Looking at this from a different viewpoint. The choice of whether to use cash on hand, stock, or sell stock to raise cash has an impact on the current year capital gains for both the withdrawing member and the remaining members. However, once the decision of how to fund is made, the effect on the remaining members of the club is fixed and the same, regardless of whether the withdrawal is a full or partial withdrawal. For the withdrawing member, the timing of capital gains recognition can be accelerated or delayed, depending on the choices made by the club.
The last sentence should have read - "For the withdrawing member taking a partial withdrawal, the timing of capital gains recognition can be accelerated or delayed, depending on the choices made by the club."
There is no discussion on a partial withdrawal. Transferring stock or selling stock and transferring cash ends up having the same result.
Only on a full withdrawal does the IRS grant the non-withdrawing members the the ability to defer gains
This is wrong. The difference between a partial and full withdrawal is that with a full withdrawal, the withdrawing member's adjusted basis in the shares received equals that member's tax basis in the club less any cash received. There is no difference in the effect on the other members of the club.
In a partial withdrawal, the withdrawing member assumes the club's cost basis in the shares received. Assuming the withdrawing member will sell the shares immediately, the member's capital gain from selling the shares could be more or less than the member's share of the capital gain had the club sold the shares and transferred cash. This current year impact on capital gains will be offset when this member makes a final full withdrawal. The total gain over the member's tenure in the club is invariant, only the timing of when it is recognized changes.
The effect of a partial withdrawal on the remaining members (that is, other than the member taking the partial withdrawal) is identical to the effect of a full withdrawal. The amount of their portions of the unrealized capital gains is locked into their current value and the capital gain will be recognized when they leave the club.
Looking at this from a different viewpoint. The choice of whether to use cash on hand, stock, or sell stock to raise cash has an impact on the current year capital gains for both the withdrawing member and the remaining members. However, once the decision of how to fund is made, the effect on the remaining members of the club is fixed and the same, regardless of whether the withdrawal is a full or partial withdrawal. For the withdrawing member, the timing of capital gains recognition can be accelerated or delayed, depending on the choices made by the club.
There is no discussion on a partial withdrawal. Transferring stock or selling stock and transferring cash ends up having the same result.
Only on a full withdrawal does the IRS grant the non-withdrawing members the the ability to defer gains
This is wrong. The difference between a partial and full withdrawal is that with a full withdrawal, the withdrawing member's adjusted basis in the shares received equals that member's tax basis in the club less any cash received. There is no difference in the effect on the other members of the club.
In a partial withdrawal, the withdrawing member assumes the club's cost basis in the shares received. Assuming the withdrawing member will sell the shares immediately, the member's capital gain from selling the shares could be more or less than the member's share of the capital gain had the club sold the shares and transferred cash. This current year impact on capital gains will be offset when this member makes a final full withdrawal. The total gain over the member's tenure in the club is invariant, only the timing of when it is recognized changes.
The effect of a partial withdrawal on the remaining members (that is, other than the member taking the partial withdrawal) is identical to the effect of a full withdrawal. The amount of their portions of the unrealized capital gains is locked into their current value and the capital gain will be recognized when they leave the club.
Looking at this from a different viewpoint. The choice of whether to use cash on hand, stock, or sell stock to raise cash has an impact on the current year capital gains for both the withdrawing member and the remaining members. However, once the decision of how to fund is made, the effect on the remaining members of the club is fixed and the same, regardless of whether the withdrawal is a full or partial withdrawal. For the withdrawing member, the timing of capital gains recognition can be accelerated or delayed, depending on the choices made by the club.
Ira Smilovitz
David Karbulka on
Thanks for this. I've read the tutorial on partial and full withdrawals several times and either it's presented poorly or my comprehension skills are awful.
I'm guessing the latter since I've read your response several times and I'm still having a bit of an issue understanding it.
There is no discussion on a partial withdrawal. Transferring stock or selling stock and transferring cash ends up having the same result.
Only on a full withdrawal does the IRS grant the non-withdrawing members the the ability to defer gains
This is wrong. The difference between a partial and full withdrawal is that with a full withdrawal, the withdrawing member's adjusted basis in the shares received equals that member's tax basis in the club less any cash received. There is no difference in the effect on the other members of the club.
In a partial withdrawal, the withdrawing member assumes the club's cost basis in the shares received. Assuming the withdrawing member will sell the shares immediately, the member's capital gain from selling the shares could be more or less than the member's share of the capital gain had the club sold the shares and transferred cash. This current year impact on capital gains will be offset when this member makes a final full withdrawal. The total gain over the member's tenure in the club is invariant, only the timing of when it is recognized changes.
The effect of a partial withdrawal on the remaining members (that is, other than the member taking the partial withdrawal) is identical to the effect of a full withdrawal. The amount of their portions of the unrealized capital gains is locked into their current value and the capital gain will be recognized when they leave the club.
Looking at this from a different viewpoint. The choice of whether to use cash on hand, stock, or sell stock to raise cash has an impact on the current year capital gains for both the withdrawing member and the remaining members. However, once the decision of how to fund is made, the effect on the remaining members of the club is fixed and the same, regardless of whether the withdrawal is a full or partial withdrawal. For the withdrawing member, the timing of capital gains recognition can be accelerated or delayed, depending on the choices made by the club.
Ira Smilovitz
David Karbulka on
Ira,
So if the remaining club members wish to defer capital gains during another members partial withdrawal, we should always choose to transfer appreciated shares vs selling those same shares and transferring cash, correct?
We were always under the impression the IRS was agnostic and treated each situation similarly.
On Thu, Aug 21, 2025 at 7:10â¯PM David Karbulka <dkarbulka@gmail.com> wrote:
Thanks for this. I've read the tutorial on partial and full withdrawals several times and either it's presented poorly or my comprehension skills are awful.
I'm guessing the latter since I've read your response several times and I'm still having a bit of an issue understanding it.
There is no discussion on a partial withdrawal. Transferring stock or selling stock and transferring cash ends up having the same result.
Only on a full withdrawal does the IRS grant the non-withdrawing members the the ability to defer gains
This is wrong. The difference between a partial and full withdrawal is that with a full withdrawal, the withdrawing member's adjusted basis in the shares received equals that member's tax basis in the club less any cash received. There is no difference in the effect on the other members of the club.
In a partial withdrawal, the withdrawing member assumes the club's cost basis in the shares received. Assuming the withdrawing member will sell the shares immediately, the member's capital gain from selling the shares could be more or less than the member's share of the capital gain had the club sold the shares and transferred cash. This current year impact on capital gains will be offset when this member makes a final full withdrawal. The total gain over the member's tenure in the club is invariant, only the timing of when it is recognized changes.
The effect of a partial withdrawal on the remaining members (that is, other than the member taking the partial withdrawal) is identical to the effect of a full withdrawal. The amount of their portions of the unrealized capital gains is locked into their current value and the capital gain will be recognized when they leave the club.
Looking at this from a different viewpoint. The choice of whether to use cash on hand, stock, or sell stock to raise cash has an impact on the current year capital gains for both the withdrawing member and the remaining members. However, once the decision of how to fund is made, the effect on the remaining members of the club is fixed and the same, regardless of whether the withdrawal is a full or partial withdrawal. For the withdrawing member, the timing of capital gains recognition can be accelerated or delayed, depending on the choices made by the club.
Ira Smilovitz
ira smilovitz on
David,
From the club's standpoint, yes. But remember that the person requesting the partial withdrawal will still be a member of the club after the partial withdrawal. Giving him appreciated stock will accelerate his recognition of capital gains if he sells the shares. This could lead to hurt/bad feelings. That's why the usual recommendation is to use cash for partial withdrawals - it isn't optimal, but may spread any pain to all the members.
The intricacies of withdrawals are complex, and it's really difficult to gain a thorough appreciation through sentences. It's similar to trying to solve word problems in your head. You really need to work through examples with numbers to see all the interactions and effects. To be honest, I've been doing this for more than 25 years and I still have to think about it.
So if the remaining club members wish to defer capital gains during another members partial withdrawal, we should always choose to transfer appreciated shares vs selling those same shares and transferring cash, correct?
We were always under the impression the IRS was agnostic and treated each situation similarly.
On Thu, Aug 21, 2025 at 7:10â¯PM David Karbulka <dkarbulka@gmail.com> wrote:
Thanks for this. I've read the tutorial on partial and full withdrawals several times and either it's presented poorly or my comprehension skills are awful.
I'm guessing the latter since I've read your response several times and I'm still having a bit of an issue understanding it.
There is no discussion on a partial withdrawal. Transferring stock or selling stock and transferring cash ends up having the same result.
Only on a full withdrawal does the IRS grant the non-withdrawing members the the ability to defer gains
This is wrong. The difference between a partial and full withdrawal is that with a full withdrawal, the withdrawing member's adjusted basis in the shares received equals that member's tax basis in the club less any cash received. There is no difference in the effect on the other members of the club.
In a partial withdrawal, the withdrawing member assumes the club's cost basis in the shares received. Assuming the withdrawing member will sell the shares immediately, the member's capital gain from selling the shares could be more or less than the member's share of the capital gain had the club sold the shares and transferred cash. This current year impact on capital gains will be offset when this member makes a final full withdrawal. The total gain over the member's tenure in the club is invariant, only the timing of when it is recognized changes.
The effect of a partial withdrawal on the remaining members (that is, other than the member taking the partial withdrawal) is identical to the effect of a full withdrawal. The amount of their portions of the unrealized capital gains is locked into their current value and the capital gain will be recognized when they leave the club.
Looking at this from a different viewpoint. The choice of whether to use cash on hand, stock, or sell stock to raise cash has an impact on the current year capital gains for both the withdrawing member and the remaining members. However, once the decision of how to fund is made, the effect on the remaining members of the club is fixed and the same, regardless of whether the withdrawal is a full or partial withdrawal. For the withdrawing member, the timing of capital gains recognition can be accelerated or delayed, depending on the choices made by the club.
Ira Smilovitz
Marjean Daniels on
I have attached the notes from the withdrawal webinar that we participated in back during the pandemic. I told you wrong, as it wasn't Bivio but iClub. We found the information to be very informative.
Marjean
On Thursday, August 21, 2025 at 08:13:16 PM MDT, ira smilovitz via bivio.com <user*2883400001@bivio.com> wrote:
David,
From the club's standpoint, yes. But remember that the person requesting the partial withdrawal will still be a member of the club after the partial withdrawal. Giving him appreciated stock will accelerate his recognition of capital gains if he sells the shares. This could lead to hurt/bad feelings. That's why the usual recommendation is to use cash for partial withdrawals - it isn't optimal, but may spread any pain to all the members.
The intricacies of withdrawals are complex, and it's really difficult to gain a thorough appreciation through sentences. It's similar to trying to solve word problems in your head. You really need to work through examples with numbers to see all the interactions and effects. To be honest, I've been doing this for more than 25 years and I still have to think about it.
So if the remaining club members wish to defer capital gains during another members partial withdrawal, we should always choose to transfer appreciated shares vs selling those same shares and transferring cash, correct?
We were always under the impression the IRS was agnostic and treated each situation similarly.
On Thu, Aug 21, 2025 at 7:10â¯PM David Karbulka <dkarbulka@gmail.com> wrote:
Thanks for this. I've read the tutorial on partial and full withdrawals several times and either it's presented poorly or my comprehension skills are awful.
I'm guessing the latter since I've read your response several times and I'm still having a bit of an issue understanding it.
There is no discussion on a partial withdrawal. Transferring stock or selling stock and transferring cash ends up having the same result.
Only on a full withdrawal does the IRS grant the non-withdrawing members the the ability to defer gains
This is wrong. The difference between a partial and full withdrawal is that with a full withdrawal, the withdrawing member's adjusted basis in the shares received equals that member's tax basis in the club less any cash received. There is no difference in the effect on the other members of the club.
In a partial withdrawal, the withdrawing member assumes the club's cost basis in the shares received. Assuming the withdrawing member will sell the shares immediately, the member's capital gain from selling the shares could be more or less than the member's share of the capital gain had the club sold the shares and transferred cash. This current year impact on capital gains will be offset when this member makes a final full withdrawal. The total gain over the member's tenure in the club is invariant, only the timing of when it is recognized changes.
The effect of a partial withdrawal on the remaining members (that is, other than the member taking the partial withdrawal) is identical to the effect of a full withdrawal. The amount of their portions of the unrealized capital gains is locked into their current value and the capital gain will be recognized when they leave the club.
Looking at this from a different viewpoint. The choice of whether to use cash on hand, stock, or sell stock to raise cash has an impact on the current year capital gains for both the withdrawing member and the remaining members. However, once the decision of how to fund is made, the effect on the remaining members of the club is fixed and the same, regardless of whether the withdrawal is a full or partial withdrawal. For the withdrawing member, the timing of capital gains recognition can be accelerated or delayed, depending on the choices made by the club.
I'm quite embarrassed about the way that I answered that question. I almost had the good mind to say Ira will be in here to correct me if I'm wrong ð¤£
From the club's standpoint, yes. But remember that the person requesting the partial withdrawal will still be a member of the club after the partial withdrawal. Giving him appreciated stock will accelerate his recognition of capital gains if he sells the shares. This could lead to hurt/bad feelings. That's why the usual recommendation is to use cash for partial withdrawals - it isn't optimal, but may spread any pain to all the members.
The intricacies of withdrawals are complex, and it's really difficult to gain a thorough appreciation through sentences. It's similar to trying to solve word problems in your head. You really need to work through examples with numbers to see all the interactions and effects. To be honest, I've been doing this for more than 25 years and I still have to think about it.
So if the remaining club members wish to defer capital gains during another members partial withdrawal, we should always choose to transfer appreciated shares vs selling those same shares and transferring cash, correct?
We were always under the impression the IRS was agnostic and treated each situation similarly.
On Thu, Aug 21, 2025 at 7:10â¯PM David Karbulka <dkarbulka@gmail.com> wrote:
Thanks for this. I've read the tutorial on partial and full withdrawals several times and either it's presented poorly or my comprehension skills are awful.
I'm guessing the latter since I've read your response several times and I'm still having a bit of an issue understanding it.
There is no discussion on a partial withdrawal. Transferring stock or selling stock and transferring cash ends up having the same result.
Only on a full withdrawal does the IRS grant the non-withdrawing members the the ability to defer gains
This is wrong. The difference between a partial and full withdrawal is that with a full withdrawal, the withdrawing member's adjusted basis in the shares received equals that member's tax basis in the club less any cash received. There is no difference in the effect on the other members of the club.
In a partial withdrawal, the withdrawing member assumes the club's cost basis in the shares received. Assuming the withdrawing member will sell the shares immediately, the member's capital gain from selling the shares could be more or less than the member's share of the capital gain had the club sold the shares and transferred cash. This current year impact on capital gains will be offset when this member makes a final full withdrawal. The total gain over the member's tenure in the club is invariant, only the timing of when it is recognized changes.
The effect of a partial withdrawal on the remaining members (that is, other than the member taking the partial withdrawal) is identical to the effect of a full withdrawal. The amount of their portions of the unrealized capital gains is locked into their current value and the capital gain will be recognized when they leave the club.
Looking at this from a different viewpoint. The choice of whether to use cash on hand, stock, or sell stock to raise cash has an impact on the current year capital gains for both the withdrawing member and the remaining members. However, once the decision of how to fund is made, the effect on the remaining members of the club is fixed and the same, regardless of whether the withdrawal is a full or partial withdrawal. For the withdrawing member, the timing of capital gains recognition can be accelerated or delayed, depending on the choices made by the club.
Ira Smilovitz
ira smilovitz on
Doug does a good job in his webinars. However, I have issues with the text on two slides. It's possible that his verbal explanation of these points clarified the text shown.
Slide 31: (with regard to partial withdrawals)
"Resist transferring appreciated stock.
⦠May have small advantages to club or member - may be easier to sell appreciated stock if necessary."
In a partial withdrawal, transferring stock (whether appreciated or not) could have a major disadvantage to the member receiving it. Assume the member has a tax basis of $1500 in the club and her value is $2000. At present she has an unrealized gain of $500 in the club. She wants a $1000 withdrawal.
Scenario 1: If the club gives cash from cash on hand, she recognizes no current capital gain. Her tax basis in the club is reduced to $500 and her value to $1000. She still has an unrealized gain of $500 in the club.
Scenario 2: If the club transfers $1000 of stock where the club has a basis of $100 (long-term holder of Apple), her tax basis in the club is reduced to $1400 and her value is now $1000. When she sells the stock upon receipt, she will have a $900 current capital gain. Her unrealized gain (loss) is now ($400) in the club.
Scenario 3: If the club transfers $1000 of stock where the club has a basis of $1400, her tax basis in the club is reduced to $100 and her value to $1000. She now has an unrealized gain in the club of $900. When she sells the stock upon receipt, she will have a ($400) current capital gain (loss).
Note that no matter which Scenario is chosen, her total capital gain over her tenure as a club member will be $500, but the timing of recognition varies dramatically.
Slide 33:
Tax Consequences of Withdrawals
"Whether you sell shares, transfer shares, or pay cash has little
impact on withdrawing partner."
This statement is only true for full withdrawals. As shown above, the impact of the to the withdrawing partner in a partial withdrawal is highly dependent on the method chosen.
I have attached the notes from the withdrawal webinar that we participated in back during the pandemic. I told you wrong, as it wasn't Bivio but iClub. We found the information to be very informative.
From the club's standpoint, yes. But remember that the person requesting the partial withdrawal will still be a member of the club after the partial withdrawal. Giving him appreciated stock will accelerate his recognition of capital gains if he sells the shares. This could lead to hurt/bad feelings. That's why the usual recommendation is to use cash for partial withdrawals - it isn't optimal, but may spread any pain to all the members.
The intricacies of withdrawals are complex, and it's really difficult to gain a thorough appreciation through sentences. It's similar to trying to solve word problems in your head. You really need to work through examples with numbers to see all the interactions and effects. To be honest, I've been doing this for more than 25 years and I still have to think about it.
So if the remaining club members wish to defer capital gains during another members partial withdrawal, we should always choose to transfer appreciated shares vs selling those same shares and transferring cash, correct?
We were always under the impression the IRS was agnostic and treated each situation similarly.
On Thu, Aug 21, 2025 at 7:10â¯PM David Karbulka <dkarbulka@gmail.com> wrote:
Thanks for this. I've read the tutorial on partial and full withdrawals several times and either it's presented poorly or my comprehension skills are awful.
I'm guessing the latter since I've read your response several times and I'm still having a bit of an issue understanding it.
There is no discussion on a partial withdrawal. Transferring stock or selling stock and transferring cash ends up having the same result.
Only on a full withdrawal does the IRS grant the non-withdrawing members the the ability to defer gains
This is wrong. The difference between a partial and full withdrawal is that with a full withdrawal, the withdrawing member's adjusted basis in the shares received equals that member's tax basis in the club less any cash received. There is no difference in the effect on the other members of the club.
In a partial withdrawal, the withdrawing member assumes the club's cost basis in the shares received. Assuming the withdrawing member will sell the shares immediately, the member's capital gain from selling the shares could be more or less than the member's share of the capital gain had the club sold the shares and transferred cash. This current year impact on capital gains will be offset when this member makes a final full withdrawal. The total gain over the member's tenure in the club is invariant, only the timing of when it is recognized changes.
The effect of a partial withdrawal on the remaining members (that is, other than the member taking the partial withdrawal) is identical to the effect of a full withdrawal. The amount of their portions of the unrealized capital gains is locked into their current value and the capital gain will be recognized when they leave the club.
Looking at this from a different viewpoint. The choice of whether to use cash on hand, stock, or sell stock to raise cash has an impact on the current year capital gains for both the withdrawing member and the remaining members. However, once the decision of how to fund is made, the effect on the remaining members of the club is fixed and the same, regardless of whether the withdrawal is a full or partial withdrawal. For the withdrawing member, the timing of capital gains recognition can be accelerated or delayed, depending on the choices made by the club.