Perhaps the simple solution is to delay her partial withdrawal to May 2017?

I don't have the documentation at my fingertips, but it follows from the treatment of partial withdrawals. A partial withdrawal is a return of capital until the partner's entire cost basis is recovered. If you had to track the holding period of investment club units, each partial withdrawal would be a capital transaction with gain/loss tied to the cost basis of the specific units liquidated. (FIFO or specific identification).

Here's a link to an old piece written by Rip West about this:

I'm trying to locate the rest of the articles.

Ira Smilovitz, EA

Boyd,

I suspect you're doing something wrong, but I don't know what. The sale of the stock should be a long-term capital gain for the club which will be reported on the appropriate year's 1065. The distributions of cash to the members will be returns of capital (no tax impact) for those members whose tax basis is larger than the amount of cash they receive. For those who receive more cash than their tax basis, the excess cash will be short-term/long-term based on their entry date into the club.

That said, you won't know for sure how much excess cash was distributed to a member until the end of the tax year. Their tax basis will include all income/expense items for the year as well as any member deposits made before the end of the year.

If you send a request to support@bivio.com, someone will review the specific transactions in your club's records.

Ira Smilovitz

On Mon, Feb 20, 2017 at 12:18 PM, A Hinds via bivio.com <user*28730700001@bivio.com> wrote:

Ira,

I'm interested in your reply to Linda. My club is about to do a partial withdrawal for all our members by distributing a large LTCG from the sale of a stock. However, altho' one partner has only been a member since April 2016, the withdrawal report classifies hers as LTCG. I have the nagging suspicion that hers should be STCG, but (a) I don't know what to base such a change on, and (b) I don't see any easy way to do so in bivio.

Perhaps the simple solution is to delay her partial withdrawal to May 2017?

---

From: ira smilovitz <ira.smilovitz@gmail.com>
To: "club_cafe@bivio.com" <club_cafe@bivio.com>
Sent: Monday, February 20, 2017 7:02 AM
Subject: Re: [club_cafe] Explaining to members how to access their K-1's

Linda,

If you are suggesting that the gain/loss from the sale of partnership units must be divided into short-term and long-term components, that's incorrect. The gain is all short-term or long-term based on the length of time since the date the member joined the club. A partnership interest is a unitary interest, it's not treated like the purchase of stock or a mutual fund.

Ira Smilovitz, EA

On Mon, Feb 20, 2017 at 2:28 AM, Linda Wiltse <wiltse@optonline.net> wrote:

[Portions deleted]

There are several ways to calculate the short and long term portions of gain or loss. You can do it by unit allocations or cost allocations. It is too complex to go into here.

Linda

Pointe Players treasurer