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I doubt you can complete everything correctly on your own. The calculation of the cost basis for the received shares is a complicated calculation - at one time it was detailed in IRS Pub. 541, but I don't think it is now. You can't ignore the cash distributed as that affects the member cost basis that must be allocated across the received shares.

Thanks. I didn't realize that a final cash distribution would need to be reflected across the share basis since this is cash that was received from selling shares, and the associated capital gains have to be reported. I do have the NAIC instructions on doing that, however, and as we had previously had a cash distribution a few years ago, I had already done the adjusting with that cash distribution. That's why I knew the members' cost basis needed to be adjusted, and those adjustments had been made.

Sounds like I need to revisit for this new small amount of cash, and it is a very small amount.

Additionally, the receiving broker will (most likely) never have the correct cost basis for the transferred shares because of the rules instituted with cost basis tracking. Those rules state that the receiving broker must take the cost basis information from the sending broker. The sending broker is going to send the club cost basis for the shares transferred. The receiving broker "may" accept correcting information from the beneficial owner of the shares, but doesn't have to. The brokers I have dealt with have all refused to adjust the cost basis on shares transferred from an investment club and have basically said, it's your responsibility to track this and correct it on your tax return when you sell the shares.

Actually, I took the time to work with the broker to ensure that the members' cost basis was accurate. It took several months (somewhere on the boards, I did mention my Scottrade saga), but they did finally get it correct with the adjusted basis. And then when the accounts were moved to the final broker, I confirmed that the cost basis followed, so that is actually correct.

That said, it sounds like we will each need to now account for the return of this cash, and track that for future sales to reduce the basis by that small cash amount. I can actually take the time now to add a new column to our cost basis for this new basis, which is pretty easy as I have it all in a spreadsheet.

Thanks again for the help. I will be working on this more this weekend.
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