There is always a fix. The question is how much time and money can you afford to fix the mistake. Remember, the IRS could raise an issue several years from now and the Treasurer can't find everyone, or somebody still doesn't want to do it right. The IRS does not care, they just keep adding interest and penalties. Do you want that mess?
Do it right the first time and you don't have a problem. Yes, some members want to do it their way. Hey, I want to look like George Clooney but that's not right either.
If you are doing stock transfers for any withdrawals, you need to enter the withdrawal in bivio prior to giving anyone anything.
You also need to use the same date for the "Stock transfer valuation date" as you use for the "Withdrawal valuation date" to avoid any issues. This is especially critical if you are disbanding.
When you enter the withdrawal, a withdrawal report is generated. It will show you which lots of stock you need to tell your broker to give each person as well as how much cash they are owed.
Laurie Frederiksen Invest with your friends! www.bivio.com
Can you summarize the differences in receiving stocks as a partial withdrawal vs full withdrawal?
At this point in time, I'm trying to figure out the options to present to the club. Right now, I'm trying to figure out the options and what we would need to do to make sure we are in the right position when we decide to disband.
Thanks again for everyone's help and advice.
Lynne
On Fri, Dec 18, 2020 at 12:58 PM Laurie Frederiksen <laurie@bivio.biz> wrote:
The tax implications of transferring stock in partial withdrawals are not the same as transferring stock in full withdrawals.
For many people, transferring shares in a partial withdrawal will not give them the tax advantages that transferring them in a full withdrawal will.
It depends on their personal tax situation.
You'll also open the potential to get into many of the issues Irina had to deal with if you transfer shares to some people and not others.
Laurie Frederiksen Invest with your friends! www.bivio.com
Thanks all for replying and to Irina for her post about distributing stock when disbanding.
Lisa - I do not know why members prefer lots of little holdings. I would say this was our first conversation and no one has thought about what the impact means.
This is why I figure I better start to learn what will need to be done. It definitely sounds like cashing out is the best option. I'm thinking if members really want stock then maybe we can do partial withdraws first and pay with the stock. I searched and found information on partial withdraws and that doesn't sound that easy either, although it does sound like Bivio will help me with that.
I appreciate any additional advice. Thanks again to all.
Why would everyone want little holdings of many stocks instead of meaningful holdings of a few stocks you really like? It is much easier to follow 50 shares of two stocks than 10 shares of ten stocks, and the tax consequences are exactly the same.
It's possible, but generally not as simple as you think. Unless each of your members has the same percentage ownership, you would be assigning shares by percentage. You won't be able to transfer fractional shares (ok, there are a few brokers that will allow fractional transfers), so you'll probably end up with a few extra shares of some companies.
An easier method would be to sell any losers. Then determine which members want which stocks. Not everyone will want every stock. Determine an equitable method for distributing the stocks that are desired. Sell everything else. Use the cash to finish funding the withdrawals.
We aren't quite ready to disband but the topic came up. Members would like to divide each stock among the members. Is this reasonable? We would start to make sure the number of shares of each stock is divisible by the number of members. I would appreciate any advice. Thanks!