Instructions For Form 1120-H - 2008 (Page 2 of 5) in pdf

paid with all ruling requests. For more

associations and residential real estate

as customers, of the association’s

information on ruling requests, see Rev.

management associations.

services.

Proc. 2008-1. You can find this revenue

Assessments or fees for a common

To qualify as a homeowners

procedure on page 1 of Internal Revenue

activity qualify but charges for providing

association, the following must apply.

Bulletin 2008-1 at

•

services do not qualify.

At least 60% of the association’s gross

income for the tax year must consist of

Examples. In general, exempt function

exempt function income (defined later).

If the association does not elect to use

income includes assessments made to:

•

At least 90% of the association’s

Form 1120-H, it must file the applicable

1. Pay principal, interest, and real

expenses for the tax year must consist of

income tax return, for example, Form

estate taxes on association property.

expenses to acquire, build, manage,

1120.

2. Maintain association property.

maintain, or care for its property, and, in

3. Clear snow from public areas and

Automatic 12-month extension to

the case of a timeshare association, for

remove trash.

make election. If the homeowners

activities provided to, or on behalf of,

association fails to make the regulatory

members of the timeshare association.

Income that is not exempt function

election to be treated as a homeowners

•

No private shareholder or individual

income includes:

association, it can get an automatic

can profit from the association’s net

1. Amounts that are not includible in

12-month extension to make the section

earnings except by acquiring, building,

the organization’s gross income other

528 election, provided corrective action is

managing, or caring for association

than under section 528 (for example,

taken within 12 months of the due date

property or by a rebate of excess

tax-exempt interest).

(including extension) of the return. See

membership dues, fees, or assessments.

2. Payments from nonmembers.

Regulations section 301.9100-2 for more

•

The association must file Form 1120-H

3. Payments from members for

information.

to elect under section 528 to be treated

special use of the organization’s facilities,

A homeowners association should

as a homeowners association.

apart from the use generally available to

compare its total tax computed on Form

all members.

Association property. Association

1120-H with its total tax computed on

4. Interest on amounts in a sinking

property includes real and personal

Form 1120, U.S. Corporation Income Tax

fund.

property that:

Return. The association may file the form

5. Payments for work done on

1. The association holds,

that results in the lowest tax.

nonassociation property.

2. The association’s members hold in

6. Members’ payments for

Tax rate. The taxable income of a

common,

transportation.

homeowners association that files its tax

3. The association’s members hold

return on Form 1120-H is taxed at a flat

privately within the association, and

For more information, see Regulations

rate of 30% for condominium

4. Is owned by a governmental unit

section 1.528-9.

management associations and residential

and is used to benefit the unit’s residents.

real estate associations. The tax rate for

When To File

timeshare associations is 32%. These

Timeshare association property

Generally, an association must file Form

rates apply to both ordinary income and

includes property related to the timeshare

1120-H by the 15th day of the 3rd month

capital gains.

project that the association or its

after the end of its tax year.

members have rights to use. These rights

If the association is tax exempt under

must arise out of recorded easements,

If the due date falls on a Saturday,

section 501(a), do not file Form 1120-H.

covenants, or other recorded instruments.

Sunday, or legal holiday, the association

See section 6033 and related regulations.

may file on the next business day.

If the association loses its exempt status,

For more information, see Regulations

Private delivery services. You can use

see Regulations section 1.528-8(e).

section 1.528-3.

certain private delivery services

Taxable income. Taxable income is the

Definitions

designated by the IRS to meet the “timely

excess, if any, of:

mailing as timely filing/paying” rule for tax

1. Gross income for the tax year,

Homeowners association. There are

returns and payments. See the

excluding exempt function income, over

three types of homeowners associations.

instructions for Form 1120 for details.

2. Allowed deductions directly

1. A condominium management

Extension. File Form 7004, Application

connected with producing any gross

association organized and operated to

for Automatic Extension of Time To File

income except exempt function income.

acquire, build, manage, maintain, and

Certain Business Income Tax,

Allowed deductions include a specific

care for the property in a condominium

Information, and Other Returns, to

$100 deduction. The following are not

project substantially all of whose units are

request a 6-month extension of time to

allowed:

homes for individuals.

file.

•

Net operating loss deduction

2. A residential real estate

(section 172).

Who Must Sign

management association organized and

•

Deductions under part VIII of

operated to acquire, build, manage,

The return must be signed and dated by

subchapter B (special deductions for

maintain, and care for a subdivision,

the president, vice-president, treasurer,

corporations).

development, or similar area substantially

assistant treasurer, chief accounting

all of whose lots or buildings are homes

officer, or any other association officer

If facilities are used (or personnel are

for individuals.

(such as tax officer) authorized to sign.

employed) for both exempt and

3. A timeshare association (other than

nonexempt purposes, see Regulations

If a return is filed on behalf of an

a condominium management association)

section 1.528-10.

association by a receiver, trustee, or

organized and operated to acquire, build,

assignee, the fiduciary must sign the

manage, maintain, and care for the

Exempt function income. Exempt

return, instead of the association officer.

property that has members who hold a

function income consists of membership

Returns and forms signed by a receiver or

dues, fees, or assessments from (a)

timeshare right to use, or a timeshare

trustee in bankruptcy on behalf of an

owners of condominium housing units, (b)

ownership interest in, real property of the

association must be accompanied by a

owners of real property in the case of a

timeshare association. A timeshare

copy of the order or instructions of the

residential real estate management

association cannot be a condominium

court authorizing signing of the return or

association, or (c) owners of timeshare

management association.

form.

rights to use, or timeshare ownership

See Regulations section 1.528-4 for

interests in, real property in the case of a

If an association officer completes

information regarding the “substantially

timeshare association. This income must

Form 1120-H, the paid preparer’s space

all” test for condominium management

come from the members as owners, not

should remain blank. Anyone who

-2-

Instructions for Form 1120-H

Instructions For Form 1120-H - 2008 Page 2

Related Articles

Related forms

Related Categories