For
loads on sales, the back-end load percentage associated with the local
security is displayed.
o Displays the Effective percentage, if entering a load.
o Shows and accepts the After Amount, Price, and Commission, based on the
before values and the percentages.
You can change the calculated values, or accept them as displayed. The
after values are transferred to the Buy Shares or Sell Shares Form.
The effective commission shows the load as a percentage of the amount
invested. A 5% load is not the same as a 5% commission. A 5%
commission on a $1000 purchase means that $1000 is invested, and an
additional $50 fee is paid. Thus, $1050 changes hands. A 5% load on a
$1000 purchase means that only $950 is invested, and a $50 fee is paid.
The effective commission is 50/950 = 5.26%.
This function is also available when recording a price in the Price
Form or Price Update Form. Mutual funds that charge loads have two prices -
one including the load and one that is just the net asset value. Most
Capital Gainz Users Manual 6-2
newspaper listings include both. If you separate loads out as commissions
and only have access to the load price, then you can use the Calc
Load/Comm option to determine the net asset value and transfer it back to
the Price Form or Price Update Form.
6.1.4.1 Example - Loads
Say you purchase 10 shares of a mutual fund at $10 each for a total of
$100. The fund charges a 5% load. To calculate the load amount:
o Enter all of the fields in the Buy Shares Form down to, but not
including, Commission.
o Hit the function key labeled Calc Load/Comm.
o Choose the LOAD type.
o At the top of the form, accept the before Price of $10.00 and before
Amount of $100.00. Enter 5.00 in the Load percentage field.
o The after amount is calculated to be $95.00, the after Price (net asset
value) is calculated to be $9.50, and the after Commission is calculated
to be $5.00 (5% of $1000). The Effective commission displayed is 5.26%.
Hit Form Accept to accept these values (or hit Enter on the remaining
fields).
o Upon return to the Buy Shares Form, the Price, Amount, and Commission
fields are set to the calculated values.
o Complete the fields in the Buy Shares Form to record the purchase.
To determine the load percentage of the purchase you entered:
o Highlight the open shares record in the Open Log and hit ENTER.
o Hit the function key labeled Calc Load/Comm.
o Choose the LOAD type.
o The before Amount of $100.00 and the before Price of $10.00 are
displayed.
o Since the commission is already set, the after Amount of $95.00, after
Price of $9.50, and after Commission of $5.00 are displayed, as is the
Load percentage of 5.00% and the Effective commission percentage of
5.26%. Hit Ctrl- Esc to return to the Buy Shares Form.
6.1.4.2 Example - Commissions
Say you buy 100 shares of a stock at $52.625 each, and pay your broker
$5322.50. To calculate the commission amount:
Capital Gainz Users Manual 6-3
o Enter all of the fields in the Buy Shares Form down to, but not
including, Commission.
o Hit the function key labeled Calc Load/Comm.
o Choose the COMM type.
o At the top of the form, accept the before Amount of $5322.50 and before
Price of $52.625.
o Since 100 * $52.625 is less than the amount paid, the after Commission
is calculated to be $60.00, and the after Amount is calculated to be
$5262.50. The Commission percentage displayed is 1.14%. Hit Form Accept
to accept these values (or hit Enter on all of the fields).
o Upon return to the Buy Shares Form, the Amount, and Commission fields
are set to the calculated values.
o Complete the fields in the Buy Shares Form to record the purchase.
To determine the commission percentage of the purchase you entered:
o Highlight the open shares record in the Open Log and hit ENTER.
o Hit the function key labeled Calc Load/Comm.
o Choose the COMM type.
o The before Amount of $5322.50 and before Price of $52.625 are displayed.
o Since the commission is already set, the after Amount of $5262.50, the
after Price of $52.625, and after Commission of $60.00 are displayed, as
is the Commission percentage of 1.14%. Hit Form Reject to return to the
Buy Shares Form.
6.1.4.3 Example - Discounts
Say a dividend reinvestment plan gives you a 5% discount on shares
purchased with reinvested dividends. You reinvest $29.15 at a price of
$16.079, purchasing 1.813 shares. You need to determine the discount,
since this amount should be reported as income.
o Enter all of the fields in the Buy Shares Form down to, but not
including, Commission.
o Hit the function key labeled Calc Load/Comm.
o Choose the DISC type.
o At the top of the form, accept the before Price of $16.079 and before
Amount of $29.15. Enter 5.00 as the Discount percentage.
o The after Price is calculated to be $16.925, the after Amount is
Capital Gainz Users Manual 6-4
calculated to be $30.69, and the after Commission (discount) is
calculated to be $-1.54. Hit Form Accept to accept these values (or hit
Enter on the remaining fields).
o Upon return to the Buy Shares Form, the Price, Amount, and Commission
fields are set to the calculated values.
o Complete the fields in the Buy Shares Form to record the purchase.
To determine the discount percentage of the purchase you entered:
o Highlight the open shares record in the Open Log and hit ENTER.
o Hit the function key labeled Calc Load/Comm.
o Choose the DISC type.
o The before price of $16.078 (rounding slightly changed the original
entry of $16.079) and before amount of $29.15 are displayed.
o Since the commission is already set, the after price of $16.925, after
amount of $30.69, and after commission (discount) of $-1.54 are
displayed, as is the discount percentage of 5.02% (rounding changed 5.00
to 5.02). Hit Form Reject to return to the Buy Shares Form.
6.1.4.4 Example - Net Asset Value
Now, if you only have access to the load price for a mutual fund that
charges a 5% load, then you can still update the price using the net asset
value. Say the most recent load price (asked price) is $11.
o Highlight the mutual fund in the Local Security Table.
o Hit the Price History Table key, and use INS to add a record.
o At the Price Form, enter the $11.00 Price, but don't hit Enter.
o Hit the Calc Load/Comm function.
o Choose the LOAD type.
o At the top of the form, accept the before Price of $11.00, and leave
Amount set to $11.00 (1 share). Enter 5.00% as the Load percentage.
o The after Price, accounting for the load, is calculated to be $10.45.
Hit Form Accept to accept these values (or hit Enter on the remaining
fields).
o Upon return to the Price Form, the Price field is set.
o Complete the fields in the form to record the price.
Capital Gainz Users Manual 6-5
6.2 Buy Shares
To record or change a share purchase, you fill in the Buy Shares Form.
When adding a purchase, this form displays the last entered symbol and the
current or last entered date. When changing a purchase, this form displays
the actual values in the record. The fields in this form are:
o (Required) The Local Symbol of the security to purchase. If you leave
this entry blank or enter an invalid symbol, the Local Security Lookup
Table, described at the beginning of the chapter, pops up. After you
enter a valid symbol, the security's name and number of open shares are
displayed.
If you have any outstanding short sales for this local security, Capital
Gainz will cycle through them, from oldest to most recent, and ask if
you want to cover the short sale. If you answer YES to cover one, the
number of shares field is set to the shorted number.
o (Required) The Date of the purchase. If you want a different date, enter
it over the displayed date.
o (Required/Calculated) The number of Shares bought. If you set this entry
to 0, it's calculated using the Price and Amount.
o (Required/Calculated) The purchase Price for the security. This is the
actual price, not including any commission or load. The price from the
Price History File with a date closest to the entered purchase date is
displayed. You can use it or enter a different price. If all you have is
a fractional figure, use the displayed Fraction-To-Decimal Table to
convert it to a decimal value. On completing this field, the Amount
field is calculated. If you set this entry to 0, it's calculated using
the Shares and Amount entries.
===>>> If you are tracking a retirement plan, such as a company-
sponsored 401k plan, you may not have prices available.
Typically, you receive statements listing your contributions and
the value of your holdings at the end of the period. To manage
these investments, use the Price From Value function described
in Chapter 8.
o (Required/Calculated) The Amount of the purchase, not including any
commission or load. If you entered the number of shares and price, the
calculated and displayed value is usually correct. However, because of
rounding, you may need to enter a different amount. You must enter at
least two of: number of Shares, Price, and Amount (unless you turn off
automatic calculations). Although Shares multiplied by Price should
equal Amount, it's not necessary.
o (Optional) The Commission or load charged on the purchase. A negative
commission should be recorded for brokerage commissions absorbed by the
investment company, as is the case with some dividend reinvestment
plans.
Capital Gainz Users Manual 6-6
===>>> You can have Capital Gainz calculate the load, commission, or
discount with the Calc Load/Comm function. A negative commission
signifies a discount. See the earlier section on Calculate
Load/Commission/Discount for details.
o (Optional) Twenty characters of Notes about the purchase, so you can
enter information such as DIV REINVEST or IRA ROLLOVER.
Function keys at the bottom of the screen are:
o Form Accept - accept form, the same as hitting Enter on each field. This
key is only displayed when changing records.
o Form Reject - exit immediately, the same as hitting Esc to back out.
This key is only displayed when adding or changing records.
o F3:Sell Shares - exit immediately, and bring up the Sell Shares Form.
This key is only displayed when adding records.
o F4:Distributions - exit immediately, and bring up the Record
Distributions Form. This key is only displayed when adding records.
o F5:Calc On/Calc Off - turn off automatic calculations, as described at
the beginning of the chapter. This key is only displayed when adding or
changing records.
o F6:Calc Load/Comm - the Calculate Load/Commission/Discount Form pops up
to determine commission and price based on load percentage, as described
at the beginning of the chapter. This function is only displayed when
adding or changing records.
===>>> After completing the form to record a purchase, the open shares
record is written to disk. Some of the field values stay the same, and the
cursor goes back to the Symbol field - this form is repeatedly accepted
until you explicitly exit from it. A counter in the upper righthand corner
of the form reminds you how many purchases you've recorded in the current
session. Also, the total open shares value is displayed to the right of
the Shares field after entering the Symbol.
If the values that you let Capital Gainz calculate are consistently
incorrect, make sure the local security's precision values are correct.
When changing open shares, additional fields are displayed and
accepted. Changing and deleting open shares is discussed in Chapter 9.
A price history is added based on the entered price and date.
6.2.1 Examples - Purchases
Several examples of purchases are given below. In these examples, a
mutual fund charges a 2% load and you make the following purchases:
Capital Gainz Users Manual 6-7
# Date Shares Price Amount Open
Bought Commission
1) 1/01/90 10.0000 4.9000 49.00 1.00 ($5.00 price with 2% load)
2) 2/01/90 9.0909 5.3900 49.00 1.00 ($5.50 price with 2% load)
3) 3/01/90 10.5263 4.6550 49.00 1.00 ($4.75 price with 2% load)
Also, we'll assume that the long term holding period is 365 days, or one
year. In these examples, we'll use 1/15/91 as the current date, and a
price of $5.292 ($5.40 price with 2% load) on that date.
Notice in these examples how the purchase commission is factored into
the gain/loss calculations. Also, the total gain or loss is calculated by
multiplying the total number of shares by the current price and
subtracting the total basis.
6.2.1.1 Non-Average Selling Method
If the local security does not use the average selling method, then
the three open shares records have the following current gains:
(open_shares * current_price) - open_amount - open_commission
1) (10.0000 * 5.292) - 49.00 - 1.00 = 2.92 (Long Term)
2) ( 9.0909 * 5.292) - 49.00 - 1.00 = -1.89 (Short Term)
3) (10.5263 * 5.292) - 49.00 - 1.00 = 5.71 (Short Term)
───────────────────
6.73 (Total)
These work out to percentages of:
1) ( 2.92/ 49.00) * 100 = 5.96% (Long Term)
2) (-1.89/ 49.00) * 100 = -3.86% (Short Term)
3) ( 5.71/ 49.00) * 100 = 11.65% (Short Term)
──────────────────────────────────────────
( 6.73/147.00) * 100 = 4.58% (Total)
If you included commissions in the basis, then the percentages would be:
1) ( 2.92/ 50.00) * 100 = 5.84% (Long Term)
2) (-1.89/ 50.00) * 100 = -3.78% (Short Term)
3) ( 5.71/ 50.00) * 100 = 11.42% (Short Term)
──────────────────────────────────────────
( 6.73/150.00) * 100 = 4.49% (Total)
6.2.1.2 Average Selling Method
With the average selling method (SCAT), the local security record
contains these values:
total open shares : 29.6172
total open amount : 147.00
total open commission: 3.00
The basis price is:
Capital Gainz Users Manual 6-8
basis_amount/open_shares = 147.00/29.6172 = 4.9633
The open shares records are therefore treated as:
# Date Shares Price Amount Open
Bought Commission
1) 1/01/90 10.0000 4.9633 49.63 1.00
2) 2/01/90 9.0909 4.9633 45.12 1.00
3) 3/01/90 10.5263 4.9633 52.25 1.00
As you can see, the purchase amounts still add up to $147.00, but the
individual prices and amounts have been changed to reflect the average
purchase price.
The three open shares records have the following current gains:
(open_shares * current_price) - basis_amount - open_commission
1) (10.0000 * 5.292) - 49.63 - 1.00 = 2.29 (Long Term)
2) ( 9.0909 * 5.292) - 45.12 - 1.00 = 1.99 (Short Term)
3) (10.5263 * 5.292) - 52.25 - 1.00 = 2.46 (Short Term)
───────────────────
6.73 (Total) {rounding}
These work out to percentages of:
1) ( 2.29/ 49.63) * 100 = 4.61% (Long Term)
2) ( 1.99/ 45.12) * 100 = 4.41% (Short Term)
3) ( 2.46/ 52.25) * 100 = 4.71% (Short Term)
──────────────────────────────────────────
( 6.73/147.00) * 100 = 4.58% (Total)
If you included commissions in the basis, then the percentages would be:
1) ( 2.29/ 50.63) * 100 = 4.52% (Long Term)
2) ( 1.99/ 46.12) * 100 = 4.31% (Short Term)
3) ( 2.46/ 53.25) * 100 = 4.62% (Short Term)
──────────────────────────────────────────
( 6.73/150.00) * 100 = 4.49% (Total)
Capital Gainz Users Manual 6-9
6.3 Sell Shares
To record or change a sale, you fill in the Sell Shares Form. When
adding a sale, this form displays the last entered symbol and the current
or last entered date. When changing a sale, this form displays the actual
values in the record. The fields in this form are:
o (Required) The Local Symbol of the security to sell. If you leave this
entry blank or enter an invalid symbol, the Security Lookup Table,
described at the beginning of the chapter, pops up. After you enter a
valid symbol, the security's name, selling method, and number of open
shares are displayed.
o (Required) The Date of the sale. If you want a different date, enter it
over the displayed date. A warning is issued if you've already recorded
a sale for a later date.
o (Required) The Sell Method to use. These are described in detail below.
The value in the local security record is displayed, but can usually be
changed. A warning is issued if you try to switch from an average
method, or try to use an average method with a non-mutual fund. This
field is not displayed if you are changing a record.
o (Required/Calculated) The number of Shares to sell. If you used the
Specific Identity method, this figure is uses the open shares selected
to sell in the Select Shares to Sell Table. This table is described
below in the discussion on the ID selling method. If you set this entry
to 0, it's calculated using Price and Amount.
o (Required/Calculated) The selling Price for the security. This is the
actual price, not including any commission or load. The price from the
Price History File with a date closest to the entered selling date is
displayed. You can use it or enter a different price. If all you have is
a fractional figure, use the Fraction-To-Decimal Table, described at the
beginning of the chapter, to convert it to a decimal value. On
completing this field, the Amount field is calculated. If you set this
entry to 0, it's calculated using Shares and Amount.
o (Required/Calculated) The Amount of the sale, not including any
commission or load. If you entered the number of shares and the price,
the calculated and displayed value is usually correct. However, because
of rounding, you may need to enter a different amount. You must enter at
least two of: number of Shares, Price, and Amount (unless you turn off
automatic calculations). Although Shares multiplied by Price should
equal Amount, it's not necessary.
o (Optional) The Commission or load charged on the sale.
===>>>
You can have Capital Gainz calculate the load or commission with the
Calc Load/Comm function. See the earlier section on Calculate
Load/Commission/Discount for details.
Capital Gainz Users Manual 6-10
o (Optional) Twenty characters of Notes about the sale, so you can enter
information such as HOUSE PAYMENT or TO PAY TAXES.
Function keys at the bottom of the screen are:
o Form Accept - accept form, the same as hitting Enter on each field. This
key is only displayed when changing records.
o Form Reject - exit immediately, the same as hitting Esc to back out.
This key is only displayed when adding or changing records.
o F2:Buy Shares - exit immediately, and bring up the Buy Shares Form. This
key is only displayed when adding records.
o F3:Open Information - go to the panel listing open information,
described in Chapter 9. This key is only displayed when changing
records.
o F4:Distributions - exit immediately, and bring up the Record
Distributions Form. This key is only displayed when adding records.
o F5:Calc On/Calc Off - turn off automatic calculations, as described at
the beginning of the chapter. This key is only displayed when adding or
changing records.
o F6:Calc Load/Comm - the Calculate Load/Commission/Discount Form pops up
to determine commission and price based on load percentage. Described at
the beginning of the chapter, this function is only displayed when
adding or changing records.
After completing the form, Capital Gainz executes the selling process:
===>>> o If the date precedes any other purchases or sales for this
security, the open shares are calculated as of this date. Also,
for the average method, the basis price is recalculated based on
the selling date.
o Builds a table of open shares to sell.
o Generates the Open Information for Shares Sold Report.
The Open Information for Shares Sold Report shows the Symbol, name,
and Selling Price. For the affected open shares, you're shown:
o The purchase Date.
o Shares sold from the open shares record.
o The Open Price (basis price) used, which is the same as the purchase
price if you didn't use the average selling method.
o The Open Amount (basis amount) used, which is the same as the purchase
Capital Gainz Users Manual 6-11
amount if you didn't use the average selling method.
o The Open Commission or load.
o The Gain/Loss amount and percentage from the entered sale.
o The broker/investment company's name and address, your account number,
and a brief message instructing the agent to sell the listed shares (if
Brief Formats report setting is NO).
Totals and short term totals are calculated for the Shares, Amount, Open
Amount, Open Commission, and Gain/Loss columns.
===>>> After exiting from the Open Information for Shares Sold Report, you
are given the choice of confirming or canceling the sale. If you confirm
the sale, affected open shares records are closed. Notice that a single
sale creates one or more closed shares records, corresponding to each
affected open shares record. The affected open shares records are deleted
or modified, depending on whether you sold all or only some of the
record's open shares.
Following confirmation of the sale:
If you specified YES for the Redistribute Proceeds option in the User
Settings Form: you are asked if you want to redirect the proceeds from
the sale. If you answer YES, then you are taken to the Buy Shares Form,
now labeled Redirect Proceeds. After accepting the local security
symbol, the rest of the values are filled in. You will probably need to
change the purchase price. After completing this form, you return to the
Sell Shares Form.
===>>> After completing the form to record a sale, some of the field
values stay the same, and the cursor goes back to the Symbol field - this
form is repeatedly accepted until you explicitly exit from it. A counter
in the upper righthand corner of the form reminds you how many sales
you've recorded in the current session.
If the values that you let Capital Gainz calculate are consistently
incorrect, make sure the local security's precision values are set
correctly. You should record sales in the order that they occur, and must
do so if you use the average selling method since the average price relies
on previous purchases and sales.
When changing closed shares, additional fields are displayed and
accepted. Changing and deleting closed shares records is discussed in
Chapter 9.
A price history entry is added based on the entered price and date.
6.3.1 Selling Methods
The Sell Method Lookup Table is brought up if you enter an invalid
selling method, or leave it blank. Hitting Enter selects the highlighted
selling method.
Capital Gainz Users Manual 6-12
6.3.1.1 First-In/First-Out (FIFO) Sell Method
The first-in/first-out (FIFO) selling method sells the entered number
of shares beginning with the oldest open shares. The open shares records
are scanned from oldest to the sell date.
6.3.1.2 Last-In/First-Out (LIFO) Sell Method
The last-in/first-out (LIFO) selling method sells the entered number
of shares beginning with the most recent open shares. The open shares
records are scanned from the sell date to the oldest.
6.3.1.3 Maximum Gain/Minimum Loss (MAX) Sell Method
The maximum gain/minimum loss (MAX) selling method sells the entered
number of shares using the open shares with the lowest open basis price,
including commissions. All open shares records up to the sell date are
scanned.
6.3.1.4 Minimum Gain/Maximum Loss (MIN) Sell Method
The minimum gain/maximum loss (MIN) selling method sells the entered
number of shares using the open shares with the highest open basis price,
including commissions. All open shares records up to the sell date are
scanned.
6.3.1.5 Specific Identity (ID) Sell Method
The specific identity (ID) selling method allows you to select open
shares to sell from a table listing the oldest up to the sell date.
The Select Open Shares to Sell Table shows a list of open shares,
sorted in ascending purchase date order. Shown for each purchase are:
o Shares to Sell, the number of open shares currently selected to sell.
o The Open Date.
o Open Shares Left, the number of open shares that would remain.
o The Open Price.
Highlight an entry and hit the Enter key to call up the Enter Shares Form
so you can enter the number of shares to sell.
This form:
o Shows Open Shares, the number of shares for the purchase.
o Accepts Shares to Sell, the number of shares to sell from that
particular purchase. If you haven't already chosen to sell some shares
from this purchase, then this field is set to the number of open shares
in the purchase.
Upon completion, the Select Shares to Sell Table is updated.
Capital Gainz Users Manual 6-13
6.3.1.6 Single Category (SCAT) Sell Method
The single category (SCAT) selling method calculates the average price
as of the end of the sell date, and sells the entered number of shares
beginning with the oldest shares. This method is only valid for mutual
funds, and shouldn't be changed later.
6.3.1.7 Short (SHRT) Sell Method
You use the short sale (SHRT) selling method to sell shares of a
security that you don't currently own. When selling short, you hope to buy
the shares back at a profit before the trade settlement date. Capital
Gainz creates a single closed shares record for the short sale, with no
associated open shares information. Then, when you record purchases
against the security, you're asked if you want to cover the short sale.
6.3.2 Examples - Sales
Examples for each selling method are given below. In these examples, a
mutual fund charges a 2% load and you make the following purchases:
# Date Shares Price Amount Open
Bought Commission
1) 1/01/90 10.0000 4.9000 49.00 1.00 ($5.00 price with 2% load)
2) 2/01/90 9.0909 5.3900 49.00 1.00 ($5.50 price with 2% load)
3) 3/01/90 10.5263 4.6550 49.00 1.00 ($4.75 price with 2% load)
In these examples, we assume you sold 15 shares at a price of $5.292
($5.40 asked price with 2% load, which is a bid price or NAV of $5.292) on
1/15/91. The fund does not charge a back-end, or selling, load. We'll
assume that the long term holding period is set to 365 days.
===>>> Some important points to notice in these examples:
o When some of an open shares record's shares are sold, the purchase
commission is applied proportionally. So, if you sell 60 shares from a
100 share purchase with a $35 commission, the purchase commission moved
to the closed shares record is:
Open commission closed =
(open_shares_sold/open_shares) * open_commission
= (60/100) * $35 = $21
o Although not shown, selling commissions are applied proportionally as
well. So, if separate 40 and 60 shares purchases are combined into one
sale with a $35 commission, the two closed shares records created have
selling commissions of:
Selling commission applied =
(open_shares_sold/shares_sold) * sell_commission
= (60/100) * $35 = $21 for the first closed shares record
= (40/100) * $35 = $14 for the second closed shares record
Capital Gainz Users Manual 6-14
o When only some shares from an open shares records are sold, the purchase
amount is allocated proportionally. This is normally the same as
multiplying the number of shares sold by the open price. So, if 60
shares from a 100 share purchase for $1000 are sold, the purchase amount
moved to the closed shares record is:
Open amount sold =
(open_shares_sold/open_shares) * open_amount
= (60/100) * $1000 = $600
(if the purchase price was $10, this is the same as 60 * $10)
o The selling amount is also applied proportionally. This is usually the
same as multiplying the number of shares by the selling price. So, if
separate 40 and 60 shares purchases are combined into one sale at $1100,
the two closed shares records created have selling amounts of:
Selling amount applied =
(open_shares_sold/shares_sold) * sell_amount
= (60/100) * $1100 = $660 for the first closed shares record
(if the sell price was $11, this is the same as 60 * $11)
= (40/100) * $1100 = $440 for the second closed shares record
(if the sell price was $11, this is the same as 40 * $11)
o Selling notes specified are included in all the closed shares records.
Purchase notes are gone when all open shares in the record are sold.
6.3.2.1 First-In/First-Out (FIFO) Selling Method
Selling 15 shares using the First-In/First-Out selling method results
in the creation of the following closed shares records (the '#' column
corresponds to the open shares records):
# Date Shares Price Amount Close Open Open Open
Sold Comm Date Basis Comm
1) 1/15/91 10.0000 5.2920 52.92 0.00 1/01/90 49.00 1.00
2) 1/15/91 5.0000 5.2920 26.46 0.00 2/01/90 26.95 0.55
The open basis for the first record is simply the open amount from the
first open shares record. The open basis for the next record is based on
the percentage of shares sold:
((10.0000 - 5.0000)/9.0909) * 49.00 = 26.95
These two closed shares records' gains are calculated with:
sold_amount - basis_amount - sold_commission - open_commission
1) 52.92 - 49.00 - 0.00 - 1.00 = 2.92 (Long Term)
2) 26.46 - 26.95 - 0.00 - 0.55 = -1.04 (Short Term)
──────────────────
1.88 (Total)
Capital Gainz Users Manual 6-15
These work out to percentages of:
1) ( 2.92/49.00) * 100 = 5.96% (Long Term)
2) (-1.04/26.95) * 100 = -3.86% (Short Term)
─────────────────────────────────────────
( 1.88/75.95) * 100 = 2.48% (Total)
If you included commissions in the basis, then the percentages would be:
1) ( 2.92/50.00) * 100 = 5.84% (Long Term)
2) (-1.04/27.50) * 100 = -3.78% (Short Term)
─────────────────────────────────────────
( 1.88/77.50) * 100 = 2.43% (Total)
The open shares records remaining after selling the 15 shares are:
# Date Shares Price Amount Open
Bought Commission
2) 2/01/90 4.0909 5.3900 22.05 0.45
3) 3/01/90 10.5263 4.6550 49.00 1.00
The first record was removed, since all the open shares were sold. The
second record was changed to reflect the sale of 5.0000 shares.
6.3.2.2 Last-In/First-Out (LIFO) Selling Method
Selling 15 shares using the Last-In/First-Out selling method results
in the creation of the following closed shares records (the '#' column
corresponds to the open shares records):
# Date Shares Price Amount Close Open Open Open
Sold Comm Date Basis Comm
3) 1/15/91 10.5263 5.2920 55.71 0.00 3/01/90 49.00 1.00
2) 1/15/91 4.4737 5.2920 23.67 0.00 2/01/90 24.11 0.49
The open basis for the first record is simply the open amount of the third
open shares record. The open basis for the next record is based on the
percentage of shares sold:
((15.0000 - 10.5263)/9.0909) * 49.00 = 24.11
These two closed shares records' gains are calculated with:
sold_amount - basis_amount - sold_commission - open_commission
3) 55.71 - 49.00 - 0.00 - 1.00 = 5.71 (Short Term)
2) 23.67 - 24.11 - 0.00 - 0.49 = -0.93 (Short Term)
──────────────────
4.78 (Total)
These work out to percentages of:
Capital Gainz Users Manual 6-16
3) ( 5.71/49.00) * 100 = 11.65% (Short Term)
2) (-0.93/24.11) * 100 = -3.86% (Short Term)
─────────────────────────────────────────
( 4.78/73.11) * 100 = 6.54% (Total)
If you included commissions in the basis, then the percentages would be:
3) ( 5.71/50.00) * 100 = 11.42% (Short Term)
2) (-0.93/24.60) * 100 = -3.78% (Short Term)
─────────────────────────────────────────
( 4.78/74.60) * 100 = 6.41% (Total)
The open shares records remaining after selling the 15 shares are:
# Date Shares Price Amount Open
Bought Commission
1) 1/01/90 10.0000 4.9000 49.00 1.00
2) 2/01/90 4.6172 5.3900 24.89 0.51
The third record was removed, since all the open shares were sold. The
second record was changed to reflect the sale of 4.4737 shares.
6.3.2.3 Maximum Gain/Minimum Loss (MAX) Selling Method
Selling 15 shares using the Maximum Gain/Minimum Loss selling method
results in the creation of the following closed shares records (the '#'
column corresponds to the open shares records):
# Date Shares Price Amount Close Open Open Open
Sold Comm Date Basis Comm
3) 1/15/91 10.5263 5.2920 55.71 0.00 3/01/90 49.00 1.00
1) 1/15/91 4.4737 5.2920 23.67 0.00 1/01/90 21.92 0.45
The open basis for the first record is simply the open amount of the third
open shares record. The open basis for the next record is based on the
percentage of shares sold:
((15.0000 - 10.5263)/10.0000) * 49.00 = 21.92
These two closed shares records' gains are calculated with:
sold_amount - basis_amount - sold_commission - open_commission
3) 55.71 - 49.00 - 0.00 - 1.00 = 5.71 (Short Term)
1) 23.67 - 21.92 - 0.00 - 0.45 = 1.30 (Long Term)
──────────────────
7.01 (Total)
These work out to percentages of:
3) ( 5.71/49.00) * 100 = 11.65% (Short Term)
1) ( 1.30/21.92) * 100 = 5.93% (Long Term)
─────────────────────────────────────────
( 7.01/70.92) * 100 = 9.88% (Total)
Capital Gainz Users Manual 6-17
If you included commissions in the basis, then the percentages would be:
3) ( 5.71/50.00) * 100 = 11.42% (Short Term)
1) ( 1.30/22.37) * 100 = 5.81% (Long Term)
─────────────────────────────────────────
( 7.01/72.37) * 100 = 9.69% (Total)
The open shares records remaining after selling the 15 shares are:
# Date Shares Price Amount Open
Bought Commission
1) 1/01/90 5.5263 4.9000 27.08 0.55
2) 2/01/90 9.0909 5.3900 49.00 1.00
The third record was removed, since all the open shares were sold. The
first record was changed to reflect the sale of 4.4737 shares.
The Maximum Gain/Minimum Loss selling method bases its decision-making
on the basis amount plus commissions, divided by shares.
6.3.2.4 Minimum Gain/Maximum Loss (MIN) Selling Method
Selling 15 shares using the Maximum Loss/Minimum Gain selling method
results in the creation of the following closed shares records (the '#'
column corresponds to the open shares records):
# Date Shares Price Amount Close Open Open Open
Sold Comm Date Basis Comm
2) 1/15/91 9.0909 5.2920 48.11 0.00 2/01/90 49.00 1.00
1) 1/15/91 5.9091 5.2920 31.27 0.00 1/01/90 28.95 0.59
The open basis for the first record is simply the open amount of the
second open shares record. The open basis for the next record is based on
the percentage of shares sold:
((15.0000 - 9.0909)/10.0000) * 49.00 = 28.95
These two closed shares records' gains are calculated with:
sold_amount - basis_amount - sold_commission - open_commission
2) 48.11 - 49.00 - 0.00 - 1.00 = -1.89 (Short Term)
1) 31.27 - 28.95 - 0.00 - 0.59 = 1.73 (Long Term)
──────────────────
-0.16 (Total)
These work out to percentages of:
2) (-1.89/49.00) * 100 = -3.86% (Short Term)
1) ( 1.73/28.95) * 100 = 5.98% (Long Term)
─────────────────────────────────────────
(-0.16/77.95) * 100 = -0.21% (Total)
If you included commissions in the basis, then the percentages would be:
Capital Gainz Users Manual 6-18
2) (-1.89/50.00) * 100 = -3.78% (Short Term)
1) ( 1.73/29.54) * 100 = 5.86% (Long Term)
─────────────────────────────────────────
(-0.16/79.54) * 100 = -0.20% (Total)
The open shares records remaining after selling the 15 shares are:
# Date Shares Price Amount Open
Bought Commission
1) 1/01/90 4.0909 4.9000 20.05 0.41
3) 3/01/90 10.5263 4.6550 49.00 1.00
The second record was removed, since all the open shares were sold. The
first record was changed to reflect the sale of 5.9091 shares.
The Minimum Gain/Maximum Loss selling method bases its decision-making
on the basis amount plus commissions, divided by shares.
6.3.2.5 Single Category (SCAT) Selling Method
Using the example purchases, values in the local security record are:
total open shares : 29.6172
total open amount : 147.00
total open commission: 3.00
Thus, the basis price for a sale using the average selling method is:
open_amount/open_shares = 147.00/29.6172 = 4.9633
The open shares records are therefore treated as:
# Date Shares Price Amount Open
Bought Commission
1) 1/01/90 10.0000 4.9633 49.63 1.00
2) 2/01/90 9.0909 4.9633 45.12 1.00
3) 3/01/90 10.5263 4.9633 52.25 1.00
As you can see, the purchase amounts still add up to $147.00, but the
individual prices and amounts have been changed to reflect the average
purchase price.
Selling 15 shares using the average selling method results in the
creation of the following closed shares records (the '#' column
corresponds to the open shares records):
# Date Shares Price Amount Close Open Open Open
Sold Comm Date Basis Comm
1) 1/15/91 10.0000 5.2920 52.92 0.00 1/01/90 49.63 1.00
2) 1/15/91 5.0000 5.2920 26.46 0.00 2/01/90 24.82 0.55
Both the basis amount and actual purchase amount for the open shares are
stored in the closed shares records. However, only the actual purchase
price is stored in the closed shares record. Thus, when reports show the
basis amount and price for a sale, the basis price is calculated from the
Capital Gainz Users Manual 6-19
basis amount and number of shares, and rounding may slightly change the
basis price.
The open basis for the first record is simply the basis amount for the
first open shares record, obtained from:
10.0000 * 4.9633 = 49.63
The open basis for the next record is derived by multiplying the number of
shares sold by the basis price of the second open shares record:
(15.0000 - 10.0000) * 4.9633 = 24.82
These two closed shares records' gains are calculated with:
sold_amount - basis_amount - sold_commission - open_commission
1) 52.92 - 49.63 - 0.00 - 1.00 = 2.29 (Long Term)
2) 26.46 - 24.82 - 0.00 - 0.55 = 1.09 (Short Term)
──────────────────
3.38 (Total)
These work out to percentages of:
1) ( 2.29/49.63) * 100 = 4.61% (Long Term)
2) ( 1.09/24.82) * 100 = 4.39% (Short Term)
─────────────────────────────────────────
( 3.38/74.45) * 100 = 4.54% (Total)
If you included commissions in the basis, then the percentages would be:
1) ( 2.29/50.63) * 100 = 4.52% (Long Term)
2) ( 1.09/25.37) * 100 = 4.30% (Short Term)
─────────────────────────────────────────
( 3.38/76.00) * 100 = 4.45% (Total)
The open shares records remaining after selling the 15 shares are:
# Date Shares Price Amount Open
Bought Commission
2) 2/01/90 4.0909 5.3900 22.05 0.45
3) 3/01/90 10.5263 4.7500 49.00 1.00
The first record was removed, since all the open shares were sold. The
second record was changed to reflect the sale of 5.0000 shares, preserving
the original shares/price relationship:
((15.0000 - 10.0000)/9.0909) * 49.00 = 26.95
The local security record for this security contains these values:
total open shares : 14.6172
total open amount : 72.55
total open commission: 1.45
Capital Gainz Users Manual 6-20
As you can see, the important values are maintained in the local security
record. In essence, the open shares are treated as:
# Date Shares Price Amount Open
Bought Commission
2) 2/01/90 4.0909 4.9633 20.30 0.45
3) 3/01/90 10.5263 4.9633 52.25 1.00
6.3.2.6 Specific Identity (ID) Selling Method
Selling 5 shares from each of the three purchases using the Specific
Identity selling method creates the following closed shares records (the
'#' column corresponds to the open shares records):
# Date Shares Price Amount Close Open Open Open
Sold Comm Date Basis Comm
1) 1/15/91 5.0000 5.2920 26.46 0.00 1/01/90 24.50 0.50
2) 1/15/91 5.0000 5.2920 26.46 0.00 2/01/90 26.95 0.55
3) 1/15/91 5.0000 5.2920 26.46 0.00 3/01/90 23.28 0.48
The open basis for each record is based on the percentage of shares sold:
1) (5.0000/10.0000) * 49.00 = 24.50
2) (5.0000/9.0909) * 49.00 = 26.95
3) (5.0000/10.5263) * 49.00 = 23.28
These closed shares records' gains are calculated with:
sold_amount - basis_amount - sold_commission - open_commission
1) 26.46 - 24.50 - 0.00 - 0.50 = 1.46 (Long Term)
2) 26.46 - 26.95 - 0.00 - 0.55 = -1.04 (Short Term)
3) 26.46 - 23.28 - 0.00 - 0.48 = 2.70 (Short Term)
──────────────────
3.12 (Total)
The percentages are:
1) ( 1.46/24.50) * 100 = 5.96% (Long Term)
2) (-1.04/26.95) * 100 = -3.86% (Short Term)
3) ( 2.70/23.28) * 100 = 11.60% (Short Term)
─────────────────────────────────────────
( 3.12/74.73) * 100 = 4.18% (Total)
If you included commissions in the basis, then the percentages would be:
1) ( 1.46/25.00) * 100 = 5.84% (Long Term)
2) (-1.04/27.50) * 100 = -3.78% (Short Term)
3) ( 2.70/23.76) * 100 = 11.36% (Short Term)
─────────────────────────────────────────
( 3.12/76.26) * 100 = 4.09% (Total)
The open shares records remaining after selling the 15 shares are:
Capital Gainz Users Manual 6-21
# Date Shares Price Amount Open
Bought Commission
1) 1/01/90 5.0000 4.9000 24.50 0.50
2) 2/01/90 4.0909 5.3900 22.05 0.45
3) 3/01/90 5.5263 4.6550 25.72 0.52
Each open shares record was changed to reflect the sale of 5.0000 shares.
6.3.2.7 Short Sell (SHRT) Method
Selling 15 shares using the Short Sell Method results in the creation
of the following closed shares record:
Date Shares Price Amount Close Open Open Open
Sold Comm Date Basis Comm
1/15/91 15.0000 5.2920 79.38 0.00 0/ 0/00 0.00 0.00
There are no associated open shares records yet. (Assume no selling
commission or load.)
If you purchase 15 shares for $77.50 on 1/20/91 to cover the short
sale, the closed shares record is updated. For comparison, the purchase
amount is the same as the previous FIFO example, and the load is 2%:
Date Shares Price Amount Close Open Open Open
Sold Comm Date Basis Comm
1/15/91 15.0000 5.2920 79.38 0.00 1/20/91 75.95 1.55
The closed shares record's gain is calculated with:
sold_amount - basis_amount - sold_commission - open_commission
79.38 - 75.95 - 0.00 - 1.55 = 1.88 (Short Term)
This works out to a percentage of:
(1.88/75.95) * 100 = 2.48% (Total)
If you included commissions in the basis, then the percentage would be:
(1.88/7.47) * 100 = 2.43% (Total)
Short sales do not appear on the tax reports until they are covered.
6.3.2.8 Compare Examples
In this example, the selling methods resulted in the following gains
(figures in parenthesis show results with commissions in the basis):
Capital Gainz Users Manual 6-22
MAX : Gain of $7.01 +9.88% (+9.69%)
LIFO : Gain of $4.78 +6.54% (+6.41%)
SCAT : Gain of $3.38 +4.54% (+4.45%)
ID : Gain of $3.12 +4.18% (+4.09%)
FIFO : Gain of $1.88 +2.48% (+2.43%)
SHRT : Gain of $1.88 +2.48% (+2.43%)
MIN : Loss of $0.16 -0.21% (-0.20%)
Capital Gainz Users Manual 6-23
6.4 Record Distribution
To record or change a distribution, you fill in the Distribution Form.
When adding a distribution, this form displays the last entered symbol and
the current or last entered date. When changing a distribution, this form
displays the actual values in the record. The fields in this form are:
o (Required) The Local Symbol of the security for the distribution. If you
leave this entry blank or enter an invalid symbol, the Security Lookup
Table, described at the beginning of the chapter, pops up. After you
enter a valid symbol, the security's name is displayed.
o (Required) The Date of the distribution. If you want a different date,
enter it over the displayed date.
o (Required) The Type of the distribution. If you enter an invalid type,
or leave the field blank, the Distribution Type Lookup Table pops up.
Distribution types are described below. After you enter the Type, the
associated global security's price history is searched. If you recently
recorded a distribution for another local security linked to the same
global security, you are asked if you want to use that distribution.
o (Required/Calculated) The total Amount of the distribution or fee. Don't
enter negative values - for types such as FEEs, Capital Gainz knows the
figure is negative. After entry, the Per Share figure is calculated. Due
to rounding, the calculated per share figure may not be exact. If you
set this entry to 0, it's calculated.
o (Required/Calculated) The distribution Per Share (not the price). The
distribution per share figure directly affects the yield. You can use
the calculated value or enter a different per share value. You should
verify the per share amount of the distribution against your security's
distribution notice, if it's available. You must enter at least one of:
Amount and Per Share (unless you turn off automatic calculations).
The per share calculation is based on the shares held at the beginning
of the specified date, so that multiple distributions on one date will
have accurate per share values calculated.
o (Optional) Twenty characters of Notes about the distribution, so you can
enter information such as QUARTERLY DIVIDEND.
Function keys at the bottom of the screen are:
o Form Accept - accept form, the same as hitting Enter on each field. This
key is only displayed when changing records.
o Form Reject - exit immediately, the same as hitting Esc to back out.
This key is only displayed when adding or changing records.
o F2:Buy Shares - exit immediately, and bring up the Buy Shares Form. This
key is only displayed when adding records.
Capital Gainz Users Manual 6-24
o F3:Sell Shares - exit immediately, and bring up the Sell Shares Form.
This key is only displayed when adding records.
o F5:Calc On/Calc Off - turn off automatic calculations, as described at
the beginning of the chapter. This key is only displayed when adding or
changing records.
After completing the form, the distribution record is written to disk.
Then:
If you just recorded a Dividend, Interest, or Capital Gain Distribution
and specified YES for the Reinvest option in the User Settings Form: you
are asked if you want to reinvest the distribution. If you answer YES,
then you are taken to the Buy Shares Form, now labeled Reinvest
Distribution. Although you will normally reinvest in the same security,
you can direct the distribution elsewhere, such as reinvesting stock
dividends into a money market fund. You must enter the purchase price
for the reinvestment. After completing the Buy Shares Form, the
reinvestment is complete and you return to the Record Distribution Form.
If you just recorded a Fee: Capital Gainz asks if you want to sell
shares to cover the fee. This is normally what a mutual fund company
will do when an IRA fee is due and you do not send in a separate
payment. If you answer YES, you are taken to the Sell Shares Form, now
labeled Sell Shares to Cover Fee. Although you will usually sell shares
of the same security, you can cover fees from a separate money market
account. After completing the Sell Shares Form, you return to the Record
Distribution Form.
If you just recorded a Return of Principal, Bond Discount, or Bond
Amortization: You are asked if you want to let Capital Gainz
automatically adjust the basis of affected shares. For return of
principal and bond amortization, the basis of outstanding shares will be
decreased by the distribution per share amount. For bond discount, the
basis of the shares are increased by the distribution per share amount.
For return of principal and bond amortization, any amount exceeding the
principal is treated as short and/or long term capital gains. A report
is generated showing the open shares affected, and how the basis will be
adjusted. If you confirm the action, the basis of the affected shares
are adjusted.
===>>> After completing the form to record a distribution, some of the
field values stay the same, and the cursor goes back to the Symbol field -
this form is repeatedly accepted until you explicitly exit from it. To
remind you how many distributions you've recorded in the current session,
a counter is displayed in the upper corner of the form.
Changing and deleting distribution records is discussed in Chapter 9.
A price history entry is added based on distribution per share and
date, except for return of principal, bond discount, bond amortization,
accrued interest, and fee distributions.
Capital Gainz Users Manual 6-25
6.4.1 Distribution Types
The Distribution Type Lookup Table is brought up if you enter an
invalid distribution type. Hitting Enter selects the highlighted type.
6.4.1.1 Dividend/Interest (DIV/INT) Distribution Type
The dividend distribution type, DIV, is used to record dividends,
while the interest distribution type, INT, is used to record interest.
Only one of these is available depending on how you defined the global
security and security type. If the global security's dividends or interest
per year value is 0 when you record a dividend or interest, it is changed
to 1.
Cash securities and many income mutual funds take into account partial
dividend/interest periods, while other securities simply multiply the
number of shares by the per share amount. To account for these
differences, Capital Gainz assumes that securities set to receive 12
interest/dividend payments per year factor in partial periods.
6.4.1.2 Short Term Capital Gain (STCG) Distribution Type
The short term capital gain distribution type, STCG, is used to record
short term capital gain distributions. Your broker/investment company
statement that you receive in the mail should indicate whether a capital
gain distribution is short term or long term. If not, assume it's long
term. For tax purposes, short term capital gain distributions are usually
treated as ordinary dividends.
6.4.1.3 Long Term Capital Gain (LTCG) Distribution Type
The long term capital gain distribution type, LTCG, is used to record
long term capital gain distributions. The broker/investment company
statement that you receive in the mail should indicate whether a capital
gain distribution is short term or long term. If not, assume it's long
term. On the tax reports, long term capital gain distributions are usually
subtracted from Schedule B totals and transferred to Schedule D.
6.4.1.4 Fees (FEE)
The fee type, FEE, is used to record miscellaneous fees, such as an
IRA maintenance fee, which can't be associated with a specific share
purchase or sale. Enter a positive number for this value, as Capital Gainz
knows to subtract it from the totals. You don't enter a per share amount
for this distribution type. Fees appear on a separate Fee Report after the
Schedule B report.
6.4.1.5 Return of Principal (PRIN)
Return of principal is generally associated with Unit Trusts or
Partnerships, where you receive non-taxable returns of capital until the
initial investment has been depleted. After exhausting the basis, excess
distributions are classified as long or short term capital gains. You can
determine the remaining basis from the basis of the open shares.
Capital Gainz Users Manual 6-26
In Capital Gainz, the per share amount of the return of principal is
subtracted from each outstanding open share, with the original purchase
amount preserved in the Original Amount field of each open shares record.
The return of principal is included in the dividend/interest totals. If
the return of principal amount exceeds the remaining basis, the excess is
recorded as short and/or long term capital gains distributions.
6.4.1.6 Bond Discount (DISC)
Bond discount is generally associated with Zero Coupon Bonds, which
are issued at deep discounts. While bond holders don't receive interest,
there is implied income which is added to the basis of the initial
investment. Even though no interest is received, bond holders are liable
for tax on the implied interest. (U.S. Savings Bonds are issued at a
discount, but purchasers can elect to defer reporting implied income until
maturity.) The difference between the maturity price and the issue price
of discounted bonds is called Original Issue Discount, or OID, in IRS
publications. Previously issued bonds may also be purchased at a market
discount, which can happen if interest rates increase, causing bond prices
to drop to meet current rates.
Typically, holders of bonds with OID receive statements indicating the
yearly amount of discount to report, making reporting easy. Otherwise,
different rulings apply to bond discount depending on whether it's
original issue discount or market discount, as well as on the actual
purchase date. No human being can possibly comprehend the maze of IRS
rulings, so you're on your own in calculating yearly discount. Get your
hands on all the related IRS publications, and good luck.
In Capital Gainz, the remaining discount per share is displayed
initially in the Per Share field of the Distribution Form. The per share
amount recorded is added to each outstanding open share, with the original
purchase amount preserved in the Original Amount field of each open shares
record. The discount is included in the dividend/interest totals.
6.4.1.7 Bond Amortization (AMRT)
Bond amortization is generally associated with previously issued bonds
purchased at a premium over maturity price. This happens when interest
rates drop, causing the price of bonds issued at higher yields to increase
to bring the actual yield down to current rates. You can choose to
amortize the premium over the life of the bond, based on the earlier of
the maturity or call date. By amortizing the premium, you reduce the
amount of interest you are taxed on.
Like bond discount, the rules for reporting bond amortization are
nearly incomprehensible. So, it's up to you to decipher the IRS
publications and determine the appropriate bond amortization method.
In Capital Gainz, the remaining amortization per share is displayed
initially in the Per Share field of the Distribution Form. The per share
amount recorded is subtracted from each outstanding open share, with the
original purchase amount preserved in the Original Amount field of each
open shares record. The amortization is subtracted from the
dividend/interest totals.
Capital Gainz Users Manual 6-27
6.4.1.8 Accrued Interest (ACCR)
Accrued interest occurs when you purchase a bond between interest
periods. Part of your purchase amount is used to compensate the seller for
interest earned but not received. Thus, when you receive the actual
interest payment, you should reduce it by the accrued interest you paid
when you purchased it. The accrued interest is subtracted from the
dividend/interest totals.
6.4.2 Examples
6.4.2.1 Dividend and Capital Gain Distributions
For example, say you have the following purchases and distributions:
1) 1/01/90 buy 10.0000 shares at 4.9000 for 49.00
2) 2/01/90 DIV of 2.40 (0.24 per share)
3) 2/01/90 buy 0.4453 shares at 5.3900 (reinvest)
4) 2/01/90 buy 9.0909 shares at 5.3900 for 49.00
5) 3/01/90 LTCG of 0.59 (0.03 per share)
6) 3/01/90 buy 0.1267 shares at 4.6550 (reinvest)
7) 3/01/90 buy 10.5263 shares at 4.6550 for 49.00
Assume the current date is 1/15/91, and the current price is $5.292. Also,
assume that dividends are paid semi-annually. The current yield is:
((dividend_per_share * dividends_per_year)/price) * 100
((0.24 * 2)/5.292) * 100 = 9.07%
From this example, you can see the importance of the dividends per year
figure associated with a security through the Global Security Form.
The total return for the mutual fund over the period is:
Reinvest (1 * 0.24/share on 2/01/90 at 5.3900 = .0445 shares
Reinvest (1.0445 * 0.03/share on 3/01/90 at 4.6550 = .0067 shares
Total shares bought = .0445 + .0067 = .0512
Amount at start = 1 share at 4.9000 = 4.9000
Amount at end = (1 + .0512) shares at 5.292 = 5.5630
Total Return = ((5.5630 - 4.9000)/4.9000) * 100 = 13.53%
6.4.2.2 Return of Principal (PRIN)
Say you made the following purchases in a limited partnership:
Date Shares Price Amount Orig Amount
1/01/90 2.0000 5000.00 10000.00 10000.00
6/01/90 1.0000 5000.00 5000.00 5000.00
If you receive a $750 return of principal on 12/31/90, you would record it
in the Distribution Form. The following record would be added:
Capital Gainz Users Manual 6-28
Date Type Amount Per Share
12/31/90 PRIN 750.00 250.00
The open shares would be adjusted proportionally:
Date Shares Price Amount Orig Amount
1/01/90 2.0000 5000.00 9500.00 10000.00
6/01/90 1.0000 5000.00 4750.00 5000.00
Finally, the price history would be updated, so that the price on 12/31/90
was $4750 instead of $5000.
6.4.2.3 Bond Discount, Zero-Coupon Bond (DISC)
Say you made the following purchase of newly issued bonds:
Date Shares Price Amount Orig Amount
1/02/92 2.0000 500.00 1000.00 1000.00
The global security bond values show the following:
Issue Date : 1/02/92 Issue Price : $500.00
Maturity Date: 12/31/01 Maturity Price: $1000.00
These are zero coupon bonds, purchased at a deep discount to maturity
price and paying no interest. The implied interest must be recorded
annually, and is treated as interest income. The implied interest
increases the basis of the bond, so the discount is not taxed again at
redemption. In the case of bonds purchased at original issue, the implied
interest is usually referred to as Original Issue Discount (OID). Capital
Gainz does not distinguish OID from regular Bond Discount. Yearly OID
should be reported to you by your broker or purchase agent.
For these bonds, the following table shows the annual distributions
recorded, the adjustments to the open shares records, and the new price
records created:
Date Type Amount Per Share Adj Open Amt Adj Price
12/31/92 DISC 71.80 35.90 1071.80 535.90
12/31/93 DISC 76.96 38.48 1148.76 574.38
12/31/94 DISC 82.48 41.24 1231.24 615.62
12/31/95 DISC 88.40 44.20 1319.64 659.82
12/31/96 DISC 94.76 47.38 1414.40 707.20
12/31/97 DISC 101.56 50.78 1515.96 757.98
12/31/98 DISC 108.84 54.42 1624.80 812.40
12/31/99 DISC 116.66 58.33 1741.46 870.73
12/31/00 DISC 125.04 62.52 1866.50 933.25
12/31/01 DISC 133.50 66.75 2000.00 1000.00
The annual Bond Discount amounts would be reported as interest income on
Schedule B. Thus, the interest income for 1992 is 71.80. The amount in the
open shares record is adjusted with each discount as shown. The price of
the bond is updated with each discount. At redemption, there is no gain to
report since the discount was recorded annually.
Capital Gainz Users Manual 6-29
6.4.2.4 Bond Discount (DISC)
Say you made the following purchase of bonds on the open market:
Date Shares Price Amount Orig Amount
1/02/93 2.0000 800.00 1600.00 1600.00
The global security bond values show the following:
Issue Date : 1/02/92 Issue Price : $1000.00
Maturity Date: 12/31/01 Maturity Price: $1000.00
Coupon Rate : 5.00%
These bonds were issued at $1000.00 each, but an inflation bout made
interest rates jump, forcing the price of the bond down so the actual
yield was competitive. You purchased two of these bonds at $800 each.
Thus, while the coupon rate is 5%, the actual yield is 50/800 = 6.25%.
These bonds will have two distribution components: actual interest paid
and implied interest for the discount.
For these bonds, the following table shows the annual distributions
recorded, the adjustments to the open shares records, and the new price
records created:
Date Type Amount Per Share Adj Open Amt Adj Price
12/31/93 INT 100.00 50.00
12/31/93 DISC 40.16 20.08 1640.16 820.08
12/31/94 INT 100.00 50.00
12/31/94 DISC 41.16 20.58 1681.32 840.66
12/31/95 INT 100.00 50.00
12/31/95 DISC 42.20 21.10 1723.52 861.76
12/31/96 INT 100.00 50.00
12/31/96 DISC 43.26 21.63 1766.78 883.39
12/31/97 INT 100.00 50.00
12/31/97 DISC 44.34 22.17 1811.12 905.56
12/31/98 INT 100.00 50.00
12/31/98 DISC 45.46 22.73 1856.58 928.29
12/31/99 INT 100.00 50.00
12/31/99 DISC 46.60 23.30 1903.18 951.59
12/31/00 INT 100.00 50.00
12/31/00 DISC 47.78 23.89 1950.96 975.48
12/31/01 INT 100.00 50.00
12/31/01 DISC 49.04 24.52 2000.00 1000.00
The annual Bond Discount amounts would be reported as interest income on
Schedule B. Thus, the interest income for 1993 is: 100.00 + 40.16 =
140.16. The amount in the open shares record is adjusted with each
discount as shown. The price of the bond is updated with each discount. At
redemption, there is no gain to report since the discount was recorded
annually.
Bond discount reporting is required unless the bonds are free of all
taxes. It would be much easier if you were allowed to simply report the
discount as a gain when the bond is redeemed.
Capital Gainz Users Manual 6-30
6.4.2.5 Bond Amortization (AMRT)
Say you made the following purchase of bonds on the open market:
Date Shares Price Amount Orig Amount
1/02/93 2.0000 1200.00 2400.00 2400.00
The global security bond values show the following:
Issue Date : 1/02/92 Issue Price : $1000.00
Maturity Date: 12/31/01 Maturity Price: $1000.00
Coupon Rate : 5.00%
These bonds were issued at $1000.00 each, but interest rates took a dive,
forcing the price of the bonds up. You purchased two of these bonds at
$1200 each. Thus, while the coupon rate is 5%, the actual yield is 50/1200
= 4.17%. You can choose to amortize the premium, which is offset against
the interest paid. These bonds will have two distribution components:
actual interest paid and amortization for the premium.
For these bonds, the following table shows the annual distributions
recorded, the adjustments to the open shares records, and the new price
records created:
Date Type Amount Per Share Adj Open Amt Adj Price
12/31/93 INT 100.00 50.00
12/31/93 AMRT -49.04 -24.52 2350.96 1175.48
12/31/94 INT 100.00 50.00
12/31/94 AMRT -47.78 -23.89 2303.18 1151.59
12/31/95 INT 100.00 50.00
12/31/95 AMRT -46.60 -23.30 2256.58 1128.29
12/31/96 INT 100.00 50.00
12/31/96 AMRT -45.46 -22.73 2211.12 1105.56
12/31/97 INT 100.00 50.00
12/31/97 AMRT -44.34 -22.17 2166.78 1083.39
12/31/98 INT 100.00 50.00
12/31/98 AMRT -43.26 -21.63 2123.52 1061.76
12/31/99 INT 100.00 50.00
12/31/99 AMRT -42.20 -21.10 2081.32 1040.66
12/31/00 INT 100.00 50.00
12/31/00 AMRT -41.16 -20.58 2040.16 1020.08
12/31/01 INT 100.00 50.00
12/31/01 AMRT -40.16 -20.08 2000.00 1000.00
The annual Bond Amortization amounts would be reported as an offset to
interest income on Schedule B. Thus, interest income for 1993 is: 100.00 -
49.04 = 50.96. The amount in the open shares record is adjusted with each
amortization as shown. The price of the bond is updated with each
amortization. At redemption, there is no loss to report since the premium
was recorded annually.
Bond premium amortization is voluntary. Because of the book-keeping
involved, many bond purchasers elect to report the premium as a loss when
the bond is redeemed.
Capital Gainz Users Manual 6-31
6.4.2.6 U.S. Savings Bonds
While you can record each individual savings bond, the small values of
these securities makes this cumbersome. I suggest the following:
Lump all savings bonds of the same series into a single security, or
into multiple securities with different denominations.
To record a purchase using the single security approach, use a cost of
$1 per share. Thus, a $50 bond purchased for $25 would be recorded as a
purchase of 25 shares at $1 each. To record a purchase using a security
for each denomination, use the cost. Thus, the previous example is
recorded as a purchase of 1 share at $25. You can put the redemption
price in the notes field for the purchase, along with the bond's serial
number.
When you redeem savings bonds, use the Specific Identity Method so you
can sell individual bonds. Selling a $50 bond purchased at $25 would
require a sale of 25 shares at $2 each, if you are using the single
security approach. With the multiple security approach, record a sale of
1 share at $50.
Make sure the savings bond security type specifies to report sales on
Schedule B. The gain on the sale is then treated as interest.
Say you purchased one Series EE $50 U.S. Savings Bond each month for
three months, at $25 each. We'll show both the single and multiple
security approaches here. First, you'd create a global security:
Multiple Security Single Security
Symbol : SB05 Symbol : SB
Name : Savings Bond $50 Name : Savings Bond
Broker/Inv Co: 1st National Broker/Inv Co: 1st National
Acct Number : Acct Number :
Type : SB05 Type : SB
Int/Year : 0 Int/Year : 0
The security type is defined as (note the Sched D Sales):
Multiple Security Single Security
Type Code : SB05 Type Code : SB
Description : Savings Bond Description : Savings Bond
Class : BOND Class : BOND
Distributions: INT Distributions: INT
Sched B Int : TAX Sched B Int : TAX
Short Term CG: B SCH Short Term CG: B SCH
Long Term CG : D<-B Long Term CG : D<-B
Sched D Sales: B SCH Sched D Sales: B SCH
Ret of Prin : B SCH Ret of Prin : B SCH
The local security would look like this:
Capital Gainz Users Manual 6-32
Multiple Security Single Security
Local Symbol : SB05 Local Symbol : SB
Linked to : SB05 Linked to : SB
Broker/Inv Co: 1st National Broker/Inv Co: 1st National
Acct Number : Acct Number :
Sell Method : ID Sell Method : ID
Tax Exempt : NO Tax Exempt : NO
The three purchases would be entered like this:
Multiple Security Single Security
Date Shares Price Shares Price Amount Notes
Bought Bought
1/01/93 1.00 25.00 25.00 1.00 25.00 $50 C20000001EE
2/01/93 1.00 25.00 25.00 1.00 25.00 $50 C20000002EE
3/01/93 1.00 25.00 25.00 1.00 25.00 $50 C20000003EE
Selling the bond purchased on 1/01/93 would look like this:
Multiple Security Single Security
Date Shares Price Shares Price Amount Open Open
Sold Sold Date Basis
1/01/03 1.00 50.00 25.00 2.00 50.00 1/01/93 25.00
The sale results in a gain of $25. This is reported on Schedule B as a
result of the security type definition.
This method won't show accurate performance for the bonds until
they're redeemed, but it significantly reducing bookkeeping chores.
6.4.2.7 Accrued Interest
You purchase shares of a unit investment trust:
Date Shares Price Amount Open
Bought Commission
2/01/91 49.00 103.45 5069.05 0.00
However, your broker also bills you for an additional $34.30, to cover
accrued interest owed to the previous owner. Thus, you paid:
5069.05 + 34.30 = $5103.35
Record the accrued interest 'distribution'. If you receive two interest
checks during the rest of the year:
Date Type Amount Per Share
02/01/91 ACCR 34.30 0.70
05/31/91 INT 98.49 2.01
11/30/91 INT 106.19 2.17
On your Schedule B for the year, you will show total interest for this
Capital Gainz Users Manual 6-33
fund of:
98.49 + 106.19 - 34.30 = $170.38
Capital Gainz Users Manual 6-34
