USA Small Private Financial Company and Unrealized Gains (losses)

[AllanR]

Hello folks,

I have a sole proprietorship company whose main business is trading stocks. From what I’ve read, I’m pretty aware that I should keep my investments in my Quickbooks categorized as trading securities, and should adjust their fair values and mirror that to unrealized gains (losses) in NI. But I wonder if it’s really common for private companies to do that and if yes, how often this adjustments should take place. I realize my securities after 1-6months usually. Shouldn’t I keep unrealized gains and losses out of my Net Income for tax purposes? How Would an experienced accountant go about it?
Would really appreciate if you can speak about it, and if it’s from your own experience, even better!

Thanks!

ALLAN R.

 

[bklynboy]

GAAP and Tax are different. For GAAP these are considered trading and MTM goes through P&L. For tax, they are not taxed until sold. You would do a MTM for GAAP at least as frequently as you produce financial statements for most companies though its monthly. Difference between GAAP and Tax gives rise to Deferred Tax Assets/Liabilities.

Personally, unless you are doing GAAP financial statements I would just treat as unrealized and do my accounting on a cash basis (i.e. record in taxable income when sold)

 

[AllanR]

GAAP and Tax are different. For GAAP these are considered trading and MTM goes through P&L. For tax, they are not taxed until sold. You would do a MTM for GAAP at least as frequently as you produce financial statements for most companies though its monthly. Difference between GAAP and Tax gives rise to Deferred Tax Assets/Liabilities.

Personally, unless you are doing GAAP financial statements I would just treat as unrealized and do my accounting on a cash basis (i.e. record in taxable income when sold)

Very helpful!! Thanks!