Partial Distributions Using Stock
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Partial Distributions Using Stock A user asks.......
Our club
would like to make a partial distribution and since some members would like cash
and others would not take a distribution we are considering making the
distr. in stock which has appreciated.
I am a little confused by your question. Are you
saying that some members of the club would prefer not to have a partial
distribution? If so, I suggest that you make distributions only to those
who wish to take funds out. Under a unit-based system, this would seem to be the
easiest and fairest way to accomplish what you are trying to do. If, by any
chance, you are trying to keep all members equal, I would recommend very
strongly against such a practice. In the long run, you will never be able to
keep all members equal. From experience, I can tell you that clubs that try to
do this face a lot of turmoil, before they finally 'give up', and allow unequal
positions. For more information on this, read Equal Partners,
and why that doesn't work, by Herb Barnett, Chairman, NAIC Computer Group,
which can be found at http://www.better-investing.org/clubs/equal-partners.html
But maybe that has nothing to do with your
question. If you transfer stock in a partial withdrawal, the basis for the stock
in the hands of the individual partner becomes the club's basis for that stock,
but in no event can the basis be more than the member's basis in the entire
partnership, reduced by any cash received. If multiple stocks are issued to one
member, the allocation of basis can become quite complex. Fortunately, both
bivio and NCA handle these transactions with ease.
For a complete discussion on the matter of using
stocks for a partial withdrawal, I can do no better than to recommend a treatise
written by my colleague, Jerry Dressel, which can be found at......
I hope this answers your question. If not, please
come back, and we will try again. Thanks for using bivio.
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