club_cafe: Re: 1099 question (unrecaptured sec. 1250 gain)

iras1 on

I don't work for bivio so I certainly can't say if they will fix it soon or not. In fact, I don't think there's anything that needs fixing. The problem isn't with bivio, it's with the complex interaction of the tax laws and REITs and partnerships. The partnership has to allocate income to its partners each time an income item occurs. Unfortunately, cash distributions from REITs are of "unknown" character until the REIT completes its year-end accounting. So, we enter them as dividends and wait for the 1099-DIV to tell us what really happened. Then we have to make adjustments. It's certainly *possible* for bivio to modify the tax program to make these adjustments a little more transparent, but only they know whether the necessary effort can be justified or whether there are more important issues to address.

My suggestion would be to not invest in REITs within an investment club. I would also suggest not investing in MLPs or PTPs for similar reasons... the tax reporting is just too complicated for the revenue received.

Sorry if I didn't provide the answers you were looking for.

Ira Smilovitz

In a message dated 02/04/03 10:22:49 PM Eastern Standard Time, minesman@bivio.com writes:

Ira - is this something Bivio will be fixing anytime soon?
My club had the same problem last year and I posted a
similar question.

IraS1@aol.com wrote:
>None of the "below". Entries from box 2d of Form 1099-DIV are already included in box 2a. The amount reported in box 2d should be entered on line 25 of Schedule K/K-1. I believe you will have to do this on your own as I do not think bivio's tax preparation program will handle it.
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>Note: If you have an entry in box 2c (5year qualified gain), you will have to subtract that amount from the amount in box 2a to get the correct tax treatment. This may create a situation where the box 2a number is negative.
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>In a nutshell, here's what you may have to do. First, review your accounting entries for dividends during the year from the REIT. If you've been entering them as "dividends" all along, you will have to reclassify some of the dividends as LTCG, 5yr CG, and return of principal. The sum of boxes 1, 2a, and 3 on Form 1099-DIV should equal the total of cash dividends recorded in bivio for the year. To adjust your bivio account to match the 1099-DIV, you will have to subtract the box 2c amount from box 2a to get the LTCG (other than 5yr CG) component. Reclassify this amount from "dividends" to "long term capital gains". Reclassify the box 2c amount from "dividends" to "qualified five year capital gain". When you prepare your tax return using bivio, the program will combine the "long term capital gain" and "qualified 5 year capital gain" and put them on line 4e(1) (along with any other long term capital gains from direct stock sales) and will place the qualified 5 year capital gain on line 4e(3) (again, along with any other qualified 5 year capital gains from direct stock sales).
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>I realize this is long and potentially confusing, so don't hesitate to ask again if you don't understand something.
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>Ira Smilovitz
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>In a message dated 02/04/03 1:08:22 PM Eastern Standard Time, dconlon@bivio.com writes:
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>on line #2 (Capital Gain Distribution) of my 1099 I have
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>listed an "unrecaptured sec. 1250 gain, how should that be
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>entered into bivio? Bivio choices are:
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>1. Dividend
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>2. Interest
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>3. Short term Capital gain
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>4. Medium Term Capital Gain
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>5. Long Term Capital gain
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>6. Qualified five year capital gain
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>7. Return of Capital
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>8. Royalty Income
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>Please help

Rob Nagler on

IraS1@aol.com writes:
> It's certainly *possible* for bivio to modify the tax program to
> make these adjustments a little more transparent, but only they know
> whether the necessary effort can be justified or whether there are
> more important issues to address.
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> My suggestion would be to not invest in REITs within an investment
> club. I would also suggest not investing in MLPs or PTPs for similar
> reasons... the tax reporting is just too complicated for the revenue
> received.

I agree with Ira. Just like we recommend closing your bank account,
same/any day payments, no special member fees, and only using an
AccountSync broker, we think REITs, DRPs, and a number of other
investment vehicles that cost you more in *time* than they bring in
value to the club. Investment clubs are complex enough to run without
these added headaches.

Rob

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