Re: Reserve Studies
From: Sharon Villines (
Date: Fri, 30 Dec 2011 05:27:10 -0800 (PST)
On 30 Dec 2011, at 6:04 AM, Diana Carroll wrote:

> Where can I find the IRS rules on reserve uses?

I don't know but you could peruse the IRS website which is pretty substantial. 
Or call an IRS office.

> And more generally why does it matter?  HOA income is generally tax exempt.

It depends on the nature of the income and the size of your reserves. As that 
fund grows, interest earnings grow. Those earnings are taxable under certain 
circumstances. The IRS doesn't want associations hiding income in reserve 

> I'm also curious what people are doing with their reserve funds,,,keep them
> in a savings account?  CDs?  Invest in mutual funds?

Laddered CDs, which means CDs with varying maturity dates so they don't have to 
be redeemed at a penalty.

Some associations are discussing putting some reserves in investments like 
mutual funds. I don't know if any actually have. The practice is to invest at 
the lowest possible risk — insured if possible.

Sharon Villines
Takoma Village Cohousing, Washington DC

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