Paid in Plus Earnings – PIPE PIPE - The figure that appears on your Member’s Status Report, following the figure for your actual Total Paid In to the club. It could be either more or less than what you have paid in. So, what does it mean? Your club has had taxable transactions during the year. These are passed through to the members, as the club partnership itself does not pay taxes. The actual amount you have contributed, Total Paid In, is reduced or increased each year by your percentage share of the club’s earnings or losses. This is the data on the K-1 you receive after year-end, which is to be included in your personal tax filing. PIPE is the tax basis of your investment in the club. Eventually you will withdraw from the club (either because you choose to, or because the club disbands). If your withdrawal is paid 100% in cash, you will report a capital gain or loss upon withdrawal based on the difference between the cash received and the aforementioned PIPE. That capital gain or loss is reportable on Form 1040 Schedule D of your personal tax return. The club should send you a withdrawal report showing the amount of the gain or loss (the gain or loss will not appear on the Schedule K-1 form the club sends you). If your withdrawal is paid 100% in stock (i.e., stock held by the club is transferred into your name), that PIPE value becomes your tax basis for the transferred stock and you will have no reportable gain or loss upon withdrawal. When you eventually sell that stock you'll report a capital gain or loss using that PIPE value as your tax basis. Comment on this Page Last Modified 2009-01-07 |
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