Excluding Tax-Deferred Accounts from Cap Gains Report

[stevetone]

I have a hierarchy of portfolios under a master portfolio. Within the hierarchy are a mixture of taxable and tax-deferred accounts. When I create the Capital Gains Report, all capital gains for the portfolios in the heirarchy are included.

Is there a way to exclude the tax-deferred accounts from the Capital Gains Report?

(As I finished writing this I suppose that I could create 2 sub-hierarchys in the master portfolio, one for taxable and one for tax-deferred portfolios. Since I already have a 3-level hierarchy as it is, this would seem to be getting a little complicated).

I guess what I am envisioning is (an enhancement to add) a checkbox on the Portfolio Properties window that would indicate if the account is tax-deferred. Then a checkbox on the Capital Gains Report settings window that would be checked to exclude tax-deferred accounts.

Any thoughts?

[Mark]

Hi stevetone,

You can accomplish this now, without reorganizing your sub-portfolios. Every investment has a "tax-free" property. See "Investment Properties... / Other / Tax-Free". You can turn this on for your tax-deferred investments. When creating a capital gains report there is an option to exclude tax-free investments. See "Options / Report Preferences / Capital Gains / Exclude Tax Free Investments". (You'll also notice there are options to exclude default and/or any cash account.)

[stevetone]

Thanks Mark for your quick reply!

Although marking the investments themselves as tax-free does not make intuitive sense to me, I went ahead and did it, per your suggestion, and it does work.

With numerous tax-deferred investments throughout numerous portfolios, it was a little tedious! Seems like it should be specified at the Portfolio level, but I admit that I may not be structuring my accounts in the same manner as others.

Steve

[Mark]

Hi Steve,

It does make sense to be able to specify this at the sub-portfolio level in many cases, but I believe doing it at the investment level gives the most flexibility.

[stevetone]

Not to drag this particular topic on...

It would be nice to exclude tax-deferred investments from the Open Lots Report as well. I use the Open Lots Report to search for opportunities to harvest tax losses, and having the tax-deferred investments in the mix just adds clutter.

Steve

[Mark]

Hi Steve,

Good idea, thank you. I'll see about getting this option added.

[elliots]

I have to vote with stevetone, and hope you'll consider making some changes.

While I grant that control at the investment level is more flexible, it seems to me the price in inconvenience is very great, particularly for an advisor. I now have to go back and, account by account, recode each investment including sold ones. Going forward I can code each asset as it's acquired, so that's a bit less of a burden (as long as I remember todo it).

Actually, there should be tax coding at both the investment level and the portfolio level to handle the tax situation which is more complicated than a single field at the investment level can handle. You have 2 broad tax issues; income and capital gains. Within income, you really have fully tax-free (e.g., same state muni bonds), fed tax-free but state taxable (e.g., out of state munis), and state tax-free but federal taxable (e.g., T-Bill). That's what should be coded at the investment level. And note that even fully tax-free bonds can generate capital gains. [To make it worse, there's really another category at the investment level:Tax deferred (e.g., accrued annuity interest or VA appreciation) which is not the same as tax-free -- but that's a complication I'm more willing to live with -- that would be asking for a lot.]

As an advisor (and I think most investors), I need to be able to generate these reports:

Taxable capital gains (excluding retirement accounts).
Tax Related Information (defined as: taxable dividends, taxable interest, CG distributions, Return of Capital, Foreign Tax)

I can do these now, but I'd really like the interest to be broken into sub-categories as described above, and a field to allow me to exclude at the sub-portfolio level.

While I know database fields are precious, it seems that a field at the portfolio level and a check box on the report set-up or the ability filter at the report level would be a great help. I would also help to expand the single field at the investment to cover all 4 tax possibilities.

Elliot

[Mark]

Hi Elliot,

Thanks for the feedback. I can appreciate the need for a "Tax-Free" property to assign to a sub-portfolio. Currently, the Capital Gains and Distribution Summary reports both have the option to exclude investments marked as tax-free. If we added a tax-free sub-portfolio property and used this same existing report option to apply to sub-portfolios marked as tax-free, would that satisfy your needs (or most of them)?

From within any report, see "Options / Report Preferences... / Distribution Summary / Exclude Tax Free Investments" and also "Options / Report Preferences... / Capital Gains / Exclude Tax Free Investments". We would rename this option to say "Exclude Tax Free Investments/Sub-Portfolios", and have a new sub-portfolio property called "Tax Free". If an investment was either marked at the investment level, or underneath a sub-portfolio marked as tax free, then it would be excluded based on these options.

[elliots]

Yes Mark, that would be a great help.

Elliot

[Mark]

Okay, we'll see about getting this added.

[elliots]

Mark,

One more thing. Could the Capital Gains Report have the option of subtotalling by sub-portfolio? That way a whole client could be in a single report.

Elliot

PS Not to be pushy, but any estimate of when the tax-free portfolio option might be in? If it's soon enough then I won't have to go back and recode investments.

[Mark]

Hi Elliot,

Sub-totaling the cap gains report will be a larger change, that wouldn't be available in the near term. One work-around would be to create your sub-portfolio hierarchy like this:

Code: Select all

Master
   - Client ABC
       - Acct 1
       - Acct 2
...

and then create the Capital Gains report at the "Client ABC" level. It will include everything beneath it, but won't be sub-totaled by account. I suspect you already realized this was an option, but just wanted to mention it.

I was hoping we could get the tax-free portfolio property option added into a 10.4 release, but we haven't dug into the details yet to see. Hopefully I'll know more in the next couple of days, and I'll post an update here.

[Mark]

Hi Elliot,

I haven't forgotten about this... With the holiday season, we haven't looked into it yet. Hopefully early this next week I will have a better answer.

[Mark]

Hi Elliot,

Unfortunately, this edit has turned out to be more significant than I had hoped. It is going to require some time to implement. Our report builder is not currently geared to support building reports where certain sub-portfolios are ignored. It is pretty easy for the Capital Gains report, as you can't sub-total there, but the Distribution Summary report is more difficult. This is still something we plan to implement, but I can't commit to exactly when it will be ready.