Cohousing-L Mailing List: Re: Gifts & Bequests - Tax Implications

[Diana Carroll (dianaecarroll]

I'm the treasurer at Mosaic Commons in Central MA. I haven't had this exact
situation, but we have had discussions about it and it is likely to happen,
so I've been thinking about it for a while.

I think that given that the contribution is from an owner/member, and is
for the purpose of maintaining or improving a common building, that it
could be considered an assessment (a voluntary assessment, something the
tax law appears not to contemplate) and therefore be exempt function
income.

Also, even more importantly, the gift is not in the main category excluded
from being exempt function income: the owner in question is not receiving a
service for their contribution (right?). The amount is clearly in support
of your HOA's exempt functions. That's my take.

Assuming you use for 1140h, here's the relevant bit:

Exempt function income.


Exempt function income consists of membership dues, fees, or assessments
from
(a) owners of condominium housing units; (b) owners of real property in the
case of a residential real estate management association; or (c) owners of
timeshare rights to use, or timeshare ownership interests in, real property
in the case of a timeshare association. This income must come from the
members as owners, not as customers, of the association's services.

Assessments or fees for a common activity qualify but charges for providing
services don’t qualify.

Examples.

In general, exempt function income includes assessments made to:

   1.

   Pay principal, interest, and real estate taxes on association property;
   2.

   Maintain association property; and
   3.

   Clear snow from public areas and remove trash.

Income that is not exempt function income includes:

   1.

   Amounts that are not includible in the organization's gross income other
   than under section 528 (for example, tax-exempt interest);
   2.

   Payments from nonmembers;
   3.

   Payments from members for special use of the organization's facilities,
   apart from the use generally available to all members;
   4.

   Interest on amounts in a sinking fund;
   5.

   Payments for work done on nonassociation property; and
   6.

   Members' payments for transportation.


On Fri, Feb 10, 2023 at 7:01 AM Mary Kay Doyle <marykaydoyle [at] gmail.com>
wrote:

> This is for all the financiers out there. I am the treasurer for a small
> (18
> homes) cohousing POA in rural North Carolina. We received a generous cash
> gift ($2,500) from a member for the designated purpose of rehabilitating
> one
> of our common buildings. There are also several members who have decided to
> include bequests to Elderberry in their wills, both cash and property.
>
>
>
> Has anyone received a property bequest or any sizable (>$1,000) cash gift?
> How did your treasurer/accountant handle it?  Did you have to pay taxes on
> it? Does the IRS consider property and/or cash gifts taxable income? I am
> getting conflicting information in my research.
>
>
>
> Thanks in advance for sharing your experience!
>
>
>
> Mary Kay Doyle
>
> Elderberry Village POA
>
> Rougemont, NC
>
> https://www.elderberrycohousing.com/
>
>
>
>
>
>
>
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