Withdrawing members
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Withdrawing members Our Investment club has 3 withdrawing members as of the end of December 2010. According to our partnership agreement, we have 90 days to pay the leaving members. The valuation used is to be the one on 12/31/2010 since our club valuation is done for the last day of every month. The question we have is about recording this information in Bivio. Do we enter the withdrawals BEFORE or AFTER we do the taxes? Is there going to be any problem if the valuation date for withdrawal is IN 2010 and we pay the leaving members in 2011? We are confused about this since our club did not have any withdrawals for a number of years and the ones we did were not at the end of the year. Please Help.... Geetha Bala It doesn't matter if you do the withdrawals before or after you do the taxes since they have no effect on the tax return. The withdrawals will be entered in 2011 and your withdrawing members will get their final K-1s showing their withdrawals in early 2012.
Ira Smilovitz Join me at InvestEd 2011 In a message dated 01/31/11 12:49:41 Eastern Standard Time, gbinvestment@bivio.com writes:
> Our Investment club has 3 withdrawing members as of the end > of December 2010. According to our partnership agreement, we > have 90 days to pay the leaving members. The valuation used > is to be the one on 12/31/2010 since our club valuation is > done for the last day of every month. Waiting 90 days to pay a withdrawing member can be pretty risky for the club. Even if the club portfolio value drops dramatically between now and March, the club will still owe the withdrawing member the amount determined on Dec 31st. Theoretically, the club could owe more than the club is worth. More typical is for a club to pay a withdrawing member within 10 days after the withdrawal valuation date. -Jim Thomas I agree with both Ira and Jim. The withdrawals will be reflected in 2011,
and you can proceed with your tax preparation. I see no reason to wait 90 days
to pay the leaving members. You could transfer stock and get it done
immediately. I would also recommend that, regardless of when you plan to make
payment, you enter the withdrawals as of 1/1/2011, using the suspense account.
Then, when you actually make the payment, you will enter a transfer from your
regular cash account to your broker. Doing it this way, will stop the allocation
of income and expense to these members, allocations that they will never
experience, since their account will be frozen as of 12/31.
Rip West
Saint Paul, MN |
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