CHURCH AND 990

[TAXMAN]

My church friends. TP died, left stock to church. If church sells stock to fund their missions and make improvements on their building is it considered UBTL income or is it considered regular church income not subject to tax?

[Gail in Virginia]

If they sell it as soon as they receive it, then it was a contribution of property and not investment income or UBTI.  If they hold it until it has appreciated in value considerably, then the gain would be investment income.  

[TAXMAN]

tp died about 5 years ago. stock up has went up since then. I realize this would be investment income. I guess the question is will the church owe tax on this gain?

[Lion EA]

Depends on the amount of UBTI...

Are you the church treasurer? Stewardship chairman? An officer of any kind? Even if not, get the work to those that are: selling stock gifts upon receipt is a best practice.

[Gail in Virginia]

I did not think that investment income, such as appreciation on stocks, was subject to UBTI unless it was debt financed.  Most of the organizations that i deal with sell stocks as soon as they get their hands on them, however, so I could not say for sure without research.

[Margaret CPA in OH]

Gail is correct.  Interest and capital gains are not taxable to 501(c)(3) organizations.  They are not considered business income unless directly related to unrelated (purpose of exemption) business.

[TAXMAN]

Thanks to all. I thought so but second opinion's strengthen the thought.