[…] Update (4/11/2007): OK, last update. But Rateladder.com has followed up with a finally post on the topic. Between the two of us, I think we’ve provided the best way to handle this until we convince Prosper to provide downloadable transactions. Posted in Personal Finance, E-Commerce, Economics. […]
I updated my post with a pointer to your final updates. Glad I could help here – this issue of how to track Prosper in Quicken has been bugging me for more than a year!
In terms of principal loss due to bankruptcy or settlement, my recommendation would be two transactions:
1) A “Sale” of shares to represent the decrease in principal.
2) A “Misc” expense, attributed to a “loss of principal” or “bankruptcy” expense to remove the cash from the account.
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.)