Condo Sch H and repairs, cap regs

[Margaret CPA in OH]

Client is condo assn. that files 1120-H. I inherited them, there isn't a balance sheet and the income is all exempt from condo owners and the expenditures are all for exempt purposes per the 90% test.

So a capitalization policy when they don't have any depreciation? A supplies and repairs policy? Should I just whimper (thanks, Rita, for the perfect reaction)and send them on their merry way? It's always been so simple before.

[Margaret CPA in OH]

Anyone?

[Lynn EA USTCP in Louisiana]

The condo has no common use areas?  Nothing on the depreciation schedule?  No landscaped areas? Who is responsible for the roof repairs and the outside shell structure repairs? I'd file the 3115 with the code 184, just so the IRS knows you know about the new cap/repair regs, as well as filing the de minimus policies that apply to this entity.

 

Just my 2 cents worth

[Gail in Virginia]

Do they own any property - common areas, club house, etc.?  Or do they just provide maintenance on grounds?  I would think that if they own property they should have a capitalization policy and depreciation even though they are exempt. And if they don't own any property, what would they have to capitalize? 

 

Sorry I don't have a good answer for you.  I don't personally handle any condo associations.

[Margaret CPA in OH]

Thanks for a good start. I think, because all income is exempt (totally used for common upkeep) and all related expenses are exempt (totally used for common upkeep), they just never capitalized anything that was commonly owned as each owner owned a share. It's possible that those individual shares, being personally owned by individuals, were not considered depreciable as not for commercial purposes.

More research needed! On to Pub. 588 and copies of association documents. And maybe pass on this one!

[Lion EA]

Yeah, read the association documents.  Used to have a couple of 1120-Hs, but no longer, where association owned common areas.  Also, have a client who's an owner in a coop.  She and her fellow owners actually own everything, via shares based on floor plans.  They have a board of directors, but no "association" that owns anything.  Board retains an accounting/bookkeeping firm that sends out the letter to the owners each year with each owner's share of property taxes, etc.  (And, deals with bids and oversight when the board votes to re-roof or whatever.  Then the letter includes an increase in cost basis for each owner.  That kind of thing.)