About Same Lot Selection Processing
When you use same lot selection, despite the difference in cost and lot structure, the system relieves the “same” lots across all bases on an entity. The
end result is that the remaining lots in each basis originate from the same lots even though the structure (due to wash sales) and cost may
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How Same Lot Selection Affects Close Transaction Processing
When youdiffer. The system can link fractured lots caused by wash sales in a tax basis back to a single lot in another basis and consider it the same lot for lot selection and reconciliation.
To use same lot selection, you identify an accounting basis within an entity as the controlling basis to use for lot selection.
During processing for a close transaction, when the system executes a trade on both bases, it first creates close transactions for the controlling basis. Then, when it is replicating the transactions for the non-controlling bases, it uses the lot selection results of the controlling basis to perform lot selection for the non-controlling basis or bases. It closes out the same lots in the non-controlling bases that were closed in the controlling basis.
Same lot selection uses the Original Event ID (tag 457)
as a common lot identifier on transactions and as the common link across lots for multiple accounting bases. This identifier indicates that a lot in a position on one basis is the same lot on another basis.
Due to fractured lots caused by wash sales, multiple lots on one basis can correspond to a single lot on another basis. This Original Event ID tag has the same value on the fractured lot and its sub-lots in the case of wash sales
Automated Processing
Manual Processing
Say you are processing a manual close for a transaction that uses the Identified Lot (IDLOT) lot selection method. When the system identifies the lot or lots to close, it can create a close that spans across open lots if multiple targets exist. This example applies to an IDLOT close transaction that must span across lots created as a result of wash sale processing. In the example of a wash sale, an open lot can be fractured. The fractured open lot and its sub-lots all share the same Original Event ID but have different Open Event IDs (tag 151).
When Eagle Accounting processes an IDLOT close transaction, the close attempts to find either a matching trade ticket number or open event ID for the close message’s target trade ticket number or target event ID. Once a match is made, the code discontinues the “search.” In the case of a fractured lot, you may want to target the fractured lot and its sub-lots with one close message. The IDLOT logic considers multiple matches based on original event ID as long as the open lot quantities can satisfy the close quantity. This course of action is more prevalent where the secondary or non-controlling basis has wash sales “enabled” where the primary or controlling basis did not.
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WRITERS NOTE: this is iffy. not sure what is manual vs. automated behavior |
About Pending Transactions and Same Lot Selection
When you use pending transactions and also use same lot selection, the system uses the controlling basis when you manually cancel a transaction. For entities marked as pending trade eligible (tag 3679 set to Y), the system insert a copy of the manually cancelled transaction to the Pending Trades table for the controlling basis. If there is no controlling basis, it stores a copy of the transaction for the primary basis.. During same lot selection processing, the system considers whether each controlling and non-controlling basis uses wash sales processing in order to keep the lot structures in sync.
Same lot selection also applies to other types of close transactions. The system references the Orig Event ID (tag 457) from the open lot on close lots for all transaction types that affect a cost position. This allows the system to maintain the same lot structure across bases for these transactions.
About Global Processes and Same Lot Selection
If you use same lot selection, certain global processes related to fixed income securities use the controlling basis during processing to keep lots in sync across bases. Global processes such as the accruals process and variation margin identify the controlling basis in order to replicate events from the controlling basis. The system does this when you run the global process panel manually or automatically, as well as when the system triggers the global events in rollback/replay when it is processing an event on an As Of basis.
When the system performs rollback and replay for entities that use same lot selection, if the system backdates any activity, the controlling basis position rolls back the cost, and propagates the replay information of any sells to loopbacks for the non-controlling basis. If there are changes to a security or amortization rule, for example, the system can roll back and replay sell transactions for multiple bases, and create sell transactions in a manner that maintains lots structures consistent with same lot selection processing.
About Reconciliation and Same Lot Selection
If you use same lot selection and use Eagle solutions for reconciliation, STAR to PACE Direct sends the Original Event ID to the Eagle data warehouse tables for use in reconciliation when comparing lots. You can set up the reconciliation process to identify expected accounting differences and to assign reason codes that inform you why lots are out of sync. For example, if you have known amortization
method differences between bases that
you expect to cause a break each day, you can set up rules to evaluate the difference to see if it
meets certain conditions. If conditions are met, the system can flag the amortization difference as an expected or known difference and assign it a specific reason
code.
About Standard Reports and Same Lot Selection
Same lot selection does not require any special setup for reports in Eagle Accounting's standard report package.
However, if you use same lot selection and you run the Hypothetical Sell Query report, be sure to run the report only for the entity's controlling basis.