Handling taxes...

[tedzo]

Mark,

1. I am trying to record an option excercise. I recorded a buy and sell transaction. The gain (say $1000) goes to a cash account. However, the actual gain is less taxes withheld by my employer (these are options from my employer, say $400). How do I account for the taxes withheld?

2. I want to transfer the gain (from #1 above=$600 after tax) from the cash account to a different cash account. I am not sure how to handle this.

Thoughts?

Thanks.

[Mark]

Hi tedzo,

In general, Fund Manager performance numbers are all pre-tax. You can track tax and have it reduce your performance if you wish, by recording it as a negative distribution.

1) Record a sell, if you do not want to lower your performance due to taxes. Record a negative distribution if you do want it to lower your performance.

2) Sell in one cash account, and buy in the other...

[tedzo]

Thanks for the response.
Hmm, I guess, if I record the entire gain (not considering tax) of $1000, then the cash balance in the account as per FM will not be valid because I actually gained only $600, not $1000. I don't think there is anyway around that.

Thanks.

[Mark]

Hi tedzo,

If you enter the pre-tax gain of $1000 that models the investment correctly. If you then sell cash, that models taking money away and paying your taxes, but doesn't penalize your performance. You would end up with the correct pre-tax performance, and the correct balance in cash. You really did gain $1000 pre-tax, and that is the performance reported.