Mutual fund type accounting

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#1
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31-Mar-2016 6:40pm
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Texas
I have a client that is looking to / already has established an entity with a handful of partners for the purpose of investing in low risk assets. i.e. bonds, participations. The idea is to establish the entity on an accrual basis to allow for the FMV and bond amortization to be calculated throughout the year. There will be quarterly "windows" to where new partners can come in to the partnership as well as old partners can sell their interest. I might be thinking a little too hard on this issue, but my current thinking is that every time a partner sells out, then essentially, the remaining partners are buying the selling partners interests in whatever investment the partnership holds. i.e. the partnership has a 500k bond and it has 10 partners. One partner leaves, so then the remaining 9 partners buy in to the 50k gap that was created when the one partner sells out. Thus recalculating their basis in the bond. The opposite is true when new partners come into the partnership. Does anyone know of any guidance that would help me get a sense of understanding on how to account for this entity? Any comments?
 

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