Long term capital gains resulting from member withdrawal

Gladys on

Thanks for the explanation.

Gladys

On 02/24/17, Irina Clements<irina39@verizon.net> wrote:

1) First this is not a penalty. This is a gain. All the members including the withdrawing member have this reflect on their form k. Getting gains is good. It means your club makes $$.

2) It is to the advantage of clubs to transfer stocks with gains to withdrawing partners, making up the difference with cash. That requires

A)having it be in the partnership agreement,

B) Making time outside the meeting to prepare and then discuss inside the meeting which stocks to transfer, and

C) requiring the withdrawing member to get an acct with the same brokerage as the withdrawing member to facilitate transfer (some brokerages will transfer outside for fee...) which also must be in partnership agreement

3) go to your local betterinvesting chapter they will have volunteer walk you through transactions face to face or have bivio do in general

4) It is a nice way to prune/balance the portfolio. Sometimes having someone withdraw is convenient for transferring stock to decrease a position, or....

Be Well. Irina Sent from my iPad

On Feb 24, 2017, at 6:28 PM, Curtis Meaux <cpmeaux51@att.net> wrote:

Yes. "The Partnership" generated a taxable gain when it sold the shares and received cash. Each member must report their share on tax return.

Had "The Partnership" transferred the stock to the withdrawing member, "The Partnership" would not have had taxable gain. Taxation of gain on the stock would have been with retiring partner if / when the partner sold the stock.

BIVIO would have handled accounting for this and provided basis report for withdrawing partner to use when stock is finally liquidated.

Sent from my iPhone

Curtis Meaux, CPA, CGMA

On Feb 24, 2017, at 5:15 PM, Scott Freeman <scottbefreeman@gmail.com> wrote:

I don't think the remaining partners are paying a penalty. It sounds as though the sale created a realized taxable gain and this is distributed to each partner in proportion to their interest in the club. The proceeds from the gain for the partners that remain are reflected in the value of the units that remain and the increase in their tax basis.

Scott

On Fri, Feb 24, 2017 at 6:07 PM, <mmoriarty@crocker.com> wrote:

We withdrew a member in August 2016 and had to cash in stock to do so. All proceeds went to the withdrawing member. Now the remaining members K-1's reflect large capital gains. Is this correct? The remaining members did not gain from the sale. Please explain why the remaining members are being penalized.

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