When we started our club in 2000, according to the research
I did, it stated that you only had to complete the 1065 form
once (the first year). If your investment club makes this
decision, it must send a letter to the IRS stating this
choice covering the lifetime of the partnership. After that,
just individual K-1's need to be filed.

Just wanted to make sure this is still correct.

Thanks,
Joe

I've never heard of such an option. Can you provide a cite
that supports this position?

Ira Smilovitz
Lakshmi Investments, LLC

Joe Pulizzi wrote:
> When we started our club in 2000, according to the research
> I did, it stated that you only had to complete the 1065 form
> once (the first year). If your investment club makes this
> decision, it must send a letter to the IRS stating this
> choice covering the lifetime of the partnership. After that,
> just individual K-1's need to be filed.
>
> Just wanted to make sure this is still correct.
>
> Thanks,
> Joe

Section 761(a) allows an election out of Subchapter K for
certain partnerships, including ones used solely for
investment purposes. However, this election is only
available for organizations that can compute each partner's
income without computing a partnership-level income, which,
in the case of an investment club, would be pretty rare. In
order for that to work (as i understand it, using a
conservative approach) the partnership could never sell
property unless it was already divided into interests equal
to each partner's ownership, otherwise the moment the
partnership sold property (ie a stock position), you would
have partnership-level income which had to then be
distributed.

I've never heard of an investment club making the 761(a)
election. I have seen it in some very small investment
partnerships, but even in such instances its rare.

As i understand the code/regs, the prevailing factor in
whether you can make the election is simply the ability to
compute income on a partner level. that would also mean not
using the NAV unit method, which distributes income after
being computed for the entire partnership.

Ira Smilovitz wrote:
> I've never heard of such an option. Can you provide a cite
> that supports this position?
>
> Ira Smilovitz
> Lakshmi Investments, LLC
>
> Joe Pulizzi wrote:
> > When we started our club in 2000, according to the research
> > I did, it stated that you only had to complete the 1065 form
> > once (the first year). If your investment club makes this
> > decision, it must send a letter to the IRS stating this
> > choice covering the lifetime of the partnership. After that,
> > just individual K-1's need to be filed.
> >
> > Just wanted to make sure this is still correct.
> >
> > Thanks,
> > Joe

FYI...this is what I found in the book (2000), "The Complete
Idiot's Guide to Starting an Investment Club." on page 151
under the heading "Filing a Return for your Club":

"After the first year, however, your club can decide whether
or not to file a tax return. The only catch is that you need
to inform the IRS if you choose not to file.

If you choose not to file tax returns after your first year,
you need to stipulate that in your first-year tax return.
Once you do, that's it. If you don't tell the IRS on your
first-year return, however, that you won't be filing any
more returns, you're obligated to file."

The authors go on to basically recommend to clubs that they
do not file. Any thoughts to this???

Thanks,
Joe

John Medio wrote:
> Section 761(a) allows an election out of Subchapter K for
> certain partnerships, including ones used solely for
> investment purposes. However, this election is only
> available for organizations that can compute each partner's
> income without computing a partnership-level income, which,
> in the case of an investment club, would be pretty rare. In
> order for that to work (as i understand it, using a
> conservative approach) the partnership could never sell
> property unless it was already divided into interests equal
> to each partner's ownership, otherwise the moment the
> partnership sold property (ie a stock position), you would
> have partnership-level income which had to then be
> distributed.
>
> I've never heard of an investment club making the 761(a)
> election. I have seen it in some very small investment
> partnerships, but even in such instances its rare.
>
> As i understand the code/regs, the prevailing factor in
> whether you can make the election is simply the ability to
> compute income on a partner level. that would also mean not
> using the NAV unit method, which distributes income after
> being computed for the entire partnership.
>
> Ira Smilovitz wrote:
> > I've never heard of such an option. Can you provide a cite
> > that supports this position?
> >
> > Ira Smilovitz
> > Lakshmi Investments, LLC
> >
> > Joe Pulizzi wrote:
> > > When we started our club in 2000, according to the research
> > > I did, it stated that you only had to complete the 1065 form
> > > once (the first year). If your investment club makes this
> > > decision, it must send a letter to the IRS stating this
> > > choice covering the lifetime of the partnership. After that,
> > > just individual K-1's need to be filed.
> > >
> > > Just wanted to make sure this is still correct.
> > >
> > > Thanks,
> > > Joe

All I can add is that NAIC, the largest "umbrella
organization" for investment clubs, no longer recommends
that clubs make the 761 election. They recommend filing
partnership returns annually.

Ira Smilovitz

Joe Pulizzi wrote:
> FYI...this is what I found in the book (2000), "The Complete
> Idiot's Guide to Starting an Investment Club." on page 151
> under the heading "Filing a Return for your Club":
>
> "After the first year, however, your club can decide whether
> or not to file a tax return. The only catch is that you need
> to inform the IRS if you choose not to file.
>
> If you choose not to file tax returns after your first year,
> you need to stipulate that in your first-year tax return.
> Once you do, that's it. If you don't tell the IRS on your
> first-year return, however, that you won't be filing any
> more returns, you're obligated to file."
>
> The authors go on to basically recommend to clubs that they
> do not file. Any thoughts to this???
>
> Thanks,
> Joe
>
> John Medio wrote:
> > Section 761(a) allows an election out of Subchapter K for
> > certain partnerships, including ones used solely for
> > investment purposes. However, this election is only
> > available for organizations that can compute each partner's
> > income without computing a partnership-level income, which,
> > in the case of an investment club, would be pretty rare. In
> > order for that to work (as i understand it, using a
> > conservative approach) the partnership could never sell
> > property unless it was already divided into interests equal
> > to each partner's ownership, otherwise the moment the
> > partnership sold property (ie a stock position), you would
> > have partnership-level income which had to then be
> > distributed.
> >
> > I've never heard of an investment club making the 761(a)
> > election. I have seen it in some very small investment
> > partnerships, but even in such instances its rare.
> >
> > As i understand the code/regs, the prevailing factor in
> > whether you can make the election is simply the ability to
> > compute income on a partner level. that would also mean not
> > using the NAV unit method, which distributes income after
> > being computed for the entire partnership.
> >
> > Ira Smilovitz wrote:
> > > I've never heard of such an option. Can you provide a cite
> > > that supports this position?
> > >
> > > Ira Smilovitz
> > > Lakshmi Investments, LLC
> > >
> > > Joe Pulizzi wrote:
> > > > When we started our club in 2000, according to the research
> > > > I did, it stated that you only had to complete the 1065 form
> > > > once (the first year). If your investment club makes this
> > > > decision, it must send a letter to the IRS stating this
> > > > choice covering the lifetime of the partnership. After that,
> > > > just individual K-1's need to be filed.
> > > >
> > > > Just wanted to make sure this is still correct.
> > > >
> > > > Thanks,
> > > > Joe

In short, i'd be wary of that book. In my opinion, its
plain wrong -- it's not nearly that simple. I would file
for your club, without hesitation. If you havent filed in
the passed, i'm not sure i would worry about it, but going
forward, i definitely would file.

Joe Pulizzi wrote:
> FYI...this is what I found in the book (2000), "The Complete
> Idiot's Guide to Starting an Investment Club." on page 151
> under the heading "Filing a Return for your Club":
>
> "After the first year, however, your club can decide whether
> or not to file a tax return. The only catch is that you need
> to inform the IRS if you choose not to file.
>
> If you choose not to file tax returns after your first year,
> you need to stipulate that in your first-year tax return.
> Once you do, that's it. If you don't tell the IRS on your
> first-year return, however, that you won't be filing any
> more returns, you're obligated to file."
>
> The authors go on to basically recommend to clubs that they
> do not file. Any thoughts to this???
>
> Thanks,
> Joe
>
> John Medio wrote:
> > Section 761(a) allows an election out of Subchapter K for
> > certain partnerships, including ones used solely for
> > investment purposes. However, this election is only
> > available for organizations that can compute each partner's
> > income without computing a partnership-level income, which,
> > in the case of an investment club, would be pretty rare. In
> > order for that to work (as i understand it, using a
> > conservative approach) the partnership could never sell
> > property unless it was already divided into interests equal
> > to each partner's ownership, otherwise the moment the
> > partnership sold property (ie a stock position), you would
> > have partnership-level income which had to then be
> > distributed.
> >
> > I've never heard of an investment club making the 761(a)
> > election. I have seen it in some very small investment
> > partnerships, but even in such instances its rare.
> >
> > As i understand the code/regs, the prevailing factor in
> > whether you can make the election is simply the ability to
> > compute income on a partner level. that would also mean not
> > using the NAV unit method, which distributes income after
> > being computed for the entire partnership.
> >
> > Ira Smilovitz wrote:
> > > I've never heard of such an option. Can you provide a cite
> > > that supports this position?
> > >
> > > Ira Smilovitz
> > > Lakshmi Investments, LLC
> > >
> > > Joe Pulizzi wrote:
> > > > When we started our club in 2000, according to the research
> > > > I did, it stated that you only had to complete the 1065 form
> > > > once (the first year). If your investment club makes this
> > > > decision, it must send a letter to the IRS stating this
> > > > choice covering the lifetime of the partnership. After that,
> > > > just individual K-1's need to be filed.
> > > >
> > > > Just wanted to make sure this is still correct.
> > > >
> > > > Thanks,
> > > > Joe

2 years ago in a previous investment club I was doing the
taxes and in Publication 550 there was a statement regarding
investment clubs opting out of annual returns, and simply
having the individual partners attaching a K-1 with their
tax return. In this year's Pub. 550 there is no such
statement under the investment club section so I would
assume that all clubs that had not previously requested an
exclusion must now file a return each and every year. No
biggie though, most clubs returns would only take 20-30
minutes to compile at the most.

Chris
cwashburn@yahoo.com


John Medio wrote:
> In short, i'd be wary of that book. In my opinion, its
> plain wrong -- it's not nearly that simple. I would file
> for your club, without hesitation. If you havent filed in
> the passed, i'm not sure i would worry about it, but going
> forward, i definitely would file.
>
> Joe Pulizzi wrote:
> > FYI...this is what I found in the book (2000), "The Complete
> > Idiot's Guide to Starting an Investment Club." on page 151
> > under the heading "Filing a Return for your Club":
> >
> > "After the first year, however, your club can decide whether
> > or not to file a tax return. The only catch is that you need
> > to inform the IRS if you choose not to file.
> >
> > If you choose not to file tax returns after your first year,
> > you need to stipulate that in your first-year tax return.
> > Once you do, that's it. If you don't tell the IRS on your
> > first-year return, however, that you won't be filing any
> > more returns, you're obligated to file."
> >
> > The authors go on to basically recommend to clubs that they
> > do not file. Any thoughts to this???
> >
> > Thanks,
> > Joe
> >
> > John Medio wrote:
> > > Section 761(a) allows an election out of Subchapter K for
> > > certain partnerships, including ones used solely for
> > > investment purposes. However, this election is only
> > > available for organizations that can compute each partner's
> > > income without computing a partnership-level income, which,
> > > in the case of an investment club, would be pretty rare. In
> > > order for that to work (as i understand it, using a
> > > conservative approach) the partnership could never sell
> > > property unless it was already divided into interests equal
> > > to each partner's ownership, otherwise the moment the
> > > partnership sold property (ie a stock position), you would
> > > have partnership-level income which had to then be
> > > distributed.
> > >
> > > I've never heard of an investment club making the 761(a)
> > > election. I have seen it in some very small investment
> > > partnerships, but even in such instances its rare.
> > >
> > > As i understand the code/regs, the prevailing factor in
> > > whether you can make the election is simply the ability to
> > > compute income on a partner level. that would also mean not
> > > using the NAV unit method, which distributes income after
> > > being computed for the entire partnership.
> > >
> > > Ira Smilovitz wrote:
> > > > I've never heard of such an option. Can you provide a cite
> > > > that supports this position?
> > > >
> > > > Ira Smilovitz
> > > > Lakshmi Investments, LLC
> > > >
> > > > Joe Pulizzi wrote:
> > > > > When we started our club in 2000, according to the research
> > > > > I did, it stated that you only had to complete the 1065 form
> > > > > once (the first year). If your investment club makes this
> > > > > decision, it must send a letter to the IRS stating this
> > > > > choice covering the lifetime of the partnership. After that,
> > > > > just individual K-1's need to be filed.
> > > > >
> > > > > Just wanted to make sure this is still correct.
> > > > >
> > > > > Thanks,
> > > > > Joe

I've heard that years ago, the NAIC was telling clubs that
they could use the 761 election w'o question and that might
be where this line of thinking came from.

Chris Washburn wrote:
> 2 years ago in a previous investment club I was doing the
> taxes and in Publication 550 there was a statement regarding
> investment clubs opting out of annual returns, and simply
> having the individual partners attaching a K-1 with their
> tax return. In this year's Pub. 550 there is no such
> statement under the investment club section so I would
> assume that all clubs that had not previously requested an
> exclusion must now file a return each and every year. No
> biggie though, most clubs returns would only take 20-30
> minutes to compile at the most.
>
> Chris
> cwashburn@yahoo.com
>
>
> John Medio wrote:
> > In short, i'd be wary of that book. In my opinion, its
> > plain wrong -- it's not nearly that simple. I would file
> > for your club, without hesitation. If you havent filed in
> > the passed, i'm not sure i would worry about it, but going
> > forward, i definitely would file.
> >
> > Joe Pulizzi wrote:
> > > FYI...this is what I found in the book (2000), "The Complete
> > > Idiot's Guide to Starting an Investment Club." on page 151
> > > under the heading "Filing a Return for your Club":
> > >
> > > "After the first year, however, your club can decide whether
> > > or not to file a tax return. The only catch is that you need
> > > to inform the IRS if you choose not to file.
> > >
> > > If you choose not to file tax returns after your first year,
> > > you need to stipulate that in your first-year tax return.
> > > Once you do, that's it. If you don't tell the IRS on your
> > > first-year return, however, that you won't be filing any
> > > more returns, you're obligated to file."
> > >
> > > The authors go on to basically recommend to clubs that they
> > > do not file. Any thoughts to this???
> > >
> > > Thanks,
> > > Joe
> > >
> > > John Medio wrote:
> > > > Section 761(a) allows an election out of Subchapter K for
> > > > certain partnerships, including ones used solely for
> > > > investment purposes. However, this election is only
> > > > available for organizations that can compute each partner's
> > > > income without computing a partnership-level income, which,
> > > > in the case of an investment club, would be pretty rare. In
> > > > order for that to work (as i understand it, using a
> > > > conservative approach) the partnership could never sell
> > > > property unless it was already divided into interests equal
> > > > to each partner's ownership, otherwise the moment the
> > > > partnership sold property (ie a stock position), you would
> > > > have partnership-level income which had to then be
> > > > distributed.
> > > >
> > > > I've never heard of an investment club making the 761(a)
> > > > election. I have seen it in some very small investment
> > > > partnerships, but even in such instances its rare.
> > > >
> > > > As i understand the code/regs, the prevailing factor in
> > > > whether you can make the election is simply the ability to
> > > > compute income on a partner level. that would also mean not
> > > > using the NAV unit method, which distributes income after
> > > > being computed for the entire partnership.
> > > >
> > > > Ira Smilovitz wrote:
> > > > > I've never heard of such an option. Can you provide a cite
> > > > > that supports this position?
> > > > >
> > > > > Ira Smilovitz
> > > > > Lakshmi Investments, LLC
> > > > >
> > > > > Joe Pulizzi wrote:
> > > > > > When we started our club in 2000, according to the research
> > > > > > I did, it stated that you only had to complete the 1065 form
> > > > > > once (the first year). If your investment club makes this
> > > > > > decision, it must send a letter to the IRS stating this
> > > > > > choice covering the lifetime of the partnership. After that,
> > > > > > just individual K-1's need to be filed.
> > > > > >
> > > > > > Just wanted to make sure this is still correct.
> > > > > >
> > > > > > Thanks,
> > > > > > Joe

This IRS link may shed a little more light on the subject.
Unfortunately, it doesn't say what the pre-1997 rules are.
However, I suspect they refer to the option to elect out of
filing a 1065 every year.

http://www.irs.gov/formspubs/display/0,,i1%3D50%26genericId%3D12257,00.html

John Medio wrote:
> I've heard that years ago, the NAIC was telling clubs that
> they could use the 761 election w'o question and that might
> be where this line of thinking came from.
>
> Chris Washburn wrote:
> > 2 years ago in a previous investment club I was doing the
> > taxes and in Publication 550 there was a statement regarding
> > investment clubs opting out of annual returns, and simply
> > having the individual partners attaching a K-1 with their
> > tax return. In this year's Pub. 550 there is no such
> > statement under the investment club section so I would
> > assume that all clubs that had not previously requested an
> > exclusion must now file a return each and every year. No
> > biggie though, most clubs returns would only take 20-30
> > minutes to compile at the most.
> >
> > Chris
> > cwashburn@yahoo.com
> >
> >
> > John Medio wrote:
> > > In short, i'd be wary of that book. In my opinion, its
> > > plain wrong -- it's not nearly that simple. I would file
> > > for your club, without hesitation. If you havent filed in
> > > the passed, i'm not sure i would worry about it, but going
> > > forward, i definitely would file.
> > >
> > > Joe Pulizzi wrote:
> > > > FYI...this is what I found in the book (2000), "The Complete
> > > > Idiot's Guide to Starting an Investment Club." on page 151
> > > > under the heading "Filing a Return for your Club":
> > > >
> > > > "After the first year, however, your club can decide whether
> > > > or not to file a tax return. The only catch is that you need
> > > > to inform the IRS if you choose not to file.
> > > >
> > > > If you choose not to file tax returns after your first year,
> > > > you need to stipulate that in your first-year tax return.
> > > > Once you do, that's it. If you don't tell the IRS on your
> > > > first-year return, however, that you won't be filing any
> > > > more returns, you're obligated to file."
> > > >
> > > > The authors go on to basically recommend to clubs that they
> > > > do not file. Any thoughts to this???
> > > >
> > > > Thanks,
> > > > Joe
> > > >
> > > > John Medio wrote:
> > > > > Section 761(a) allows an election out of Subchapter K for
> > > > > certain partnerships, including ones used solely for
> > > > > investment purposes. However, this election is only
> > > > > available for organizations that can compute each partner's
> > > > > income without computing a partnership-level income, which,
> > > > > in the case of an investment club, would be pretty rare. In
> > > > > order for that to work (as i understand it, using a
> > > > > conservative approach) the partnership could never sell
> > > > > property unless it was already divided into interests equal
> > > > > to each partner's ownership, otherwise the moment the
> > > > > partnership sold property (ie a stock position), you would
> > > > > have partnership-level income which had to then be
> > > > > distributed.
> > > > >
> > > > > I've never heard of an investment club making the 761(a)
> > > > > election. I have seen it in some very small investment
> > > > > partnerships, but even in such instances its rare.
> > > > >
> > > > > As i understand the code/regs, the prevailing factor in
> > > > > whether you can make the election is simply the ability to
> > > > > compute income on a partner level. that would also mean not
> > > > > using the NAV unit method, which distributes income after
> > > > > being computed for the entire partnership.
> > > > >
> > > > > Ira Smilovitz wrote:
> > > > > > I've never heard of such an option. Can you provide a cite
> > > > > > that supports this position?
> > > > > >
> > > > > > Ira Smilovitz
> > > > > > Lakshmi Investments, LLC
> > > > > >
> > > > > > Joe Pulizzi wrote:
> > > > > > > When we started our club in 2000, according to the research
> > > > > > > I did, it stated that you only had to complete the 1065 form
> > > > > > > once (the first year). If your investment club makes this
> > > > > > > decision, it must send a letter to the IRS stating this
> > > > > > > choice covering the lifetime of the partnership. After that,
> > > > > > > just individual K-1's need to be filed.
> > > > > > >
> > > > > > > Just wanted to make sure this is still correct.
> > > > > > >
> > > > > > > Thanks,
> > > > > > > Joe