Which is the best account type?

ATCE

Which is the best account type for tracking a collateralized debt income fund where qtrly dist's are Ord Income to the owner and automatically reinvested in the fund. Also would I set up a separate security for this to keep track of basis and income….etc.? I am thinking there is probably a couple different ways to do this but looking for the most efficient as I will have to be manually entering transactions for (including accruing monthly estimates of income for the company that owns this). Have not done anything like this before, simply worked with individual stocks using brokerage accounts. Thanks in advance for suggestions and assist.

Jim_Harman

Does the fund have shares or units of some sort, the reinvested income buys more shares, and the share price varies?

If so I would set up a security for the fund and treat it like a mutual fund or ETF. Set up an offline brokerage account to hold the security.

If not, please explain the structure.

ATCE

From the offering "Membership interests comprise the only outstanding equity ownership interests in the fund. Membership interests are uncertificated and documented by the Fund with book entries." There is a whole section on Revaluation of Properties, Capital Accounts accounting of and allocations of profits and losses. In the simplest sense ownership is a percentage of the equity and reported quarterly with complete financial statements…etc. I have not elected to receive distributions, rather having distributions turn into reinvestments which take place when additional loans are booked. I am using a conservative monthly accrual estimates for the ordinary income recognition monthly and reconciling to actual quarterly amounts reported.

ATCE

I set up an Ordinary Income Account to capture this element, (income generated is not a div int or CG), trying to use a reinvestment feature to avoid loading a purchase each month. Thoughts on a way to accomplish?

Jim_Harman

OK, then is it a one-time investment, or will you be making additional investments over time? Can you sell part of your membership interest, or is it all or nothing? Presumably its value will change over time and you might get more or less than your initial investment when you decide to sell.

There may be a better way to do this, but I would be inclined to say that if your initial investment is $X, you should record it as buying X shares of the special security at $1.00 each for the amount of your initial investment. Add or remove shares at $1.00 as the value changes per the statements you receive. Record the income you receive as reinvested dividends at $1.00 each. You may have to make some adjustments when you eventually sell to make Quicken's capital gain calculation correct.

ATCE

Technically yes there may be an opportunity to add to the investment if demand is in excess of capital raised (and reinvestment distribution funds left by most members in the fund so far) as the loans are short term in nature and turning all the time (the fund also carries a line of credit to fulfill short term needs as the goal is to have very little cash not loaned out). As far as redemption, yes can request some or all of your equity interest with conditions tied to this as to timing and amounts. The $1 share was what I was thinking as well, but wanted to see if there was some other creative way to deal with in Quicken. Thank you for your time on this subject.

Jim_Harman

The challenge is that you want Quicken to accurately track your cost basis, dividend income, and current market value. I think the $1.00 per share approach can easily track the income and market value correctly, but it loses track of the cost basis when you add and remove shares to get the correct market value. Trying to track all three values gets complicated with reinvested dividends unless there is a published price per share.