1989 Concord Consumers Cooperative Case

Started by RogerB • 4 replies • 2715 views

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RogerB (Colorado)
Posts: 5,067

Posted:

I've seen several IRS 1120-H tax forms where a tax deduction of 10% of the total management fees was taken. This seems ridiculus and unjustifiable when the deduction is greater than the total income earned from investments. For example, a deduction of $960 on a taxable income totally $600 from interest on CD's. Those who are doing this have referred to the above case and the CAI Ledger Quarterly, Fall 2000 issue.

Does anyone have information or thoughts on this?

AudreyB (Florida)
Posts: 104

Posted:

Hi Roger,

I'm curious, and I realize this is none of my business.

I'm curious about how much your Association pays for your management fees a year? Please give me a total that's close, not exact. If your Association has a monthly payment, may I know the ball park monthly figure?

The reason, our President has our homeowner's believing that if we hire a management company's are in the business for making money for themselves, and not too personal as our BOD's is, and it will cost every homeowner $400 a month, times 269 homeowner's equals $107,600 year for the management company's bank account from us.

I belive, the Assoication pays the management company $400 a month divided by 269 homeowner's, equals $1.49 a month from each homeowner.

So,I'm, curious to know who's right.

As for your question, maybe a CPA who has done HOA income taxes who knows the ins and outs of what you need help with might know best? Good luck with it, and when you get the answer, please share.

Thank you.

Audrey

RogerB (Colorado)
Posts: 5,067

Posted:

Audrey, Our company's full services fee averages $7 to $8/home for 70 homes and for 400+ homes as low as $3/home. Extra cost items include collection on delinquent accounts, administrative supplies, and drafting documents and amendments. Often we save HOA's more money than we are paid by providing the lowest management cost, getting good contractors at lowest costs, increasing the return on investments, getting better insurance at a lower cost, reducing legal costs (never been to court), and other items.

RogerB (Colorado)
Posts: 5,067

Posted:

Quote:

Posted By RogerB on 11/14/2005 8:11 PM
I've seen several IRS 1120-H tax forms where a tax deduction of 10% of the total management fees was taken. This seems ridiculus and unjustifiable when the deduction is greater than the total income earned from investments. For example, a deduction of $960 on a taxable income totally $600 from interest on CD's. Those who are doing this have referred to the above case and the CAI Ledger Quarterly, Fall 2000 issue.

Does anyone have information or thoughts on this?

Second time around - any comments?

DaneC (California)
Posts: 210

Posted:

Interesting and curious.
Claiming 10% of the management fee - can't figure out the rationale behind that. As far as the case you cited, it seems that it was addressed under IRC 277.

Following is an excerpt from IRC 528.

HOMEOWNERS ASSOCIATIONS
§ 1.528–1 Homeowners associations.
(a) In general. Section 528 only applies to taxable years of homeowners
associations beginning after December 31, 1973. To qualify as a homeowners association an organization must either be a condominium management association or a residential real estate management association. For the purposes of Section 528 and the regulations under that section, the term homeowners association shall refer only to an organization described in section 528.
Cooperative housing corporations and organizations based on a similar form
of ownership are not eligible to be taxed as homeowners associations.

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