Schedule H Income Reporting

[MBCarey]

Can anyone help me understand how net gain/loss for SChedule H Part II 4a,b,c are calculated. I have outside brokerage accounts that I have calculated realized and unrealized gains and losses for. Is that the number they are looking for? The instructions say something about the beginning, the value sold and the ending. I use a spreadsheet to calculate these individually and only have a total number for realized and unrealized gains. Unrealized I have reported on (5)(B). This is my first time doing a 5500 for this plan with o/s brokerage accounts and I am really confused. I posted before about this and received a response, but I am still confused.

Thanks

[JohnCheek]

MB, you are over-analyzing it. The instructions you mention refer to lines 2(B)(6), (7), (8), (9) and (10), which are CCTs. PSAs and master trusts, 103-12s, and mutual funds. In those cases, all gain, loss, interest, and expenses are reported on a single line, and the net gain is computed as a "plug" number-- the difference between beginning balance plus additions minus expenses, vs. the ending fair value.

Now, lines 2(B)(4) A-C apply to all the other investments, and DOL wants you to calculate the realized gain or loss on sales by pretending that the carrying value of all assets was re-set to fair value at each year end. So the realized gain on an asset sold Jan 31, 02, is the dales proceeds minus fair value on Dec 31, 01.

I have not seen anything that indicates participant directed brokerage accounts should be handled any differently.

[MBCarey]

John, thanks for replying. I think I understand what you are saying. In regards to the brokerage accounts, I should use the ending value of the o/s assets less the beginning value to get vlaue for 2(B)4© - net gain/loss, unrealized g/l goes on line 5(B), investmens from PSA (ING assets) on Line 7. Please correct me if I am wrong. I have done a spread sheet for the brokerage accounts to calculate the g/l and unrealized g/l.

Can you also tell me if when reporting the assets in the o/S brokerage accounts do I need to report the Money Market Value separately in Section 1 line c1 or is that just for reporting general assets of the plan?

Mbc

[JohnCheek]

Sorry, MB, my first response was a bit off base.

See the instructions on page 39 of the 5500 booklet: for the 2001 plan year, you have a choice in reporting assets of Participant Directed Brokerage Accounts. You can report the underlying assets on each line that applies, and report the income on the lines that relate to the underlying assets, OR, you can "one-line" the assets on 1©(15) Other, and one-line the income on 2c "Other". You need to read the instructions, because certain underlying inveestments (loans, partnerships, etc) are not eligible for the one-line treatment.

You mentioned "outside brokerage accounts", and I am assuming you mean participant directed brokerage accounts as deescribed under feature code 2R

[MBCarey]

John, yes I am referring to self directed brokerage accounts there are about 15. So I can just put the total brokerage assets on the one line together and report the g/l on one line with the exception of loans and Ltd. Partnerships (which there is one loan and two limited partnerships within the brokerage accounts.

The remaining assets for the other participants are held at ING in Pooled Separate accounts which I should report on the appropriate line.

Also, when it refers to unrealized g/l should I report the value in the Brokerage accounts only. Am I right in assuming that with the Pooled Separate accounts there is no unrealized gain only with stocks that are sold?

mbc

[JohnCheek]

The instructions get a little fuzzy here. They say to report total aggregate investment income on one line (excluding expenses). To me, that means dividends, interest, realized and unrealized gains/losses.

By the way, you need to separate loans, partnerships, joint ventures, real property, employer securities, and "investments that can result in a loss in excess of the account balance of the participant."

[MBCarey]

John, thanks for getting back to me. Will try to stop bothering you after this. In completing the Schedule H, this is what I have done:

1) Income - Completed Line (4) a - Total Proceeds from Sale of Assets in Brokerage accounts (4)b Value of Sold Assets at Beg Yr. plus total purchases for year (4) c is the result

2) Line(5)(B) - unrealized gain/loss on brokerage accounts

3) Line (7) total assets is PSA

4) Line (10) total assets in Reg. Inv. Companies.

(Ltd. Partnerships belong to only one participant and are maybe 1% of his total account balance - so they were lumped with all other part. directed brokerage money

What do you think. Have I broken it down too much

Mb

[JohnCheek]

As I said, the instructions are fuzzy when it comes to the gain or loss component, so your treatment could be supported. I think I would have broken out the partnership interest, however.

[MBCarey]

John, I guess I can break it out since I did break it out when listing assets in Part 1. Would I then put its gains and losses under the Line C Other Income and then list it separately on the schedule for Line J or Line J apply? I am assuming I have to answer yes to Line J and then list the assets?

[JohnCheek]

line c- other income-- seems right.

For the schedule of assets held for investments, participant directed brokerage accounts can be one-lined, except that those specific assets mentioned previously need to be detailed.

For the schedule of 5% transactions, all participant directed transactions can be excluded, including PD brokerage accounts.

[MBCarey]

John, thanks so much for your help.

One last "dumb" question. Because all investments in this plan are direct participant direction, do I have to do any reporting under the 5% Excess question?

mb

[JohnCheek]

No.