individual paying fees
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individual paying fees Our club has an agreement that any fees incurred from bouncing checks are to be paid by the member who caused the fee in the first place. Does everyone get credit for the expense of the fee? How do we allocate the payment of the fee by the 'bad' member? Bob Bob,
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Our club has an agreement that any fees incurred from
bouncing checks are to be paid by the member who caused the fee in the first
place.
>> Yes, that's a good idea. The way to handle it is to have
the offending member pay the amount of the nsf charge to the club, and record
that payment as a fee. Then, record the charge from the bank/broker as an
expense. Allocate such expense by ownership units, not equally by member. Done
this way, the offending member has borne the expense, and all the members have
received a share of the tax deduction. In addition, the offending member has had
his basis in the club increased by the amount of the extra payment he has
made.
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Does everyone get credit for the expense of the fee? How
do we allocate the payment of the fee by the 'bad' member?
>> We must make sure we are talking about the same thing,
when we say 'allocate the payment' and 'get credit for the expense'. As I tried
to explain, above, the offending member has been 'allocated' the economic burden
of the expense. Every member gets a share of the tax deduction, including the
offending member. In addition, the offending member has an increase in his
basis, which will result in less tax for him when he finally leaves the
club.
I'm not sure from your post what result you want. Done as
explained above, no member's worth goes down because of the imposition of
the nsf charge. The non-offending members have received a bonus in that they
have received a small tax deduction at no cost. Only a portion of the amount
paid by the offending member has resulted in an immediate tax deduction to him.
It is important to allocate the expense by ownership
units. When the member's payment is recorded as a fee, everyone's value goes up
in ratio to ownership units. Then, when the expense is recorded and allocated,
as suggested, everyone's value goes down in ratio to ownership units. Thus,
recorded this way, it's a wash for the other members, with the added kicker that
they get a tax deduction.
Pretty long-winded explanation for a $25 fee, but there
you have it.
Rip West
Saint Paul, MN
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