Inconsistent capital gains calculations

John's Avatar

John

25 Dec, 2016 01:30 PM

I have created a simple example for a mutual fund, average cost accounting, USD. No Fees, No commissions.
There is one BUY, one SELL, and three dividend re-investments over the course of a year and a day. Please see attached files.
The Transaction report is correct, the cost basis report appears to be correct, but the capital gains report is very strange. According to my calculations, the short-term capital gains should be $135 and the long-term should be $405. MD calculates them a $136.15 and $408.46.
Can anyone make sense of this please?

Thanks,

  1. 1 Posted by -Kevin N. on 25 Dec, 2016 04:46 PM

    -Kevin N.'s Avatar

    Hi John,

    It has been my experience that the Cap Gains report only works to my expectations when Lot Matching is used.

    In your example, the 3/15 Sell would yield $10 Short Term Gains.
    Sale of Short Term Shares:
    10 Shares @ $16 = $160
    Minus Short Term Cost Basis:
    10 Shares @ $15 = $150
    $160 - $150 = $10

    The 12/22 Sell would yield $450 Long Term Gains and $90 Short Term Gains.
    Sale of Long Term Shares:
    90 Shares @ $20 = $1800
    Minus Long Term Cost Basis:
    90 Shares @ $15 = $1350
    $1800 - $1350 = $450

    Sale of Short Term Shares:
    30 Shares @ $20 = $600
    Minus Short Term Cost Basis
    10 Shares @ $16 +10 Shares @ $17 +10 Shares @ $18 = $510
    $600 - $510 = $90

    Total Short Term Gains ($10 + $90) = $100
    Total Long Term Gains = $450.
    Total S.T. + L.T. Gains = $550.

    HTH -Kevin N.

  2. 2 Posted by jspitzer on 25 Dec, 2016 05:27 PM

    jspitzer's Avatar





    still

    -Kevin N. wrote:
    pre { width: 92%; margin: 10px 2%; padding: 5px 2%; background: #efefef; border: 1px solid #d6d6d6 } blockquote { margin-left: 0; padding-left: 1em; border-left: 5px solid #ccc; }

    // Please reply above this line
    ==================================================

    From: -Kevin N.

    Hi John,

    It has been my experience that the Cap Gains report only works to my expectations when Lot Matching is used.

    In your example, the 3/15 Sell would yield $10 Short Term Gains.
    Sale of Short Term Shares:
    10 Shares @ $16 = $160
    Minus Short Term Cost Basis:
    10 Shares @ $15 = $150
    $160 - $150 = $10

    The 12/22 Sell would yield $450 Long Term Gains and $90 Short Term Gains.
    Sale of Long Term Shares:
    90 Shares @ $20 = $1800
    Minus Long Term Cost Basis:
    90 Shares @ $15 = $1350
    $1800 - $1350 = $450

    Sale of Short Term Shares:
    30 Shares @ $20 = $600
    Minus Short Term Cost Basis
    10 Shares @ $16 +10 Shares @ $17 +10 Shares @ $18 = $510
    $600 - $510 = $90

    Total Short Term Gains ($10 + $90) = $100
    Total Long Term Gains = $450.
    Total S.T. + L.T. Gains = $550.

    HTH -Kevin N.

    On Sun, Dec 25 at 05:30 AM PST, John wrote:

    I have created a simple example for a mutual fund, average cost accounting, USD. No Fees, No commissions.
    There is one BUY, one SELL, and three dividend re-investments over the course of a year and a day. Please see attached files.
    The Transaction report is correct, the cost basis report appears to be correct, but the capital gains report is very strange. According to my calculations, the short-term capital gains should be $135 and the long-term should be $405. MD calculates them a $136.15 and $408.46.
    Can anyone make sense of this please?

    Thanks,

    Having trouble reading this? View this discussion online: Inconsistent capital gains calculations.

    Reply with #ignore to stop receiving notifications for this discussion.


  3. 3 Posted by maybetrustworth... on 25 Dec, 2016 05:30 PM

    maybetrustworthy's Avatar





    still

    -Kevin N. wrote:
    pre { width: 92%; margin: 10px 2%; padding: 5px 2%; background: #efefef; border: 1px solid #d6d6d6 } blockquote { margin-left: 0; padding-left: 1em; border-left: 5px solid #ccc; }

    // Please reply above this line
    ==================================================

    From: -Kevin N.

    Hi John,

    It has been my experience that the Cap Gains report only works to my expectations when Lot Matching is used.

    In your example, the 3/15 Sell would yield $10 Short Term Gains.
    Sale of Short Term Shares:
    10 Shares @ $16 = $160
    Minus Short Term Cost Basis:
    10 Shares @ $15 = $150
    $160 - $150 = $10

    The 12/22 Sell would yield $450 Long Term Gains and $90 Short Term Gains.
    Sale of Long Term Shares:
    90 Shares @ $20 = $1800
    Minus Long Term Cost Basis:
    90 Shares @ $15 = $1350
    $1800 - $1350 = $450

    Sale of Short Term Shares:
    30 Shares @ $20 = $600
    Minus Short Term Cost Basis
    10 Shares @ $16 +10 Shares @ $17 +10 Shares @ $18 = $510
    $600 - $510 = $90

    Total Short Term Gains ($10 + $90) = $100
    Total Long Term Gains = $450.
    Total S.T. + L.T. Gains = $550.

    HTH -Kevin N.

    On Sun, Dec 25 at 05:30 AM PST, John wrote:

    I have created a simple example for a mutual fund, average cost accounting, USD. No Fees, No commissions.
    There is one BUY, one SELL, and three dividend re-investments over the course of a year and a day. Please see attached files.
    The Transaction report is correct, the cost basis report appears to be correct, but the capital gains report is very strange. According to my calculations, the short-term capital gains should be $135 and the long-term should be $405. MD calculates them a $136.15 and $408.46.
    Can anyone make sense of this please?

    Thanks,

    Having trouble reading this? View this discussion online: Inconsistent capital gains calculations.

    Reply with #ignore to stop receiving notifications for this discussion.


  4. 4 Posted by John on 25 Dec, 2016 07:19 PM

    John's Avatar

    Thanks for the speedy reply. I agree with your calculations. I came up with the same results.

    Here is my problem: I paid for a financial program that would provide the correct calculations. If I have to calculate capital gains by hand, why do I want to keep Moneydance?
    Sadly, I am finding many issues with MD. Screens that are not easily readable, calculations that are wrong, reports that are information sparse.

    I looked through many discussions on the Support site. I found a "bug reports" that was submitted in 2009, but still has not been fixed. I am very disappointed.

  5. 5 Posted by -Kevin N. on 25 Dec, 2016 07:44 PM

    -Kevin N.'s Avatar

    Hi John,

    Full Disclosure
    I have no affiliation with Moneydance, Moneydance Support or The Infinite Kind.

    These forums are actively monitored by the Moneydance Support Staff as well as a knowledgeable user base. I humbly include myself in the latter.

    I therefore can not speak to your complaint(s) other than to agree with them.

    -Kevin N.

  6. 6 Posted by dwg on 25 Dec, 2016 08:34 PM

    dwg's Avatar

    Personally I do not think they should be even trying to calculate short and long term capital gains when using average costing because I think it becomes meaningless since your cost price is now just an average over the entire period of the investment hence I believe that only the total capital gain is the only figure you can look at.

    It is only when using lot matching that you can make a distinction between short and long term gains because it is only with the method you have the actual cost basis at each point in time.

    My 2 cents worth.

  7. 7 Posted by -Kevin N. on 25 Dec, 2016 08:50 PM

    -Kevin N.'s Avatar

    Hi Des,

    There should be some indication that the Cap Gains report is only accurate when using Lot Matching.

    I'll see you 2 cents and raise you mine. :)

    -Kevin N.

  8. 8 Posted by dwg on 25 Dec, 2016 09:00 PM

    dwg's Avatar

    Hi Kevin,

    I'll see your hand :)

    I think it would be best if a slightly different capital gain report was produced depending on what costing method is selected.

    If you use Lot Matching you get the whole lot showing each lot etc etc,where as if you are using Average costing you just get the totals - really with Average cost it is as if you just had the one lot and there is no distinction between short term and long term capital gains.

    In most instances for taxation purposes you can rarely use Average cost

  9. 9 Posted by John on 25 Dec, 2016 09:02 PM

    John's Avatar

    Thanks to both of you for your help and your candid comments.

    Re Average Cost pricing. It is my understanding that average cost pricing is the default for most financial houses. Quicken calculates it correctly. So does Vanguard. It is regrettable that MD cannot do such a simple calculation correctly.

  10. 10 Posted by -Kevin N. on 25 Dec, 2016 09:33 PM

    -Kevin N.'s Avatar

    Hi All,

    As John mentioned, some bug reports have been floating around for many years. It seems unlikely that this issue will garner much attention.

    As it stands, I use Lot Matching and rely on Fidelity's reporting more than MD's.

    I fold.

    -Kevin N.

  11. 11 Posted by dwg on 25 Dec, 2016 09:44 PM

    dwg's Avatar

    Reporting should be spot on in the data it gives, if not the report should not exist.

    Like Kevin I hold little hope that these types of issues will be corrected. I'm not convinced that Infinite Kind currently has too much interest in Investments at all.

    For capital gains tracking n shares I have to rely on Spreadsheets especially as MD also does not have a mechanism for Returns of Capital. I refuse to go back to Quicken/Reckon and I have had no luck in identifying any software that handles investments any better.

  12. 12 Posted by -Kevin N. on 25 Dec, 2016 09:55 PM

    -Kevin N.'s Avatar

    Hi Des,

    I have had no luck in identifying any software that handles investments any better.

    Here's is a link to fundmanager. There looks to be a free trial.
    https://www.fundmanagersoftware.com/

    I scrolled down the list of reports...
    https://www.fundmanagersoftware.com/demo2.html

    The 'Distribution Summary' report (read more) link does indicate that it contains a RtrnCap column.
    https://www.fundmanagersoftware.com/help/rpt_tp_distsum.html

    -Kevin N.

    Edit: Looking over the fundmanager website, it doesn't look like it manages savings, checking or credit card accounts. Boo.

  13. 13 Posted by dwg on 25 Dec, 2016 10:18 PM

    dwg's Avatar

    Hi Kevin,

    Thanks for the pointer. I've seen software like this but in one respect it is overkill for what I need and in another it doesn't deliver what I am looking for.

    My needs are not all that excessive really a program where I can keep all transaction records relating to my bank accounts, credit cards, term deposits, mutual fund, allocated pension and direct share investments and report on these as appropriate. Using a program like you pointed at would involve using two different programs and aggregating data at times.

    Standard accounts MD handles fine, mutual fund and pension well I have had to jump through some hoops since my funds do not have an overall unit price as such and getting transaction and cost information for each sub fund would be a nightmare and involving a lot of coding at best given the reports I can get, shares however are a real aggravation.

    I've said before that if MD wants to be a serious contender against all personal versions of Quicken it needs to lift its game in Investment handling. I'm concerned because MD is not a new program by any stretch of the imagination and seems to ignore investment handling most of the time, not to mention bugs in existing reports.

  14. 14 Posted by -Kevin N. on 25 Dec, 2016 11:06 PM

    -Kevin N.'s Avatar

    Hi Des,

    Yea I agree, fundmanager looks to be a bit of overkill. I noticed too that there's no integration of savings, checking or credit cards. Throw in the c-note price tag and that makes for kind of a non-starter.

    IK keeps making improvements to MD but they're not the improvements that I'm interested in. :( I've no use for mobile banking which seems to have contributed to much of the bloat in the program and data file.

    There is a ton of suggested improvements posted here on the forum that I sense Sean has unfortunately never seen or heard about.

    -Kevin N.

  15. 15 Posted by dwg on 25 Dec, 2016 11:36 PM

    dwg's Avatar

    Hi Kevin,

    I'm in the same boat which is why I have not upgraded from MD2012. I would have been more than happy to upgrade if what I need had of been included.

    I put the lack of some investment transactions directly to Sean and got a positive response, I'm now waiting to see if there is any development in that area. I had the opportunity and took it :)

    I can understand the development of using a phone to capture transactions on the fly so to me that makes sense in the marketplace, (using the phone to take a photo of a receipt etc and storing it also makes sense) even though I do not use it. The synchronization between desktop versions is actually a very advanced feature for a piece of Personal Financial Management Software, I cannot think of any other PFM software that does this, but it does seem a little odd to me when what I consider to be some of the basics of financial management are not there.

    I do wonder on the structure behind the request ticketing system and just how easy it is to get good data on suggestions.

    FWIW I enjoy our little discussions :)

    Des

  16. 16 Posted by -Kevin N. on 26 Dec, 2016 12:35 AM

    -Kevin N.'s Avatar

    Hi Des,

    I understand the need for IK to take Moneydance in the mobile direction. Don't hate me. I don't own a cell / smart phone. :) It just seemed, at the time, that far too much attention was given to the mobile app aspect, throwing out some (a lot) of the more desirable features of the 'paid for' program in favor of being able to use the 'free' mobile app.

    Most, if not all, of the lost functionality has been returned or replaced in one way or another but returning lost functionality doesn't actually count as an upgrade or improvement.

    I enjoy our little tete-a-tetes too. :)

    -Kevin

  17. 17 Posted by John on 26 Dec, 2016 12:45 AM

    John's Avatar

    I have enjoyed "listening" to you all.
    I think there is a common theme here. MD is not listening to users. We have needs that are not being met. (or acknowledged).

    Re: phone capture. Silly me, I would think that a company would have a solid foundation of financial reports and applications before bounding off into a new venture.

    I cannot afford to spend hours figuring MDs errors and idiosyncrasies. I may have to resort to writing my own programs or spreadsheets; I think I will spend less time doing so. MD is "pretty" without a doubt. It is not functional, however. A pity. I would have loved using it if it worked properly.

  18. 18 Posted by dwg on 26 Dec, 2016 03:01 AM

    dwg's Avatar

    You are not going to get too much criticism for adding features but take something away and you can expect to hear lot of loud complaints and that has well and truly proven to be the case here. Yes returning functionality cannot be counted as an improvement since it should never have been removed in the first place. IK have been trying to shoot themselves and succeeded.

    Des

  19. 19 Posted by dwg on 26 Dec, 2016 03:21 AM

    dwg's Avatar

    John,

    I would not say they are not listening, if they weren't the functionality would not have been bought back. For me it is more a case of some odd prioritization of where development is taking place. Being able to enter transaction as you make them by making entries in a phone app is reasonably logical and fits in with banking and credit card accounts so i am not overly critical there, even though it is not something I use.

    I believe the development team is small and they have 1000's of requests, so working out what to develop next is a key question. Synchronising data between desktop instances is probably not where I would have put in the effort at this time, that being said it is a point of differentiation from the competition, so you could argue it that way too.

  20. 20 Posted by Mark on 12 Jan, 2017 09:45 PM

    Mark's Avatar

    I had the same problem with Moneydance capital gains not agreeing with Vanguard's calculation, even when selling all shares. The total gain/loss was correct, but the split between short-term and long-term was not correct. I changed the cost basis to "Lot Matching" as suggested above and then it calculated the gains correctly. The problem with "Lot Matching" is that if you have to fill in every line with the number of shares to sell even when you just want to choose all. When you have held a fund for many years with reinvestments every month, this is VERY tedious. You should be able to just click each line for the shares you want to sell and it would prefill the number of shares. And if you are selling all shares they could have a box to check to "sell all". Seems like this should be a pretty easy fix. I am disappointed that they apparently don't seem to be very responsive in this regard.

  21. 21 Posted by dwg on 12 Jan, 2017 10:02 PM

    dwg's Avatar

    There are definitely a lot of improvements that could be made, you're correct in if you sell out everything in one transaction than gains based on average cost and lot matching will be the same. The software doing more behind the scenes like having a "Sell All" box is a good idea, after all computers are supposed to make it easier and quicker

    Differentiating between long term and short term gains could be a sticking point since I think there may be definition differences between countries. In my case a long terms gain is > 1 year a short term gain is from 45 days to one year and under 45 days it is considered income in many cases.

  22. 22 Posted by Mark on 13 Jan, 2017 12:26 AM

    Mark's Avatar

    dwg,
    You should be able to customize your own criteria for short-term versus long-term gain to solve that issue. Moneydance uses 1 year, which is correct for the U.S. But the most important thing is to calculate the gains properly, which Moneydance currently does not do. Certainly "lot matching" should be the same as "average cost" when you sell all shares, but Moneydance gives different results. The good news is that by using "lot matching" you can at least get the correct result even if it is cumbersome to use.

  23. 23 Posted by kking18474 on 12 Feb, 2017 11:47 PM

    kking18474's Avatar

    I'll chime in that I am using lot matching and the Capital Gains calculations are still not correct for me.

    If I sell a security where some of the shares are short term sales and some are long term then it completely screws up the calculations.
    In one example it somehow it adjusts my basis by +.09(on the short term) then adjusts the sale price (of both transactions) by +.09 total also.
    Why does it add this value? and when the transaction crosses the short/long term boundary it does not add it evenly so it throws off both.
    There is one condition where its correct, when a security is sold and all shares fall into either Short term completely, OR long term completely.
    I assume this is because it adds this arbitrary value to each transaction, so while the basis and proceeds are both off, at least they are off by the same amount, and therefore the gain/loss is unaffected.

  24. 24 Posted by Marcio Dias Fer... on 06 May, 2017 03:14 PM

    Marcio Dias Feres's Avatar

    Is MD hearing this? I second everything was said. I want to like MD, but you are making it hard.

    M

  25. System closed this discussion on 05 Aug, 2017 03:20 PM.

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