Homeowners Associations: Cautions of filing 1120-H or 1120

September 29, 2009
Homeowners Associations: Cautions of filing 1120-H or 1120

A Homeowners Association has the right to either file a Form 1120 or Form 1120-H provided:

This really is the question. The providing part of the question.

Title 26, chapter 1, Section 301.9100-2(a)(2)(v)

The election to be treated as a homeowners association under section 528;

But under

Title 26, chapter1, section 301.9100-2(a)

Automatic 12-month extention–(1) In general. An automatic extension of 12 months from the due date for making a regulatory election is granted to make elections described in paragraph (a)(2) of this section provided the taxpayer takes corrective action as defined in paragraph (c) of this section within that 12-month extension period. For purposes of this paragraph (a), the due date for making a regulatory election is the extended due date of the return if the due date of the return including extensions and the taxpayer has obtained an extension of time to file the return. This extension is available regarless of whether the taxpayer timely filed its return for the year the election should have been made.

If you are late in filing your return past the natural 3 1/2 months timeframe or an additional 6 months for an extension plus 12 months for the automatic extension you will be required to file a Form 1120 and may not elect to file a Form 1120-H. The task of being a procrastinator in this case can be extremely costly and expensive. Not only are penalties and interest adding from the usually higher Form 1120 calculations but in some cases the difference of the 1120-H and the 1120 can be substantial.

When filing Form 1120 the usage of normal depreciation schedules and calculations must be used. If an asset needs to be depreciated and a section 179 election is not permitted due to the usage of the asset then the differences of the taxable amount can be enormous. If you have an asset such as a Roof which costs $75,000 and in order to get enough in the way of cash for paying off the new asset of $50,000 then on your 1120 you would have an income of $50,000 and a depreciation for the year if put into service on February 28th of $2386.36. On the Form 1120-H you would have income of $75,000 and expenses of $50,000. Additional expenses for qualification would usually mean for direct income is not taxed. Only your indirect expenses of interest income from dues and fees for the year would be taxable. This assumes you are not renting the grounds out to outsiders and looking at other extra income which may be separately taxed. And of course, it would be difficult to have additional expenses to make up the $47,613.64 difference for Form 1120.

But is there a solution to the above situation besides just having to pay taxes on the “excessive” income for the current year if you missed the 528 election time allowance.


My cautionary notes would be to have interest income from bank accounts in a tax-exempt money market instead of just in a regular bank account. Your financial plan or board of directors and members would have to direct you to this path. Some tax may be healthy for your need for a return on investment or for the basic concept of reaching your building maintenance fund program. This would be a board and members decision. The treasurer should not make this as an independent decision.

The second item to look at when establishing a policy of improving the life expectancy of your building (new roof, double and triple pane windows, etc.) is to collect the income over a period of years. Since you can have an income and expense which do not match (positive income) up to a certain level adjust your building fund to exceed your expenses. Look at the required income and expense ratios of 90/60%. (See Form 1120-H instruction booklet on page 2 for examples and definitions.) Do not go under these numbers however. You will need to satisfy these ratios or you will not be qualified to file as an 1120-H Homeowners Aassociation.

Do not confuse an asset which increases the life expectancy of your building and one which you will need to expense for the year. If it is maintenance or a repair and not extensive and does not increase the life expectancy of your building then it could be a current expense and not a depreciable asset. For most purposes also a section 179 deduction on residential property does not apply. But if the assets is a coffee pot for example which would be personal property and not real property then a section 179 may apply. But this is another topic for another day.

So bottom lining for tax purposes on Form 1120-H. If you can elect then you usually will be better off making an election. If you cannot elect or perceive that you may not be able to elect Form 1120-H then try to reduce your exposure to excess taxes on Form 1120 by creating an improvement fund. But under all circumstances make sure the board and the members know well ahead of time what your options are and what actions you are taking to protect the members against possible oversites and mistakes. If the members only want to be charged at the last minute maybe advise of differing tax concequences or set up a loan program so the members can draw down on the debt. This approach, however, can be extremely negative if payments are not made.

If it is too risky, avoid it. If it is too cumbersome then try to mitigate the obstacle. But if is the only avenue of revenue at least try to reduce the risk exposure to taxes. But above all be direct with your board and members in explaining their consequences if there is any chance of something going wrong. i.e. get it in the minutes.





Elizabeth Campbell and Viaduct/Tunnel Law Suite

September 18, 2009

The Viaduct is not dead.  Or at least not as of yet.  A law suite has been filed by Elizabeth Campbell according to her supporters.  This is in the process of being verified.  However, I had knowledge that this was going to happen two months ago.  The only delay was in the acquisition of funds for the lawsuite.  Stay tuned as to exactly what the specific details are.  Will be getting this information from Elizabeth Campbell as soon as I am able to contact her.

The stigma of the lawsuite should be that an environmental impact statement has not been filed for the Tunnel as of yet.  The Tunnel project has been separated into many different parts so that the necessity for a large Environmental Impact Statement is lessened.  This might be strategic on the construction of the Tunnel but it violates the spirit of the law.  A correction in this endeavor needs to be upheld and thus stop the progress of the building of the Tunnel until a correct and complete Environmental Impact Statement can be completed and evaluated by Federal Authorities and others who would need to make evaluations.

But is this the part of the lawsuite which is being filed.  Stay tuned for complete details on this obvious controversy.

SR 520 construction may be dependent upon these determinations and findings.  Financing of both are tight and could be flipped at any time.  Who is responsible for what and when still needs to be answered.  Again, the costliest roads are being played with.  Your money is at stake again. 

Either through politics or legal maneuvering.

Obama says U.S. not in Bankruptcy and indirectly proves Birth Certificate Issue still a Valid Question

September 12, 2009

With President Obama stating in his speach to the join session of Congress two days ago that if the health bill does not pass then the United States will have to file for “bankruptcy”.  What does this mean.

If we are not in bankruptcy as the above wording does positively indicate then we are out of bankruptcy.  If we were in bankruptcy then we would be dictated by a democratic or a national socialist agenda.  With not being in bankruptcy we according to our constitution must be governed by republican ideals and not democratic ideals.  And by republican vs. democratic I am not refering to a party but rather a style of government.

Under the original constitution and under a republican form of government the ideal of the constitution can be enforced.  The qualification of being a natural born citizen and proving the qualifications of such as are required.  Without being a qualified President the duties or “Acting as President” transfer to the Vice President which is Vice President Obama.

If we are in bankruptcy then we would be governed by the bankruptcy courts or the holders of credit which would be the European bankers, the Illuminaty and the Chinese government.  Unfortunately a government run by creditors would be adversarial to the continuance of a republic because this would be counter to the bankers profit motives and thus also resulting in being counter to american citizens.  As  a United States citizen we do not have a choice in the matter but as an american citizen we do have a choice in the matter.

The “You Lie” comment on the floor of the joint session of Congress was both enlightening and refreshing to hear.  We need more displays of Congressmen truly expressing their opinions and beliefs.  Only after “True Confessions” and of course balancing the budget can America heal itself and become an enduring republic once again.   

Politics and a little economic stimulus can go hand in hand if developed properly and to the goals of the citizenry.   

Maybe what our economy needs is a little bit of alternative politics instead of alternative energy.  Or perhaps the definition of alternative energy is alternative politics.  Keep that political energy going but in the direction of the american citizens benefit.

Oil will be going up. Russia and China ticked off.

September 10, 2009

Russia and China have had it with the United States policies. 

Russian has had a United States Ambassador harassed and stolen from in the last few months.  The United States has not addressed any of these issue and will be retaliating by non-cooperation. 

The Tacoma Ambassador, Sir Bishop Bill Mount, Ph.D. had been ordered in the spring by the city of Tacoma to get rid of his 27 farm animals or to be fined.  He had four turkeys, chickens and rabbits on the farm.  The farm was established in Tacoma in the early twentieth century.  One of the young turkeys was also the ambassadors pet.  The Ambassador decided to not complain but cooperating with the local authorities.

In another earlier episode reports were that the ambassador Bishop Mount was swindle out of $150,000.  Proper notification prior to the theft was given to United States authorities and no action was taken.

In a more recent event a minor amount of goods was taken from the Ambassador. 

Bishop Mount has given notification through www.SCANTV.org local channel 77 on the internet and television show “All Day Live” which broadcasts @ 4:30 p.m. on Wednesday and 10 p.m. on Thursday since May.  Sir Mount has broadcast on such topics as nuclear bomb attacks on the United States by rogue forces inside of the United State in the last few months to patent ingredients of the H1N1 virus and the potential of 25% of the United States citizen dying from the vacation shots due to the ingredients to how Michael Jackson actually died which was from a Satellite attach from the United States from a stolen Russian satellite.

Russia according to Dr. Mount will be not enforcing or propping up the United States dollar any more as a retaliation for non-compliance in acceptable international standards during the Obama Administration.

In other non-related to Dr. Mount the National Park system confiscation pre-revolutionary war guns from a Canadian.  The Canadian flag flies over the Park during the daylight time.  The re-enactors were commemorating the Pig Wars of 1859 and the Park and Canadian flag have flown over the park since then.  A musket according to United States law is considered as a stick.  The alleged confiscation according to Sir Mount occurred because of alleged drug dealers in the park at 10 p.m. and 3 p.m. harassing the re-enactors.  This incident was also attended by Her Magesty Queen Elizabeth’s representative as well as Ambassador Mount and Canadian and United States re-enactment buffs.  

The result of the non-propping up of the dollar by Russia if necessary will drive down the dollar further than normal.  This will establish higher prices for oil futures and thus higher gasoline prices.  Russia does have a huge economy related to oil and is extremely beneficial on higher oil prices.  Although the other industrial and domestic industries will suffer I believe they are thinking that a rouge country is unstable and if they are to be dealt with must be dealt with in a fashion which shows hands off and in a hands off fashion which will also benefit themselves. 

Then China is unhappy about the continual borrowing of funds.  A low interest rate and the eventual prospect of a high inflation rate may curtail their local growth.  Unhappy about United States policy and non-cooperative fiscal policy China will continue to seek oil contracts with other countries to maintain stability and cohesion in their country.  They are also drawing back on including more United States debt in their portfolio.  The buying of United States debt at a low interest rate may not be enough of a return in the future when compared to the future inflation rate.  A more defensive poster on China’s part also seem to be in alignment with Russia’s overall views as well. 

You should be expecting higher inflation and a weaker dollar.  A weaker dollar stimulates higher oil prices do to the overall lower value of the dollar.  Then in the future the United States weaker dollar will stimulate durable goods sold to foreign countries including Russia and China and then the economy will start to recover.  Boeing will probably be the greatest achiever in this scenario.  They will be having stronger sales to countries and by the time the 787 comes out the economy should be starting to recover.  AirBus will be the weaker partner here due to their sales being dependent upon the strong dollar.  AirBus writes its contracts based upon U.S. currency including wages and jets.

Rep Jim McDermott Town Hall Meeting answered one question

September 3, 2009

On September 1, 2009, Representative Jim McDermott of the 7th Congressional District in Seattle, Washington on the Campus of the University of Washington at Meany Hall for the Health Care Town Hall Meeting only took one, yes, 1 question.

How do I know this.

Questions which were gathered were on 3 X 5 inch cards and Mr. McDermott was given questions on 5 X 7 inch cards.  I was in the front row.  He read about four and answered four to the audience. 

Many questions from the audience of about 800+ were asked.  But, and this is the reason why I say but, there was a code to who was supposed to be picked for the questions which Mr. McDermott would answer.  A combination of a Nazi 45 degree raised hand and a communist raised hand was the signal.  A closed fist and a Nazi open hand was the singled.  But instead of being an outstretched open hand the first two fingers were out and the last two fingers were tucked under.  Simplistic yet unsuspecting.  They also had three cards with them instead of only the one 3 X 5 card which were handed out outside to the audience line they the questioners had 5 X 7 inch cards as well and three cards each.  I am assuming this would be just in case the questions had already been asked by someone else. 

The surprising aspect of the brownshirt technique here for occupying time was that after the question was asked the questioner would walk outside to the lobby area and leave.  Normally someone would wait to ask the question and then leave but leave to their seat.  These people left not to their seat but to the outside of the back doors.  There was a set of mikes on both sides of the aisles as well so no excuse here.    

Heckles were plentiful during the initial history comments of where we are in the health care process.  This was obviously set up as a repeat of the Nazi Brownshirts technical to intimidate and disorient other prospective hecklers.  Was most liberals do not realize is that conservatives want to hear both sides of an debate and determine their final decision on all facts and circumstances.  This obviously was and historically has been a technique of the far left and was extremely predominant in the Nazi Party Brownshirters in the 1930’s and 1920’s. 

One lady did get a questions through however.  She did not raise her hand upright with the palm out but had here palm out with a 45 degree angle.  Her question was original, in my opinion, because that was the only question which Mr. McDermott wrote down prior to answering the question.

Next time, Mr. McDermott answer real questions.  If you really do not know the answer just say you do not know the answer.  Do not rely on Brownshirt techniques of deception.  Say the answer to a question will be included on your website. 

Duh!  Do the right thing. 

QuestionOne:  Since the Veterans Administration is collecting and permitted to selling Veterans Medical Files around the world to anyone through the University Medical system what is to stop anyone from finding out what the Minuteman Launch codes are from a Veteran who had access to them through deception medical knowledge trickery.  An example would be someone who might be allergic to peanuts and then getting the veteran drug after inserting peanuts into their food so they are weak and asking them about three or four of the launch code numbers.  This is both a national security issue and a health privacy issue. 

Question Two:  What is to prevent selling of records also in the same fashion of Military personnel to the highest bidder and getting the DNA records of the Military personnel.  A weapon currently could detect the DNA pattern and with a flip of the switch eliminate the entire force facing an enemy.  What is their to prevent this from happening.     

You see Mr. McDermott hardball questions can make a bill stronger and not weaker and at the same time strengthen our national system.  There are reason for the current system besides just money.   

Next time, stop wasting the time of 800+ american citizens or united states citizens and answer real questions.