club_cafe: Re: Closing Club

iras1 on

You do NOT want to do what you have proposed below. If you make ANY distribution to a member in 2005, you will have to file a complete set of 2005 tax returns and K-1s. There is no minimum amount of income which a partnership must earn before it has to report. It has to report if there is any income or distribution to the partners. You cannot make a distribution in 2005 (even on January 1) and consider it to be made in 2004.

What you CAN do is the following. Decide this year how much money you need to reserve to cover your expenses for copying and mailing your tax return(s) and dissolving your club (if your state requires a fee to terminate the partnership). Record the expense in 2004 payable to the treasurer. Either allow the treasurer to keep any excess, or decide beforehand to contribute the excess to a charity. If you are careful, the excess shouldn't be more than a few dollars. Then withdraw the members fully and dissolve the club. Complete the payouts in 2004. Remind your members that they need to cash their checks ASAP.

Ira Smilovitz

In a message dated 9/18/2004 11:20:25 AM Eastern Daylight Time, suejones@bivio.com writes:

I'm in the same position - our club is going to close this
year. You can pay your members most of their final
distribution before the end of the year (95% or so), holding
back just a little for unexpected expenses. You can also
give them a report showing their tax allocatons. Just warn
them that the numbers aren't the ones they should use on
their tax returns. They will still have to wait for their
final K-1. In order to do an accurate tax return, I suggest
you wait until you get your 1099's and other final
statements in January. Bivio has an option to sign up for a
short period (three months, I think) for a reduced fee that
includes 2004 tax preparation. Sign up for that, and make
sure you pay that fee before 12/31/04 so the expense shows
up on your 2004 return. When you write your final checks in
January after the tax return is done, you may have just a
tiny bit of interest income in January, but it shouldn't be
enough to require reporting in 2005. Doing it this way
delays final payment a bit, and costs a little bit for the
extra three months of Bivio, but it saves the hassle of
doing the tax return by hand. Been there, done that many
times, don't want to do it again!

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