Categorized Transfer?

What you are missing is the loan receivable from your tenant. Change the balance adjustment transaction to [Loan Receivable]. Now you split will balance without being forced.

When the tenant pays, post it to the [Loan Receivable] account.

Rick, I'd create an asset/liability account.You can transfer the money into there from your wife's account. Then spend it using the rent and security deposit categories. When the tenant reimburse your wife, transfer the money back into her account? Would that work?

Suppose this friend had gotten the loan from someone else, someone you don't even know. That person, in his Quicken file, would have make an entry:

transfer from checking to loan

Then the friend, now flush, would (we hope) come to you and make the payment which you would record in one of your accounts, say checking

checking, category rent....

When the loan is repaid, the person making the loan records

transfer from loan to checking

Once you've agreed to the entries made above (where the loan was in a stranger's quicken file) - just make the same entries in your own files.

your wife made a loan the friend paid rent the friend repaid the loan

all different transactions. As our friend used to say here, "just follow the money". dick w

Rick Hess wrote:

"Dick Weaver"

(snip)

(snip)

Gentlemen, thank you for taking the time to respond.

A loan account is what I was overlooking.

You're making it more complicated than need be.

I hate "transfers" so I'd simply show the money from your wife as a "Personal" deposit and then split the monies from the tenant appropriately when received. You could show your wife's money as rent etc and the friends money as personal but that seems illogical to me. For instance, what happens if you friend never paid anything; would you still show the money from your wife as rental income?? I wouldn't!!

The only part of your suggestion that I'm even a little in agreement with is the eventuality that the loan does not get repeaid. In that instance, I doubt Rick would want to show income from the rental, because then he'd have to pay tax on his loss as well.

"Mike B" wrote

Agreed, and I thought about that before I even posted the question.

In this case, I am reasonably certain that we will be repaid. The friend's house burned down and he's waiting for the insurance settlement. Since he was left with nothing after the fire, he obviously had immediate financial needs such as clothing & furniture. He couldn't rent a furnished apartment because of his pets. My rental houses aren't furnished, but I did agree to take his pets. This was my wife's way of helping him.

IMO, the proper way for me to have recorded this (accountants please correct me if I'm wrong) would have been to show ONLY the transfer from wife's account to mine. Then when she's reimbursed, show her deposit as the rent income.

Why didn't I want to show it the "proper" way? In addition to paragraph #2, I handle an extraordinary amount of transactions with Q and I didn't want to have to remember to track his reimbursement. My wife enters her own statements and she wouldn't know how to record that one. As it turns out, I'll still have to remember to show her reimbursement back to the loan account, but at least my failure to do that won't affect my P&Ls.

"IMO, the proper way for me to have recorded this (accountants please correct me if I'm wrong) would have been to show ONLY the transfer from wife's account to mine. Then when she's reimbursed, show her deposit as the rent income"

That's the correct way, at least for taxes. Louisiana is a community property state, so her payment is the same as you paying yourself. There's no revenue there. You just have a renter with an accounts receivable.

I spoke in jest, more as a means to object to the methodology proposed by the OP of this sub-thread than as a true criticism/warning.

I will also cede that you have far more financial expertise than I could hope to have. Still, I kinda disagree with your "proper" method. I have not done accounting since I left university a fair number of years ago.

So, IMHO. When your wife extended credit to her friend, an obligation was created. "Proper" bookkeeping require that you show that obligation. This you do by creating a loan asset. Then you need to record the "income" of renting the property. Hence a transfer of money from the loan account to your (business?) account. At that point you are reflecting accurately the situation as it stands. The rest of it is depending on outcome. In all probability you get repaid, then you show a cancellation of the loan asset and an increase in your wife's checking account to reflect the loan repayment. If the loan does not get repaid, then the loan is a write-off. Technically (and please understand I'm not versed in tax matters - I don't even do my own taxes) I believe you still have that income from renting the property.

IMO, again, the trick is to rather show the rental as creating the loan, that way if the loan does not get repaid, it is a tax write-off. But then, the probability for that is small, so no need to worry about the tax implications, right?

"Mike B" wrote

Ahhh, OK, my left brain takes everything literally (don't try to tell me any jokes at a party). But, nevertheless, the possibility of non-reimbursement S/B considered.

NOW you jest!

(snip)

Yes, true. I only mentioned "my" side of the transaction: the transfer to my account. The loan obligation would be "created/initiated by my wife".

I (cautiously) disagree. (We're going with what I proposed is "the correct method", right? -- not how I'm actually recording this?).

IMO, there is no rent income until the tenant pays it. There is a loan receivable, which is NOT income.

Think about it another way in reverse: Suppose you borrow $10K from your bank in 2005 and don't pay it back until next year. Do you report $10K as income for 2005? Of course not. (Well, if the Creditor relieves you of the debt, then you do have income; but as long as there is an obligation to pay it back, there is no income.) And going back to our case in point, if my wife's friend does NOT pay the loan because we relieve him of his obligation, then he is obligated to report that amount as income to IRS.

And for all my other tenants who owe their rent on the first of the month and haven't paid it yet, they have the obligation to pay it (I'm the Obligee) but I don't/can't record the rent income until I receive it (cash-based accounting).

Case 1. The wife gives the friend the rent money in cash. In her quicken records, records the loan Friend appears and pays rent with cash (Hubby doesn't know source). Later, friend repays wife. Wife records loan repayment.

Case 2. The wife tells hubby she is loaning the friend the rent money. In her records, records the loan, gives cash to hubby Hubby records rent paid Later friend repays wife Wife records loan repayment.

Question: Are 1 and 2 the same transaction or different. Question: In both cases, assume friend defaults. Is hubby out rent? (How? - he has recorded it as paid.) Or is wife out loan?

dick

The transactions are identical if you treat these cases as arms-length transactions. Let's change the wording slightly to make it a true arms-length transaction. Suppose the friend gets a loan from a bank instead of the wife. The bank would record the loan as a receivable and the landlord records the receipt of cash as rent paid.

In either case if the tenant defaults on the loan, the lendor writes off the loan by reducing the loans receivable account and taking a charge to a bad debt account. The lendor can use the loss to offset other income for tax purposes.

If, for some reason, the landlord were ordered by a court to repay the bank or the wife, he loses the rent income. The lendor/wife would record that transaction as loan writeoff recovery.

If the husband and wife are comingling funds and accounts, then who cares how it's recorded? The wife can't write off a bad personal loan for tax purposes. However, the husband can refuse to accept the income, potentially lowering or eliminating profit and generating a tax loss.

Not an accountant, but used to hang around them a lot........

sb

Or you could just do nothing; ie no loan etc - and just record the rent when it is paid! What's the purpose/advantage to the loan from wife anyway? If you trust the fried so much then let him "owe" the rent until he receives his monies.

non-reimbursement