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.
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.
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...