AboutJohn Stancil, CPA Expertise I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I teach tax and accounting at a small church-related college. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a part time tax practice for over 30 years. I am a member of the AICPA, National Society of Tax Professionals, and the Institute of Management Accountants.
Experience I hold a doctorate in Accounting, and four professional certifications: CPA, CMA, CFM, and CIA. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I write a monthly tax column for the local newspaper.
Expert: John Stancil, CPA Date: 7/11/2008 Subject: Tax on HOA Gas Royaties
Question John:
I am the Treasurer of my Homeowners' Association. It is a not-for-profit. We are expecting to receive a lease bonus check as well as future gas royalty payments for leasing the Association's land. Even though we are not a business and this income is not from regular operations, are either of these (bonus check or royalties) subject to taxation?
Thanks,
David
Answer David,
Thanks for your question.
If the amount is less than $1,000 a year, it is not a problem.
If the amount is $1,000 or more you may have unrelated business income. There are three criteria that would make these funds taxable 1) A trade or business, 2) regularly carried on, 3)not substantially related to the exempt purpose of the organization.
I think it is clear that is it regularly carried on and not related to your exempt purpose. Since all you are doing is collecting royalties, I would be hard pressed to say that you are carrying on a business, so in my opinion, the funds are not subject to income tax.
