exiting member
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exiting member We have one member who wants to leave our club on Dec. 31, 2006. Instead of selling off stock, we would like to buy her out and divide her percentage among some or all of the members. How do we do this? You don't have those other members 'buy' her out. What you
do is have those members contribute extra funds in the amount of the withdrawal
payment due, and then process a withdrawal for that partner. The contributions
for those extra funds should be processed as payments from those
members.
You might be better off, transferring appreciated stock to
the withdrawing member, and then having the other members contribute extra funds
which can be used by the club to replentish the stock used in the payoff, or in
any other way the club decides. That is the best way to defer taxable income for
the remaining members. Check out the following trez-talk posts:
Our investment club just trys to maintain a cash surplus in our bank account to pay off any member as they need some of their money or all of it. We set aside about 15% each quarter for this prupose. So far it has worked very well for the Sanke River Investment Club. Scott Rip West wrote: > You don't have those other members 'buy' her out. What you > do is have those members contribute extra funds in the amount of the withdrawal > payment due, and then process a withdrawal for that partner. The contributions > for those extra funds should be processed as payments from those > members. > > You might be better off, transferring appreciated stock to > the withdrawing member, and then having the other members contribute extra funds > which can be used by the club to replentish the stock used in the payoff, or in > any other way the club decides. That is the best way to defer taxable income for > the remaining members. Check out the following trez-talk posts: > > > http://www.bivio.com/trez_talk/mail-msg?t=17312400003&s=2 > > http://www.bivio.com/trez_talk/mail-msg?t=2984700003 > > http://www.bivio.com/trez_talk/mail-msg?t=4241800003&s=1 > > Rip West > Saint Paul, > MN Hi Scott,
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Our investment club just trys to maintain a cash surplus in our bank
account to pay off any member as they need some of their money or all of it. We
set aside about 15% each quarter for this prupose. So far it has worked very
well for the Sanke River Investment Club.
>> To each his own, but I can't endorse your club's practice.
I think, over the years, that performance will really suffer if you are only 85%
invested. And there is really no need for such a reserve, if you utilize
appreciated stocks to pay members. This method yields better tax results, allows
you to be fully invested at all times, and even gives better results for the
departing members.
I again would urge people studying this problem to look at
the following trez-talk articles on the bivio site.
> http://www.bivio.com/trez_talk/mail-msg?t=17312400003&s=2
> > http://www.bivio.com/trez_talk/mail-msg?t=2984700003 > > http://www.bivio.com/trez_talk/mail-msg?t=4241800003&s=1 Rip West Saint Paul, MN |
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