Cohousing-L Mailing List: Re: CoHo Partnerships and taxes

[RLob4Grell (RLob4Grell]

Dave Adams wrote:

>We (Cornerstone) have a Joint Venture Agreement describing how one becomes a

>partner and the rules for breaking up (which WON'T happen...).  We are not 
>incorporated as anything, although we do have a Federal Employer ID number 
>(We didn't want to attach the group's checking accounts to any individual's 
>SSN.)

>We have been trying to figure out whether we need to file a partnership 
>statement with the IRS.  If not, why not?  If so, how do we calculate the 
>profit (NOT!) or loss, and what do we need to put into our report to 
>ourselves?

I'm not sure if an example from California helps but this is what we have
done.

We incorporated as a Non-Profit Mutual Benefit Corp. The impetus for this was
to sign legally binding documents as a group and  take title to our land as
 a group. We actually have yet to take title but that is for another day's
explanation. Presently we have simple 'bolier plate' Articles of
Incorporation and Bylaws. We have not followed the path of Joint Ventureship.

Presently, our profit and loss for tax purposes is almost completely defined
by how much interest the money in the bank accounts is generating ('profit')
and how much money we are paying on an interest only loan we are using a
'bridge' financing (also known as 'hard money'). All monies comming in from
members (dues) is being considered 'loans' from the members. With that
stratagy, we belive that at the time of construction financing, we can
convince the bank that part of the construction financing includes paying
back the loans (with interest). That way, the members can use all the money
paid in as down payment instead of simply reducing the cost of the units . We
pay virtually no Federal Tax but for having the privlidge of doing business
in CA we owe a minimum of $800 a year in taxes.

We have been incorporated since May '93 and have just come to the realization
that we are deliquent on the above taxes. We are presently in the process of
have an Accounting firm design our General Ledger, author our tax returns and
provide us with Tax planning stratagies. The bill for the work to date is
about $2800. 

We may ultimately end up with two legal entities; the present development
group and a true 501(c)(4) non-profit corp which acts as the holder of the
common areas and is the 'homeowners association'.

Good luck on this extremely exciting portion of cohousing development. The
good part of it is, very few people in the group care about legal issues and
you dont have to take long in the meetings explaining this stuff. Just make
sure your consultants are good and then delegate!

Rich Lobdill
Grell CoHousing Group
San Luis Obispo, CA