Closing club

John W Ranby Trustee PGM Cariboo Trust on

Barbara:

Ira answered it in a nutshell.

If you want to review a more in-depth discussion of the
ramifications of transferring stock in a partial withdrawal,
read the article found in bivio's help area. It is under
"withdrawals" in the index.

https://www.bivio.com/trez_talk/mail-thread?p=69429100003

The explanation has been provided in multiple other message
traffic on this site as well. A search of prior messages
will find several explaining the impact on the partnership
and the transferee.

To respond to your comment: "To divide it all up at once
seems mindboggling."
You don't have to withdraw all partners at the same time. Do
one or two, or three or four together. Just make the
withdrawals full withdrawals. You are still a legal
partnership as long as you have two partners. People could
volunteer the order in which they exit; or you could do
partners with the smallest holdings first. I would aim to
make the withdrawals of the final two partners in December
so you can file the final Partnership tax returns in the
normal cycle in 2026.

Jack

DR CHISHOLM MD on

I did the withdrawal form and have the exact number of specific stock shares and cash to be distributed. But Schwab will not give the money to any account except an account that has the same name and EIN as the Schwab account. This means the club has to have 2 accounts - a Schwab account and another from which it can distribute funds. Unless a club does this, they cannot distribute any funds to partners. Ultimately, there is no reason to continue the Schwab account and maintain 2 accounts.

Is there a way to edit out the original partial withdrawal in Bivio? And , then , resubmit it after out assets are in Fidelity which will distribute withdrawals to individual partners?

On 06/09/2025 4:10 PM EDT Rebecca Kruse <kruse@bivio.biz> wrote:

Always, always, always complete the bivio member withdrawal form first. The bivio withdrawal form determines exactly how much any member is owed if the member is paid in cash, and also values the shares and determines the additional amount of cash if the withdrawal is paid in stock and cash. Pay the member the exact amount of cash shown on the Cash line of the member's withdrawal report and transfer shares from the lots specified in the report.

You can enter a practice partial or full member withdrawal entry at any time in bivio and print the withdrawal report for review. Then delete the practice member withdrawal entry by selecting Accounting>Members>member's name. Click the Delete box at the right of the withdrawal entry and scroll down and click Delete.

There are two types of tax liability upon withdrawal from the partnership. A withdrawing partner will receive a K-1 when the club's taxes are filed for the current year reporting their allocation of the club's current year realized gains/losses and dividends and interest. The withdrawing partner will also receive a bivio withdrawal report showing their gain as a partner in the club. Give both of these documents to your tax preparer.

Becky Kruse

bivio

On Mon, Jun 9, 2025 at 2:19 PM Roman Geletkanycz via bivio.com <user*33583000001@bivio.com> wrote:

There is a valuation problem in this. If the club has appreciated stock and the departing member has a valuation of $25000 (just using this amount for the example), then what amount would you pay them? If you give them the whole $25000 then they will not pay any tax on the stock appreciation in the portfolio which will be paid by remaining members when the stock is eventually sold or transferred to them. Would you give them the $25000 less an amount estimated for future capital gain taxes? The estimate will never be exact.

There are 2 components of tax liability for every partner:

- First, the gain / loss and interest & dividend activity of investments as realized each year

- Second, the net gain or loss of their ultimate total withdrawals versus their total capital injections to the club over the years.

Unless you adjust the valuation of the cash withdrawal for the first type of tax I note above, they will not be accountable for it and the remaining members will ultimately absorb the amount.

The best solution is to follow your Partnership Agreement and if it is in cash, sell some of the holdings to generate the needed funds. Keep it simple!!!

Roman

Newfane Investment Partners

On Monday, June 9, 2025 at 01:26:59 PM EDT, Kolb, George via bivio.com <user*24878100001@bivio.com> wrote:

I know this has taken a bit of a tangent from the original question, but I wanted to caution that this approach does not need to (nor should it) happen "outside the walls of the club." If you have member(s) who are willing to "buy in" the funding necessary to cover a withdrawing member, that shouldn't require anything special in the bylaws. Essentially, existing member(s) invest $20K into the club and instead of investing those funds, you use the money to effect a cash withdrawal to the departing member. It's as simple as that (the hard part is whether you have existing members willing and able to pony up $20K).

If your partnership agreement has a cap on the percentage ownership any one member can have, just be sure not to violate that provision. Otherwise, it's no different than having enough cash on hand to pay out a departing partner - you simply need enough people willing to invest that much money on short notice rather than selling off existing stocks. This approach is an option whether you need to come up with $2K or $20K for a withdrawal. The existing members putting new money in receive units in the club just like they would with any other monthly investment, and the departing member's cash withdrawal is handled like any other cash withdrawal. There is no tax impact to the remaining members in this scenario - only the departing member.

George Kolb

Blue Chips & Salsa

From: club_cafe@bivio.com <club_cafe@bivio.com> On Behalf Of mp via bivio.com
Sent: Monday, June 9, 2025 11:44 AM
To: club_cafe@bivio.com
Subject: Re: [club_cafe] Closing club

[External Email]

Is it at all possible that your club bylaws did (or could be modified to) allow for remaining member(s) to buy out the departing member with OUTSIDE funds?

This is how we anticipated this scenario. Assuming that one or more of the existing members has the $20k to absorb the departing member you can just update the remaining member(s) basis as appropriate. The buyout happens outside the walls of the club. There are no stock transactions and no tax impact on the remaining members or the club. The entire tax impact is on the departing member who presumably is expecting it. I am not a tax advisor or lawyer. Consult a tax professional and get legal advice. May cause drowsiness. Do not operate heavy machinery.

On Sun, Jun 8, 2025 at 10:17 PM ira smilovitz via bivio.com <user*2883400001@bivio.com> wrote:

If you sell any stock before the withdrawal date, every member of the club will report their proportional share of the gains on their 2025 personal tax return.

If you give stock, and this is not a full withdrawal, the member receiving the stock will assume the club's cost basis in the shares. This could create more or less capital gain when the shares are sold than a full withdrawal on the same date. The "good" news, if there is any, is that their final capital gain (or loss) on their final withdrawal will be adjusted to account for any accelerated gain from the partial withdrawal.

If you give stock and this is a full withdrawal, the withdrawing member assumes an adjusted cost basis in the shares received which is equal to their tax basis in the club. For the remaining members, their proportional share of the capital gains (had that stock been sold) is locked away and won't be reported until each member makes a full withdrawal from the club.

The foregoing is somewhat simplified as it ignores the treatment of any cash received in the withdrawal.

Ira Smilovitz

On Sun, Jun 8, 2025 at 6:52 PM Richard Evans via bivio.com <user*32774200001@bivio.com> wrote:

I need basics. A member is requesting a substantial amount of her money. Not in stocks but in cash. We will have to decide which stock or stocks to sell to come up with $20,000. We have made great decisions on stocks, everything but one is a gain in dollar value as well as dividends. Which means capital gains. Is each member be required to pay capital gains on their taxes or is it just the member who is requesting the payment?

Diana Evans

Sent from my iPhone

On Jun 6, 2025, at 12:38 PM, Anne Weeks via bivio.com <user*6029900001@bivio.com> wrote:

Thank you,

Anne

Sent from the all new AOL app for iOS

On Thursday, June 5, 2025, 4:30 PM, John Rice via bivio.com <user*24380400001@bivio.com> wrote:

Schwab doesn't allow shares to be distributed to members. The only alternative for transferring stock to members and avoiding the IRMAA adjustment will be to switch your broker to another one that allows stock transfers to members. After the transfer to the new broker you can disband and distribute the stocks and cash. The individual members now have the choice to sell the amount of stocks each year to avoid the IRMAA and higher tax on capital gains.

John

On Wed, Jun 4, 2025 at 12:31 PM Bob Ford via bivio.com <user*14310900001@bivio.com> wrote:

Michael

Could you please provide the Schwab form number. You are the first investment club that has been able to perform a stock transfer to a member that has reported through club cafe. We have been told that Schwab will not transfer stock from an investment Club to a member.

Thank you.

Bob Ford

From my Kindle

On June 4, 2025, at 12:38 PM, "Michael Wainer via bivio.com" <user*35350100001@bivio.com> wrote:

Hello Anne:

Our club, The Bear Trap Co., switched to Schwab when TD Ameritrade ended a few years ago. We have given stock transfers to a member twice in the past year. Before that our experience was to sell stock(s) to give to a member withdrawing a portion of their club shares or a complete withdrawal. No issues with Schwab. We do have to fill out a form and the two co-signers in our club (Treasurer and Assistant Treasurer) have to sign. We are lucky to have a Schwab office nearby where we drop off the form.

Michael Wainer

Assistant Treasurer, The Bear Trap Co.

From: club_cafe@bivio.com <club_cafe@bivio.com> on behalf of ANNE WEEKS via bivio.com <user*6029900001@bivio.com>
Sent: Wednesday, June 4, 2025 11:41 AM
To: club_cafe@bivio.com <club_cafe@bivio.com>
Subject: [club_cafe] Closing club

Like many clubs, we are planning to closedown this year.
Just members getting older. We are with Schwab with
checking privileges. Obviously, it is simpler to sell
everything and distribute the cash. But some members have
large capital gains and would prefer stock. I have been the
long time treasurer and have been reading the conversations
on here for ideas.

I have some specific questions.
Must all distributions be the same for each member, that is
all cash or all stock?
Is Schwab allowing stock transfers? Hard or easy to work
with them?
Has anyone considered the effect of these large capital
gains on the IRMAA adjustment (Medicare)? Any work around
ideas.
If our club distributes shares, I am considering using a CPA
to do things properly. Or is that overkill and I should be
able to do myself?
What about taking some capital gains this year and doing the
final shutdown next year? Any advantages?
Thanks for your thoughts. I am sure I will be posting again
soon.
Anne Weeks

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