Got it. However, when looking at the purification FAQ, I am still a bit confused about how to purify, more specifically the differences between purifying capital gains and purifying when holding the stock. I read in the FAQ that even with a compliant company we should follow the same steps as “if the business screen fails”, yet I don’t quite understand how it should work. Here is where my confusion stems from:
If a company becomes non-compliant (either through the financial or business screen), 2 years after I bought it, and I immediately sell (within 90 days) can I count any gains as being complaint gains?
If I bought 1 share of company XYZ at $100 and one year goes by and the 1 share I own is still at $100, there is no need to purify since there’s been no gain, correct?
Similarly, if the 1 stock I own becomes $105 and the company has the following metrics:
Total non-compliant revenue: $10mil of out $1bil
Total outstanding shares: 1mil shares
Then would the amount I need to purify be ($10 mil / 1 mil) * 1 share = $10? Thus, at the end of the purification, I would have $95 worth of the stock? I feel like I am incorrectly applying the method because to me it does not make sense that in some instances, I would need to purify all my gains and some of my initial investment.
Which comes to my last point: What are the purification methods for unrealized gains and capital/realized gains? Are they the same? Can you give an example(s)?
If you can answer these questions, it would be greatly appreciated.