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

[David G Adams (dadams]

> 
> 
> I wrote about Joint Venture Agreements and taxes...
> 
Rich Lobdill responded
> 
> ...
> 
> Presently, our profit and loss for tax purposes is almost completely defin
> 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 fro
> 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 mone
> paid in as down payment instead of simply reducing the cost of the units .
> pay virtually no Federal Tax but for having the privlidge of doing busines
> in CA we owe a minimum of $800 a year in taxes.
> 
A couple of more specific notes about Massachusetts and Cornerstone...

* I believe Mass. eliminated the minimum corporate tax a few years back.  
One of the few advantages of having a Republican govenor who is actually 
effective rather than reactionary.

* We were concerned about classifying monies put into the group as "loans" 
because the IRS assumes you receive at least some standard rate of interest 
on any loan.  We don't know if we need to pay federal income tax on the 
interest on all our contributions to the group so far (about $6000 / 
household) even though we haven't actually received interest payments from 
the group.

* We put two types of money into the group:  "dues" of $50 / quarter, and 
"fair share", which is loan money for the development.  The dues are paid by 
associates as well as full members.  I'm afraid that we'll be considered a 
training center type business which teaches associates about our development 
process for a fee of $50 / quarter, and that this "dues" money must be 
considered income.  We spent almost all of it, so it's not like we have to 
pay extra taxes.  However, each of the 16 members of the group may have to 
fill out a schedule C with lots of complicated income and expense reporting 
just so that we split up the miniscule profits among the partnership.

Anyone else out there a partnership?  If not, I might push through an 
incorporation discussion at this coming Sunday's meeting.

Dave Adams
Cornerstone

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  |\/\/\/|  David G. Adams   
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