Our club interest has dwindled to the point that we have decided to terminate the partnership. We have put in sell orders for all the stocks to obtain any losses or gains in 2007.  We will have two more expence that we anticipate in 2008- the maintenance fee for the software and postage for tax forms. We will close the ameritrade account and send all monies to our bank before the end of 2007. Then at tax time, withdraw all members and print and distibute the tax forms and termination checks at the same time, followed by closure of the bank account.

What other logistical things do i need to consider to terminate the club?

Hi Stan,

Hope you and your members had some fun and learned about investing!  We have some info about disbanding on iclub.com, i'll post what we have here and hope that others members of the community can chime in if they think there are other steps/issues you may run into.

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There are two ways to dissolve the club and distribute the proceeds among club members, the "Cash Only" method and the "Cash and Stock Transfer" method. If there are gains on some of your unsold shares, there may be tax advantages to the Cash and Stock Transfer method (please consult your tax adviser). Please be advised that after you disband your club the IRS requires you to file your final tax return by the 15th of the 4th month after operations have ceased. The return will cover the period from the start of the year up to the date that operations ceased.

Starting with the 2005 tax printer, we were able to offer the option to file a short year return to clubs using Club Accounting 3 and Club Accounting Online. If the club disbands during the year, the previous year's tax printer can be used to create final tax forms. Once you have followed the disbanding directions below, run the Tax Printer. It will detect that the club has dissolved, and will prepare final returns for the period starting January 1, of the year the club is disbanding, and ending with the date that operations ceased. Note - you will have to insert the beginning and ending dates on all schedules produced by the Tax Printer.

WARNING: You must wait until you have all the income and 1099s from your club's holdings. If you do not, you may end up getting a dividend or other income after you've already disbanded the club and handed out the checks. If this happens, you technically must re-run disbanding the club, change how much you paid everyone out, and refile. Your club is officially disbanded when you cut the checks, not when the vote takes place.

I. Cash Only Withdrawals Method

1. Sell all Securities.

2. Enter all "Sell" transactions into Club Accounting.

3. Record all final/closing expenses.

4. Enter a valuation for the day after all sells and final/closing expenses have been entered.

5. Print a Member Status Report on the last valuation date.

6. Withdraw all members one day after the last valuation date. Do NOT charge any withdrawal fees. You can use the same date for announcement and payout.

7. Print the Withdrawal Distribution Reports.

To process your final tax return you should print and keep copies of the following reports:
* The withdrawal distribution reports for each member
* A copy of the valuation statement that was used to disband the club
* A copy of the Income and Expense report and the Balance Sheet
* A copy of the Transaction Report for the entire year to date.
* A copy of each member’s Individual Valuation Units Ledger from the time they joined the club.
* A copy of the Investment History Report for each stock that you sold or distributed to members.

The IRS currently requires you to file your final form 1065, K and K1 forms on the 15th day of the 4th month following the date operations ceased.

II. Cash and Stock Transfer Withdrawals Method

1. Sell all Securities that are not to be transferred.

2. Enter all "Sell" transactions into Club Accounting for those Securities sold.

3. Record all final/closing expenses.

4. Enter a New Valuation. Use a date after the last sell transactions were entered.

5. Print a Members Status Report for the valuation date in Step 4.

6. Withdraw all members who are receiving CASH ONLY after the valuation date in step 4. Do NOT charge any withdrawal fees. These withdrawals can all have the same date, which should be one day later than the last valuation. The announcement date and payout date should be the same.

7. Enter any "Stock" withdrawals after all "Cash Only" withdrawals are entered.

8. Club accounting (all versions) will not accept two stock withdrawals on the same day, therefore each withdrawal with a stock transfer must be entered on a different date. Enter the first stock withdrawal on the date after the valuation date.

9. Enter the next stock withdrawal. Date the withdrawal for the next day. Again, announcement and payout dates will be the same.

10. Continue until the last withdrawal is entered, then print Withdrawal Distribution Reports.

If the club uses the Tax Printer software, print the club's 1065 and K-1's for all the members for the final year, using the Tax Printer for the prior year. Please check the "final return" box on Form 1065 manually.
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If you have further question please fire away!

dave

hi Dave,

Our club also folded but we did learn alot and enjoyed our times together.  Everyone felt it was time to go on their own after 6 years,  We sold everything 10/1/2007.

I have a question about step #4, It says "Enter your valuation the day after you sell and everything but we were still earning dividends after the sell date and interest at the bank.  Should we just use a valuation date on 12/28/2007 to account for the dividends and interest and again on 12/31/2007 to close the books for tax purposes?

Please advise.

Thanks.

John

Hi John,

After conferring with our club accounting gurus Gene Rooks and Ira Smilovitz, I have the following answers.

As per Ira:

"John should use a final valuation date after the last dividend/interest receipt. 12/28/07 would be fine. Once all the withdrawals are processed, there is no need for a 12/31 valuation.

The only "problem" that I see has to do with the date of the final withdrawals. If the withdrawal checks aren't issued in 2007, the club will have to file a 2008 short-year return"

And as Gene points out:

"Step 4 is a little misleading by saying do a valuation after all sales.   John is correct in noting that even after sales are posted, trailing dividends and money market interest continue to trickle in.  The final valuation should be done after all possible entries have been made, especially that would be on items subject to tax allocations.  Sometimes you have to fudge a little to meet the year end, by guesstimating and predating items you are sure will show up.

The order is sell or transfer any stocks you plan to do.

Enter all dividends and interest related to your stocks and money that might come in after that.

Enter any expense transactions, either actual deductible expenses, or a phantom expense not deductible to clear out any remaining bits of money market interest, the most usual clinker in the deal.

Do Valuation

After that valuation date, process withdrawals.
 
As a matter of practicality, I would leave the treasurer's til last, so if any surprises come up, he can delete his withdrawal, make any corrections, then redo his WD.   That is, if the surprise is something minor like a couple dollars interest.  Any thing major would require a rethinking of how to handle it."

I'll see if our support department can update the content in the FAQ's/Tech Notes at iclub.com.  Please let us know if any additional questions/comments, thanks!

Dave (and Ira and Gene)

Al Molter asks:

"2. Question: Why is it necessary to process the cash withdrawals first (in scenario #2) before stock withdrawals? I'd process the stock and cash withdrawals before I processed the all cash withdrawals to ensure that I had enough cash to satisfy the combination withdrawals."

Hi Al,

After conferring with our club accounting gurus, and confirming with our dev team, we have concluded that, when processing a dissolution, there is no good reason to process cash w/d's first, and we actually recommend that you do the stock WD's first, then the cash, in case there are broker related charges that apply to the transfer of stock.  That way those charges can be entered as a WD fee for the appropriate member, and not affect the other members.

Our support documentation/faq at iclub.com should be updated soon with this information.  Please let us know if you have more questions, thanks!

Dave

hi Dave (Ira and Gene),

Thank you all for looking into this and making recommendation on the valuation situation.  I really appreciated your help!

Keep on investing  and don't worry, be happy!

Thanks again.

John