waving assessmemts with profit from sale in Az.

Bob, be verrrrrrrrry careful. If your association were to do that, it may be that the income from the sale would be held to be taxable income by the IRS. It may end up costing the association 30 percent in corporate income taxes, perhaps even more. And that does not take into consideration any state tax liabilities.

The smart move now would be to return it to the association members, and let each unit owner decide if they want to use it to pay for their annual assessments. However, such a distribution might subject some individual unit owners to the Alternative Minimum Tax or require that they pay capital gains tax.

Perhaps a reasonable alternative would be to put 100 percent into the reserve fund and suspend further annual contributions by members to the reserve fund. This would keep it on the asset side of the balance sheet and might escape income taxation (trading one capital asset for another in a non taxable exchange).

You need good tax counsel to advise you on your options at this point.

The distribution/use of the sale proceeds should have been carefully considered before the land was sold. This could be considered a serious failure of board due diligence. perhaps even misfeasance. At the very least, if the issue of distribution of proceeds was not considered by the board, it is a sign of poor judgment.

Because of tax liabilities the sale may cost association members more than it benefits them.

A sticky wicket . . .

Excellent advice, George.