Attorneys Steven Long and David Heeren were recently featured in the NCBarBlog for their article, “Sale of Social Club Assets Upon Liquidation.”
Published by the North Carolina Bar Association’s Tax Section, the piece unpacks the tax consequences social clubs face when selling assets as part of a liquidation.
Excerpt for the article:
Eventually, social clubs desire to end their operations. The question arises of what impact the sale and eventual distribution of net profits has on the club and its members. Based on several IRS rulings, a liquidating sale of assets, such as a clubhouse or sporting facilities, does not cause a social club to lose its tax exemption. While a club generally can earn no more than 35% of its annual income from non-membership income, unusual income is excluded from this calculation. Gain from the sale of assets upon dissolution of a club qualify as unusual income. Thus, clubs that sell their assets remain tax-exempt through the date of sale, and the distribution of the liquidated assets to its active members. Rev. Rul. 58-501 and PLR 201003022 (revenue from the sale of social club property is excluded from calculation required to determine whether club derives its primary support from members).
This article is a great reminder of how nuanced tax law can be, especially when it intersects with dissolutions and the preservation of qualifying statuses. By dissecting IRS rulings and statutory provisions, Steve and David provide both clarity and practical guidance to social clubs facing asset liquidation.
Read the full article on the NCBarBlog.
