incorrect capital gain calculation?

[mkappa74]

I've got this problem.

I've bought 2000 shares of Unicredit stocks (ITA) @2.135€ on 07/05/09 + 8.50 commission (total: 4278.50)
I've bought 2000 shares @1.87€ on 14/05/09 + 7.44 commission (total: 3747.44)
On 18/05/09 I received 730 shares as dividend
I've sold 2000 shares of stock @1.776€ on 18/05/09 (after receiving dividend) + 7.08 commision, total: 3552.92 received

For my bank (and for me), gain calculations about the last sold are calculated as follow:

share average value: (4278.50+3747.44+730) / (2000+2000+730) = 1,696

So, the sold produce a POSITIVE gain of (1.776-1.696)*2000 = 159.28

FundManager always calculate a NEGATIVE gain.
If I set Investment to FIFO, it's obvious because FM refers to first purchase (@2.13)
If I set to AVERAGE COST, I receive a negative gain too, and I'm not able to explain this.
In every way, average cost always refers to all shares owned, even if there have been selling transition.

It doesn't appear to be correct for "normal" gain calculation (here in Italy, I don't know other situations), that is calculated on average share price depending on the last owned share (not ALL).

I'm not sure to be clear....

[Mark]

Hi mkappa74,

How did you record the 730 dividend shares in Fund Manager?

In your calculation, you are giving them a total cost of €730. Did you record that you paid €730 for these 730 shares? This would be a purchase at a cost of 1.00€/share. To get your number, you would use the AVG cost accounting method, and make sure you've recorded them at this cost if that is what is appropriate. I don't know what is appropriate to record for the cost, I'm just relating it to the equation you wrote below. Maybe the tax cost basis should be 0? You'd have to check with your broker or tax advisor on how you are suppose to handle the tax cost basis of those 730 shares, and record it that same way in Fund Manager.

[mkappa74]

I've recorded it as follow:

BUY 730 shares on 18.05.2009 @0.00€

because I've received 730 shares without have to pay for them.

This is the sequence:
shares value comm. price
2000 4278,5 8,5 2,135
2000 3747,44 7,44 1,87
730 0 0 0

and this is the average price per share:
4730 8025,94 15,94 1,69345

this is the sell operation:
2000 3552,98 7,08 1,77295

so that the gain would be: (1,77295-1,69345)*2000 = 159€

[Mark]

If you recorded them at a cost of 0, then that is the tax basis. It doesn't matter what the market value is for tax cost basis. If you recorded that you paid 0 for them, then the tax cost basis is 0.

Average cost basis is:
(4278.50+3747.44+0) / (2000+2000+730) = 1.697

If you sold 2,000 shares at 1.776, your gain is:

2000 * (1.776 - 1.697) = 158 gain

I am rounding to 3 significant digits, but this is the idea.

If you're getting a negative gain in Fund Manager, then something isn't recorded as described here. Check your transactions for these 3 purchases, plus your sell. Also, look and see if you have any "Return of Capital" or "Account Fee" distribution types recorded. Those also affect your cost basis. If you cannot find the reason, you can email me the investment file, and I can take a closer look.

[mkappa74]

I'm not able to understand where the mistake is ...

Before that operations I've done other buy/sell order, but at the date of 14.05 I owned 0 shares, so that it could be as you wrote (and as I was thinking)

I send you my .dat files for a look, if you can, just to better understand.

Thanks.

[Mark]

Hi mkappa74,

Thanks for sending the file. The problem is you have the redemption of 2,000 shares recorded _before_ the 730 shares were acquired from the dividend. They both happened on the same date, so the order you enter them is important. If you look in the Data Register and sort by Date, you will see the redemption happened before the 730 share purchase. If you edit the redemption, and click OK (without even making any changes) it will move it to the end of the day. (The last transaction edited or entered goes to the end of the day.) Now, if you run the Capital Gains report, you will see a gain of 159.29.

[mkappa74]

it works!
All ok!