club_cafe: Dividends

iras1 on

Yes, dividends (and other income and expense) impact the cost basis of the members in your club. However, the method for accounting for that change is somewhat different from that used by mutual funds.

Within bivio, the cost basis adjustment is made on December 31 after the tax allocations have been determined. Unlike a mutual fund, where the dividends are actually paid out to the investors who then have a choice of whether to reinvest the dividend or keep the cash, investment club "dividends" are always reinvested. So, rather than lowering the price per unit and purchasing more units and the new (lower) price, bivio keeps the current unit value constant and raises the cost per unit for each of the units you already own. The net result is the same.

Ira Smilovitz

In a message dated 11/9/2004 10:01:00 AM Eastern Standard Time, ted_metro@bivio.com writes:

Do dividends impact the cost basis of the members in our
club? It seems that because dividends raise the value of
the share price, they would have to be paid out as a
distribution (like a mutual fund) in order to impact cost
basis. Then the share price would have to be adjusted down
to reflect the payout of the dividends, even though most (if
not all) members would just reinvest those dividends in more
shares (adjusting their cost basis).

I guess it seems to me like a mutual fund. They collect all
these dividends throughout the year, but until they pay them
out (usually in December) my cost basis doesn't change, but
my fund's share price is going up as the total value has
gone up from dividends.

Can someone confirm or correct me about how dividends may or
may not impact our cost basis information for members??

Ted Metro on

So on 12/31 the "Total Paid" column on Bivio will just
increase for each member relative to their proportionate
share of dividends received during the calendar year? Which
means the increase would equal their taxable portion
reported on their respective K-1 forms?

Thanks for the quick and informative reply!!!

IraS1@aol.com wrote:
> Yes, dividends (and other income and expense) impact the cost basis of the
> members in your club. However, the method for accounting for that change is
> somewhat different from that used by mutual funds.
> �
> Within bivio, the cost basis adjustment is made on December 31 after the
> tax allocations have been determined. Unlike a mutual fund, where the dividends
> are actually paid out to the investors who then have a choice of whether to
> reinvest the dividend or keep the cash, investment club "dividends" are always
> reinvested. So, rather than lowering the price per�unit and purchasing more
> units and the new (lower) price, bivio�keeps the current unit value
> constant and raises the cost per unit for each of the units you already own. The
> net result is the same.
> �
> Ira Smilovitz�
> �
> In a message dated 11/9/2004 10:01:00 AM Eastern Standard Time,
> ted_metro@bivio.com writes:
> Do
> dividends impact the cost basis of the members in our
> club?� It seems
> that because dividends raise the value of
> the share price, they would have
> to be paid out as a
> distribution (like a mutual fund) in order to impact
> cost
> basis.� Then the share price would have to be adjusted down
> to
> reflect the payout of the dividends, even though most (if
> not all) members
> would just reinvest those dividends in more
> shares (adjusting their cost
> basis).
>
> I guess it seems to me like a mutual fund.� They collect
> all
> these dividends throughout the year, but until they pay them
> out
> (usually in December) my cost basis doesn't change, but
> my fund's share
> price is going up as the total value has
> gone up from dividends.
>
> Can
> someone confirm or correct me about how dividends may or
> may not impact our
> cost basis information for members??
>
>
> �

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