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Accounting for Prosper in Quicken Strategy Update?

April 17th, 2007 | Prosper.com, Tools 

Yesterday I received a comment from a reader:

Question: would the principal repayment be considered a “return of capital?” as opposed to a sale? What are the implications of using one category over the other? I’ve taken a look at the irs (a search on the phrase returned numerous results) and wikipedia (http://en.wikipedia.org/wiki/Return_of_capital)websites on the topic, but I’m still a little hazy.

I could only find the IRS applying the phrase to stocks and mutual funds.

I’ve tried both in Quicken. Recording principal payments as sales resulted in my cost basis increasing when that payment was reinvested, but with return of capital used the cost basis did not increase. (Well, technically it did with the purchase, but it declined by an equal amount when the payment was recorded.)

I tried the suggestion and it keeps my cost basis at my original dollar moved into Prosper amount.  I like this very much, but when I make this change Quicken thinks my ROI YTD in the account 50%.  Clearly, something is not right.

Looking a little deeper, if I use return of capital the cash balance increases but the assets stay the same.  This is a problem.  The assets (prosper loans) need to decrease in value by the amount of capital returned.

Sale is the right choice.

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1 comment so far ↓
#1 chris on 04.24.07 at 11:26 am

You need to adjust the security prices for the return of capital. I had the same issue. It is a pain. Using the market value field in the data entry seems to cause weird behavior, as well. I edit the securities price history, and get a realistic IRR (that is WAY lower than what I’d hoped for).

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