Re: Purchase/redeem Funds

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Posted by Mark on January 12, 2007 at 00:22:23:

In Reply to: Re: Purchase/redeem Funds posted by H. C, Pierce on January 11, 2007 at 23:52:51:

: Mark:

: First: My above paragraph: "Further, there is no provision to designate the transfer location of the proceeds of a sale not the source of a cash transfer to fund a purchase." Should have read .....sale nor the source.....

: It becomes very difficult to track and balance cash flow when you cannot transfer cash into nor out of a given data file such as one holding a given fund's information. Second, at times some funds have a "cash on hand" listing or sub-account (which may be an MMA sub-account) where cash accumulates until a destination is specified by the fund owner as to where to apply this cash.

: On "OOP" --- I have found no current application for "Out-Of-Pocket" accounting anymore nor the use of this acronym and the idea of it in current literature on value, growth, and allocation investing. The only critical consideration has become the IRS requirement to be able to trace source cost of specific investments when they are sold. Perhaps, a "Do you want OOP or IRS tracking of cost?" question may become in order.

: Also, (Non-IRA/401/403K) "Reinvested cash distributions (div., ST, LT, Interest, etc.) are considered to be paid income received by the payee wnich are then released back to the payor for re-investment as pre-arranged automatic matched transactions thus increasing the cost basis of the investment. They are income in the current year." With this definition (H&R Block IRS advisor), since the distribution has been paid to and accepted by the payee, it would seem to become "In-Pocket"; therefore, it would seem to follow that re-investments are "Out-Of-Pocket."

: The immediate problem I'm dealing with is an automatic monthly payout from one fund routed as an automatic monthly investment purchase in another fund. The transaction appears solely as a paperwork record. No IRA's nor 401/403 accounting is involved. Obviously, these funds both have the same parent fund firm.

: Best regards, HCP

Hi HCP,

You can see the online help in Fund Manager for more on OOP, but it basically is to help you track your overall break-even point. Fund Manager does of course also offer the tax cost basis as well, for the different accounting methods like FIFO, AVG, or Specific Lot. When you have a reinvested distribution, this does not change how much money has come out of your pocket to acquire the owned shares. As I mentioned previously, reinvested distributions do increase the "tax" cost basis, as reported in the capital gains reports, the custom reports, or in the Portfolio Editor.

Thanks,
Mark
--
Fund Manager - Portfolio Management Software

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