Ann,

 

You are mixing apples and oranges. All allocations of income and expense are done on the basis of the percentage ownership on the day the income/expense is recognized. Additionally, there are two independent sources of "income" for a withdrawing partner. First is the income allocated to that partner while still a member of the club. This is reported on Schedule K-1. Since your club sold a stock at a gain during this partner's membership period, he shares in the gain. The second source of income is the gain or loss that the partner realizes when he leaves the club. In this case, your member received less cash than his adjusted cost basis, therefore he will report a capital loss on Schedule D.

 

The ownership gain (or loss in this case) is the sum total of all of his capital contributions and allocated income/expense over all the years of his membership subtracted from the value received when he withdrew. The K-1 only represents the current year contribution to his cost basis.

 

If this isn't clear, please ask again.

 

Ira Smilovitz

 

In a message dated 3/5/2004 8:14:23 PM Eastern Standard Time, anns97@bivio.com writes: