What is Withdrawal Related Realized Gain?
This extra line, Withdrawal Related Realized Gain,shows up if a member has taken a withdrawal that is greater than their cost basis in the club.You should be able to see that any members listed have withdrawn amounts greater than their cost basis in the club. You can check this by looking at an Individual Valuation Unit ledger report for the members mentioned. At the end of the year on 12/31 their "Paid in Plus Earnings" amount will be negative. The negative amount denotes taking more out of the club than their cost basis.
The negative amount is a capital gain from their investment in the club. The members listed will report the amount on their personal form 1040. There is a new form for individuals to itemize capital gains. It is form 8949. The details of capital gains go on form 8949 and a summary is transferred to schedule D of form 1040.
If these members were members of the club for at least a year on 12/31/XX then these amounts are long-term capital gains for them. It they were members for less than a year on 12/31/XX, then the amounts are short-term capital gains
NOTE: This should normally only appear for members who have taken a partial withdrawal during the year. Our accounting advisor gives the following example of why:
" You know the gain immediately with a full withdrawal and it is reported on the Withdrawal Report.
You don't know the gain on a partial withdrawal until the end of the year. Members can make deposits to bring their cost basis back up to reduce or eliminate a gain from a partial.
For example: I make a partial withdrawal in February that would result in a $500 gain, if I deposit at least $500 during the remainder of the year I will not have a gain to report at the end of the year."