Accounting question: Prepayment penalty

[Cody L.]

I don't ask much here (and I assume the few times I do, start with this statement) but I'm curious:   For those of you that have closed out the books on a property that had a prepayment penalty, how did you do the accounting for it?

At closing of this refi, I had (making up some numbers now), $1m due to my old lender.  Of that, $950k was principle, $10k was the interest due for that month, and $40k was prepay penalty.   Normally when I do the accounting for a closing, I'll actually charge the full $1m paid to "Principle" and then wait for my annual "here is what you paid in interest" report and make an adjustment to all my 'principle' payments throughout the year and make one big modification to what was interest.  I do it that way as I record all mortage payments as going towards the principle then do a 1 time adjustment at the end of the year anyway as my software won't split principle v. interst automatically and I don't want to make someone do that for 50 loans each month against an am table.  But I'm getting off track..

For the prepayment penalty I could use a GL account I already have for "Bank fee".   Or if I wanted to make up a new one I could make a GL code called "prepayment fee".  But that aside, is this normally an expense level GL account?  If I had a prepay from the SALE it would be easy (i.e., wouldn't matter) as the cost would simply go against whatever profit I made.  However in this case I'm wondering if I have to amortize the cost over time?  Use it to increase my cost basis?  Or just write it off this year's income?

It's not an inconsequential amount.  On this refi I had ~$500k in prepayment penalties.  Yes, that's pure insanity. 

(If your reply is "Call your accountant" don't bother.  He does my taxes via the reports ran from my system which depend on how I enter things.  And plus, I don't want to ask him.  I'm more curious what others here, who are real world investors, might do)