club_cafe: Re: Investment Club Operations Handbook

iras1 on

In a message dated 10/28/2007 1:04:07 P.M. Eastern Daylight Time, nycpartners@bivio.com writes:

Thanks, this is really helpful. In the latter scenario
(club has cash on hand to fund withdrawal), how is that
recorded on the K-1? Is it "sale of investment club unit"?
Secondly, does it affect the remaing members in any way?
Would their taxable basis adjust downward to reflect the
realizing by the withdrawing member? Thanks.

The K-1 does not show the gain or loss from a withdrawal. It will show the amount transferred (IIRC it's on line 19) regardless of whether cash or stock is used. Nothing having to do with a withdrawal affects the other members - that is, their tax basis and value remains constant. The key point to keep in mind is that decisions made by the club as to how to fund the withdrawal are not part of the withdrawal. Funding decisions affect all members.

I suspect that I haven't really answered your questions, so feel free to ask again

Ira Smilovitz

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