How do I book IRA/401k fees for which broker specifies no/incorrect cost basis

[Aaron Stacy]

Hi everyone, I'm trying to book a 401k fee. I'm using beancount, but hopefully the syntax is similar enough:

; Assume the price for TraditionalIRA was $1/share when purchased

2021-01-03 balance Assets:TraditionalIRA    10 TRADIRA

; Now the broker wants to charge $0.50 in fees, and the price of TraditionalIRA

; has dropped to $0.50/share. For tax purposes, the cost basis is all

; essentially zero, so (presumably to keep things simple) they just deduct

; (fee / share price) from the shares.

2021-01-04 * "Fee"

  Assets:TraditionalIRA                     -1 TRADIRA @ 0.50 USD

  Expenses:Fees                           0.50 USD

2021-01-05 balance Assets:TraditionalIRA     9 TRADIRA

The problem is this is ambiguous about the cost basis now. It may not matter for tax purposes, but I care. I'd like to simply deduct the 1 TRADIRA share from the lot purchased at $1/share, but that doesn't balance:

2021-01-04 * "Fee"

  Assets:TraditionalIRA                     -1 TRADIRA {1 USD} @ 0.50 USD

  Expenses:Fees                           0.50 USD

  ; This transaction is -0.50 from balancing

So I suppose this makes sense since, because the price went down, I lost 50 cents, so that should come from somewhere.

What's a good account to take this from? Maybe Income:TraditionalIRA?

[psionl0]

I presume that the fees are a liability rather than a paid expense otherwise the fees would be taken from a bank account . Probably the best way to would be to have two extra accounts: A depreciation account and a liability account:

Example:

2021-01-04 * "Fees & Depreciation"

  Assets:TraditionalIRA              -0.50 USD
     Expenses:Depreciation               0.50 USD
  Liabilities:TraditionalIRA:fees    -0.50 USD
  Expenses:Fees                       0.50 USD

[Ismael Bouya]

Hi,
There is a section about that in the manual ;)
https://www.ledger-cli.org/3.0/doc/ledger3.html#Buying-and-Selling-Stock

In your case, that would be something like:

2021-01-04 * "Fee"
Assets:TraditionalIRA -1 TRADIRA {1 USD} @ 0.50 USD
Expenses:Fees 0.50 USD

Expenses:Capital losses 0.50 USD

Here is how to see it: during that "fee", you’re actually "selling" one
action (TRADIRA) to pay that fee.
However that action is worth 0.50USD less than before, so had actually
two expenses: one for the fee (0.50 USD) and one for the loss of capital
which gets activated at that time (0.50 USD)

The capital loss expense didn’t appear so far because you didn’t "spend"
them: as long as you keep them as TRADIRA, you don’t have any loss or
gain or capital, and the expense (or the reverse Income:Capital Gains)
only occurs when you actually do something of the action (in your case,
"pay something with it").


(Sat, May 01, 2021 at 06:23:54PM -0700) Aaron Stacy :

> --
>
> ---
> You received this message because you are subscribed to the Google Groups "Ledger" group.
> To unsubscribe from this group and stop receiving emails from it, send an email to ledger-cli+...@googlegroups.com.
> To view this discussion on the web visit https://groups.google.com/d/msgid/ledger-cli/d1750d80-b867-4dc0-be8b-ed8e223ae266n%40googlegroups.com.

> --
>
> ---
> You received this message because you are subscribed to the Google Groups
> "Ledger" group.
> To unsubscribe from this group and stop receiving emails from it, send an
> email to [1]ledger-cli+...@googlegroups.com.
> To view this discussion on the web visit
> [2]https://groups.google.com/d/msgid/ledger-cli/d1750d80-b867-4dc0-be8b-ed8e223ae266n%40googlegroups.com.
>
> References
>
> Visible links
> 1. mailto:ledger-cli+...@googlegroups.com
> 2. https://groups.google.com/d/msgid/ledger-cli/d1750d80-b867-4dc0-be8b-ed8e223ae266n%40googlegroups.com?utm_medium=email&utm_source=footer



--
Ismael

[Aaron Stacy]

Ash makes sense thanks!

You received this message because you are subscribed to a topic in the Google Groups "Ledger" group.
To unsubscribe from this topic, visit https://groups.google.com/d/topic/ledger-cli/rHgn5MVCkC0/unsubscribe.
To unsubscribe from this group and all its topics, send an email to ledger-cli+...@googlegroups.com.
To view this discussion on the web visit https://groups.google.com/d/msgid/ledger-cli/20210503131518.bhzlen2lcjklg2lo%40dilion.

[psionl0]

It would be clearer to split the TraditionalIRA account into four sub-accounts:
Assets:TraditionalIRA:Purchase Price
Assets:TraditionalIRA:Plus Appreciation
Assets:TraditionalIRA:Less Depreciation
Assets:TraditionalIRAl:Less Fees

These would be paired with one of the following income/expense accounts:
Income:Appreciation
Expenses:Depreciation
Expenses:Fees

A balance report would instantly give the net value of Assets:TraditionalIRA after accounting for fees and depreciation.

[Aaron Stacy]

When you say "pair" the accounts, is this just a convention? Or is there some functionality to associate them?

To view this discussion on the web visit https://groups.google.com/d/msgid/ledger-cli/8dfa5fe1-8cf4-4fdc-9107-9b2e5c60636en%40googlegroups.com.

[psionl0]

> When you say "pair" the accounts, is this just a convention? Or is there some functionality to associate them?

It is just a case of a gain in the value of an asset comes from income and a loss of value of an asset is an expense.

Your original transactions would be recorded as

2021-01-04 * "Depreciation"

  Assets:TraditionalIRA:Less Depreciation       5.00 USD

  Expenses:Depreciation                         5.00 USD

2021-01-04 * "Fee"

  Assets:TraditionalIRA:Less Fees  -1 TRADIRA @ 0.50 USD

  Expenses:Fees                                 0.50 USD

The first transaction records the loss in value of your shares without affecting the number of shares you own while the second transaction records the deduction of the share from your holdings (at the new price).

[Aaron Stacy]

Ah interesting. I guess I was planning to track the gain/loss via cost basis (hence the curlies) instead of adding accounts. I think your example makes total gains/losses more clear from reading the balance sheet, but I've got a number of these accounts, so if I want that broken down by account, I need, i.e. Expenses:TraditionalIRA:Fees, etc., and then going from that back to a rolled-up rate of returns involves some scripting.

All that to say it seems like if I want to track cost basis, returns on individual accounts, overall returns, I end up needing some combination of extra accounts as you propose and scripting.

To view this discussion on the web visit https://groups.google.com/d/msgid/ledger-cli/d81fc133-c50c-44c8-bc34-a5b768229608n%40googlegroups.com.