Hi,

I think I understand this from having read the discussion
at:
http://www.bivio.com/trez_talk/mail-msg?t=6072600003
But since I'm a club accounting newbie, let me see if I got
it right.

There are no transactions of any kind that appear anywhere
in bivio, just because it's the end of the year. There are
none that bivio records automatically, and none that I'm
supposed to record. Specifically, if I go to
accounting/Members for my club, and click on the
transactions link for a member, there isn't any transaction
saying the member received a distribution of earnings, isn't
supposed to be, and doesn't need to be.

What there is instead is a Member Tax Allocations report,
available at accounting/Reports, which details the various
gains & losses that compose each member's Net Profit for the
year.

Yes? (Unless maybe a club has rules requiring a
distribution, but then those transactions are required by
the rules, not by bivio or the IRS.)

Mike Carroll

Michael Carroll writes:
> What there is instead is a Member Tax Allocations report,
> available at accounting/Reports, which details the various
> gains & losses that compose each member's Net Profit for the
> year.

You are correct. The ICLUBcentral software has a concept called a
"distribution", which is really just "make work". Distributions are
non-events in a pass-through partnership. Tax allocations happen
whether you do a "distribution" or not. Mutual funds have
distributions to keep their share price low to improve their
marketability.

Rob

Just FYI, IClub software dropped the term 'distribution' a few years ago,
and simply report the allocations of expenses and earnings that members
report on their K-1's. The adjustment is made in members paid in tax basis.
Same process. There never was any genuine, paid out, distribution. Gene
Rooks, Orlando

Regardless of the terminology, the point, as I understand
it, is that with ICLUBcentral's products, the treasurer has
to do something (click the right buttons) at the end of the
year to cause the annual "allocation" to happen. With bivio
it's automatic (there isn't a separate step the treasurer
has to remember to do).

-Jim Thomas

Did I miss something looking at bivio's Transaction Ledger report before?
I just asked to see a ledger report for this year, 2007, as I had a question
about how Account Synch reported one of our reinvested dividends received in
2007, showing a .02 cent fee, when TDAmeritrade doesn't charge a fee.

What I also noticed is the Transactions report showed an 'automatic'
distribution dated 12/31/07, for my 2007 transactions to date. What gives
with that? I don't want a distribution showing all during the year, I want
to see my cumulative totals.

Gene Rooks, Orlando

Gene Rooks writes:
> Did I miss something looking at bivio's Transaction Ledger report before?
> I just asked to see a ledger report for this year, 2007, as I had a question
> about how Account Synch reported one of our reinvested dividends received in
> 2007, showing a .02 cent fee, when TDAmeritrade doesn't charge a
> fee.

The fee is implicit, because there's a couple of pennies left over due
to rounding. You lose them.

I am going to use your particular case as an example. Normally we
wouldn't discuss club data in public, but you seem to like emailing
the Club Cafe instead of support@bivio.com where we normally answer
questions like this. I'm assuming you are trying to help people
understand how bivio works.

Your club got a dividend of $9.45. You also received .211 shares. If
you work out the math on this, the price per share on bivio is
44.691943. That's right, all the way out to 6 digits to the right of
the decimal. When you multiple 44.691943 x .211 you get 9.429999,
which rounds to 9.43, because there's no such thing as a fractional
cent. Where did the $.02 go? In TD's pocket.

While I'm on my soap box here, I would strongly suggest you stop all
automatic investing. When you reinvesting dividends, you are giving a
blank check to the companies you are investing in. Moreover, you
spend a tremendous amount of time tracking down pennies, like these
$.02. Think of all the time you could have spent looking into better
investing opportunities.

Well, that's my $.02. :-)

> What I also noticed is the Transactions report showed an 'automatic'
> distribution dated 12/31/07, for my 2007 transactions to date. What gives
> with that? I don't want a distribution showing all during the year, I want
> to see my cumulative totals.

The "Member year-end allocations" is dated 12/31/2007 on the
Transaction Ledger. It's there all year long for a reason. It lets
everybody in the club know its cummulative taxable income for the
year. It's important for tax planning to know what you income
liabilities are at any point in the year.

Cheers,
Rob

Rip West writes:
> It simply means that their club paid $9.45 for .211 shares.

The club did pay $9.45 for .211 shares. The $.02 is very important,
because the market price you pay for your stock is important.
Moreover, DRPs are a racket for brokers to make money off of dividends
owned by "buy and hold" investors, instead of paying interest on those
dividends.

> So, here, you have an instance where AccountSync caused more
> work<g>.

This is not an AccountSync(tm) issue. This is a difference between
entering the data naively in the reinvested dividend form vs. having
AccountSync enter the two distinct transactions. bivio does not
support reinvested dividends directly via AccountSync, because the
brokers provide us with two transactions: cash dividend and share
purchase. AccountSync computes share price exactly, and it cannot
exceed the gross amount, and it has to be within 6 places to the right
of the decimal. That's what I explained before, and why the $.02
shows up. It truly is a fee.

You are correct that gross amount $9.45 is the cost basis (fees are
included in the cost basis), and therefore most of this discussion is
moot.

However, the fact is that we are telling our customers that the broker
is making at least $.02 on each reinvested dividend (and probably a
lot more). I therefore argue that AccountSync is doing a service to
our customers by exposing hidden charges by the broker with respect to
reinvested dividends. :-)

Cheers,
Rob

Exactly, Rip. Your approach is exactly how I enter transactions
manually. We know how many shares and the dividend received. The cost
is what I'd round. AccountSynch just makes more unnecessary work here.

John Munn
Capitol Investors.


Rip West wrote:

> Rob,
>
> ...cut... if I were to enter this transaction in bivio without the aid
> of AccountSync, I would just show a purchase of .211 shares for $9.45.
> No need for a fee.

Rip West writes:
> Obviously, I should let this go, but it's just not in me to do so.

Me either. :-) Gene, skip the tedious bits, and go to the part where I
explain how the real cost is probably 1.5% commission, or $.14 on a
$9.45 purchase.

DRP investors: You need to understand that DRPs are an expensive way
to invest, and my job as an accounting software provider is to make
that cost clear. AccountSync can't know the share price the broker
paid, and it can't round up like Rip's calculator. That would be
creating pennies out of thin air. Although the air is thin in
Boulder, it ain't that thin. ;-) Follow the math below, if you are
*really* curious.

> This ridiculous. Let's see if I understand. You tell Gene that she
> spent 'a tremendous amount of time tracking down pennies, like these
> $.02.

You and John Munn seem to be very ready to attack the virtues of
AccountSync at the drop of a few cents. You are throwing out the baby
with the bath water without even seeing how beautiful and strong the
baby is! What's more, your math is wrong.

> I don't think you've given me enough to 'work out the math'. If I
> divide 9.45 by .211 shares, I get 44.786730, carried to 6 places.

Your calculator is rounding for you. 0.001 x 0.00003 is not exactly
$0.05 (of the $9.45) so how can the division be exactly right?

It's not *exactly* right. Oddly enough, 9.45/.211 is a repeating
decimal. It starts repeating around the 30th place. Your calculator
won't do this for you. My calculator(s) will. Here's the *exact* number
44.786729857819905213270142180094... The ellipsis means that the
number repeats 786729857819905213270142180094 forever. Again, the
point is that there is a remainder, and properly truncated to six
decimal places, that remainder is $0.02, which shows up as a fee on
the purchase.

> I hope it is obvious to anyone who has followed through all of this
> that I am not disparaging the bivio program, only the tortured logic
> of the explanation given.

My logic was taken out of context, and has nothing to do with
AccountSync. I said "$.02 (at least)". The "at least" part means
that the broker buys the shares well below $44.78.

Here's another attempt at clarifying the "real" cost of DRPs.

The high and low for this stock on the day the dividend was reinvested
was $44.91 and $43.38, respectively. Let's assume the broker buys in
the middle at $44.145. When we multiply 44.145 x .211 we get
$9.314595. Subtracting that from $9.45 we get $0.135405. Rounding
this we get $.14, or 1.5% of $9.45.

For comparison, if I buy $1,000 worth of stock at a $9 commission, I'm
paying 0.9%.

More importantly, it's likely the broker bought at the open, or
$43.38, that is, at an even lower price -- commission math left up
to the reader. :-)

The broker probably got the cash the day before from the company, and
invested it at the overnight rate -- making even more money in the
process. It doesn't matter what price the broker buys at, because DRP
investors don't ask what the execution price is. What's a few pennies
between friends, right?

The broker can and does add an arbitrary fee or commission. It's a
"free" service the broker provides to its customers, and like all
"free" services, the customer ends up paying for it.

Back to AccountSync. It's important to understand that AccountSync
sees two distinct transactions: the dividend and the purchase. This
is not one transaction, but two, just like a "member buy out" is
really a member payment followed by a member withdrawal. There's no
difference.

bivio provides the Reinvest Dividend Form as a convenience for
investors like John and Rip who like doing bookkeeping by hand. I
believe Rip was one of the people advocating for a single form. The
form hides the share price so (obviously) it really grates on my
nerves. I don't like obfuscated math. And, if you all used
AccountSync, we wouldn't have to explain it in such excruciatingly
painful detail. ;-)

I apologize for the length of this post, but it's very important to me
that you know this: At bivio, we take pennies *very* seriously so you
can invest effectively with the confidence your books are correct.

Cheers,
Rob

Gee, it seems to me you guys could have spent a lot of time checking out
investment opportunities. ;-) Reminds me of my husband and son, on nights
he spends with us, haggling over who gets the remote, tough to have two
alpha males on the same issue.

I see now why Account Synch classifed the difference as fee, when TDA
actually doesn't assess a separate fee. In CAO, the price is the last item
calculated, from the fraction purchased with the dividend paid, rather than
the other way around. Six of one or half a dozen of the other, once you
understand it, and don't suddenly think your broker has instituted a
separate charge for reinvestments.

Rob, hope you don't mind my posting procedural questions on Club Cafe, I
usually think of support as applying to problems with the software, and the
forum for discussions on practices and procedures.

Gene Rooks, Orlando

Gene Rooks writes:
> Rob, hope you don't mind my posting procedural questions on Club Cafe, I
> usually think of support as applying to problems with the software, and the
> forum for discussions on practices and procedures.

I agree. It makes our lives easier. I do need your official approval
to dig into details relating to your questions, and post them here,
too. We don't normally like doing that part, but if you don't mind,
we're all for it.

Rob

Rip West writes:
> Gee, I had forgotten how much fun these 'discussions' with you could
> be. <g>

Nice to see you are still interested in accounting software. I
thought you had retired. ;-)

> I don't believe I am attacking the virtues of AccountSync or
> throwing out anyone's baby. I am questioning one transaction that it
> made. I would like to understand how it works. You seem very
> defensive about people who have not tried AccountSync making
> comments about it. I am simply asking the question

Here's the simple answer: Every purchase is just a purchase, we do it
the same way if it is a reinvested dividend or an explicit execution
order. It's what brokers give us that's the problem.

Let's take a typical example. You buy 10 shares of AAPL at $80. That
would normally be $807 taken from your account. We know that. We
also know the price you paid (most times) per share. However,
sometimes the commission will be $7.02, because of some SEC fee. The
broker doesn't list the commission as a separate item (in most cases)
so if we have the share price, we can calculate the commission/fee
directly.

I wrote:

>> Your club got a dividend of $9.45. You also received .211 shares.
>> If you work out the math on this, the price per share on bivio is
>> 44.691943.

You're right. It's more complicated than I first thought. We do our
best to extract the correct share price from the site. With Former TD
Waterhouse (not TD Ameritrade, which doesn't exist from a user's
perspective yet :-) we extract this information from the share price.
Here's the data we have: REIN @ 44.6790.

Our software parses the 44.6790 out of the comment, and uses that as
the share price.

That was my mistake. The point is that there are really $.02 left
over, and AccountSync wasn't making it up even though the broker
doesn't tell you they are charging something.

Sometimes we have to calculate the share price, and other times we get
it from the broker. In all cases, when we show a fee, it's based on
some calculation that has been carefully thought through by someone
other than me. :-) I'm just the flunky who gets to answer the
questions here. They really don't want me doing support regularly
either. :-)

Rob