Hi Ira,
That's it exactly!! Our group has been doing it that way since we've been
with Bivio. Your explaination was perfect! Rip West also gave a great
explaination of this in the old Trez Talk in Bivio.

Brian






----Original Message Follows----
From: IraS1@aol.com
Reply-To: "The Club Cafe" <club_cafe@bivio.com>
To: club_cafe@bivio.com
Subject: Re: club_cafe: Re: A wash expense??
Date: Thu, 24 Oct 2002 10:26:10 EDT

Lynn,

I did understand your question, and I gave you the correct responses. I just
failed to explain the reasoning.

From the standpoint of your club's members, the annual $14 NAIC fee is a
potential tax deduction (investment expense - miscellaneous itemized
deductions). What you think you are trying to accomplish is to move the
money
through the club without affecting anything within the club and leaving it
to
the members to keep track (on their own) that the $14 is a deductible
expense.

What I am proposing is to have the "club" keep track of all the potential
tax
deductions related to club membership and report them in a manner which will
make the members' tax record keeping and preparation less painful.

If you record all the $14 payments as fees (one of my suggestions) you are
*temporarily* increasing the paid-in and tax basis columns by $14 for each
member who has paid the fee. The timely payers will see their paid-in and
tax
basis columns increase first, the late payers will see theirs increase
later.

You then record the check from the club to NAIC as (possibly) two separate
transactions. (1) The sum of the $14 fees is entered as a deductible club
expense equally allocated to all partners. When you run your distribution of
earnings report at the end of the year each member will see their tax basis
column decrease by $14 to account for the fee. The $14 NAIC payment will
appear on the Sch. K-1 on lines 10 and 14(b)2 which will transfer to Sch. A
on the member's 1040.

(2) If your club allocates the $40 Club fee on the basis of % ownership in
the club, this will have to be entered separately from the sum of the $14
individual fees. If you allocate this fee equally across all members, just
post the full amount of the check to NAIC in step (1) above.

The net result is that your club's records will show that each member
contributed $14 more (each year) in the paid in column. This will lower your
return calculations slightly, but *correctly*. Again, if we view this from
the perspective of the individual member, his/her total investment is the
sum
of the money given to the club and the money given to NAIC. Return
calculations *should* be based on this total, so why not keep the accurate
totals within the club.

Hope this explanation helps some. If not, ask again and I'll try once more.

Ira Smilovitz


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