Average cost basis in PP

English
#1

Hello,

Italian user here! I don’t speak german, so I will write in english.

I just discovered this very useful program (thanks to an advice from an italian user in a financial forum), and I’m trying to get the best of it. Unfortunately, PP calculates the average cost per share very differently compared to my online broker, which doesn’t use the FIFO methodology, but instead the average cost basis (ACB). This creates problems in the calculation of capital gains and taxes.

The following example comes from my personal brokerage account. I will ignore trading fees and dividends since they do not affect the ACB, capital gain or taxes in this particular case:

ISIN - IE00B2NPKV68

02/01/2020 – Buy 24 shares / price 101,94 euro per share = 2446,56 euro

02/04/2020 - Buy 10 shares / price 87,40 euro per share = 874 euro

29/01/2021 – Sell 25 shares / price 93,10 euro per share = 2327,50 euro

29/01/2021 - Buy 25 shares / price 93,13 euro per share = 2328,25 euro

In 02/01/2020 my ACB is 101,94, then the ACB becomes [(2446,56+874)/34] = 97,66 in 02/04/2020

I sold my 25 shares in 29/01/2021 and I happen to be at a loss of 114 euro, as my broker calculates the loss using the ACB method: [25*(97,66 – 93,10)] = 114. PP uses the FIFO methodology instead, and calculates my loss at roughly 206 euro, which is the result of [24*(101,94 – 93,10) + 1 *(87,4 – 93,10)] = 206,46.

Using the same criteria, when I bought my 25 shares back at 93,13 euro, my broker calculated my new ACB at 94,32 euro, which is [(997,66)+(2593,13)]/34

PP instead calculates another average, which is the result of [(987,4)+(2593,13)]/34 = 91,61

This creates a distortion in the calculation of capital gains and taxes. In PP I have a (negative) realized capital gain of 206,46 euro and (considering today’s market prices at 94,54 euro per share) an unrealized capital gain of 93,39 euro, while in reality I suffered a loss of only 114 euro and I would have a slight capital gain of 7 euro if I sold today my shares.

Since this difference in methodologies affect the correct calculation of capital gains and taxes in Italy, I wonder if there is any way set PP to calculate the ACB like my Italian broker.

Many thanks for any help or advice you will provide!

1 Like
Adjusted Cost Basis (ACB)
#2

Generally speaking, PP doesn’t attempt to follow tax laws, which vary by country and, even for a single country, often are extremely complex. The intention is instead to provide economically meaningful reports about the portfolio development.

There actually is one place where the ACB is calculated, and that’s in the chart view for a security. There, you can add various optional lines, and the ACB over time is one of them. Depending on your needs, that may or may not be useful for you.

1 Like
#3

Thanks for your help @chirlu ! I found the ACB in the chart view and now I’m even happier that I found out this amazing program!

Of course I can’t expect a single program to be customized for every need of any kind of user around the world, but just having the option to show the ACB on a chart as my broker calculates it is more than enough for me.

It is indeed my broker that files the tax paperwork on my behalf, so I do not need PP or any other resource to proper calculate my taxes. That would have just been the cherry on top of an already incredibly useful tool as it is PP.

1 Like
#4

I can’t seem to find it in chart view. Please help.

Adjusted Cost Basis (ACB)
#5

for canada calculation:


ACB = initial investment + additional contributions + fees and commissions - amount of any previous sales or redemptions

or ACB/unit


Average ACB/unit = (initial investment + additional contributions + fees and commissions - amount of any previous sales or redemptions) / total number of units currently held