Non Profit Sale of Excess Property

[Duane Anderson]

A non profit community homeowners association serving the area members (about 500) received land and building from the developer several years ago at no cost. About five acres of the land is now deemed as excess and they may sell it for approximately $700,000.....Is any of this taxable to the non profit? I assume they cannot get a step up in basis to the value of the property when received.....Thanks,,,Duane Anderson

[Roland Slugg]

Is any of this taxable to the non profit?

Absolutely! An HOA is only exempt on its income received in dues, fees and assessments from its members. The profit from the sale of the land is reportable on form 1120-H, and will be taxed at a 30% rate. (See Code §528)

I assume they cannot get a step up in basis to the value of the property when received.

Nope. The basis of that land is the same as the developer's cost or basis when it was turned over to the HOA.