Recording Distribution after Basis is Recovered
Eric in North Texas
Member ✭
How do I record a distribution that ends being both a return of capital and has some capital gain in it?
I have several investments for which regular distributions are made in the form of return of capital. I have dutifully recorded that. Recently, one of them made another distribution (from a recap) that has zeroed out the basis, with the remainder being income (a capital gain).
As a numerical example; original investment $100. Prior distributions $80, all recorded as return of capital. This distribution is, say, $35. Clearly $20 is return of capital (original investment $100 less $80 previous distributions equals $20) and remainder of $15 is income (a capital gain).
For the time being I recorded the distribution all as return of capital and now have a significant "negative" basis in the investment.
Have looked in many places and have not seen this issue addressed. All suggestions welcomed.
I use Windows Home & Business subscription.
I have several investments for which regular distributions are made in the form of return of capital. I have dutifully recorded that. Recently, one of them made another distribution (from a recap) that has zeroed out the basis, with the remainder being income (a capital gain).
As a numerical example; original investment $100. Prior distributions $80, all recorded as return of capital. This distribution is, say, $35. Clearly $20 is return of capital (original investment $100 less $80 previous distributions equals $20) and remainder of $15 is income (a capital gain).
For the time being I recorded the distribution all as return of capital and now have a significant "negative" basis in the investment.
Have looked in many places and have not seen this issue addressed. All suggestions welcomed.
I use Windows Home & Business subscription.
0
Comments

Off the top, I’d say two transactions. First a $20 RtrnCap followed by a (maybe) LTCGDist of $15. A MiscInc transaction could also be used for the second.1

Thanks for your suggestion. Still think Quicken would have built something into the 'return of capital' type of transaction to handle this for us.
For the time being I ended up doing a similar thing from a different direction; I entered a "negative" return on capital transaction in the investment account to get the basis back to zero (in the example, $20) with the offset posting to a different balance sheet account (one I use for accruing property tax, and so forth). Then I made another entry to zero out the balance sheet amount and post it to income.
This allowed the bank account to reflect the full amount of the distribution (easy for reconciling, checking the K1, and so forth) and still reflect the gain in the proper place (good reminder when preparing estimated tax payments, final tax return, and so forth). I went to the investing tab to get the cost basis amount I needed to get back to zero.0