0 price for total loss of shares

[Steve Blackwell]

On Wed, 15 May 2013 10:43:00 -0700
Stefano M Canta <cantastefano at gmail.com> wrote:

> Here is my situation.
> I have a Lending Club account where I can borrow money to somebody by
> issuing shares that are worh 25$ each. Each share is paid back in a
> certain amount of time, with interest, and reinvested in new shares.
> Let's say I have 100 shares, and in a year I receive back 50$ in
> capital and 50$ in interest, then the total shares I have are 102
> (the original capital reinvested + 2 shares worth of interest).
> 
> Now it happens that some people can't repay their loans. Let's say a
> person has paid back 12.5$ and now defaults. I lose half a share. So
> I record a loss of 0.5 shares (12.5$).
> 
> That's when the advanced portfolio can't compute a basis if I have
> many of these losses.
> 
> Stefano
> 

OK. I would look at this from a different angle.

When someone does not replay the loan, it's not that the value of the
"share" has changed, it's that you have lost the "share". I think you
probably need a write-off expense account to handle the lost asset.

When someone does pay you back with interest, transfer the original
 number of shares back to you main share account and use an income
 account for the interest and then buy more shares with the interest.

HTH.
Steve