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Lev
Lev, Tax Advisor
Category: Tax
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Experience:  Taxes, Immigration, Labor Relations
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For Jax Tax preferably If a non-profit housing cooperative

Resolved Question:

For Jax Tax preferably

If a non-profit housing cooperative has a net income one year of $300,000, where that income is the difference between assessment income from its shareholders and expenses before depreciation for that year, what would be its Federal income taxes using IRS Forms 1120 and 1120H?
Submitted: 2 years ago.
Category: Tax
Expert:  Jax Tax replied 2 years ago.

Jax Tax : Filing an 1120 the answer is easy. $139250.
Jax Tax : Filing form 1120H the answer is much more complex. First, that high of a profit margin may be cause for concern. Depending on the size of the coop. That would be extremely concerning for those in which I work with but cities like New York, maybe.
Jax Tax : Also, we would need to define net profit. It is not exactly the same when dealing with an 1120h as there can be some funds retained for upcoming anticipated expenses that are excluded from the net profit. Really, it is kind of odd to look at the question from a profit standpoint. The 1120h really is designed for non profit activity.
Jax Tax : But, to answer your question, the tax rate is always 30% so $90,000.
Jax Tax : Here are the rules for filing form 1120h. They are general qualifications.
Jax Tax : IRC section 528 maintains 4 tests to qualify a residential condominium association for section 528 treatment:1.       Residential test – substantially (85%) all the units must be for residential use2.       Income test – 60% of the gross income must be of exempt nature3.       Expenditure test – 90% of the expenses must of exempt nature4.       No benefit test – the residual income may not be used for members’ benefit. 
Customer:

Thank you Jax Tax. You have given me what I was hoping for. I understand the general qualifications you state so I'm OK with them....I do not understand, however, how filing with Form 1120 can lead to an income tax of $139,250 that would be an overall tax rate of 46%!!!

Jax Tax : Sorry, I miscalculated. It is $22250 plus 39% over $100000 so $100250 for the 1120.
Jax Tax : I applied the rate to $300k instead of $200k.
Jax Tax : Good spot. The tax rate on the 1120 is 39% over $100000 plus $22250.
Customer:

Dear Jax Tax...I fear something else is not correct. The income was $300,00, and $50,000 is at the 15% rate, that leaves $250,000 to be taxed at some other rate that I understand might be 39%. Correct, that is another question! :-) Please confirm...

Jax Tax, Tax Attorney
Category: Tax
Satisfied Customers: 1376
Experience: JD, LL.M in Business and Taxation, IRS Enrolled Agent. Expert in Business and Tax Transactions
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Customer: replied 2 years ago.
Jax Tax--I do still need to know what the income tax is on a $300,000 income. I believe from what you have told me, it is a tax-rate of 15 % on the first $50,000--which is $7,500--and then one of 39% on the balance above an income of $50,000, which would be 39% of $250,000--which is $97,500--making a total of $105,000.
Expert:  Jax Tax replied 2 years ago.
I gave you the tax rate on $300000. It is $22250 plus 39% of the amount in excess of $100000k. It appears it did not post for one reason or another. Total is $100250. Sorry.
Jax Tax, Tax Attorney
Category: Tax
Satisfied Customers: 1376
Experience: JD, LL.M in Business and Taxation, IRS Enrolled Agent. Expert in Business and Tax Transactions
Jax Tax and 2 other Tax Specialists are ready to help you
Customer: replied 2 years ago.
Jax Tax

Sorry, but I need answer ASAP. Using Form 1120 to file corporation IRS income taxes on a profit of $300,000, if the tax-rate on the first $50,000 is 15% and is 39% on the balance of $250,000, I calculate the total tax as coming to $105,000.
Customer: replied 2 years ago.
Relist: Other.
I'm quite happy with Jax Tax but need an answer ASAP.
Customer: replied 2 years ago.
Jax Tax

I do not know where we are presently on my question, and cannot make out if you are still with me. I still need to know if income taxes on an income of $300,000 is $105,000 filing using IRS Form 1120.
Expert:  Lev replied 2 years ago.
Hi and welcome to Just Answer!
Calculations provided above are correct.
See instructions for the form 1120, page 17 Tax rate schedule - www.irs.gov/pub/irs-pdf/i1120.pdf
if your taxable income is $300,000 - your tax liability is calculated as following -
$22,250 + 39% on taxable income above $100,000 = $22,250+39%*($300,000-$100,000) = $100,250.
Let me know if you need any help.
Customer: replied 2 years ago.
Would you please assure me the tax of $22,250 is on the first $100,000 of income as that comes to a income-tax rate of 22.25% as I've read in an article "Federal form 1120-H, 990, or 1120?' by Laura V. Scheel on page two, paragraph four: "starting at 15% for the first $50,000 of taxable income" for corporate filing using Form 1120?
Expert:  Lev replied 2 years ago.

Yes - that is correct

$50,000*15%+($75,000-$50,000)*25%+($100,000-$$75,000)*34%=$22,250

Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22616
Experience: Taxes, Immigration, Labor Relations
Lev and 2 other Tax Specialists are ready to help you

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