Stock splits, lot accounting supported in 2 beta?

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Stock splits, lot accounting supported in 2 beta?

Postby ras » Sun Jul 06, 2008 1:35 pm

As for so many others, the main reason I haven't moved over from Windows to Linux has been the lack of a viable MS Money / Intuit Quicken alternative in the latter environment. Although my needs are simpler than most -- I could care less about downloading from financial institutions, mortgage and loan support, and budgeting -- I do require the ability to keep track of security lots bought and sold (i.e., accounting by lot, vs. average cost accounting) -- and to globally handle stock splits.

Which leads me to my question: does My Money 2 handle lot accounting and stock splits?

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Re: Stock splits, lot accounting supported in 2 beta?

Postby mthadm » Sun Jul 06, 2008 5:50 pm

Not at the moment.

We have an "Investments" module that is in the works, it has a portfolio management functions that allow for proper accounting of stock splits.
We obviously will support lifo, fifo and average cost accounting as well.

Investments will be distributed as a module of My Money, in other words it is not a separate product, you will need to have a copy My Money to install Investments on top of it.

We don't have a ETA yet, we hope to get it of the door sometime this fall, may be as a beta first.


Thanks
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Re: Stock splits, lot accounting supported in 2 beta?

Postby ras » Sun Jul 06, 2008 8:58 pm

Thanks for the informative reply, mthadmin! I'll be watching subsequent developments with great interest.

One point of importance: most serious investors do accounting by lots, which isn't FIFO, LIFO, or average cost accounting but something else. Let's take a simplified example. Suppose I've accumulated 300 shares of XXX in the following fashion.

I bought 100 shares of XXX on 4/1/05 at $40 a share.
I bought 100 shares of XXX on 4/1/06 at $80 a share.
I bought 100 shares of XXX on 4/1/07 at $52 a share.

On 4/1/08, I believe I'm overinvested in XXX by 100 shares; besides, my tax bill for 2008 looks really large, so I need to take some tax losses to counterbalance the capital gains I have for this year. The price of XXX on 4/1/08 is $70 a share. If I do as most investors do, it will cost me big time with the IRS. Most investors -- or equivalently, their brokerage services -- will sell using FIFO unless told otherwise. But if I do FIFO, I've got a capital gain of $30 a share or $3,000.

It's not much better with LIFO, which also generates a capital gain of $18 a share or $1,800. And average cost accounting is only slightly better, in this case, than LIFO, for the average cost per share of my 300 shares is $57.33, so I'll still be stuck with a capital gain, in this case $1,267.

A savvy investor, however, will insist, when he sells his 100 shares of XXX on 4/1/08, that the sale come from the lot of XXX shares purchased on 4/1/06. That gives him a taxable loss of $10 per share or $1,000 in total.

Now wouldn't one prefer My Forum 2 to have the capability that savvy investors will insist on, cost lot accounting? The same goes for the ability to handle stock splits as a single manual entry at most. MS Money and Quicken have both these capabilities. Failing these capabilities, personal finance software can usefully handle bank accounts and charge cards, but not investments.

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Re: Stock splits, lot accounting supported in 2 beta?

Postby ras » Sun Jul 06, 2008 9:02 pm

Make that "My Money 2" for the erroneous "My Forum 2" above.
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Re: Stock splits, lot accounting supported in 2 beta?

Postby mthadm » Sun Jul 06, 2008 10:05 pm

This was an interesting read. I assume this is legal from a tax handling point of view, it actually isn't that difficult to do technically in the software.

We will keep "lots" in mind.
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Re: Stock splits, lot accounting supported in 2 beta?

Postby ras » Tue Jul 08, 2008 4:08 pm

Yes, accounting by lots is allowed by the IRA but you have to do it consistently. You're not allowed to switch back from one accounting method to another. It's not just lot accounting that this applies to. You can't, for example, arbitrarily switch from LIFO to FIFO.

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Re: Stock splits, lot accounting supported in 2 beta?

Postby ras » Tue Jul 08, 2008 4:19 pm

Regarding lot accounting: a desirable -- though not absolutely essential -- feature is to implement a Minimum Gain button that one can optionally press rather than manually assigning the lots and quantities to be sold. Thus, using the example I gave earlier, suppose I want to sell 150 shares of XXX. If I press the Minimum Gain button, it assigns (subtracts) 100 shares from the lot producing the smallest capital gain, and then assigns (subtracts) an additional 50 shares from the lot with the next smallest capital gain.

MS Money has also implemented a Maximum Gain button, which I've never found a use for.

Thanks for your interest.

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