Federal Income Tax Law
Condominium associations are unique in that the Internal Revenue Service (IRS) allows them to elect annually to be taxed as a regular corporation or receive special treatment and be taxed as a homeowners’ association. If electing to be taxed as a regular corporation IRC § 277 applies and Form
1120 is filed. If electing to be taxed as a homeowners’ association IRC § 528 applies and Form 1120-H is filed. The board of directors can seek advice from accountants, attorney or property manager but must ultimately decide which form to file. In order to make that choice they need to know details about the specifics of each filing option. Many associations tend to file the form which produces the lowest tax liability. However the choice is much more complex and many factors must be considered.
If an association chooses treatment under IRC § 528 it allocates its income and expenses between exempt function activities and non-exempt function activities (Checkpoint, 500.2). As the name implies, exempt function income is not taxable. Non-exempt function income, net of related expenses, is taxable. The first $50,000 of taxable income is subject to a 30% tax rate (Checkpoint, 500.2). If an association files under IRC § 277 it allocates its income and expenses between membership and non-membership activities (Checkpoint, 500.2). Non-membership income is not taxable. Membership income, net of related expenses, is taxed at regular corporate rates. Currently the first $50,000 of taxable income is subject to a 15% tax rate (Hoffman et al, 2014).
The board of directors must also be aware of the accounting requirements for income taxes. Income tax preparation is based on the amounts shown in the association’s fi...
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...me Taxes, 501 Tax Law Principles Commons to All CIRAs
Checkpoint.riag.com. Accounting, Audit & Corporate Finance Library, Editorial Materials, Specialized Industries, Homeowners’ Associations, Chapter 5 Income Taxes, 502 Form 1120-H – Taxation under IRC Section 528
Checkpoint.riag.com. Accounting, Audit & Corporate Finance Library, Editorial Materials, Specialized Industries, Homeowners’ Associations, Chapter 5 Income Taxes, 503 Form 1120 – Taxation under IRC Section 277
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[4] Colin Drury, Management and Costing Accounting, (7th edition), Chapter 3, Cost Assignment, p. 54-59
Plunkett, Linda M., and Robert W. Rouse. "Revenue Recognition and the Bausch and Lomb Case." CPA Journal Sept. 1998: n. pag. CPA Journal. Web. 16 May 2014.
The goal of the Codification is to simplify the organization of thousands of authoritative U.S. accounting pronouncements issued by multiple standard-setters. To achieve this goal, the FASB initiated a project to integrate and topically organize all relevant accounting pronouncements issued by the U.S. standard-setters including those of the FASB, the American Institute of Certified Public Accountants (AICPA), and the Emerging Issues Task Force (EITF)
Living in a neighborhood that has a Homeowners Association is not for everyone. If you buy a property with a Homeowners Association you are required to pay an Association membership fee, which may increase. The Association may also enforce new rules that you may find too restrictive, like what type of bush you can plant or the type of fence you can have in your own yard. There are places where it is becoming more difficult to buy a house that is not governed by an HOA, especially in newly developed areas. There are pros and cons to living in a community with a HOA.
Internal Revenue Service, (2011). Energy incentives for individuals in the american recovery and reinvestment act Retrieved from http://www.irs.gov/newsroom/article/0,,id=206875,00.html
Resolving the taxable status of units that later remain in the condominium as common elements pursuant to MCL 559.167.
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Every individual or organization has to pay taxes base on their income. These taxes are the Income tax
talktoataxpert,. (2013). Tax resdidency for individuals – the domicile test. Retrieved 14 May 2014, from http://talktoataxpert.wordpress.com/2013/03/10/tax-resdidency-for-individuals-the-domicile-test/
Purchasing my first home was a monumental moment for me, yet there were so many steps involved. The acquisition was a process, far more extensive than I had ever realized. I had select criteria, and felt I satisfied this well. As a mother I needed a clean and safe environment in which to raise my daughter; as a first time home-buyer, I had to do this within a modest budget. I found a quiet little neighborhood on the edge of town; it was a dream come true. It was the perfect family neighborhood. I bought a cute little house in a cul-de-sac, no more apartments, and no more stringent guidelines. I had a protected investment and felt in control. I am not an experienced home-buyer, so it is quite possible I missed a few warning signs. My neighborhood is replete with rental properties. Neighbors came and went, few with lasting ties. There was a noticeable decline in property maintenance, as well as morale. If you’ve ever mistaken the neighbor’s home for a yard sale, then you know what must be done. In order to protect our investments, the residents of Windsor Village need to organize a homeowner’s association.
Mintz, Jack M., And Alfons J. Weichenrieder. "The Indirect Side Of Direct Investment." National Tax Journal, 2010: 731-738.
"Accountants." WISCareers. University Of Wisconsin System Board of Regents, 2009. Web. 20 Nov. 2009. .
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