flip tax aka "capital contribution"
From: Christine Johnson (manzjohnsonnetzero.net)
Date: Mon, 12 Feb 2007 17:50:35 -0800 (PST)
HOAs and COAs frequently assess a "capital contribution" at closing the sale of a home. It is usually the equivalent of two months of the monthly assessment rate. It is revenue subject to tax.

Sadly, bad developers put a capital contribution in place in lieu of properly funding reserves for new developments. I don't think it's common in CA, land of land speculators, where Developers are highly regulated).

Your C,C & Rs are where you would find any reference to it. If allowed, the seller and buyer may negotiate who makes pays the capital contribution. The convention in AZ is that is the buyer that pays. The payment goes into reserves, i.e., as a contribution to capital. The reasoning is that all the owners have mutual obligation to maintain, preserve and enhance the property held in common and that new owners benefit from the capital improvements that were funded by all the other owners who are in place and so it is just for new owners to "contribute."

Christine Johnson
Stone Curves Cohousing
Tucson, AZ 85705

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