How Should Income Received from a Limited Partnership/Venture Capital Fund be Recorded?

I invested in a venture capital fund in 2004. The fund invests in startups primarily in North Carolina. When the fund exits a position, they send out a check to the investors, but they never state explicitly what type of income it is. I would like to record the income with the correct tax category in Quicken. When I have asked the fund managers to define what the income is (dividend, interest, return of capital, qualified dividend, etc) they can't tell me specifically and typically say to just consult with my accountant. The most common suggestion I get from them is to consider it Return of Capital. I do my own taxes so I don't have an accountant to consult. It is not that big a deal because the tax gets taken care of via the K1, but I would like to have information in Quicken to show the overall return I am getting on the investment. The fund should be liquidated within 18 months, so it is not that big a deal, but I was wondering if anyone out there has an investment like this and knows how to properly record the proceeds into Quicken.


  • Tom Young
    Tom Young SuperUser ✭✭✭✭✭
    Have you been getting Schedule K-1s all along, or are you anticipating only a Schedule K-1 with the liquidation?
  • NotACPA
    NotACPA SuperUser ✭✭✭✭✭
    What Q product are you running and what BUILD of that product?  Do HELP, About Quicken for this info.
    And, why does "Return of Capital" not work for you?
    Q user since DOS version 5
    Now running Quicken Windows Subscription, Home & Business
    Retired "Certified Information Systems Auditor" & Bank Audit VP
  • Jim_Harman
    Jim_Harman SuperUser ✭✭✭✭✭
    I have a similar situation with an investment that sends me regular checks but only identifies the type of income on a K-1 at the end of the year. You can't really track all the details if this information is not provided regularly.

    Was this a one-time investment, or have you been buying and selling over the years?

    Do you get regular statements that show how many shares you hold and the price per share, or just an account balance and a check?

    There are different techniques you can use to track the performance depending the answers to these questions. 
    QWin Premier subscription
  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
    You should be getting a K-1 annually.  I would probably treat this as follows:

    1) Each check you receive would be to a user-created category - (Maybe "K-1 Income" or "VCFund income".  Let's say over the course of the year that totals $300.

    2)  When you receive the annual K-1, it shows info like
    • Business Income = $100
    • Interest Income = $50
    • Dividend Income = $5
    • Investment Expenses = $40
    I'd enter 4 transactions to those 4 categories, three as income (+$155); one as an expense (-$40) for a net of +$115. (All dated 12/31/yy)

    3)  You have actually received $300 you categorized as K-1 Income.  You've accounted for $115 of that.  I'd treat the other $185 as RtrnCap also dated 12/31/yy) bringing the total to $300.  (Potentially the RtrnCap could be positive or negative.)  This amount should be the same or similar to the change in your capital account reported on the K-1.

    4)  Your cash in this account is now $300 high.  Enter a MiscExp transaction for that amount ($300) dated 12/31/yy against category K-1 Income.

    On 12/31, your cash went from $0 to $300 and back to $0; you now show amounts for 'correct' income categories; your annual K-1 Income category came in as $300 and closed out as $0.   

    That is nominally how I have handled similar circumstance, though not from a VC fund K-1.  YMMV.