Handling ESPP

[sponge]

In FM, I am trying to manage ESPP (Employee Share Purchase Plan) where shares are purchased at discount of the FMV on the day of purchase. To keep track of the real gains, i enter the purchase price to be what i paid (not the FMV).
Of course the internet price retrieval keeps track of daily closing prices or FMVs.

Now the question is, how do i get ACB for the tax purposes? Since the difference between purchase price and FMV on day of purchase is already taxed as income, for future sale and capital gains calculation, the cost basis will be the FMV on the day of purchase and NOT the price i paid.
Is there any way to get this info rom FM ?

[Mark]

Hi sponge,

You could use a Transfer In, and record separate "OOP" and "Tax" cost basis values. With a regular Buy transaction there is only a single amount entered, and that is used for both your OOP cost and tax basis cost of that transaction. However, with a TxIn you can record them separately. For this situation you could record what you paid as the OOP cost, and the FMV on the date of purchase as your tax basis.

Note, that Transfer In transactions do not remove cash from a default cash account.

[sponge]

Ok I have used this method for a while. I have several TxIn transactions and some redemption transactions. Also note that this security is in foreign currency.

My questions are:
- does FM keep track of current ACB after each Txin / redemption transaction? and it takes in to account the exchange rates?
- do I get ACB value to be Basis per share shown in sub portfolio window?
- what are the steps to determine capital gains (in local currency) if I were to redeem X shares?

thanks

[Mark]

Hi sponge,

What is ACB? It looks like some sort of (Average/Adjusted?) cost basis, but I'm not familiar with the term ACB.

Yes, your cost basis is calculated for you, depending on all your recorded transactions. There is both a tax cost basis you can get, or a Fund Manager specific "Out Of Pocket" (OOP) cost basis. If you choose a tax basis, you can get it calculated using any of the FIFO, AVG, or Specific Lot accounting methods. The OOP figures include distributions, to help you know your overall break even point. You can read more about OOP figures here:

https://www.fundmanagersoftware.com/help/def_oop.html

You can get your cost basis information either in the native/assigned currency, or in whatever you have designated as your default currency by turning on "View / Exchange Rate Adjusted". The exchange rates are factored in when displaying any values adjusted into the default currency. Exchange rates do not matter when displaying numbers in the native currency.

By "sub portfolio window", do you mean the Portfolio Editor? If so, you can customize which fields are displayed in this window using "View / List Columns...". There are a variety of cost/share fields available to choose from, like:

OOP Historical Basis Per Share
OOP Current Basis Per Share
Basis Per Share
FIFO Basis Per Share
AVG Basis Per Share
Spec Lot Basis Per Share

See the documentation for a more thorough description of what each field means:

https://www.fundmanagersoftware.com/hel ... lumns.html

[sponge]

Yes ACB means Adjusted cost basis. This requires adjustment in the cost basis after each transaction. i.e. it does not follow fifo or lifo method.

So for this, I should be looking at AVG basis per share (I guess it is really weighted average basis right?) What is the difference with plain "basis per share"?

ALso, only diff between above basis and OOP cost basis are distributions?

Got it about currency.

Specifically for this scenario where shares are discounted at purchase but tax already paid on the amount of discount at purchase.... I am interested in calculations FM performs for AVG tax basis *and* ROI --- can I see that in some log?

thanks.

[Mark]

You can read our definition of average cost basis here:

https://www.fundmanagersoftware.com/help/def_avg.html

There are different fields for Basis per share, one for each of the accounting methods. If it doesn't specify an accounting method, then it is using the accounting method assigned as an investment property under "Investment Properties... / Other / Accounting Method".

Yes, OOP differs from tax cost basis due to distributions. Distributions lower your OOP basis, but not tax cost basis.

You can see both the AVG cost basis and ROI in a report. We have a log file that you can create that shows the ROI calculation equation/details, but not one for the AVG cost basis. For the ROI log, see "Options / General Preferences... / Yields / Log Calculation Details for ROI Yield".