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PE Fund distributed assets in-kind

Bob_C
Bob_C Member ✭✭
edited March 7 in Investing (Windows)
I invested in a PE Fund that returned a combination of cash and publicly-traded stocks (in-kind) before dissolving. I intend to hold the stocks for awhile.

My question is how these transactions should be recorded in Quicken? My primary objective is ensuring the cost basis of the stocks is correct so that gains are tracked accurately. Secondary objective would be to have accurate reporting for the performance of the PE Fund.

Best Answer

  • Tom Young
    Tom Young SuperUser ✭✭✭✭✭
    Accepted Answer
    "- I want to track cost basis/gains of new stocks"
    As I said, I think you will need to do Add actions, one for each new security, with the proper basis and date of acquisition.  That will allow you to accurately track gains and losses in your new stocks.
    "I want to know the total value returned from the PE fund security"
    You run an IRR report from the time of the first investment in the PE fund to the time the distributions are made.  The securities included in the report are the PE fund and all the distributed cash/securities.  There's no easy way to do a "gain/loss" analysis within Quicken unless you want to count the new securities as "cash" associated with a "sale" and then delete all that and make the correct "going forward" entries.
    "It's OK if the gains from the PE fund security are not accurate."
    Since you have no basis in the PE fund I think you're looking at a "back of the envelope" calculation.

Answers

  • NotACPA
    NotACPA SuperUser, Windows Beta Beta
    What Q product are you running, and what BUILD of that product?  Do HELP, About Quicken for this info.
    How did you previously record that "Private Equity" fund (or, does PE stand for something else?) in Q?
    Depending upon your answer to my questions, there are several possible routes.
    Q user since DOS version 5
    Now running Quicken Windows Subscription,  Home & Business
    Retired "Certified Information Systems Auditor" & Bank Audit VP
  • Tom Young
    Tom Young SuperUser ✭✭✭✭✭
    I'm kind of guessing here having not actually encountered this situation.  I'm assuming the fund is a partnership of some sort and you've received or will receive a final Schedule K-1 with the information you need to account for the distribution properly.
    Cash distributions out of a partnership generally serve to reduce your basis, as a partner, in the partnership.  The remainder of the basis I'd think would then be allocated among the various shares distributed.
    So the first entry, for the cash, would be a RtrnCap action.  Since the distribution of the securities is a non-taxable event you could use the "Corporate Securities Spin-off" if only one stock was distributed, assigning a value of $0 to the "parent" limited partnership.  (I've never tried this so I'm assuming the Corporate Securities Spin-off wizard is "smart enough" to understand that all the basis in the parent would be assigned to the spun-off security.)
    But I think you're going to have to do your calculations of basis in this situation outside of Quicken, doing a series of "Add" actions to get the new securities properly established in Quicken with the correct basis and a holding period that carries over from the partnership.
    Assuming the dissolution results in no gain or loss a "Removed" action would get rid of the partnership.
    Frankly this might require professional help to figure out, depending on what information and guidance the partnership provides.  The foregoing is simply some "top of mind" thoughts about how the situation might be handled, but the devil is in the details on these sort of things.
  • Bob_C
    Bob_C Member ✭✭
    > @NotACPA said:
    > What Q product are you running, and what BUILD of that product?  Do HELP, About Quicken for this info.How did you previously record that "Private Equity" fund (or, does PE stand for something else?) in Q?Depending upon your answer to my questions, there are several possible routes.

    Quicken - Premier
    Year 2020, Version R31.20, Build 27.1.31.20

    Correct, PE = Private Equity

    I recorded the original PE transaction as:
    Shares Added (no basis - just to create the security)
    MiscExp for the capital commitment
    MiscExp for the fees
    Typically I would then do a MiscInc for the eventual capital return(s) and Remove Shares at the end.

    I know this will not track gains properly but I have not found Quicken to be capable of doing this for PE/VC funds. At least with MiscExp and MiscInc I can run a report for that security and get all cashflow transactions so I can calculate IRR.

    In this case, though, I want to know that the value returned from the PE fund is not just the cash but also the value of the public company shares that were returned.


    So to summarize:
    - I want to track cost basis/gains of new stocks
    - I want to know the total value returned from the PE fund security
    - It's OK if the gains from the PE fund security are not accurate

    Any feedback on how I'm doing PE/VC funds in general are welcomed as well! =)
  • Tom Young
    Tom Young SuperUser ✭✭✭✭✭
    Accepted Answer
    "- I want to track cost basis/gains of new stocks"
    As I said, I think you will need to do Add actions, one for each new security, with the proper basis and date of acquisition.  That will allow you to accurately track gains and losses in your new stocks.
    "I want to know the total value returned from the PE fund security"
    You run an IRR report from the time of the first investment in the PE fund to the time the distributions are made.  The securities included in the report are the PE fund and all the distributed cash/securities.  There's no easy way to do a "gain/loss" analysis within Quicken unless you want to count the new securities as "cash" associated with a "sale" and then delete all that and make the correct "going forward" entries.
    "It's OK if the gains from the PE fund security are not accurate."
    Since you have no basis in the PE fund I think you're looking at a "back of the envelope" calculation.
  • NotACPA
    NotACPA SuperUser, Windows Beta Beta
    When you invested in the PE fund, did you not pay cash for that?  Why would that not be the basis of the PE investment?
    And, a MiscExp normally takes cash out of an investment account ... so I don't understand how that was the "Capital commtment".  In one line you're using MiscExp to put funds in and on the next you're MiscExp to take funds out (for the fees).  Very confusing .
    And, why not use a SALE transaction to close the position?
    Q user since DOS version 5
    Now running Quicken Windows Subscription,  Home & Business
    Retired "Certified Information Systems Auditor" & Bank Audit VP
  • Bob_C
    Bob_C Member ✭✭
    Thanks for the help everyone! I confused the situation by saying the PE Fund started as a MiscExp transaction. (I track that way because most PE/VC Funds call and distribute capital over time, and so I record all those transactions as MiscExp/MiscInc just for cashflow. I do not track basis or gains in Quicken because I've found it incapable of handling this use case.)

    For this situation, assume the PE Fund started as a Buy for $X. Based on the info in this thread, it sounds like I have 2 options:

    Option 1:
    - Sale transaction for the PE Fund in the amount of Cash I received
    - Add Shares transaction for each stock I received with an original date and cost basis as directed by my brokerage

    This would give me accurate tracking for the stocks since I plan to hold those going forward. It would *not* give me accurate tracking for the PE Fund since the Sale transaction is "only" the cash amount.

    Option 2:
    - Sale transaction for the PE Fund in the amount of Cash + total value of all the stocks I received as of that time
    - Buy transactions for each stock

    This would give me accurate tracking for the PE Fund. I'm unsure if the stock tracking would actually work though as I'm not sure I can back-date the acquisition date of the stock.


    Is this a good summary and is consensus I should do Option 1 - and just track the PE Fund details outside of Quicken?
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