Support Query

After processing a Return of Capital, an incorrect amount of Capital Gains is processed. The description of the transaction also reads "Capital Gain occurred from excess of Return of Capital".
Why is this occurring?

A Return of Capital transaction can result in capital gain when the proceeds exceed the existing cost base recorded in the investment.

Issues can occur when the average cost per unit in multiple parcels is different.
Specifically, the proceeds from the Return of Capital are applied to each unit equally. If parcels have different average cost bases, some of the applied proceeds exceed the cost base of said units resulting in Capital Gains.

Example

In the following example, two parcels will be selected for a Return on Capital:

Once entered, processing a Return of Capital for the full cost base amount ($1,001) and selecting both of these parcels results in the following transaction:

Clicking into this transaction, the 'more details' section displays that both parcels are selected:

The reason this occurs is because as mentioned, the proceeds are applied to each unit equally.

The calculations for how this $1,001 is applied to each parcel are as follows:

In total, the cost base is reduced by $2 while the excess of $999 is recorded as Capital Gain.

Solution

The solution to this is to separate the proceeds from the Return of Capital into multiple lines: one for each parcel held in the investment.

1. Add additional lines to the transaction and split the proceeds into the amounts to be applied to each parcel:

2. In the 'more details' section for the first line, select the relevant parcel that has sufficient cost base.
   For this example, the proceeds is $1,000 so we select the parcel with $1,000 cost base:

3. Repeat this process for any remaining lines in the transaction, selecting the relevant parcels in the 'more details' section each time:

4. Click Save. The transaction should now display multiple lines related to the investment with no Capital Gains recorded: