The Motley Fool Discussion Boards

Previous Page

Financial Planning / Tax Strategies

URL:  http://boards.fool.com/in-early-2005-i-withdrew-from-an-investment-club-23689779.aspx

Subject:  Re: InvClub Partnership Distributions Date:  2/10/2006  10:56 PM
Author:  irasmilo Number:  83810 of 121572

In early 2005 I withdrew from an investment club partnership. I have my 2005 K-1 form which includes my share of capital gains and dividends for 2005 plus my gross withdrawal distribution on line 19.
The club invested in cash and stocks only. My withdrawal distribution was in cash for about $10,000 of which about $3000 was gain over the years in the club.

I understand that I report the distribution gain on Capital Gains Form D but I'm not sure where to report it on the form or what figures to report-Gross, Gain only or both. The club did not issue a form 1099, but does provide a Withdrawal Distribution Report which shows the gross distribution, basis and gain. Should this be submitted with Form D or do I just have it available if needed later. Are any other forms required?


Here's what you do. You report all of the income/gain/expense items shown on your K-1 in boxes 4-18 on the appropriate lines/forms of you tax return. Include the amounts in box 20, if you have margin interest to report (from the club or from other investments). You can ignore the entries in box 19. If they were completed correctly (and not all club accounting software does it correctly), these numbers are the club's adjusted cost basis in your withdrawal amount, a concept that is meaningless with regard to what you report.

Finally, you must report your gain/loss on withdrawal from the club. You get this information from your withdrawal report. You report this on Schedule D as a long-term gain/loss. Your purchase date is the date you joined the club, your sale date is your withdrawal date. Your cost is the adjusted tax basis shown on the withdrawal report. The "sales proceeds" is the net withdrawal amount. The difference is the gain/loss you recognize for tax purposes.

Ira
Copyright 1996-2014 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us