We've been discussing REITs here recently so I wanted to pass along a comment that was received this morning from a club treasurer who attended last nights webinar:

"During the talk there was a side conversation about keeping accounting simple and to do so by avoiding things like REITs, DRIPS, etc... As a club treasurer that makes great sense - we owned a REIT for a while and waiting for their final numbers to come in ended up with frustrated members. Well, we ditched that holding 2 years ago."

The problem with holding these things in a small partnership such as an investment club is that the tax issues that come along with them affect, not only the club treasurer and the club, but also each members personal tax situation.

For example, if you receive a revision in a REIT 1099 after you've filed and distributed your taxes, it could mean that not only would you have to file amended club partnership returns, each member in your club would also have to file amended personal returns.

If you have an investment in a commodity ETF like GLD, which requires manual adjustments to your tax forms, it doesn't only affect your partnership return. You also need to allocate the item correctly to each member and adjust all the K-1's correctly and manually.

Our caution about holding them is because we want you to be able to keep things simple and be able to have a club.

Complicated accounting and tax issues to deal with are not something most club treasurers really want to sign up for.

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Laurie Frederiksen
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