- quote -

It is a tax question, in the end, because certain programs
are miscalculating capital gains values, but that's for
anothe rthread.

In this thread, I was just looking for affordable software
recommendations.

I called the IRS yesterday to discuss the tax implication. I
expect that tey will return my call today. After I speak to
the IRS, I'll describe the capital gains issue in another
thread.

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Found what I wanted.

Section 1.1012-1 of 26 CFR Ch, 1 (4-1-06 Edition), on page
39, right-hand column gives an example using rounding "to
the nearest cent". So Fidelity is doing it right and several
programs are doing it wrong.

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"L K Williams" <lanny[at]loxinfo.co.th> wrote:

- quote -

I am not affecting the calculation. The NAV is THE
historical price which cannot be derived from the other
values, so it needs to be saved

Neither the NAV nor the cost per share, for a given
transaction is relevant for calculations, but the NAV has
historical value.

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- quote -

Dear esteemed Moderator,

Did this slip through the cracks or is it a forgery?

Moderator:
I mistook it for a tax question when it is really a
computer mathematics question. At least it is not spam.

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Howard Kaikow wrote:

- quote -

If you're talking about trading stocks or bonds, you don't
use the average cost. Mutual funds, it's another ballgame.

ChEAr$,
Harlan Lunsford, EA n LA

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"Howard Kaikow" <kaikow[at]standards.com> wrote:

- quote -

I now believe that there is not an industry standard for
rounding dollars. There should be.

As recently as 24 Nov 2006, I did a transaction at Janus.
Amount was ROUNDED UP, where Fido would have TRUNCATED.

Ditto for trades at AIM in 2005.

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"Howard Kaikow" <kaikow[at]standards.com> wrote:

- quote -


- quote -

I disagree! The unit cost is relevant because this will be
used to compute gain or loss on ultimate disposal. The
equation Value = unit cost X number of shares MUST be valid.
Your method can result in inaccuracies.

- quote -

Maybe I'm missing something but I don't see your problem.
If you received 0.016 shares and paid $0.97, the per share
price is $60.63, not $61.54. Check the math!

Lanny K. Williams, CPA
Nawarat, Williams & Co., Ltd.
Income Tax Services for Expatriate Americans

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Recently, I did a heck of a lot of trading in my sister's
taxable account, so I thought that it might advantageous to
get software that would determine whether it would be better
to use actual cost or average cost to compute capital gains.

I've been disappointed that most, if not all, of the
programs suffer from the deficiencies described below. I'd
be reluctant to trust their calculations.

Are there portfolio management programs that do not suffer
from the problems described below? The comments are about
FundManger, similar comments apply to other programs.
-------------
1. The total portfolio value is off by $.06 (too high). This
is due to the incorrect rounding of the market value for
each security. Market values are not to be rounded, they are
always TRUNCATED to 2 digits to the right of the decimal
mark. You can see this at the Fidelity web site.

Such incorrect rounding accounts for $.05 of the error, the
additional error of $.01 results from the adding of the
security values.

2. When a transaction is entered, IF both the number and
shares and the value are given, the price is irrelevant only
of interest as an historical item. It is incorrect to
compute the price if the user manually enters the price, or
the price is downloaded from wherever.

For example, on 16 Sept 2005, the NAV of FSPTX used for a
purchase was $61.54. The amount purchased was $.97 resulting
in the purchase of .016 shares. Fund Manager displays the
price as $60.63. Manually correcting the price does not
stick.

--
http://www.standards.com/; See Howard Kaikow's web site.

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