Estimating impact of charter member withdrawals
Hello Bivio Club Cafe members. I need some opinions on a difficult topic. I currently lead our SCS Investment Club (over 20 years old) and am trying to assess the impact of 1 or more ‘charter members’ who are in their 80’s and may withdraw at any time now. Three charter members hold 70% of the club’s valuation. Is it possible to simulate the impact of their withdrawals from a capital gains/losses tax standpoint on them and the rest of the members, and what are the guidelines around partial vs complete withdrawals? A response as soon as possible is requested as we have a committee meeting to discuss this topic on Friday May 15.
Thanks in advance for your support.
Norm
Norman C Blizard
SCSIC
Have you considered entering a withdrawal to see the effect and then deleting it afterwards?
Hello Bivio Club Cafe members. I need some opinions on a difficult topic. I currently lead our SCS Investment Club (over 20 years old) and am trying to assess the impact of 1 or more 'charter members' who are in their 80's and may withdraw at any time now. Three charter members hold 70% of the club's valuation. Is it possible to simulate the impact of their withdrawals from a capital gains/losses tax standpoint on them and the rest of the members, and what are the guidelines around partial vs complete withdrawals? A response as soon as possible is requested as we have a committee meeting to discuss this topic on Friday May 15.
Thanks in advance for your support.
Norm
Norman C Blizard
SCSIC
This is a problem older clubs usually have to deal with; there is no easy answer.
One thing that would help a little would be to limit the maximum percentage any single member may hold.
We limit any single member to 20% of our total holdings.
Were your club to do this it would soften the withdrawal flow a bit.
Also, you could ask these members to reduce their holdings slowly to some agreed to percentage.
Bob Shaw
On May 13, 2020, at 7:43 AM, SB via bivio.com <user*1595500001@bivio.com> wrote:Have you considered entering a withdrawal to see the effect and then deleting it afterwards?Hello Bivio Club Cafe members. I need some opinions on a difficult topic. I currently lead our SCS Investment Club (over 20 years old) and am trying to assess the impact of 1 or more 'charter members' who are in their 80's and may withdraw at any time now. Three charter members hold 70% of the club's valuation. Is it possible to simulate the impact of their withdrawals from a capital gains/losses tax standpoint on them and the rest of the members, and what are the guidelines around partial vs complete withdrawals? A response as soon as possible is requested as we have a committee meeting to discuss this topic on Friday May 15.
Thanks in advance for your support.
Norm
Norman C Blizard
SCSIC
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What is the cumulative column representing?
Dick Lewis
GMIC
From: SB via bivio.com
Sent: Wednesday, May 13, 2020 7:43 AM
Subject: Re: [club_cafe] FW: Estimating impact of charter member
withdrawals
Have you considered
entering a withdrawal to see the effect and then deleting it afterwards?
Hello Bivio Club Cafe members. I need some opinions on a difficult topic. I currently lead our SCS Investment Club (over 20 years old) and am trying to assess the impact of 1 or more 'charter members' who are in their 80's and may withdraw at any time now. Three charter members hold 70% of the club's valuation. Is it possible to simulate the impact of their withdrawals from a capital gains/losses tax standpoint on them and the rest of the members, and what are the guidelines around partial vs complete withdrawals? A response as soon as possible is requested as we have a committee meeting to discuss this topic on Friday May 15.
Thanks in advance for your support.
Norm
Norman C Blizard
SCSIC
My club was a 5 person club for almost 10 years. We were all around 20% ownership. Three of the partners withdrew at the same time in the spring of 2016 leaving just me and one other. We withdrew them using unrealized gains. We lost some stocks we would have liked to have kept but when 60% of the club goes out the window you are going to lose stocks we wanted to keep.
Kevin Gillogly
Happy Destiny Investment Club
Silver spring, MD
What is the cumulative column representing?Dick LewisGMICFrom: SB via bivio.comSent: Wednesday, May 13, 2020 7:43 AMSubject: Re: [club_cafe] FW: Estimating impact of charter member withdrawalsHave you considered entering a withdrawal to see the effect and then deleting it afterwards?Hello Bivio Club Cafe members. I need some opinions on a difficult topic. I currently lead our SCS Investment Club (over 20 years old) and am trying to assess the impact of 1 or more 'charter members' who are in their 80's and may withdraw at any time now. Three charter members hold 70% of the club's valuation. Is it possible to simulate the impact of their withdrawals from a capital gains/losses tax standpoint on them and the rest of the members, and what are the guidelines around partial vs complete withdrawals? A response as soon as possible is requested as we have a committee meeting to discuss this topic on Friday May 15.
Thanks in advance for your support.
Norm
Norman C Blizard
SCSIC
You can calculate the CG impact on a withdrawing member by comparing their tax basis to their market value on the Member Status Report. If the difference (MV - TB) is positive, they have a capital gain, if negative, a capital loss.
The withdrawal itself has no impact on the remaining members. What can affect the remaining members is what actions you take to fund the withdrawal. The best option is to transfer highly appreciated stock to the withdrawing member. This locks in each remaining member's share of the unrealized capital gain and defers the tax recognition of that gain until the date that member withdraws from the club. Another useful tactic is to review the club's portfolio and sell any losers that don't meet the club's investment strategy to raise cash for the withdrawal. This provides a current year capital loss for all of the members. What you don't want to do is sell gains or transfer shares at a loss.
Ira Smilovitz
Hello Bivio Club Cafe members. I need some opinions on a difficult topic. I currently lead our SCS Investment Club (over 20 years old) and am trying to assess the impact of 1 or more 'charter members' who are in their 80's and may withdraw at any time now. Three charter members hold 70% of the club's valuation. Is it possible to simulate the impact of their withdrawals from a capital gains/losses tax standpoint on them and the rest of the members, and what are the guidelines around partial vs complete withdrawals? A response as soon as possible is requested as we have a committee meeting to discuss this topic on Friday May 15.
Thanks in advance for your support.
Norm
Norman C Blizard
SCSIC
A couple of observations:
* there are many withdrawal options, each of which plays out
differently for the club as well as for the member making
a withdrawal
* bivio help has **excellent** information about all of this
in the withdrawals section; there's a lot to study and
understand and it's very worth the time
https://www.bivio.com/site-help/bp/StartPage
* our club has worked hard over the years to find solutions
that are advantageous for everyone and the bivio
information has been invaluable
* speaking as one of the longer - term members of my club, I
hope you are including representation from your senior
members in this discussion
* bearing in mind that everyone's situation is different,
and this may not be an option for your members, I add my
own experience. I recently took a partial withdrawal of
highly appreciated stock from our club in order to reduce
my share of the club relative to others. I did not sell
these shares, but transferred them to charity. This
resulted in no capital gains for the club or for me.
* there are many withdrawal options, each of which plays out
differently for the club as well as for the member making
a withdrawal
* bivio help has **excellent** information about all of this
in the withdrawals section; there's a lot to study and
understand and it's very worth the time
https://www.bivio.com/site-help/bp/StartPage
* our club has worked hard over the years to find solutions
that are advantageous for everyone and the bivio
information has been invaluable
* speaking as one of the longer - term members of my club, I
hope you are including representation from your senior
members in this discussion
* bearing in mind that everyone's situation is different,
and this may not be an option for your members, I add my
own experience. I recently took a partial withdrawal of
highly appreciated stock from our club in order to reduce
my share of the club relative to others. I did not sell
these shares, but transferred them to charity. This
resulted in no capital gains for the club or for me.
|
You can calculate the CG impact on a withdrawing member by comparing their tax basis to their market value on the Member Status Report. If the difference (MV - TB) is positive, they have a capital gain, if negative, a capital loss.The withdrawal itself has no impact on the remaining members. What can affect the remaining members is what actions you take to fund the withdrawal. The best option is to transfer highly appreciated stock to the withdrawing member. This locks in each remaining member's share of the unrealized capital gain and defers the tax recognition of that gain until the date that member withdraws from the club. Another useful tactic is to review the club's portfolio and sell any losers that don't meet the club's investment strategy to raise cash for the withdrawal. This provides a current year capital loss for all of the members. What you don't want to do is sell gains or transfer shares at a loss.Ira SmilovitzHello Bivio Club Cafe members. I need some opinions on a difficult topic. I currently lead our SCS Investment Club (over 20 years old) and am trying to assess the impact of 1 or more 'charter members' who are in their 80's and may withdraw at any time now. Three charter members hold 70% of the club's valuation. Is it possible to simulate the impact of their withdrawals from a capital gains/losses tax standpoint on them and the rest of the members, and what are the guidelines around partial vs complete withdrawals? A response as soon as possible is requested as we have a committee meeting to discuss this topic on Friday May 15.
Thanks in advance for your support.
Norm
Norman C Blizard
SCSIC