Refundable Fees - A Reader Dares to Disagree <g>
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Refundable Fees - A Reader Dares to Disagree <g> Deborah Kearney courageously <g> disagrees with a
recent column on non-refundable fees. She says...
I disagree - a fee is a fee is a
fee.
Well, each club, of course, is free to set its own policy.
Having dealt with these questions for many years, I am comfortable in saying
that most clubs that set up a fee upon entering the club do so in order to
offset later administrative expenses. To the extent these are used up in such
expenses, they have already been deducted from the member's value. So to deduct
them again seems like overkill.
Deb also states.......
Since deductible expenese are allocated along with income, the leaving member already has the benefit of income reducing expenses. The 'benefit' the member has had was the luxury of having
his total worth go down when the expense was recorded.
Having said all that, if a club wants to set a policy of
an iron-clad non-refundable fee in addition to any withdrawal fee, and
irregardless of whether or not that fee has already been deducted from the
member's value, they have every right to do so.
I appreciate all comments and disagreements to my columns
and I thank Deb for having replied. Her complete response is shown
below........
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I disagree - a fee is a fee is a fee. If
I pay a non-refundable fee to rent an apartment, plus a cleaning fee, plus
a deposit. No one would question a non-return of that non-refundable
fee. the fee is distinguished from payments in that
Since deductible expenese are allocated along with income, the leaving member already has the benefit of income reducing expenses. The 'non-refundable' forces the prospective member (hopefully) to thoughtfully consider all of the aspects of joining an investment club. A member would have to belong for a while to 're-coup' that 'non-refundable' fee - an incentive not to quit too soon. When a member withdraws, there is nothing to calculate in relation to that fee - the number is stated and set - it does not change. If there is a % penalty for withdrawals, that % amount is entered first, allowing the program to generate the % that it represents. Then the withdrawal % is increased appropriately. Unless there is another legal reason for avoiding this.... (If there is, let me know!) Deb Kearney |
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