|
What is a distribution and when should I distribute the club's earnings?
When the treasurer uses the Distribute task at the end of
each year to "distribute earnings" the task calculates the taxable gain to be
added to each member's tax basis (amount on which taxes have already been paid). Each
member must pay taxes on his or her share of the taxable gain.
One of the most difficult problems in understanding
distributions is the terminology. There are two kinds of distributions: the distribution
of earnings (dividends, interest, capital gains, etc.) and the distribution of tax
liabilities. Club Accounting distributes earnings automatically as they occur. Club
Accounting distributes the tax liabilities on earnings once a year when you invoke the
Distribute task. Because the distribution of tax liabilities is commonly called a
"distribution of earnings" we also refer to it in that way even though it is
somewhat of a misnomer.
You should use the "Distribute" task to do a distribution of
earnings once a year for the last day of the tax year. In the vast majority of the cases,
this is December 31. (A few clubs operate on a different tax year and should distribute
earnings on the last day of that tax year.) Although the software allows you to distribute
earnings on any valuation date you choose, there is no reason to do so more often than the
last day of the tax year.
Note: When a person withdraws from the club, the software
automatically distributes that person's tax liabilities to the withdrawing member.
This distribution appears on the Withdrawal Distribution Report. Therefore, it is never
necessary to use the Distribute task when a member withdraws from the club.
|
