That changed recently when Russell Malley updated us with some information he gathered together about clubs filing short year returns. While there is not a specific date during the year when these forms can no longer be used, there is a guideline set by the IRS about clubs who consider closing early. What he found was the following:
IF THE CURRENT TAX YEAR FORMS WILL BE AVAILABLE BY THE DEADLINE TO FILE THE SHORT-YEAR RETURN, A PARTNERSHIP IS REQUIRED TO USE THE CURRENT YEAR YEAR FORMS.

Based on this, Russell suggested the following:
-If a club disbands in December, their deadline is April 15 of the following year. Tax forms should ALWAYS be available by then so these clubs should always wait to use the new forms.
-A November dissolution has a deadline of March 15. Forms are usually ready by mid January to early February. These clubs should wait for the new forms to file their returns.
-An October dissolution has a deadline of February 15. Most years forms will be available by this date. If large tax law changes are enacted, forms may not be available by Feb 15. While this is uncommon, it has happened in the past.

Based on this, we recommend that clubs considering disbanding in the last quarter should wait until the new year to file, and use the forms
for that year. To be safe, those dissolving in October can file for a 5 month extension using form 7004 to anticipate the event the 1065 forms are not ready by Feb 15.

Just to be clear: This does not mean that we are going to turn off the tax printers, or somehow block a club from using the short year return if it's past one of the dates noted above. What it means is that the closer it is to one of those dates, the more likely it becomes that someone at the IRS will notice, and send a polite inquiry about why the more current forms were not used.

Two other things to keep in mind:
1.) File in a timely manner; better to file on time and need to make a correction, than file late and hope nobody notices.
2.) If the tax law changes, a dissolving partnership must follow the law in effect for the year they dissolve no matter which forms they use.
For example, a club dissolving in April 2010 would need to use 2010 law even if using the 2009 forms. Significant law changes can be a problem for customers using the previous year tax printer to file their final return. This is because that tax printer will not include the tax law changes needed to file an accurate return for the following year.

One recent example is the split of dividends into qualifying and non-qualifying. Clubs with some history will also remember the splitting of capital gains into 3 categories one year (long-term, medium-term and short-term) and a year or so later back to the current 2 categories.
In those cases, the previous year's tax printer would NOT produce an accurate final return for a dissolved club on the previous year's forms.

Before completing a short year return, be sure that you have have all income from your club's holdings (Especially any dividends, or account interest). 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.

Keeping the above information in mind, 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 day 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.

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 report 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 each member 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 K-1 forms by 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. 
Note: previous instructions indicated that a new valuation should be produced for each member withdrawal using stock. This is no longer true. 
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, and you have followed the NOTE at the beginning of this email, 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. Make sure to check the "final return" box on Form 1065 manually.