club_cafe: Club Merger

iras1 on

In a message dated 7/27/2004 12:41:04 PM Eastern Daylight Time, nagler@bivio.biz writes:

J. Michelle Sudduth writes:
> What is needed to merger two seperate clubs? Our club has
> been presented with an opporunity to merge, however, we
> are not sure what is required/needed?

It's not something we recommend, because the tax implications are
complex, and it's just as easy to disband one club, and have its
members join the other.

When you disband the one club, you can avoid immediate tax
consequences by transferring the stock its members. Here's an article
about the best way to disband a club:

http://www.bivio.com/trez_talk/mail-msg?t=16570100003

Cheers,
Rob

While Rob is correct about transferring stock to members to avoid immediate tax consequences, you should be aware that if your intention is to immediately join another club, you cannot use the stock to purchase units without encountering the same problems as if the two clubs had merged directly.

The only "easy to track" method to fund an investment club is with cash. Using any other form of property creates significant tax complications.

Ira Smilovitz

Rip West on

I would just add that it's not the tax consequences or implications that are the problem, it's the accounting requirements. You can merge two clubs [or contribute appreciated stock to a club] without immediate tax consequence. However, later disposition of any stock so contributed with a built-in gain must be accounted for. None of the existing investment club accounting programs can handle the accounting involved. IMO, it does not make sense to expend the effort to produce this feature, but there always do seem to be one or two requests a year.

Rip West
Saint Paul, MN

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