Expense Allocation Methods

You should only pay expenses from club funds which are shared by all the members in the club and can be split up either in proportion to their ownership share or in an equal dollar amount to each member.

Expenses which are to be allocated only to specific members are not actually club expenses. They should not be entered in the club records nor paid using club funds. Instead, the members in question should pay the expenses directly from their personal accounts and keep track of them for their own records themselves.

By default, expenses are allocated per IRS instructions, based on ownership percentage. This is the same way income is distributed. When a club has an expense each member pays an equal percentage of their club ownership toward the expense.

Club officers can also check the Allocate per Partnership Exception box on the Account Expense form. When checked, an equal dollar amount of the expense is allocated to each member. This is achieved by removing an equal number of units from each member. The number of units to debit is computed by dividing the expense amount by the Unit Value on the date of the expense.

Note - the selection of Allocate per Partnership Exception should only be made if such selection is expressly defined and permitted in the clubs partnership agreement and such selection is in accordance with IRS regulations. Per section Section 1.704-1 of the IRS Treasury Regulations.

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