Member responsibilities
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Member responsibilities Would appreciate any info from clubs if you have members that are more of an administrative member but does not participate in the stock studies/ investment decisions. How does your club handle this? Do you allow them to pay dues to invest? What voting rights do they have? What other responsibilities ? Any input would be appreciated. Rita A. If they are a member of your club then they must be paying dues to stay in the club. Personally, if they don't want to research stocks but would rather do administrative duties only then so be it as long as the other members are okay. I believe by law they must have all of the voting rights as anyone else. John From: Rita Allvey <rita.allvey@gmail.com> To: club_cafe@bivio.com Sent: Thursday, November 14, 2013 4:42 PM Subject: [club_cafe] Member responsibilities Would appreciate any info from clubs if you have members that are more of an administrative member but does not participate in the stock studies/ investment decisions. How does your club handle this? Do you allow them to pay dues to invest? What voting rights do they have? What other responsibilities ? Any input would be appreciated. Rita A. Rita, there are plenty of clubs with older members who either don't have a computer and internet access, or simply don't know how to use them. These people either take the minutes,provide the education or the refreshments, or read papers, books or magazines and share what they learned with the others. In other words, they contribute something of value to the rest of the group.
But I agree with John. Everyone participates to some degree. Everyone pays dues. And everyone gets a vote. Sincerely, Lynn Ostrem, President Crow River Investment Club
I've served as treasurer/tax preparer for my club since inception in 1996. About 10 years ago I moved to another state and can attend few meetings. You could say I have an administrative job and only vote when physically present. I continue to pay dues and communicate on necessary matters by email or phone. Thank goodness for bivio which helps me to continue to do my job from afar. Pat From: Rita Allvey <rita.allvey@gmail.com> To: club_cafe@bivio.com Sent: Thursday, November 14, 2013 6:42 PM Subject: [club_cafe] Member responsibilities Would appreciate any info from clubs if you have members that are more of an administrative member but does not participate in the stock studies/ investment decisions. How does your club handle this? Do you allow them to pay dues to invest? What voting rights do they have? What other responsibilities ? Any input would be appreciated. Rita A. I believe that in order to be an investment club member, you have to participate fully in the decision-making process, including buying and selling stocks. I know of one Florida club which ran into trouble with the IRS because a handful of men were managing the portfolio for the entire group. This in not allowed. Also, how does the out-of-state person who replied to your question deal with his club's state revenue department. I was under the distinct impression that all members had to be residents of the state in which the club is registered. This is one reason I have not thought seriously about moving my residency from PA to FL. Margaret, The IRS doesn't care who manages the portfolio for an investment club. It only wants to know that all income is reported and the appropriate taxes are paid. It's the SEC and/or state securities commissions who care about how an investment entity is managed.
There is no issue with regard to where the members of a club live. A club must file a state tax return in the state where it is registered (if that state requires one). Some states also require a tax return if any member is a resident of that state. Some states require that partnerships with non-resident members withhold tax on the in-state sourced income of the partnership, but investment clubs that restrict their investments to interest and common stocks (that is, no MLPs/PTPs) do not generate "source" income.
I hope this helps explain things somewhat. Ira Smilovitz On Mon, Dec 2, 2013 at 3:22 PM, Margaret F. Wentworth <pegw@comcast.net> wrote: I believe that in order to be an investment club member, you Margaret, I believe your information is wrong, on several counts. << I believe that in order to be an investment club member, you have to participate fully in the decision-making process, including buying and selling stocks.>> In order to operate as a general partnership, you have to have the ****ability**** to participate fully in the decision-making process. If you choose not to do that, you can still operate as an investment club. << I know of one Florida club which ran into trouble with the IRS because a handful of men were managing the portfolio for the entire group. This in not allowed. >> I can't believe that this club ran into trouble with the IRS. Could it have been the SEC? The SEC might have the view point that Partners' contributions and withdrawals might constitute buys and sells of securities which should be regulated by the SEC. This has always been a factor of which we should be aware, but I do believe that in the history of Investment Club accounting there have been very few cases where this regulation has been applied. I would be very interested to find out more about the Florida club in question. Could you give me a name and/or a person I could contact about this information? << I was under the distinct impression that all members had to be residents of the state in which the club is registered. This is one reason I have not thought seriously about moving my residency from PA to FL. >> That, also, is just not true. There are many clubs that have out-of-state partners. Since club income is 'investment income', it is reported in the state in which the owner resides, but that doesn't mean that every partner has to be a resident of the same state. There are a few states that require a partnership return in the state of residency in cases where partners reside in a different state from where the club is registered, but that is not the rule. To my knowledge there would be nothing wrong with your moving your residency from PA to FL, at least as far as the investment club is concerned. Rip West Saint Paul, MN Dear Rip,
You and Laurie are really on top of things.
I will check with the Florida club (some people in my condo association
have moved to Florida but maintain their holdings in a Long Island investment
club, going to one or sometimes no meetings each year). I will ask if I may send
you their information.
The problem with the IRS was that having some people pick stocks
constitutes a managed situation, which is not supposed to be how an investment
club works. We ran into this question when we had a member who had to be
"inactive" because of her health. We never marked her inactive, and every so
often we would Skype her during meetings to keep her up to date on our choices
and get her vote on record.
I am sorry if I misled your clients, but I still think having members who
do not vote is first, a disservice to the rest of the club and second,
questionable under the charter of our club.
Another issue is that Pennsylvania, as you know, requires K-1s from each of
our membership, so how does that works for out-of-state people who do not pay PA
taxes on gains but have to file a K-1? We don't have any, so not an issue at
this time.
Thanks for clearing up my muddles and I will try to get you further
information from my Florida friend who discussed this with me several years
ago.
As far as regulations go, Laurie will tell you that I am a stickler where
taxes and our books are concerned. I have read the warnings, including your own,
about having all members refiling with penalties if I make a huge mistake, so I
do not skirt anywhere near the line.
I continue to be impresssed with the level of service Bivio provides and
value your experience and advice.
Peg Wentworth
From: rip west
Sent: Monday, December 02, 2013 4:09 PM
Subject: RE: [club_cafe] Re: Member
responsibilities Margaret,
I believe your information is wrong, on several counts.
<< I believe that in order to be an investment club member, you have to participate fully in the decision-making process, including buying and selling stocks.>>
In order to operate as a general partnership, you have to have the ****ability**** to participate fully in the decision-making process. If you choose not to do that, you can still operate as an investment club.
<< I know of one Florida club which ran into trouble with the IRS because a handful of men were managing the portfolio for the entire group. This in not allowed. >>
I can't believe that this club ran into trouble with the IRS. Could it have been the SEC? The SEC might have the view point that Partners' contributions and withdrawals might constitute buys and sells of securities which should be regulated by the SEC. This has always been a factor of which we should be aware, but I do believe that in the history of Investment Club accounting there have been very few cases where this regulation has been applied. I would be very interested to find out more about the Florida club in question. Could you give me a name and/or a person I could contact about this information?
<< I was under the distinct impression that all members had to be residents of the state in which the club is registered. This is one reason I have not thought seriously about moving my residency from PA to FL. >>
That, also, is just not true. There are many clubs that have out-of-state partners. Since club income is 'investment income', it is reported in the state in which the owner resides, but that doesn't mean that every partner has to be a resident of the same state. There are a few states that require a partnership return in the state of residency in cases where partners reside in a different state from where the club is registered, but that is not the rule. To my knowledge there would be nothing wrong with your moving your residency from PA to FL, at least as far as the investment club is concerned.
Rip West Saint Paul, MN
Dear Ira,
Thanks for your response and correction. Rip also sent me a response about
the errors in my reply. Wow, you are impressive in your turn around time.
I will be interested in further study of the out-of-state member issue
since we may face that situation in the coming year.
I will check again with the Florida person who told me about the troubles
his club had with 3 men making the picks for 20. I believe he said IRS but maybe
I supplied that in my head or he might have been mistaken.
Again, I appreciate being set straight and I am sorry if I triggered any
worries for your members.
Peg Wentworth
From: ira smilovitz
Sent: Monday, December 02, 2013 3:44 PM
Subject: Re: [club_cafe] Re: Member
responsibilities Margaret,
The IRS doesn't care who manages the portfolio for an investment club. It
only wants to know that all income is reported and the appropriate taxes are
paid. It's the SEC and/or state securities commissions who care about how an
investment entity is managed.
There is no issue with regard to where the members of a club live. A club
must file a state tax return in the state where it is registered (if that state
requires one). Some states also require a tax return if any member is a resident
of that state. Some states require that partnerships with non-resident members
withhold tax on the in-state sourced income of the partnership, but investment
clubs that restrict their investments to interest and common stocks (that is, no
MLPs/PTPs) do not generate "source" income.
I hope this helps explain things somewhat.
Ira Smilovitz On Mon, Dec 2, 2013 at 3:22 PM, Margaret F. Wentworth
<pegw@comcast.net> wrote:
I believe that in order to be an investment club member, you We have a family investment club and we are scattered all
over. We have, Florida, Washington, Colorado, Alaska, and Wisconsin.
We do most of our work on line including votes, and have had no
problems.
Amy From: club_cafe@bivio.com [mailto:club_cafe@bivio.com] On Behalf Of Peg Wentworth Sent: Monday, December 02, 2013 2:37 PM To: club_cafe@bivio.com Subject: Re: [club_cafe] Re: Member responsibilities Dear Ira,
Thanks for your response and correction. Rip also sent me a response about
the errors in my reply. Wow, you are impressive in your turn around time.
I will be interested in further study of the out-of-state member issue
since we may face that situation in the coming year.
I will check again with the Florida person who told me about the troubles
his club had with 3 men making the picks for 20. I believe he said IRS but maybe
I supplied that in my head or he might have been mistaken.
Again, I appreciate being set straight and I am sorry if I triggered any
worries for your members.
Peg Wentworth
From: ira smilovitz
Sent: Monday, December 02, 2013 3:44 PM
Subject: Re: [club_cafe] Re: Member
responsibilities Margaret,
The IRS doesn't care who manages the portfolio for an investment club. It
only wants to know that all income is reported and the appropriate taxes are
paid. It's the SEC and/or state securities commissions who care about how an
investment entity is managed.
There is no issue with regard to where the members of a club live. A club
must file a state tax return in the state where it is registered (if that state
requires one). Some states also require a tax return if any member is a resident
of that state. Some states require that partnerships with non-resident members
withhold tax on the in-state sourced income of the partnership, but investment
clubs that restrict their investments to interest and common stocks (that is, no
MLPs/PTPs) do not generate "source" income.
I hope this helps explain things somewhat.
Ira Smilovitz On Mon, Dec 2, 2013 at 3:22 PM, Margaret F. Wentworth
<pegw@comcast.net> wrote:
I believe that in order to be an investment club member, you Amy,
Thanks for the info. Good to know.
Peg
From: Amy Carlson
Sent: Monday, December 02, 2013 5:45 PM
Subject: RE: [club_cafe] Re: Member
responsibilities We have a family investment club and we are scattered all
over. We have, Florida, Washington, Colorado, Alaska, and Wisconsin.
We do most of our work on line including votes, and have had no problems.
Amy
From: club_cafe@bivio.com [mailto:club_cafe@bivio.com] On Behalf Of Peg Wentworth Sent: Monday, December 02, 2013 2:37 PM To: club_cafe@bivio.com Subject: Re: [club_cafe] Re: Member responsibilities Dear Ira,
Thanks for your response and correction. Rip also sent me a response about
the errors in my reply. Wow, you are impressive in your turn around time.
I will be interested in further study of the out-of-state member issue
since we may face that situation in the coming year.
I will check again with the Florida person who told me about the troubles
his club had with 3 men making the picks for 20. I believe he said IRS but maybe
I supplied that in my head or he might have been mistaken.
Again, I appreciate being set straight and I am sorry if I triggered any
worries for your members.
Peg Wentworth
From: ira smilovitz
Sent: Monday, December 02, 2013 3:44 PM
Subject: Re: [club_cafe] Re: Member
responsibilities Margaret,
The IRS doesn't care who manages the portfolio for an investment club. It
only wants to know that all income is reported and the appropriate taxes are
paid. It's the SEC and/or state securities commissions who care about how an
investment entity is managed.
There is no issue with regard to where the members of a club live. A club
must file a state tax return in the state where it is registered (if that state
requires one). Some states also require a tax return if any member is a resident
of that state. Some states require that partnerships with non-resident members
withhold tax on the in-state sourced income of the partnership, but investment
clubs that restrict their investments to interest and common stocks (that is, no
MLPs/PTPs) do not generate "source" income.
I hope this helps explain things somewhat.
Ira Smilovitz On Mon, Dec 2, 2013 at 3:22 PM, Margaret F. Wentworth
<pegw@comcast.net> wrote:
I believe that in order to be an investment club member, you |
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