Instructions For Form 1120-H - U.s. Income Tax Return For Homeowners Associations - 2010 Page 2
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members have rights to use. These rights
For more information, see Regulations
must arise out of recorded easements,
section 1.528-9.
Homeowners association. There are
covenants, or other recorded instruments.
three types of homeowners associations.
When To File
1. A condominium management
For more information, see Regulations
association organized and operated to
Generally, an association must file Form
section 1.528-3.
acquire, build, manage, maintain, and
1120-H by the 15th day of the 3rd month
care for the property in a condominium
after the end of its tax year.
Taxable income. Taxable income is the
project substantially all of whose units are
excess, if any, of:
homes for individuals.
If the due date falls on a Saturday,
1. Gross income for the tax year,
2. A residential real estate
Sunday, or legal holiday, the association
excluding exempt function income, over
management association organized and
may file on the next business day.
2. Allowed deductions directly
operated to acquire, build, manage,
connected with producing any gross
maintain, and care for a subdivision,
Private delivery services. You can use
income except exempt function income.
development, or similar area substantially
certain private delivery services
Allowed deductions include a specific
all of whose lots or buildings are homes
designated by the IRS to meet the “timely
$100 deduction. The following are not
for individuals.
mailing as timely filing/paying” rule for tax
allowed:
returns and payments. See the
3. A timeshare association (other than
•
Net operating loss deduction
instructions for Form 1120 for details.
a condominium management association)
(section 172).
organized and operated to acquire, build,
•
Deductions under part VIII of
manage, maintain, and care for the
Extension. File Form 7004, Application
subchapter B (special deductions for
property that has members who hold a
for Automatic Extension of Time To File
corporations).
timeshare right to use, or a timeshare
Certain Business Income Tax,
ownership interest in, real property of the
Information, and Other Returns, to
timeshare association. A timeshare
If facilities are used (or personnel are
request a 6-month extension of time to
association cannot be a condominium
employed) for both exempt and
file.
management association.
nonexempt purposes, see Regulations
section 1.528-10.
If the association elects to file
!
Form 1120-H, it should file for
See Regulations section 1.528-4 for
Exempt function income. Exempt
extension on Form 7004 using the
information regarding the “substantially
CAUTION
function income consists of membership
original form type assigned to the entity.
all” test for condominium management
dues, fees, or assessments from
associations and residential real estate
(a) owners of condominium housing units,
management associations.
Who Must Sign
(b) owners of real property in the case of
a residential real estate management
The return must be signed and dated by
To qualify as a homeowners
association, or (c) owners of timeshare
the president, vice-president, treasurer,
association, the following must apply.
rights to use, or timeshare ownership
assistant treasurer, chief accounting
•
At least 60% of the association’s gross
interests in, real property in the case of a
officer, or any other association officer
income for the tax year must consist of
timeshare association. This income must
(such as tax officer) authorized to sign.
exempt function income (defined later).
come from the members as owners, not
as customers, of the association’s
•
At least 90% of the association’s
If a return is filed on behalf of an
services.
expenses for the tax year must consist of
association by a receiver, trustee, or
expenses to acquire, build, manage,
assignee, the fiduciary must sign the
maintain, or care for its property, and, in
Assessments or fees for a common
return, instead of the association officer.
the case of a timeshare association, for
activity qualify but charges for providing
Returns and forms signed by a receiver or
activities provided to, or on behalf of,
services do not qualify.
trustee in bankruptcy on behalf of an
members of the timeshare association.
association must be accompanied by a
•
Examples. In general, exempt function
copy of the order or instructions of the
No private shareholder or individual
income includes assessments made to:
court authorizing signing of the return or
can profit from the association’s net
form.
earnings except by acquiring, building,
1. Pay principal, interest, and real
managing, or caring for association
estate taxes on association property.
property or by a rebate of excess
If an association officer completes
2. Maintain association property.
membership dues, fees, or assessments.
Form 1120-H, the paid preparer space
3. Clear snow from public areas and
•
should remain blank. Anyone who
remove trash.
The association must file Form 1120-H
prepares Form 1120-H but does not
to elect under section 528 to be treated
charge the association should not
as a homeowners association.
Income that is not exempt function
complete that section. Generally, anyone
income includes:
who is paid to prepare the return must
Association property. Association
sign it and fill in the “Paid Preparer Use
1. Amounts that are not includible in
property includes real and personal
Only” area.
the organization’s gross income other
property that:
than under section 528 (for example,
1. The association holds,
tax-exempt interest).
The paid preparer must complete the
2. The association’s members hold in
required preparer information and:
2. Payments from nonmembers.
•
common,
Sign the return in the space provided
3. Payments from members for
for the preparer’s signature.
3. The association’s members hold
special use of the organization’s facilities,
•
Give a copy of the return to the
privately within the association, and
apart from the use generally available to
taxpayer.
all members.
4. Is owned by a governmental unit
4. Interest on amounts in a sinking
and is used to benefit the unit’s residents.
fund.
Note. A paid preparer may sign original
or amended returns by rubber stamp,
5. Payments for work done on
mechanical device, or computer software
nonassociation property.
Timeshare association property
program.
includes property related to the timeshare
6. Members’ payments for
project that the association or its
transportation.
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Instructions for Form 1120-H
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