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To see what happens when we pay expenses out of fees, let's take an example of a two person investment club.  

Assume you and I are a club of two members - I own 90 units and you own 10, making you a 10% owner. If we decide that both of us should be assessed a fee of $100, the club's value will go up by $200. Of that, I get $180, and you get $20. So you have put in $100, but your total worth only went up by $20. That's a $80 loss for you, and a $80 gain for me. 

Is that fair? Well no, not if that's the end of the story. But let's assume that we needed to buy a $200 computer program, and we, in our wisdom, decided that it was only fair that we split this cost equally. I don't know how I talked you into that, but I did. So, we have each put in $100, and my worth has increased by $180, and yours has increased by $20. Now, we pay out the $200 for the computer program. When an expense is incurred,  the economic burden will be allocated according to ownership interests. So my value will go down by 90% of that $200, and yours will go down by $20. Now we are back where we started, only we are both $100 poorer, and the club has a $200 computer program. That's not so bad, since we agreed that we would each bear the computer expense of $200 equally. But that only works when the expense exactly equals the fee assessment. If the computer program had only cost $100, I would have ended up with $90 of yours. 

In practice, making the expenses exactly equal the fee assessment is impossible, and, I might add, completely unnecessary. 

All right. We know that assessing fees in excess of the expenses they are intended to cover can benefit the majority unit holders, at the expense of those with lesser units. But if we can make expenses equal to the assessments, isn't it a good idea to pay these expenses out of fees? The answer is no. This accomplishes spreading the burden of the economic cost equally among the members, if that is the goal, but it does not accomplish the other important goal - namely to allocate the tax deduction equally among the partners.  

The IRS takes the position that the tax deduction for expenses should be allocated according to how the actual economic burden is spread. So, assessing fees for expenses is NOT in accordance with IRS regulations. 

On of the main reasons for assessing fees for expenses is to spread the economic burden equally among the partners. If the club wants to do this, there is a much easier and better way to accomplish it. Now, all club accounting software programs give treasurers the option of allocating any expense equally among partners for both the actual economic burden and for taxes. You are able to select this option every time you record an expense.