A man who installed a pea gravel and sand path as a safey measure for his son who is an autistic epileptic, is being asked to remove the trim to his driveway because it does not fit in the neighborhood. The man has contacted the Department of Housing and Urban Development to request an investigation of disability discrimination.
An apartment building that had been converted to condos, underwent $2.3 million in repairs after the building began falling apart.
Home invasion crimes have increased and associations are looking at installing surveillance cameras for security.
A woman went to talk to her association president about hiring security to help curb crime in her neighborhood. She ended up getting arrested for assault after the president starting yelling at her.
Review Governing Documents Before Entering Into A Contract
Written by Lynn KrupnikReview Governing Documents Before Entering Into a Contract
Whenever an association is renewing or entering into a new contract, there are many issues to consider. With so much focus on finding the right company at a good price, it is easy to overlook the requirements that may exist in the declaration and bylaws.
Some governing documents require that certain contracts be approved by the members or by a specific percentage of the board (such as 2/3 or 75%). Other times, documents place limits on the length of term for a contract. For example, an association’s bylaws may limit contracts to no more than one-year terms. Such a requirement could impact many possible contracts, such as landscape contracts, management contracts, or security contracts.
Governing documents may also require that contracts contain specific terms allowing for termination of the contract. For example, the governing documents may require that the contract contain a provision stating that the contract can be terminated with 30 days’ notice.
Finally, some governing documents contain specific requirements on who must sign the contract (such as the President and the Secretary).
Associations should be mindful of these types of requirements and limitations in their governing documents so that, once the association finally finds the right company at the right price, the contract does not get challenged or invalidated over a technicality. If your association has questions about contracts, please contact Lynn Krupnik at 480-922-9292.
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The recent articles on Revenue Ruling 70-604 generated a number of questions from readers. One of the questions related to how carryovers under Revenue Ruling 70-604 interact with member losses (excessive member expenses over member revenues) calculated under Code Section 277.
The Internal Revenue Service issued Revenue Ruling 2003-73 to explain this issue, providing four examples that illustrate the calculations. Simply stated, an association choosing to file Form 1120 can have only three possible outcomes as it relates to that member income:
- 1)The Association could have an excess of member income over member expenses, which generally is either refunded or rolled over to the following year under the provisions of Revenue Ruling 70-604. If the excess member income is not refunded or carried over to the subsequent year, it’s considered gross income under Code Section 61 and is added to taxable nonmember income.
- 2)It could have an excess of member deductions over member income under Code Section 277, which by law is required to be rolled over to the subsequent year. It may not be carried back, nor may it be used to offset nonmember income.
- 3)It could have exactly $0 net member income, though that outcome is virtually impossible.
The following table is reproduced from Revenue Ruling 2003 – 73.
|
|
Member Income |
Nonmember Income |
Taxable Income |
|
Year 1 |
|
|
|
|
Income/(Loss) before loss carryover |
(2,000) |
4,000 |
|
|
Minus loss carried forward |
0 |
0 |
|
|
Income/(loss) |
(2,000) |
4,000 |
4,000 |
|
Loss carryover |
(2,000) |
|
|
|
|
|
|
|
|
Year 2 |
|
|
|
|
Income/(Loss) before loss carryover |
1,500 |
3,500 |
|
|
Minus loss carried forward |
(2,000) |
0 |
|
|
Income/(loss) |
(500) |
3,500 |
3,500 |
|
Loss carryover |
(500) |
|
|
|
|
|
|
|
|
Year 3 |
|
|
|
|
Income/(Loss) before loss carryover |
2,250 |
3,000 |
|
|
Minus loss carried forward |
(500) |
0 |
|
|
Income/(loss) |
1,750 |
3,000 |
4,750 |
|
Loss carryover |
(0) |
|
|
|
|
|
|
|
|
Year 4 |
|
|
|
|
Income/(Loss) before loss carryover |
1,000 |
(1,500) |
|
|
Minus loss carried forward |
0 |
0 |
|
|
Income/(loss) |
1,000 |
(1,500) |
(500) |
|
Loss carryover (IRC Section 172 loss) |
(0) |
(500) |
|
Note that in Year 1, the member loss cannot be upset against the nonmember income, resulting in the full $4000 of nonmember income being reported as taxable.
In Year 2, the same situation exists in that after applying the member loss carryover from Year 1, there is still a net member loss in Year 2. That cannot be offset against nonmember income, so the $3,500 nonmember income stands alone as being taxable.
In Year 3, a different situation occurs. There is a net member income which is not fully offset by the member loss carryover from Year 2, thus resulting in a net member income in Year 3. This calculation assumes that no election has been made under Revenue Ruling 70-604, so net member income is added to nonmember income and the combined amount is taxable income. Had the Association made an appropriate election under Revenue Ruling 70-604 in Year 3, the net member income of $1,750 would have been either refunded or carried over to the subsequent year and would not be taxable in Year 3.
In Year 4, there is the unusual situation of a net member income of $1,000 and a net nonmember loss of $1,500. This is similar to Year 3 in that member income and nonmember income are both considered taxable and are combined. Please note, however, that member losses may not be offset against nonmember income.
In a subsequent article, we will address additional questions that were raised relating to Revenue Ruling 70-604.
A homeowners association claim a pathway is on private property and was never intended to be used by the public. The city is threatening to take it by eminent domain.
In this Q & A, the author discusses the records a homeowner can review, the Illinois Firearm Concealed Carry Act, fines and unit owner violations.
A feud between a club owner and an association is going to court because the club owner feels the association has gone too far in trying to get his business shut down.
A high profile federal corruption case in Las Vegas has brought forth four more defendants years after the case began.
