Investment account on 990-EZ balance sheet

Technical topics regarding tax preparation.
#1
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Client has a small public charity. We file the 990-EZ. Gross receipts $70K, fixed assets approximately $36K.

This year they started an investment account at a brokerage co. At 12/31/21, the account had grown slightly. I'm confused on how to present it on the balance sheet of the 990-EZ. The instructions for Part II, Line 22 (page 17) say to report the "book value of securities held as investments", which seems clear but the instructions for line 20 (page 16) say to put there any "unrealized gains or losses on investments carried at market value". If I do that, my balance sheet won't balance.

So which is it? Book value or market value. I think it makes more sense to report it on market value personally since that seems like a true reflection of what they had at year-end.

I also searched 990-EZs filed online and I see "unrealized gains and losses" reporting on line 20 on lots of 990-EZs.

Any help is greatly appreciated.
 

#2
Nilodop  
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Read the instructions carefully. For instance, you don't report on line 4 the unrealized gains on investments carried at FMV. But you carry them at cost, I gather, so you'd report the unrealized on line 4. And follow the instructions for line 20 and explain as needed on Sch O.
 

#3
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I didn’t interpret line 4 that way when I read it. Your interpretation is interesting. Will that work though? If I include it on line 4 (or line 20 for that matter), it will cause my net assets to increase by the unrealized gain. But then the balance sheet won’t balance if recorded at book value. And then next year, I’d include it again, presumably a bigger unrealized gain, including the 2021 unrealized gain. Doesn’t feel right to me.
 

#4
Nilodop  
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Tell you what. Let's look at it this way.

If you book the investments at cost, then there is no unrealized gain or loss in the number, so IRS is asking what it is. Tell them by disclosing the unrealized amount in an explanation on Sch O. Nowhere on the income statement or balance sheet. But you could also put them on the balance sheet on line 24 and have an offsetting deferred credit account in the liabilities section, plus a Sch O explanation.

If you book the investments at value, the unrealized amount is in the number. But they don't want it in the income number on lines 4 or 5, so put it in the reconciling number on line 20 and explain on Sch O.

They want disclosure and they want a b/s that balances. So give them all that.
 

#5
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You think either would be fine? My numbers are small and likely will be for a long long time. But I can see if I do show it at market value and they keep adding to it, it could top $500k and then we would have to do the full blown 990. Tricky.
 

#6
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The cost of success.
 

#7
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I have a 990 with donated stock that they have kept. You put the stock on the balance sheet at FMV, but there is an accompanying amount booked as unrealized gain/loss. That adds to revenue. Balance sheet will balance if you do the AJE correctly. The gain will go on line 20.
 

#8
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Interesting. Is this a 990 or 990-EZ?
 

#9
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990
 


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