On 19/01/16 02:41, Jeff Barlow wrote:
On 01/18/2016 05:25 PM, Jack wrote:
Two separate issues. First, I'm not sure we're using the same
terminology. They pay a dividend, which needs an assigned income
category, so it can be properly allocated for tax reasons. Most
commonly, all of that amount is used to buy shares, so some number of
shares get added to the holdings, and there is no cash to be transferred
to a brokerage account.
Hello, I don't mean to hijack your thread but I have some closely
related issues.
No hijacking is involved - it's a free-for-all!
First let me concur that the category amount on a
reinvested dividend sould never be zero. If it was then there is no
transaction to record. As Jack says it's exactly a dividend and a buy
rolled into one. The dividend is income and must be accounted for as such.
But some transactions involve no money, add or remove shares for instance.
The snag is that any dividend gets added into the transaction total,
together with the share cost. That dividend/category payment will add
to your total income, and really is a duplication as it will also appear
in the value of the involved shares. At least that's how it appears to
my simple non-accountant's brain. I don't see how the income can
purchase shares and also appear as an apparent dividend payment.
Perhaps someone can put me right on this.
I receive dividends from several mutual funds. Some are reinvested in
shares of the same fund. Some are used to buy shares in a different fund
from the same institution (The Vanguard Group). Some are paid as a cash
transfer to my checking account (an ACH transfer). No broker is
involved. There is no actual brokerage account. Vanguard does not allow
cash accounts. Most of these transactions represent taxable income and
need to categorized as such even though many involve no cash flow.
It's not unusual for 'virtual' accounts to be employed, sometimes to
allow for delays between, say, a cheque being raised and the bank's
clearing of it. Superficially, from the KMM point of view, everything
is simple and straight forward, but the users are far more creative than
that.
The only way I've found to record all these transactions in KMM is to
employ a fictional brokerage account within KMM. I have to record these
single transactions as two separate transactions into and out of this
fictional brokerage account.
Since this fictional brokerage account does not indeed exist in the real
world one would at least expect it to maintain a zero balance. Alas, due
to KMM rounding errors that is not even true.
Rounding errors in what parameter? Presumably not in the monetary side,
as generally a fixed two decimal places is the norm, except in a few(?)
countries.
I am currently waiting to fill out my income tax returns until I receive
statements (1099s) from Vanguard because the numbers I get from KMM
never quite match reality.
For the time being, at least, I'll leave this aspect well alone, or I'll
be bound to upset someone.
Allan
