HOA 1120H vs 1120

[jasdlm]

Client needs return for HOA. Previous preparer filed 1120H. Expenses are around $40,000, Gross income from Dues, etc. is about $36,000. HOA has an ongoing fundraiser where members sell gift certificates. Total sales are around $160,000 even though net income from this fundraiser is only about $8,000. The way I read the rules, 1120 must be filed because the 60% test isn't met (on GROSS income) and therefore 1120H is not allowed. 1120H has been filed previously, however, with similar numbers.

Am I misinterpreting Gross Income? Do I have to file 1120? It also seems like the tax burden will be smaller with an 1120, because I think I can use the loss on related income/expenses to offset the unrelated income.

Any help would be appreciated. I don't want to make this any more complicated, and if I'm incorrect and an 1120H can be filed, I will do so.

Thanks!

[jasdlm]

Bump.

[Margaret CPA in OH]

Hmm, I don't see a way out. I do one HOA but they are consistently in the right range. With the profit on 1120, wouldn't the tax be uncomfortable? Maybe they should consider raising the dues or assessments as needed.

When filed earlier without apparent notices, was the income put on Line 7 and expenses on Line 15? That would give rise to 30% tax. Or was the total income, without identification, all on Line 1? Maybe 'someone' figured it was all 'exempt function' without research. I didn't look to see how the exempt loss would work. Hope it does.

[Lee B]

Some practitioners in this situation, just plug in the net fundraising income and move on.

Not saying it's the right thing to do, but it's seems to be done that way quite a bit.