units and contribution
In unit based system at beginning person A contribute $200 to get 10 units. After six months of growth in stocks value of those unit become $250 or $25 per unit. Now person A want to add $500 more as capital contribution.
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Should he get assigned 20 more units at $25 per units or 50 more units at same cost of $10 per unit?
Which is better for year end accounting of profit/loss allocation and taxes? So that someone will not get unfairly taxed as in case of mutual fund distributions....
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Hi,
The number of units a member contribution will purchase will depend on what you use as a valuation date when you enter the member payments.
If you let a member purchase units on the second date using the valuation date you used for the first date, it would be like letting him buy stock today at, for example, the price 2 months ago.
That doesn't seem right. If the valuation had gone up as in your example, the member would be getting a bargain. He could immediately cash out the units he purchased for more than he paid for them.The number of units a member contribution will purchase will depend on what you use as a valuation date when you enter the member payments.
If you let a member purchase units on the second date using the valuation date you used for the first date, it would be like letting him buy stock today at, for example, the price 2 months ago.
Laurie Frederiksen
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On Thu, May 29, 2014 at 5:12 PM, raka maka <rakamaka@inbox.com> wrote:
In unit based system at beginning person A contribute $200 to get 10 units. After six months of growth in stocks value of those unit become $250 or $25 per unit. Now person A want to add $500 more as capital contribution.Should he get assigned 20 more units at $25 per units or 50 more units at same cost of $10 per unit?Which is better for year end accounting of profit/loss allocation and taxes? So that someone will not get unfairly taxed as in case of mutual fund distributions....
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If A contributes $200 and buys 10 units, the cost was $20 per unit. If unit value increases to $25, then adding an additional $500 should purchase 20 additional units at the new unit price.
Person A should not be permitted to enjoy the original price since the club is worth more now and additional units are also worth
more.
Mike Jones
Wallstreet Wannabees
Bloomington, MN
From: raka maka <rakamaka@inbox.com>
To: club_cafe@bivio.com
Sent: Thursday, May 29, 2014 4:12 PM
Subject: [club_cafe] units and contribution
In unit based system at beginning person A contribute $200 to get 10 units. After six months of growth in stocks value of those unit become $250 or $25 per unit. Now person A want to add $500 more as capital contribution.
Free 3D Earth Screensaver
Watch the Earth right on your desktop! Check it out at www.inbox.com/earth
Should he get assigned 20 more units at $25 per units or 50 more units at same cost of $10 per unit?
Which is better for year end accounting of profit/loss allocation and taxes? So that someone will not get unfairly taxed as in case of mutual fund distributions....
Free 3D Earth Screensaver
Watch the Earth right on your desktop! Check it out at www.inbox.com/earth