Re: HOA taxes
From: Diana E Carroll (dianaecarrollgmail.com)
Date: Mon, 8 Feb 2010 05:58:51 -0800 (PST)
The key there is "operating expenses", which is a pretty broad term.

In our case, we provide childcare only during our general meetings, which are meetings whose purpose is to discuss the operation of our association. I don't see how we'd be able to pay a secretary to take notes during the meeting, but not a childcare person to watch our children during the meeting. I think it would be quite different if it were childcare for other purposes.

Meals I think would be hard to include.  :-\

On 2/8/2010 7:41 AM, Fred H Olson wrote:

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Rosemary McNaughton<astromezzo [at] gmail.com>
is the author of the message below.  It was posted by
Fred, the Cohousing-L list manager<fholson [at] cohousing.org>
after deleting excess quotes.
--------------------  FORWARDED MESSAGE FOLLOWS --------------------

From the instructions for the 1120-H:


At least 90% of the association’s
expenses for the tax year must consist of
expenses to* acquire, build, manage,
maintain, or care for its property*, and, in
the case of a timeshare association, for
activities provided to, or on behalf of,
members of the timeshare association

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Item C. 90% expenditure test. At least 90% of the association’s expenditures
for the tax year must consist of *expenses to care for property*, and in the
case of a timeshare association, for activities provided to, or on behalf
of, members of the timeshare association. Include current and capital
expenditures. Use the association’s accounting method to figure the total.

Include:
1. Salary for an association manager or secretary.
2. Expenses for gardening, paving, street signs,
security guards, and property taxes assessed
on association property.
3. Current operating and capital expenditures
for tennis courts, swimming pools, recreation halls, etc.
4. Replacement costs for common
buildings, heating, air conditioning,
elevators, etc.

Do not include expenditures for
property that is not association property.
Also, do not include investments or
transfers of funds held to meet future
costs. An example would be transfers to a
sinking fund to replace a roof, even if the
roof is association property.

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These instructions seem pretty oriented towards care of property - but I
don't know about any past history of tax rulings that clarify whether
something like childcare would count as managing property.  In most condo
associations there's professional management, but when a lot is managed by
volunteers is their childcare expense a management expense?

With childcare you'd want to be careful to file the right 1099s for any
provider who's received over the threshold amount for the tax year.

I don't see how common meals would fit in there at all - or really any
social event.  Even once we separated common meals, it was hard to believe
we would meet the 90% expenditure test every year given that we try to keep
our property maintainance costs low (through a lot of volunteer labor) and
social interaction high!

-Rosemary


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