Cohousing-L Mailing List: Re: reserve investment and taxes

[Diana Carroll (dianaecarroll]

Sharon says, of Takoma Village:

>
> We certainly did pay taxes but the H Form way is more complicated and
> there is a different way that I think is a straight percentage.

The people (not me) who handle this are aware of all the options and just
> use the one that is best for that year.
>
> I think you have it backwards. 1120-H is the form specifically designed
for home owners associations and is very simple (one page), and it is a
straight 30% on taxable earnings, which includes interest but NOT
assessments. The option would be to file as a corporation using the 1120
which is not only a million times more complicated, it also treats
assessments as taxable income, which would then require you to depreciate
your property to offset it. I've looked briefly into whether filing 1120
would benefit us financially, but it doesn't seem it would benefit any not
for profit condo association. And it also seems that once you file an 1120
you would need to do so forever in order for the depreciation to be
appropriately amortized.

If it is true that Takoma Village (or any other community!) is really
alternating over the years between filing 1120-H and 1120 and making it
work to their financial benefit, I really need you to hook me up with your
finance people for a powwow! (dianaecarroll [at] gmail.com please)


> In NYC, there are condos that won’t allow people to hold _any_ mortgage on
> their units. Buyers have to have cash. Others will limit the mortgage to
> half the cost of the unit. I’m sure there are many variations. Some
> buildings just don’t want people who are “living above their means.” It’s a
> form of maintaining exclusivity but also of financial security for the
> building.


Are you sure those are condominiums and not coops? And are any of those
cohousing? That sounds like a very uncohousing approach. Anyway, if there
is somewhere an existing cohousing condominium that does not support buyers
getting mortgages, that would be a very tiny edge case, so not really an
explanation for how to avoid paying taxes.

Diana