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22 KiB
820 lines
22 KiB
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<ARTICLE ID="XACC-DEPRECIATION">
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<ARTHEADER>
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<TITLE>Depreciation and Capital Gains</TITLE>
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</ARTHEADER>
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<SECT1>
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<TITLE> Depreciation and Capital Gains</TITLE>
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<PARA> </PARA>
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<PARA>This section provides a treatment of the handling of
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depreciation and appreciation of assets in GnuCash.
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</PARA>
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<PARA>It also provides a brief introduction to the related tax
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issues.
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</PARA>
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<PARA><EMPHASIS>Warning:</EMPHASIS> <EMPHASIS>Be aware that different countries can
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have <EMPHASIS>substantially</EMPHASIS> different tax policies for handling
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these things; all that this document can really provide is some
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of the underlying ideas to help you apply your "favorite"
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tax/depreciation policies.</EMPHASIS>
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</PARA>
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<PARA>Note that appreciation and depreciation of assets tend to be
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treated somewhat differently:
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<ITEMIZEDLIST>
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<LISTITEM>
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<PARA> <LINK LINKEND="XACC-DEPRECIATION">Depreciation</LINK> is <EMPHASIS>usually</EMPHASIS>
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recognized (the technical term is <EMPHASIS>accrued</EMPHASIS>) as an
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expense on an ongoing basis, gradually reducing the value
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of an asset towards zero.
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</PARA>
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<PARA>Depreciation tends to only get calculated on assets that
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are used for professional or business purposes, because
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governments don't generally allow you to claim depreciation
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deductions on personal assets, and it's pointless to bother
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with the procedure if it's not deductible.
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</PARA>
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</LISTITEM>
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<LISTITEM>
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<PARA> In contrast, <LINK LINKEND="APPR">Capital Gains,</LINK> which could
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be called <EMPHASIS>asset value appreciation,</EMPHASIS> are typically
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<EMPHASIS>not</EMPHASIS> recognized until some time down the road when
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the asset is sold, and at that <EMPHASIS>instant,</EMPHASIS> the entire
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gain becomes income.
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</PARA>
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<PARA>Unlike depreciation, governments tend to be <EMPHASIS>quite
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interested</EMPHASIS> in taxing capital gains in one manner or
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another.
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</PARA>
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<PARA>(As always, there are exceptions. If you hold a bond
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that pays all of its interest at maturity, tax authorities
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will often require that you recognize interest each year,
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and refuse this to be treated as a capital gain. The
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phrases <EMPHASIS>accrued interest,</EMPHASIS> or <EMPHASIS>imputed
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interest</EMPHASIS> are often there to scare those that are
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sensitive to such things...)
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</PARA>
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</LISTITEM>
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</ITEMIZEDLIST>
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</PARA>
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</SECT1>
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<SECT1 ID="XACC-CAPITALGAINS">
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<TITLE> Capital Gains - Asset Appreciation</TITLE>
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<PARA> <ANCHOR ID="APPR">
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</PARA>
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<PARA>Appreciation of assets is, in general, a fairly tricky
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matter to deal with. This is so because, for some sorts of
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assets, it is difficult to correctly estimate an increase in
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value <EMPHASIS>until you actually sell the asset.</EMPHASIS>
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</PARA>
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<PARA>If you invest in <LINK LINKEND="XACC-TICKER">securities</LINK>
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that are traded on a daily basis on open markets such as stock
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exchanges, prices may be quite exact, and selling the asset at
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market prices may be as simple as calling a broker and issuing
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a <EMPHASIS>Market Order.</EMPHASIS>
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</PARA>
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<PARA>On the other hand, homes in your neighborhood are sold
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somewhat less often, such sales tend to involve expending
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considerable effort, and involve negotiations, which means that
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estimates are likely to be less precise. Similarly, selling a
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used automobile involves a negotiation process that makes
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pricing a bit less predictable.
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</PARA>
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<PARA>Harder to estimate are values of collectible objects such as
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jewelry, works of art, baseball cards, and "Beanie Babies." The
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markets for such objects are somewhat less open than the
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securities markets.
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</PARA>
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<PARA>Worse still are one-of-a-kind assets. Factories often
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contain presses and dies customized to build a very specific
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product that cost tens or hundreds of thousands of dollars;
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this equipment may be <EMPHASIS>worthless</EMPHASIS> outside of that very
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specific context. In such cases, there several conflicting
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values might be attached to the asset, <EMPHASIS>none</EMPHASIS> of them
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unambiguously correct.
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</PARA>
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<PARA>Let's suppose you buy an asset expected to increase in
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value, say a Degas painting, and want to track this. (The
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insurance company will care about this, even if nobody else
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does.)
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</PARA>
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<PARA>Properly tracking the continually-increasing value of the
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Degas will require at least three, quite possibly the following
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four accounts (plus a bank or cash account where the money for
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the purchase comes from):
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<ITEMIZEDLIST>
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<LISTITEM>
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<PARA>An <EMPHASIS>Asset Cost</EMPHASIS> asset account to track the
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original cost of the painting,
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</PARA>
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</LISTITEM>
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<LISTITEM>
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<PARA>An <EMPHASIS>Accrued Unrealized Gains on Asset</EMPHASIS> asset
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account to keep track of increases in value, and
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</PARA>
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</LISTITEM>
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<LISTITEM>
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<PARA>An <EMPHASIS>Accrued Gain On Asset Income</EMPHASIS> income account
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in which to record the income side of the annual gains in
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your riches, and
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</PARA>
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</LISTITEM>
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<LISTITEM>
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<PARA>A <EMPHASIS>Realized Gain On Asset Income</EMPHASIS> income account
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in which to record the realized income when you sell the
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asset.
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</PARA>
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</LISTITEM>
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</ITEMIZEDLIST>
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</PARA>
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<PARA>The <EMPHASIS>accrued gains</EMPHASIS> likely won't affect your taxable
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income for <EMPHASIS>income</EMPHASIS> tax purposes, although it could have
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some effect on <EMPHASIS>property</EMPHASIS> taxes.
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</PARA>
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<SECT2>
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<TITLE>The handling of capital gains in GnuCash</TITLE>
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<PARA> </PARA>
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<SECT3>
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<TITLE>The Acquisition</TITLE>
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<PARA>The first thing you have to do is to create the <EMPHASIS>asset
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cost account</EMPHASIS>, then transfer the sum you paid for this
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painting from your bank account to this asset account to record
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the purchase.
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</PARA>
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<PARA>A month later, you have reason to suspect that the value of
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your painting has increased by $1200. In order to record this
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you transfer $1200 from your <EMPHASIS>accrued gains on asset</EMPHASIS>
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income account to your asset account.
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</PARA>
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<PARA>Your main window will resemble this:
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<INLINEMEDIAOBJECT>
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<IMAGEOBJECT>
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<IMAGEDATA FILEREF="appr-main1.gif">
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</IMAGEOBJECT>
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<TEXTOBJECT>
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<PHRASE>Main window after purchase and appreciation</PHRASE>
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</TEXTOBJECT>
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</INLINEMEDIAOBJECT>
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</PARA>
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<PARA>and your asset account will resemble this:
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<INLINEMEDIAOBJECT>
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<IMAGEOBJECT>
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<IMAGEDATA FILEREF="appr-asset1.gif">
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</IMAGEOBJECT>
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<TEXTOBJECT>
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<PHRASE>Asset account after purchase and appreciation</PHRASE>
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</TEXTOBJECT>
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</INLINEMEDIAOBJECT>
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</PARA>
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</SECT3>
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<SECT3>
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<TITLE>While You Hold the Asset</TITLE>
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<PARA>Asset appreciation is a sort of income but it is <EMPHASIS> not</EMPHASIS> cash in hand.
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</PARA>
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<PARA>The people that got "rich" in 1999 from IPOs of
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Linux-related companies like Red Hat Software and VA Linux
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Systems could verify this. They hold options or stock that are
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<EMPHASIS>theoretically</EMPHASIS> valued at millions of dollars USD.
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</PARA>
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<PARA>That doesn't mean that they are actually millionaires; the
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principal participants have to hold their stock for at least
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six months before selling <EMPHASIS>any</EMPHASIS> of it. The fact that
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they <EMPHASIS>can't</EMPHASIS> sell it means that while it may in theory
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be worth millions of dollars on paper, there is, as of late
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1999, no way for them to legally <EMPHASIS>get</EMPHASIS> those
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millions.
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</PARA>
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</SECT3>
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<SECT3>
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<TITLE>Selling the Asset</TITLE>
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<PARA>Let´s say another month later prices for Degas
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paintings have gone up some more, in your case about $2500, you
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estimate. You duly record these $2500 as an income like above,
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then decide to sell the painting.
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</PARA>
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<PARA>Now there arise three possibilities:
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<ITEMIZEDLIST>
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<LISTITEM>
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<PARA> Your optimistic estimate of the painting's value was
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correct.
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</PARA>
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<PARA>The income account is left alone (or perhaps gets
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transferred from an <EMPHASIS>Accrued Gain</EMPHASIS> income to a <EMPHASIS> Realized Gain</EMPHASIS> income account), and the recording is
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rather like:
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<TABLE>
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<TITLE>Turning an Accrued Gain into a Realized Gain</TITLE>
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<TGROUP COLS="2">
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<THEAD>
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<ROW>
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<ENTRY>Account</ENTRY>
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<ENTRY>Amount</ENTRY>
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</ROW>
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</THEAD>
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<TBODY>
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<ROW>
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<ENTRY>Cash</ENTRY>
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<ENTRY>$16055</ENTRY>
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</ROW>
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<ROW>
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<ENTRY>Painting</ENTRY>
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<ENTRY>-$11000</ENTRY>
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</ROW>
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<ROW>
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<ENTRY>Realized Gain Income</ENTRY>
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<ENTRY>-$5055</ENTRY>
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</ROW>
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</TBODY>
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</TGROUP>
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</TABLE>
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</PARA>
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<PARA>And if any amounts had been accrued as <EMPHASIS>Accrued
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Gains,</EMPHASIS> the asset amount should be closed out, offset
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by a <EMPHASIS>negative</EMPHASIS> value for <EMPHASIS>Accrued Gain</EMPHASIS>
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income. If the total that had been accrued was $5000, then
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the transaction might look like the following:
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<TABLE>
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<TITLE>Accrued Gain becomes Realized Loss</TITLE>
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<TGROUP COLS="2">
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<THEAD>
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<ROW>
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<ENTRY>Account</ENTRY>
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<ENTRY>Amount</ENTRY>
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</ROW>
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</THEAD>
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<TBODY>
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<ROW>
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<ENTRY>Cash</ENTRY>
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<ENTRY>$16055</ENTRY>
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</ROW>
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<ROW>
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<ENTRY>Painting</ENTRY>
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<ENTRY>-$11000</ENTRY>
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</ROW>
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<ROW>
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<ENTRY>Accrued Gain Asset</ENTRY>
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<ENTRY>-$5000</ENTRY>
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</ROW>
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<ROW>
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<ENTRY>Realized Gain Income</ENTRY>
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<ENTRY>-$5055</ENTRY>
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</ROW>
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<ROW>
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<ENTRY>Accrued Gain Income</ENTRY>
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<ENTRY>$5000</ENTRY>
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</ROW>
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</TBODY>
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</TGROUP>
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</TABLE>
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</PARA>
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<PARA>Note that the two income accounts offset one another so
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that the <EMPHASIS>current</EMPHASIS> income resulting from the
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transaction is only $55. The remaining $5000 had previously
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been recognized as <EMPHASIS>Accrued Gain Income.</EMPHASIS>
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</PARA>
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</LISTITEM>
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<LISTITEM>
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<PARA> You were over-optimistic about the value of the painting.
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</PARA>
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<PARA>Instead of the $16055 you thought the painting was worth
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are only offered $15000. But you still decide to sell,
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because you value $15000 more than you value the
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painting.
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</PARA>
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<PARA>The numbers change a little bit, but not too
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dramatically.
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<TABLE>
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<TITLE>Accrued Gain becomes Realized Gain</TITLE>
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<TGROUP COLS="2">
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<THEAD>
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<ROW>
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<ENTRY>Account</ENTRY>
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<ENTRY>Amount</ENTRY>
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</ROW>
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</THEAD>
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<TBODY>
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<ROW>
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<ENTRY>Cash</ENTRY>
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<ENTRY>$15000</ENTRY>
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</ROW>
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<ROW>
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<ENTRY>Painting</ENTRY>
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<ENTRY>-$11000</ENTRY>
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</ROW>
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<ROW>
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<ENTRY>Accrued Gain Asset</ENTRY>
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<ENTRY>-$5000</ENTRY>
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</ROW>
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<ROW>
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<ENTRY>Realized Gain Income</ENTRY>
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<ENTRY>-$4000</ENTRY>
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</ROW>
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<ROW>
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<ENTRY>Accrued Gain Income</ENTRY>
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<ENTRY>$5000</ENTRY>
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</ROW>
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</TBODY>
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</TGROUP>
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</TABLE>
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</PARA>
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<PARA>Note that the two income accounts offset one another so
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that the <EMPHASIS>current</EMPHASIS> income resulting from the
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transaction turns out to be a <EMPHASIS>loss</EMPHASIS> of $1000.
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That's fine, as you had previously recognized $5000 in
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income.
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</PARA>
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</LISTITEM>
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<LISTITEM>
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<PARA> You manage to sell your painting for more than you thought
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in your wildest dreams.
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</PARA>
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<PARA>The extra value is, again, recorded as a gain, <EMPHASIS> i.e.</EMPHASIS> an income.
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<TABLE>
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<TITLE>Accrued Gain Becomes Handsome Realized Gain</TITLE>
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<TGROUP COLS="2">
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<THEAD>
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<ROW>
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<ENTRY>Account</ENTRY>
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<ENTRY>Amount</ENTRY>
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</ROW>
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</THEAD>
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<TBODY>
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<ROW>
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<ENTRY>Cash</ENTRY>
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<ENTRY>$50000</ENTRY>
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</ROW>
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<ROW>
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<ENTRY>Painting</ENTRY>
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<ENTRY>-$11000</ENTRY>
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</ROW>
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<ROW>
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<ENTRY>Accrued Gain Asset</ENTRY>
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<ENTRY>-$5000</ENTRY>
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</ROW>
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<ROW>
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<ENTRY>Realized Gain Income</ENTRY>
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<ENTRY>-$39000</ENTRY>
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</ROW>
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<ROW>
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<ENTRY>Accrued Gain Income</ENTRY>
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<ENTRY>$5000</ENTRY>
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</ROW>
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</TBODY>
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</TGROUP>
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</TABLE>
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</PARA>
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</LISTITEM>
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</ITEMIZEDLIST>
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</PARA>
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<PARA>In practice, it truly is important to keep the <EMPHASIS>Accrued
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Gain Income</EMPHASIS> separate from the <EMPHASIS>Realized Gain
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Income,</EMPHASIS> as the former is likely to be ignored by your tax
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authorities, who will only care to charge you on the <EMPHASIS> Realized Gain.</EMPHASIS>
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</PARA>
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<PARA>Below, we show the second case discussed.
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<INLINEMEDIAOBJECT>
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<IMAGEOBJECT>
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<IMAGEDATA FILEREF="appr-main2.gif">
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</IMAGEOBJECT>
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<TEXTOBJECT>
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<PHRASE>Main window after sale</PHRASE>
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</TEXTOBJECT>
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</INLINEMEDIAOBJECT>
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<INLINEMEDIAOBJECT>
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<IMAGEOBJECT>
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<IMAGEDATA FILEREF="appr-asset2.gif">
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</IMAGEOBJECT>
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<TEXTOBJECT>
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<PHRASE>Asset account after sale</PHRASE>
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</TEXTOBJECT>
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</INLINEMEDIAOBJECT>
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</PARA>
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</SECT3>
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</SECT2>
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<SECT2>
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<TITLE>Caution about Valuation</TITLE>
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<PARA> </PARA>
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<PARA>As we see in this example, for non-financial assets, it may
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be difficult to correctly estimate the ``true'' value of an
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asset.
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</PARA>
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<PARA>It is quite easy to count yourself rich based on
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questionable estimates that do not reflect "money in the
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bank."
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</PARA>
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<PARA>Thus, when dealing with appreciation of assets,
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<ITEMIZEDLIST>
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<LISTITEM>
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<PARA> Be careful with your estimation of values.
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</PARA>
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<PARA>Do not indulge in wishful thinking.
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</PARA>
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</LISTITEM>
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<LISTITEM>
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<PARA> Never, ever, count on money you do not have in your bank or
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as cash.
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</PARA>
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<PARA>Until you have actually sold your asset and got the
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money, any numbers on paper (or magnetic patterns on your
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hard disk) are merely that.
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</PARA>
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<PARA>If you could realistically convince a banker to lend you
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money, using the assets as collateral, that is a pretty
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reasonable evidence that the assets have value, as lenders
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are professionally suspicious of dubious overestimations of
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value.
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</PARA>
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<PARA>Be aware: all too many companies that appear
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"profitable" on paper go out of business as a result of
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running out of <EMPHASIS>cash,</EMPHASIS> precisely because "valuable
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assets" were not the same thing as cash.
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</PARA>
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</LISTITEM>
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</ITEMIZEDLIST>
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</PARA>
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</SECT2>
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<SECT2>
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<TITLE>Taxation of Capital Gains</TITLE>
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<PARA> </PARA>
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<PARA>Taxation policies vary considerably between countries, so it
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is virtually impossible to say anything that will be
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universally useful.
|
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|
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</PARA>
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<PARA>However, it is <EMPHASIS>common</EMPHASIS> for income generated by
|
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capital gains to not be subject to taxation until the date that
|
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the asset is actually sold, and sometimes not even then.
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</PARA>
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<PARA>North American home owners <EMPHASIS>usually</EMPHASIS> find that when
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they sell personal residences, capital gains that occur are
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|
exempt from taxation. It appears that other countries treat
|
|
sale of homes differently, taxing people on such gains. German
|
|
authorities, for example, tax those gains only if you owned the
|
|
property for less than ten years.
|
|
|
|
</PARA>
|
|
<PARA><ULINK URL="mailto:cbbrowne@hex.net">I have</ULINK> one story from
|
|
my professional tax preparation days where a family sold a
|
|
farm, and expected a <EMPHASIS>considerable</EMPHASIS> tax bill that turned
|
|
out to be virtually nil due to having owned the property before
|
|
1971 (wherein lies a critical "Valuation Day" date in Canada)
|
|
and due to it being a <EMPHASIS>dairy</EMPHASIS> farm, with some <EMPHASIS>really
|
|
peculiar</EMPHASIS> resulting deductions.
|
|
|
|
</PARA>
|
|
<PARA>In short, this presentation is fairly simple, but taxation
|
|
often gets terribly complicated...
|
|
|
|
</PARA>
|
|
</SECT2>
|
|
</SECT1>
|
|
<SECT1 ID="XACC-DEPR">
|
|
<TITLE> Depreciation of assets</TITLE>
|
|
<PARA>Compared to the often uncertain estimates one has to do
|
|
where appreciation of assets is concerned, we are on somewhat
|
|
firmer ground here.
|
|
|
|
<ITEMIZEDLIST>
|
|
<LISTITEM>
|
|
<PARA>Governments tend to set up precise rules as to how you
|
|
are required to calculate depreciation for tax purposes.
|
|
|
|
</PARA>
|
|
</LISTITEM>
|
|
<LISTITEM>
|
|
<PARA>It is easy to look up in references such as "Blue Books"
|
|
estimates of what an automobile should be worth after 3 years
|
|
of use.
|
|
</PARA>
|
|
</LISTITEM>
|
|
</ITEMIZEDLIST>
|
|
|
|
</PARA>
|
|
<PARA>Since depreciation of assets is very often driven by tax
|
|
policies, the discussion of depreciation will focus in that
|
|
direction, on some of the more common depreciation calculation
|
|
schemes.
|
|
|
|
</PARA>
|
|
<PARA>While there has been some discussion about how to accomplish
|
|
automated calculation and creation of transactions to handle
|
|
things like depreciation, there is not yet any working code, so
|
|
for now, you will have to do calculations by hand.
|
|
|
|
</PARA>
|
|
<SECT2>
|
|
<TITLE>Depreciation schemes</TITLE>
|
|
<PARA> </PARA>
|
|
<SECT3>
|
|
<TITLE>Linear depreciation</TITLE>
|
|
<PARA>Linear depreciation diminishes the value of an asset by a
|
|
fixed amount each period until the net value is zero. This is
|
|
the <EMPHASIS>simplest</EMPHASIS> calculation, as you estimate a useful
|
|
lifetime, and simply divide the cost equally across that
|
|
lifetime.
|
|
|
|
</PARA>
|
|
<PARA><EMPHASIS>Example:</EMPHASIS> You have bought a computer for $1500 and
|
|
wish to depreciate it over a period of 5 years. Each year the
|
|
amount of depreciation is $300, leading to the following
|
|
calculations:
|
|
|
|
|
|
<TABLE>
|
|
<TITLE>Example 1</TITLE>
|
|
<TGROUP COLS="3">
|
|
<THEAD>
|
|
<ROW>
|
|
<ENTRY>Year</ENTRY>
|
|
<ENTRY>Depreciation</ENTRY>
|
|
<ENTRY>Remaining Value</ENTRY>
|
|
</ROW>
|
|
</THEAD>
|
|
<TBODY>
|
|
<ROW>
|
|
<ENTRY>1</ENTRY>
|
|
<ENTRY>300</ENTRY>
|
|
<ENTRY>1200</ENTRY>
|
|
</ROW>
|
|
<ROW>
|
|
<ENTRY>2</ENTRY>
|
|
<ENTRY>300</ENTRY>
|
|
<ENTRY>900</ENTRY>
|
|
</ROW>
|
|
<ROW>
|
|
<ENTRY>3</ENTRY>
|
|
<ENTRY>300</ENTRY>
|
|
<ENTRY>600</ENTRY>
|
|
</ROW>
|
|
<ROW>
|
|
<ENTRY>4</ENTRY>
|
|
<ENTRY>300</ENTRY>
|
|
<ENTRY>300</ENTRY>
|
|
</ROW>
|
|
<ROW>
|
|
<ENTRY>5</ENTRY>
|
|
<ENTRY>300</ENTRY>
|
|
<ENTRY>0</ENTRY>
|
|
</ROW>
|
|
</TBODY>
|
|
</TGROUP>
|
|
</TABLE>
|
|
|
|
</PARA>
|
|
</SECT3>
|
|
<SECT3>
|
|
<TITLE>Geometric Depreciation</TITLE>
|
|
<PARA>Each period the asset is depreciated by a fixed percentage
|
|
of its value in the previous period. In this scheme the rest
|
|
value of an asset decreases exponentially leaving a value at
|
|
the end that is larger than zero ( <EMPHASIS>i.e.</EMPHASIS> - a resale
|
|
value).
|
|
|
|
</PARA>
|
|
<PARA><EMPHASIS>Beware: Tax authorities may require (or allow) a larger
|
|
percentage in the first period.</EMPHASIS> On the other hand, in
|
|
Canada, this is reversed, as they permit only a <EMPHASIS>half</EMPHASIS>
|
|
share of "Capital Cost Allowance" in the first year.
|
|
|
|
</PARA>
|
|
<PARA>The result of this approach is that asset value decreases
|
|
more rapidly at the beginning than at the end which is <EMPHASIS> probably</EMPHASIS> more realistic for most assets than a linear
|
|
scheme. This is certainly true for automobiles.
|
|
|
|
</PARA>
|
|
<PARA><EMPHASIS>Example:</EMPHASIS> We take the same example as above,
|
|
with an annual depreciation of 30%.
|
|
|
|
<TABLE>
|
|
<TITLE>Example 2</TITLE>
|
|
<TGROUP COLS="3">
|
|
<THEAD>
|
|
<ROW>
|
|
<ENTRY>Year</ENTRY>
|
|
<ENTRY>Depreciation</ENTRY>
|
|
<ENTRY>Remaining Value</ENTRY>
|
|
</ROW>
|
|
</THEAD>
|
|
<TBODY>
|
|
<ROW>
|
|
<ENTRY>1</ENTRY>
|
|
<ENTRY>450</ENTRY>
|
|
<ENTRY>1050</ENTRY>
|
|
</ROW>
|
|
<ROW>
|
|
<ENTRY>2</ENTRY>
|
|
<ENTRY>315</ENTRY>
|
|
<ENTRY>735</ENTRY>
|
|
</ROW>
|
|
<ROW>
|
|
<ENTRY>3</ENTRY>
|
|
<ENTRY>220.50</ENTRY>
|
|
<ENTRY>514.50</ENTRY>
|
|
</ROW>
|
|
<ROW>
|
|
<ENTRY>4</ENTRY>
|
|
<ENTRY>154.35</ENTRY>
|
|
<ENTRY>360.15</ENTRY>
|
|
</ROW>
|
|
<ROW>
|
|
<ENTRY>5</ENTRY>
|
|
<ENTRY>108.05</ENTRY>
|
|
<ENTRY>252.10</ENTRY>
|
|
</ROW>
|
|
</TBODY>
|
|
</TGROUP>
|
|
</TABLE>
|
|
|
|
</PARA>
|
|
</SECT3>
|
|
<SECT3>
|
|
<TITLE>Sum of digits</TITLE>
|
|
<PARA>A third method most often employed in Anglo/Saxon countries
|
|
is the "sum of digits" method. Here is an illustration:
|
|
|
|
</PARA>
|
|
<PARA><EMPHASIS>Example:</EMPHASIS> First you divide the asset value
|
|
by the sum of the years of use, <EMPHASIS>e.g.</EMPHASIS> for our example
|
|
from above with an asset worth $1500 that is used over a period
|
|
of five years you get 1500/(1+2+3+4+5)=100. Depreciation and
|
|
asset value are then calculated as follows:
|
|
|
|
<TABLE>
|
|
<TITLE>Example 3</TITLE>
|
|
<TGROUP COLS="3">
|
|
<THEAD>
|
|
<ROW>
|
|
<ENTRY>Year</ENTRY>
|
|
<ENTRY>Depreciation</ENTRY>
|
|
<ENTRY>Remaining Value</ENTRY>
|
|
</ROW>
|
|
</THEAD>
|
|
<TBODY>
|
|
<ROW>
|
|
<ENTRY>1</ENTRY>
|
|
<ENTRY>100*5=500</ENTRY>
|
|
<ENTRY>1000</ENTRY>
|
|
</ROW>
|
|
<ROW>
|
|
<ENTRY>2</ENTRY>
|
|
<ENTRY>100*4=400</ENTRY>
|
|
<ENTRY>600</ENTRY>
|
|
</ROW>
|
|
<ROW>
|
|
<ENTRY>3</ENTRY>
|
|
<ENTRY>100*3=300</ENTRY>
|
|
<ENTRY>300</ENTRY>
|
|
</ROW>
|
|
<ROW>
|
|
<ENTRY>4</ENTRY>
|
|
<ENTRY>100*2=200</ENTRY>
|
|
<ENTRY>100</ENTRY>
|
|
</ROW>
|
|
<ROW>
|
|
<ENTRY>5</ENTRY>
|
|
<ENTRY>100*1=100</ENTRY>
|
|
<ENTRY>0</ENTRY>
|
|
</ROW>
|
|
</TBODY>
|
|
</TGROUP>
|
|
</TABLE>
|
|
|
|
</PARA>
|
|
</SECT3>
|
|
</SECT2>
|
|
<SECT2>
|
|
<TITLE>The handling of depreciation in gnucash</TITLE>
|
|
<PARA> </PARA>
|
|
<PARA>In order to keep track of the depreciation of an asset, you
|
|
need :
|
|
|
|
<ITEMIZEDLIST>
|
|
<LISTITEM>
|
|
<PARA>An <EMPHASIS>Asset Cost</EMPHASIS> asset account to keep track of the
|
|
original value;
|
|
|
|
</PARA>
|
|
</LISTITEM>
|
|
<LISTITEM>
|
|
<PARA>An <EMPHASIS>Accumulated Depreciation</EMPHASIS> asset account in
|
|
which to collect the sum of all of the years' depreciation
|
|
amounts;
|
|
|
|
</PARA>
|
|
</LISTITEM>
|
|
<LISTITEM>
|
|
<PARA>A <EMPHASIS>Depreciation Expense</EMPHASIS> expense account in which
|
|
to record periodic depreciation expenses.
|
|
</PARA>
|
|
</LISTITEM>
|
|
</ITEMIZEDLIST>
|
|
|
|
</PARA>
|
|
<PARA>The first step, again, is to record the purchase of your
|
|
asset by transferring the money from bank bank account to the
|
|
<EMPHASIS>asset cost</EMPHASIS> account. Afterwards, in each accounting
|
|
period you record the depreciation as an expense in the
|
|
appropriate account.
|
|
|
|
</PARA>
|
|
<PARA>The two windows below show your asset account and the main
|
|
window after the third year of depreciation using a "sum of
|
|
digits" scheme for the example above.
|
|
<INLINEMEDIAOBJECT>
|
|
<IMAGEOBJECT>
|
|
<IMAGEDATA FILEREF="depr-asset.gif">
|
|
</IMAGEOBJECT>
|
|
<TEXTOBJECT>
|
|
<PHRASE>Asset account after depreciation</PHRASE>
|
|
</TEXTOBJECT>
|
|
</INLINEMEDIAOBJECT>
|
|
<INLINEMEDIAOBJECT>
|
|
<IMAGEOBJECT>
|
|
<IMAGEDATA FILEREF="depr-main.gif">
|
|
</IMAGEOBJECT>
|
|
<TEXTOBJECT>
|
|
<PHRASE>Main window after depreciation</PHRASE>
|
|
</TEXTOBJECT>
|
|
</INLINEMEDIAOBJECT>
|
|
|
|
|
|
</PARA>
|
|
</SECT2>
|
|
<SECT2>
|
|
<TITLE>A word of caution</TITLE>
|
|
<PARA> </PARA>
|
|
<PARA>Since depreciation and tax issues are closely related, you
|
|
may not always be free in choosing your preferred method.
|
|
Fixing wrong calculations will cost a whole lot more time and
|
|
trouble than getting the calculations right the first time, so
|
|
if you plan to depreciate assets, it is wise to make sure of
|
|
the schemes you will be permitted <EMPHASIS>or required</EMPHASIS> to
|
|
use.
|
|
|
|
</PARA>
|
|
</SECT2>
|
|
</SECT1>
|
|
</ARTICLE>
|