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Christopher B, Esq
Christopher B, Esq, Attorney
Category: Landlord-Tenant
Satisfied Customers: 2963
Experience:  Litigation Attorney
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Does a church have to pay capital gains tax on a rental house

Customer Question

does a church have to pay capital gains tax on a rental house when that house is sold?
Submitted: 1 year ago.
Category: Landlord-Tenant
Expert:  Christopher B, Esq replied 1 year ago.
Hello, my name is***** and I will be helping you with your question today.
Did the rental house ever have a mortgage on it? Was the house donated to the church?
-Could you explain your situation a little more?
Expert:  Christopher B, Esq replied 1 year ago.
I'm going to go ahead and answer your question.
Churches and religious organizations, like other tax-exempt organizations, may engage in income-producing activities unrelated to their tax-exempt purposes, as long as the unrelated activities are not a substantial part of the organization’s activities. However, the net income from such activities will be subject to the unrelated business income tax(UBIT) if the following three conditions are met: (1)the activity constitutes a trade or business,
(2) the trade or business is regularly carried on, and (3) the trade or business is not substantially related to the organization’s exempt purpose. (The fact that the organization uses the income to further its charitable or religious purposes does not make the activity substantially related to its exempt purposes).
Even if an activity meets the above three criteria, the income may not be subject to tax if it meets one of the following exceptions: a)substantially all of the work in operating the trade or business is performed by volunteers; (b) the activity is conducted by the organization primarily for the convenience of its members; or (c) the trade or business involves the selling of merchandise substantially all of which was donated. In general, rents from real property, royalties, capital gains, and interest and dividends are not subject to the unrelated business income tax unless financed with borrowed money. Since selling rental properties are not a regular trade or business of the church, the church will not have to pay capital gains on the sale of the property. Another exception would be if there was a mortgage on the property which is why I asked that question of you originally.
Please let me know if I have answered your question fully and if so please positively rate my answer.
Expert:  Christopher B, Esq replied 1 year ago.
I'm just checking back in on the status of this question. If you do not have any further questions and you feel that I have fully answered your question, please positively rate my answer.
Expert:  Christopher B, Esq replied 1 year ago.
It has been a few days since I provided you a service and answered your question. Do you have any further questions? If not please positively rate my answer as it is the only way I will be compensated.

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