Gains as Income

gabriel.hernandez's Avatar

gabriel.hernandez

14 Jan, 2024 04:04 PM

Hi there,

Is there a way to include Gains and Returns from investments in the Income and Expenses report? This is particularly important if Investment returns are a relevant part of your income.

Thank you.

  1. 1 Posted by Stuart Beesley ... on 14 Jan, 2024 04:25 PM

    Stuart Beesley (Mr Toolbox)'s Avatar

    Yup...

    Create two income categories.
    - Income:Capital Gains/Losses - Income:FAKE DUMMY TAX ACCOUNT

    Whenever you make a sale, calculate the gain/loss and then enter two new txns into the investment account register using the Xfr type... One to debit Capital Gains, the other to credit FAKE TAX ACCOUNT (or visa versa depending on gain or loss).

    Now include these categories in your reports...

  2. 2 Posted by gabriel.hernand... on 14 Jan, 2024 04:54 PM

    gabriel.hernandez's Avatar

    Thank you for your prompt reply, Stuart.

    Your suggestion works only for realized gains but not for unrealized gains. Unrealized gains are indeed very real income, so much that if you are mainly an investor they are to be reported in your financial statements.

    In Moneydance, gains (realized and unrealized) are reflected in the Net worth and investment performance reports, so to make the income and expenses report consistent with them, they should be included, at least as an option to activate.

    By the way, unrealized gains are not properly calculated in the Capital Gains report; if a security has been acquired before the report start date, its cost basis is assumed to be ZERO, while it should be the security value and the report start date.

  3. 3 Posted by gabriel.hernand... on 14 Jan, 2024 04:56 PM

    gabriel.hernandez's Avatar

    ...at the report start date.

  4. 4 Posted by Stuart Beesley ... on 14 Jan, 2024 05:29 PM

    Stuart Beesley (Mr Toolbox)'s Avatar

    A few points...

    • What country are you in? I have never seen anywhere that unrealised gains have to be reported as income, anywhere? E.g. sitting my my house, that has grown in value, provides me no income, and cannot be realised until I sell it..?

    • MD does NOT include unrealised gains in the networth / investment performance report(s) (as far as I know)? Please clarify this?

    • Yes, the URG in the CG report is broken...

    FYI - Custom Balances extension (PREVIEW) can now calculate CG/URGs..
    https://yogi1967.github.io/MoneydancePythonScripts/

  5. 5 Posted by gabriel.hernand... on 15 Jan, 2024 12:15 AM

    gabriel.hernandez's Avatar

    Point #1: This article might help:

    "Recording Unrealized Gains: ...Securities that are held for trading are recorded on the balance sheet at their fair value, and the unrealized gains and losses are recorded on the income statement."

    Source: https://www.investopedia.com/investing-essentials-4689754

    The above is valid for all countries that follow International Financial Reporting Standards. Another thing is that unrealized gains are not subject to taxation, but yes they are to be included in the income statement if you hold securities for trade.

    Point#2: MD Net worth and investment performance reports use securities fair value, not securities original purchase value. Due to this, the value of all securities in a specific date are printed at the current date fair value. In the attachments I generated the report for exactly the same securities on two different dates: Dec 14/2023 and Jan 14/2024. No transactions have occurred between both dates, the only variation is the daily value of the security. MS properly reports the securities at their current fair value on each date.

    Unrealized gain in a period by definition is the difference between the security fair value at the end vs. the start of the period. That's why I say that Net worth and investment performance reports use securities fair value.

    In attention to the above, my suggestion is to include unrealized gains as AN OPTION in the Income and Expenses report.

  6. gabriel.hernandez closed this discussion on 19 Jan, 2024 02:41 PM.

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