Instructions For Form 1120-H - 2009 (Page 2 of 5) in pdf

project that the association or its

6. Members’ payments for

Definitions

members have rights to use. These rights

transportation.

must arise out of recorded easements,

Homeowners association. There are

covenants, or other recorded instruments.

three types of homeowners associations.

For more information, see Regulations

1. A condominium management

section 1.528-9.

For more information, see Regulations

association organized and operated to

section 1.528-3.

acquire, build, manage, maintain, and

care for the property in a condominium

When To File

Taxable income. Taxable income is the

project substantially all of whose units are

Generally, an association must file Form

excess, if any, of:

homes for individuals.

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

1. Gross income for the tax year,

2. A residential real estate

after the end of its tax year.

excluding exempt function income, over

management association organized and

2. Allowed deductions directly

operated to acquire, build, manage,

If the due date falls on a Saturday,

connected with producing any gross

maintain, and care for a subdivision,

Sunday, or legal holiday, the association

income except exempt function income.

development, or similar area substantially

may file on the next business day.

Allowed deductions include a specific

all of whose lots or buildings are homes

$100 deduction. The following are not

for individuals.

Private delivery services. You can use

allowed:

3. A timeshare association (other than

•

certain private delivery services

Net operating loss deduction

a condominium management association)

designated by the IRS to meet the “timely

(section 172).

organized and operated to acquire, build,

mailing as timely filing/paying” rule for tax

•

Deductions under part VIII of

manage, maintain, and care for the

returns and payments. See the

subchapter B (special deductions for

property that has members who hold a

instructions for Form 1120 for details.

corporations).

timeshare right to use, or a timeshare

ownership interest in, real property of the

Extension. File Form 7004, Application

timeshare association. A timeshare

If facilities are used (or personnel are

for Automatic Extension of Time To File

association cannot be a condominium

employed) for both exempt and

Certain Business Income Tax,

management association.

nonexempt purposes, see Regulations

Information, and Other Returns, to

section 1.528-10.

request a 6-month extension of time to

See Regulations section 1.528-4 for

file.

information regarding the “substantially

Exempt function income. Exempt

all” test for condominium management

function income consists of membership

Who Must Sign

associations and residential real estate

dues, fees, or assessments from

management associations.

(a) owners of condominium housing units,

The return must be signed and dated by

(b) owners of real property in the case of

the president, vice-president, treasurer,

a residential real estate management

To qualify as a homeowners

assistant treasurer, chief accounting

association, or (c) owners of timeshare

association, the following must apply.

officer, or any other association officer

rights to use, or timeshare ownership

•

(such as tax officer) authorized to sign.

At least 60% of the association’s gross

interests in, real property in the case of a

income for the tax year must consist of

timeshare association. This income must

exempt function income (defined later).

If a return is filed on behalf of an

come from the members as owners, not

•

association by a receiver, trustee, or

At least 90% of the association’s

as customers, of the association’s

assignee, the fiduciary must sign the

expenses for the tax year must consist of

services.

return, instead of the association officer.

expenses to acquire, build, manage,

Returns and forms signed by a receiver or

maintain, or care for its property, and, in

Assessments or fees for a common

trustee in bankruptcy on behalf of an

the case of a timeshare association, for

activity qualify but charges for providing

association must be accompanied by a

activities provided to, or on behalf of,

services do not qualify.

copy of the order or instructions of the

members of the timeshare association.

court authorizing signing of the return or

•

No private shareholder or individual

Examples. In general, exempt function

form.

can profit from the association’s net

income includes assessments made to:

earnings except by acquiring, building,

1. Pay principal, interest, and real

If an association officer completes

managing, or caring for association

estate taxes on association property.

Form 1120-H, the paid preparer’s space

property or by a rebate of excess

should remain blank. Anyone who

2. Maintain association property.

membership dues, fees, or assessments.

prepares Form 1120-H but does not

•

3. Clear snow from public areas and

The association must file Form 1120-H

charge the association should not

remove trash.

to elect under section 528 to be treated

complete that section. Generally, anyone

as a homeowners association.

who is paid to prepare the return must

sign it and fill in the “Paid Preparer’s Use

Income that is not exempt function

Association property. Association

Only” area.

income includes:

property includes real and personal

1. Amounts that are not includible in

property that:

the organization’s gross income other

The paid preparer must complete the

1. The association holds,

than under section 528 (for example,

required preparer information and:

•

tax-exempt interest).

Sign the return in the space provided

2. The association’s members hold in

for the preparer’s signature.

common,

2. Payments from nonmembers.

•

3. Payments from members for

Give a copy of the return to the

3. The association’s members hold

special use of the organization’s facilities,

taxpayer.

privately within the association, and

apart from the use generally available to

4. Is owned by a governmental unit

all members.

Note. A paid preparer may sign original

and is used to benefit the unit’s residents.

4. Interest on amounts in a sinking

or amended returns by rubber stamp,

fund.

mechanical device, or computer software

program.

Timeshare association property

5. Payments for work done on

includes property related to the timeshare

nonassociation property.

-2-

Instructions for Form 1120-H

Instructions For Form 1120-H - 2009 Page 2

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