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When the user fulfills a capital commitment, a Bought transaction is recorded to increase the number of "shares". When there is a distribution, a transactions are recorded to reflect the amount of invested investment gains as well as the amount of capital returned and to cause the cash or stock distributed to appear in the appropriate Quicken account.
Quicken tracks the cost basis for the LP Interest as the cumulative capital contribution less the any cost basis returned in cash or stock distributions; however, because of the complexity of tax reporting for investment partnerships, users should rely primarily on the reporting (Capital Account statements and K-1s) provided by the fund for tax preparation and planning.
Entering Investment Partnership Transactions
To make tracking investment partnerships easier, Quicken has added five Investment Actions in the Enter Transactions wizard for investment accounts:
Partnership – Set up
Before using the Partnership – Set Up action, users should choose which investment account is going to contain the transaction history for their LP interests. This should be a manual account. Quicken recommends using a single account, with a name like "PE & VC Funds". However, there is no requirement that all the Investment Partnerships are tracked in a single account.
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Setting up the first Investment Partnership also enables the Investment Partnership Summary and Investment Partnership Detail reports on the Reports/Investing menu.
Partnership – Close Out
This action sets the partnership share balance (and thus market value) to zero, and marks the partnership as hidden, causing it to be excluded from reports by default. It is intended to be used for partnerships that are no longer active. Note that by customizing the partnership reports, these Closed/hidden partnerships can still be included in reports.
Partnership – Capital Call
A Capital Call action is used to record an investment in a partnership. By specifying an existing Quicken account as the source of funds, users can cause Quicken to also create the bank or brokerage transaction from the funding source account.
Quicken provides an option, on by default, to increase the market value of the LP Interest by the value of the partnership interest by the value of the capital call.
Partnership – Distribution
Distribution transactions are used to record a cash or stock distribution received. The user can specify the account where the funds or securities are to be deposited and Quicken will enter the appropriate transactions.
Quicken records the value of the distribution, less any capital amount being returned, as a MiscExpX transaction in the investment account containing the partnership interest. The category for the MiscExpX is "Realized Gain" for cash, and "Unrealized Gain" for securities. The capital returned is recorded as a RtrnCapX transaction in the same account.
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Quicken provides an option, off by default, to decrease the market value of the LP interest by the value of the distribution. For a large distribution that will have a material impact on the remaining value, users may wish to enable this option.
Partnership – Set Value
The Set Value action allows a user to enter the total value of their partnership interest and have Quicken make the appropriate price history entry to reflect this. Note that this value is the "remaining value" in the fund, leaving aside the value of distributions that have occurred.
Investment Partnership Reports
Quicken provides two reports, the Investment Partnership Summary Report, and the Investment Partnership Detail report to allow users to track their investment results. Note that these reports do not appear on the Reports/Investing menu unless at least one security of type "Inv Partnership" has been created.
Investment Partnership Summary Report
This reports summarizes capital commitments(total, remaining and paid-in) as well as the value of distributions received and the current value. The Cash MOIC ("Multiple of Invested Capital") is Distributions divided by Paid In. The Total MOIC is Distributions + Current Value divided by the amount Paid In. The IRR is calculated based on the cash flows, as shown in the Detail report (see below).
Investment Partnership Detail Report
The Investment Partnership provides the detailed cash flows that are used in calculating the IRR for each fund and for all the funds together. It also provides additional information such as the Creation date and Tax ID.
Tax Tracking
Quicken provides accurate tracking of the pre-tax investment performance of LP interests in investment partnerships. However, Quicken's ability to provide tax reporting for planning and tax preparation is limited by the nature of the information provided by funds at the time when distributions are made. For example, cash distributions may not be accompanied by detailed information about the amount of capital being returned in the distribution, and about the allocation of the income between ordinary income, short-term and long-term capital gains.
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