It isn't clear to me how losses can be allocated.

Our situation is that a friend jumped into a partnership a friend and I have had investing in 2017 after becoming excited at our performance, but as the market sank they demanded to be withdrawn. We sold stock at the bottom of the market so they could take their funds out in a full withdrawal. The funds sold resulted in a realized gain for the club. While the guy still made a loss, the club had a realized capital gain. If k1s are passing the realized gain to members, how do we pass a loss to the withdrawn member?

Curiously,
Mat-

If he made a significant loss on his full withdrawal, and then weirdly had to take on a share of the realized gain made that year for the sell-offs required to liquidate his position, he would have to offset his losses with gains he never realized.

My guess is his tax basis was eliminated completely if fully withdrawn, even if done very late in the year, leaving members to shoulder his portion of the gain on their k1s, as the losses actually experienced by the fund can be realized for current members later on. Is this right?

Is the withdrawal form an IRS tax document or just a printout from Bivio?

Thanks for the reply.

If he made a significant loss on his full withdrawal, and then weirdly had to take on a share of the realized gain made that year for the sell-offs required to liquidate his position, he would have to offset his losses with gains he never realized.

My guess is his tax basis was eliminated completely if fully withdrawn, even if done very late in the year, leaving members to shoulder his portion of the gain on their k1s, as the losses actually experienced by the fund can be realized for current members later on. Is this right?

Is the withdrawal form an IRS tax document or just a printout from Bivio?

If he made a significant loss on his full withdrawal, and then weirdly had to take on a share of the realized gain made that year for the sell-offs required to liquidate his position, he would have to offset his losses with gains he never realized.

He did realize every gain the club realized when it sold stock. Each item of income or gain adjusts his tax basis upward, reducing any future withdrawal gain or increasing any withdrawal loss. Similarly, each item of expense or loss reduces his tax basis, increasing any future withdrawal gain or decreasing any future withdrawal loss.

My guess is his tax basis was eliminated completely if fully withdrawn, even if done very late in the year, leaving members to shoulder his portion of the gain on their k1s, as the losses actually experienced by the fund can be realized for current members later on. Is this right?

No. Each transaction's tax consequences are fixed on the date of the transaction. Each member receives his/her proportional share of the effect immediately, sometimes as both a change in value and tax basis (income and expense items), and sometimes only as a tax basis adjustment (gain or loss). There is no way to transfer the tax consequences of an action from one member to another.

Is the withdrawal form an IRS tax document or just a printout from Bivio?

The withdrawal report is a bivio generated document that contains additional information which is necessary to complete a member's personal tax return. It reports the date the member joined the club, his/her tax basis, the date s/he left the club, and the amount s/he received in the withdrawal. The net gain/loss is reported on Schedule D.

Ira Smilovitz, EA

On Thu, Feb 14, 2019 at 6:04 PM Matthew Steele via bivio.com <user*37608600001@bivio.com> wrote:

Thanks for the reply.

If he made a significant loss on his full withdrawal, and then weirdly had to take on a share of the realized gain made that year for the sell-offs required to liquidate his position, he would have to offset his losses with gains he never realized.

My guess is his tax basis was eliminated completely if fully withdrawn, even if done very late in the year, leaving members to shoulder his portion of the gain on their k1s, as the losses actually experienced by the fund can be realized for current members later on. Is this right?

Is the withdrawal form an IRS tax document or just a printout from Bivio?

Ira,

I thought that gains on sales of assets to liquidate a partner's share in a partnership were charged to that account called "Unrealized Losses (Gains) Disbursed" which was "realized" to partners only when the entire partnership was liquidated. From your description it sounds like my understanding is not correct.

Peter Dunkelberger

On Fri, Feb 15, 2019 at 3:15 PM ira smilovitz via bivio.com <user*2883400001@bivio.com> wrote:

If he made a significant loss on his full withdrawal, and then weirdly had to take on a share of the realized gain made that year for the sell-offs required to liquidate his position, he would have to offset his losses with gains he never realized.

He did realize every gain the club realized when it sold stock. Each item of income or gain adjusts his tax basis upward, reducing any future withdrawal gain or increasing any withdrawal loss. Similarly, each item of expense or loss reduces his tax basis, increasing any future withdrawal gain or decreasing any future withdrawal loss.

My guess is his tax basis was eliminated completely if fully withdrawn, even if done very late in the year, leaving members to shoulder his portion of the gain on their k1s, as the losses actually experienced by the fund can be realized for current members later on. Is this right?

No. Each transaction's tax consequences are fixed on the date of the transaction. Each member receives his/her proportional share of the effect immediately, sometimes as both a change in value and tax basis (income and expense items), and sometimes only as a tax basis adjustment (gain or loss). There is no way to transfer the tax consequences of an action from one member to another.

Is the withdrawal form an IRS tax document or just a printout from Bivio?

The withdrawal report is a bivio generated document that contains additional information which is necessary to complete a member's personal tax return. It reports the date the member joined the club, his/her tax basis, the date s/he left the club, and the amount s/he received in the withdrawal. The net gain/loss is reported on Schedule D.

Ira Smilovitz, EA

On Thu, Feb 14, 2019 at 6:04 PM Matthew Steele via bivio.com <user*37608600001@bivio.com> wrote:

Thanks for the reply.

If he made a significant loss on his full withdrawal, and then weirdly had to take on a share of the realized gain made that year for the sell-offs required to liquidate his position, he would have to offset his losses with gains he never realized.

My guess is his tax basis was eliminated completely if fully withdrawn, even if done very late in the year, leaving members to shoulder his portion of the gain on their k1s, as the losses actually experienced by the fund can be realized for current members later on. Is this right?

Is the withdrawal form an IRS tax document or just a printout from Bivio?

Unrealized gains/losses are created when the club gives shares of stock to a withdrawing member. The unrealized gains/losses are each remaining partner's share of the gain/loss that would have been realized if the stock had been sold and cash given to the withdrawing member. The unrealized gain/loss is locked away for each remaining member until s/he withdraws from the club.

Ira Smilovitz

On Fri, Feb 15, 2019 at 11:11 PM Peter Dunkelberger via bivio.com <user*26984900001@bivio.com> wrote:

Ira,

I thought that gains on sales of assets to liquidate a partner's share in a partnership were charged to that account called "Unrealized Losses (Gains) Disbursed" which was "realized" to partners only when the entire partnership was liquidated. From your description it sounds like my understanding is not correct.

Peter Dunkelberger

On Fri, Feb 15, 2019 at 3:15 PM ira smilovitz via bivio.com <user*2883400001@bivio.com> wrote:

If he made a significant loss on his full withdrawal, and then weirdly had to take on a share of the realized gain made that year for the sell-offs required to liquidate his position, he would have to offset his losses with gains he never realized.

He did realize every gain the club realized when it sold stock. Each item of income or gain adjusts his tax basis upward, reducing any future withdrawal gain or increasing any withdrawal loss. Similarly, each item of expense or loss reduces his tax basis, increasing any future withdrawal gain or decreasing any future withdrawal loss.

My guess is his tax basis was eliminated completely if fully withdrawn, even if done very late in the year, leaving members to shoulder his portion of the gain on their k1s, as the losses actually experienced by the fund can be realized for current members later on. Is this right?

No. Each transaction's tax consequences are fixed on the date of the transaction. Each member receives his/her proportional share of the effect immediately, sometimes as both a change in value and tax basis (income and expense items), and sometimes only as a tax basis adjustment (gain or loss). There is no way to transfer the tax consequences of an action from one member to another.

Is the withdrawal form an IRS tax document or just a printout from Bivio?

The withdrawal report is a bivio generated document that contains additional information which is necessary to complete a member's personal tax return. It reports the date the member joined the club, his/her tax basis, the date s/he left the club, and the amount s/he received in the withdrawal. The net gain/loss is reported on Schedule D.

Ira Smilovitz, EA

On Thu, Feb 14, 2019 at 6:04 PM Matthew Steele via bivio.com <user*37608600001@bivio.com> wrote:

Thanks for the reply.

If he made a significant loss on his full withdrawal, and then weirdly had to take on a share of the realized gain made that year for the sell-offs required to liquidate his position, he would have to offset his losses with gains he never realized.

My guess is his tax basis was eliminated completely if fully withdrawn, even if done very late in the year, leaving members to shoulder his portion of the gain on their k1s, as the losses actually experienced by the fund can be realized for current members later on. Is this right?

Is the withdrawal form an IRS tax document or just a printout from Bivio?

Ira--Are you saying that if the club sells stock to liquidate a partnership withdrawal, the club recognizes the gains in the year of the sale, but if the partner is given stock instead, the gain is unrealized until the partnership is dissolved?

Regards,

Peter

Peter

Virus-free. www.avg.com

On Sat, Feb 16, 2019 at 9:15 AM ira smilovitz via bivio.com <user*2883400001@bivio.com> wrote:

Unrealized gains/losses are created when the club gives shares of stock to a withdrawing member. The unrealized gains/losses are each remaining partner's share of the gain/loss that would have been realized if the stock had been sold and cash given to the withdrawing member. The unrealized gain/loss is locked away for each remaining member until s/he withdraws from the club.

Ira Smilovitz

On Fri, Feb 15, 2019 at 11:11 PM Peter Dunkelberger via bivio.com <user*26984900001@bivio.com> wrote:

Ira,

I thought that gains on sales of assets to liquidate a partner's share in a partnership were charged to that account called "Unrealized Losses (Gains) Disbursed" which was "realized" to partners only when the entire partnership was liquidated. From your description it sounds like my understanding is not correct.

Peter Dunkelberger

On Fri, Feb 15, 2019 at 3:15 PM ira smilovitz via bivio.com <user*2883400001@bivio.com> wrote:

If he made a significant loss on his full withdrawal, and then weirdly had to take on a share of the realized gain made that year for the sell-offs required to liquidate his position, he would have to offset his losses with gains he never realized.

He did realize every gain the club realized when it sold stock. Each item of income or gain adjusts his tax basis upward, reducing any future withdrawal gain or increasing any withdrawal loss. Similarly, each item of expense or loss reduces his tax basis, increasing any future withdrawal gain or decreasing any future withdrawal loss.

My guess is his tax basis was eliminated completely if fully withdrawn, even if done very late in the year, leaving members to shoulder his portion of the gain on their k1s, as the losses actually experienced by the fund can be realized for current members later on. Is this right?

No. Each transaction's tax consequences are fixed on the date of the transaction. Each member receives his/her proportional share of the effect immediately, sometimes as both a change in value and tax basis (income and expense items), and sometimes only as a tax basis adjustment (gain or loss). There is no way to transfer the tax consequences of an action from one member to another.

Is the withdrawal form an IRS tax document or just a printout from Bivio?

The withdrawal report is a bivio generated document that contains additional information which is necessary to complete a member's personal tax return. It reports the date the member joined the club, his/her tax basis, the date s/he left the club, and the amount s/he received in the withdrawal. The net gain/loss is reported on Schedule D.

Ira Smilovitz, EA

On Thu, Feb 14, 2019 at 6:04 PM Matthew Steele via bivio.com <user*37608600001@bivio.com> wrote:

Thanks for the reply.

If he made a significant loss on his full withdrawal, and then weirdly had to take on a share of the realized gain made that year for the sell-offs required to liquidate his position, he would have to offset his losses with gains he never realized.

My guess is his tax basis was eliminated completely if fully withdrawn, even if done very late in the year, leaving members to shoulder his portion of the gain on their k1s, as the losses actually experienced by the fund can be realized for current members later on. Is this right?

Is the withdrawal form an IRS tax document or just a printout from Bivio?

Virus-free. www.avg.com

Yes. That is why it is recommended to transfer appreciated stock to a withdrawing partner. Conversely, if a club sells a loss to fund a withdrawal, everyone recognizes their share of the loss this year. If the losing stock is transferred, the remaining members' share of the loss is deferred until they withdraw.

Ira Smilovitz, EA

On Wed, Feb 20, 2019 at 11:27 AM Peter Dunkelberger via bivio.com <user*26984900001@bivio.com> wrote:

Ira--Are you saying that if the club sells stock to liquidate a partnership withdrawal, the club recognizes the gains in the year of the sale, but if the partner is given stock instead, the gain is unrealized until the partnership is dissolved?

Regards,

Peter

Peter

Virus-free. www.avg.com

On Sat, Feb 16, 2019 at 9:15 AM ira smilovitz via bivio.com <user*2883400001@bivio.com> wrote:

Unrealized gains/losses are created when the club gives shares of stock to a withdrawing member. The unrealized gains/losses are each remaining partner's share of the gain/loss that would have been realized if the stock had been sold and cash given to the withdrawing member. The unrealized gain/loss is locked away for each remaining member until s/he withdraws from the club.

Ira Smilovitz

On Fri, Feb 15, 2019 at 11:11 PM Peter Dunkelberger via bivio.com <user*26984900001@bivio.com> wrote:

Ira,

I thought that gains on sales of assets to liquidate a partner's share in a partnership were charged to that account called "Unrealized Losses (Gains) Disbursed" which was "realized" to partners only when the entire partnership was liquidated. From your description it sounds like my understanding is not correct.

Peter Dunkelberger

On Fri, Feb 15, 2019 at 3:15 PM ira smilovitz via bivio.com <user*2883400001@bivio.com> wrote:

If he made a significant loss on his full withdrawal, and then weirdly had to take on a share of the realized gain made that year for the sell-offs required to liquidate his position, he would have to offset his losses with gains he never realized.

He did realize every gain the club realized when it sold stock. Each item of income or gain adjusts his tax basis upward, reducing any future withdrawal gain or increasing any withdrawal loss. Similarly, each item of expense or loss reduces his tax basis, increasing any future withdrawal gain or decreasing any future withdrawal loss.

My guess is his tax basis was eliminated completely if fully withdrawn, even if done very late in the year, leaving members to shoulder his portion of the gain on their k1s, as the losses actually experienced by the fund can be realized for current members later on. Is this right?

No. Each transaction's tax consequences are fixed on the date of the transaction. Each member receives his/her proportional share of the effect immediately, sometimes as both a change in value and tax basis (income and expense items), and sometimes only as a tax basis adjustment (gain or loss). There is no way to transfer the tax consequences of an action from one member to another.

Is the withdrawal form an IRS tax document or just a printout from Bivio?

The withdrawal report is a bivio generated document that contains additional information which is necessary to complete a member's personal tax return. It reports the date the member joined the club, his/her tax basis, the date s/he left the club, and the amount s/he received in the withdrawal. The net gain/loss is reported on Schedule D.

Ira Smilovitz, EA

On Thu, Feb 14, 2019 at 6:04 PM Matthew Steele via bivio.com <user*37608600001@bivio.com> wrote:

Thanks for the reply.

If he made a significant loss on his full withdrawal, and then weirdly had to take on a share of the realized gain made that year for the sell-offs required to liquidate his position, he would have to offset his losses with gains he never realized.

My guess is his tax basis was eliminated completely if fully withdrawn, even if done very late in the year, leaving members to shoulder his portion of the gain on their k1s, as the losses actually experienced by the fund can be realized for current members later on. Is this right?

Is the withdrawal form an IRS tax document or just a printout from Bivio?

Virus-free. www.avg.com

Thanks Ira. One other question--if the club uses uninvested cash to pay off a withdrawing partner, I presume there is no gain or loss recognized by the partnership. Is that correct?

Peter

Virus-free. www.avg.com

On Wed, Feb 20, 2019 at 11:36 AM ira smilovitz via bivio.com <user*2883400001@bivio.com> wrote:

Yes. That is why it is recommended to transfer appreciated stock to a withdrawing partner. Conversely, if a club sells a loss to fund a withdrawal, everyone recognizes their share of the loss this year. If the losing stock is transferred, the remaining members' share of the loss is deferred until they withdraw.

Ira Smilovitz, EA

On Wed, Feb 20, 2019 at 11:27 AM Peter Dunkelberger via bivio.com <user*26984900001@bivio.com> wrote:

Ira--Are you saying that if the club sells stock to liquidate a partnership withdrawal, the club recognizes the gains in the year of the sale, but if the partner is given stock instead, the gain is unrealized until the partnership is dissolved?

Regards,

Peter

Peter

Virus-free. www.avg.com

On Sat, Feb 16, 2019 at 9:15 AM ira smilovitz via bivio.com <user*2883400001@bivio.com> wrote:

Unrealized gains/losses are created when the club gives shares of stock to a withdrawing member. The unrealized gains/losses are each remaining partner's share of the gain/loss that would have been realized if the stock had been sold and cash given to the withdrawing member. The unrealized gain/loss is locked away for each remaining member until s/he withdraws from the club.

Ira Smilovitz

On Fri, Feb 15, 2019 at 11:11 PM Peter Dunkelberger via bivio.com <user*26984900001@bivio.com> wrote:

Ira,

I thought that gains on sales of assets to liquidate a partner's share in a partnership were charged to that account called "Unrealized Losses (Gains) Disbursed" which was "realized" to partners only when the entire partnership was liquidated. From your description it sounds like my understanding is not correct.

Peter Dunkelberger

On Fri, Feb 15, 2019 at 3:15 PM ira smilovitz via bivio.com <user*2883400001@bivio.com> wrote:

If he made a significant loss on his full withdrawal, and then weirdly had to take on a share of the realized gain made that year for the sell-offs required to liquidate his position, he would have to offset his losses with gains he never realized.

He did realize every gain the club realized when it sold stock. Each item of income or gain adjusts his tax basis upward, reducing any future withdrawal gain or increasing any withdrawal loss. Similarly, each item of expense or loss reduces his tax basis, increasing any future withdrawal gain or decreasing any future withdrawal loss.

My guess is his tax basis was eliminated completely if fully withdrawn, even if done very late in the year, leaving members to shoulder his portion of the gain on their k1s, as the losses actually experienced by the fund can be realized for current members later on. Is this right?

No. Each transaction's tax consequences are fixed on the date of the transaction. Each member receives his/her proportional share of the effect immediately, sometimes as both a change in value and tax basis (income and expense items), and sometimes only as a tax basis adjustment (gain or loss). There is no way to transfer the tax consequences of an action from one member to another.

Is the withdrawal form an IRS tax document or just a printout from Bivio?

The withdrawal report is a bivio generated document that contains additional information which is necessary to complete a member's personal tax return. It reports the date the member joined the club, his/her tax basis, the date s/he left the club, and the amount s/he received in the withdrawal. The net gain/loss is reported on Schedule D.

Ira Smilovitz, EA

On Thu, Feb 14, 2019 at 6:04 PM Matthew Steele via bivio.com <user*37608600001@bivio.com> wrote:

Thanks for the reply.

If he made a significant loss on his full withdrawal, and then weirdly had to take on a share of the realized gain made that year for the sell-offs required to liquidate his position, he would have to offset his losses with gains he never realized.

My guess is his tax basis was eliminated completely if fully withdrawn, even if done very late in the year, leaving members to shoulder his portion of the gain on their k1s, as the losses actually experienced by the fund can be realized for current members later on. Is this right?

Is the withdrawal form an IRS tax document or just a printout from Bivio?

Virus-free. www.avg.com