Have a Tax Question? Ask a Tax Expert
As long as YOUR organization, the church organization, qualifies as a tax exempt entity, there would be no Federal capital gains tax (that's the tax that typically happens at the time of sale), charged on sales proceeds less investment, or basis) There are basically 5 tests under IRS rules for whether your organization qualifies for tax exempt status ... they are the following:
1. The organization must be organized and operated
exclusively for religious, educational, scientific, or othercharitable purposes,
2. Net earnings may not inure to the benefit of any
private individual or shareholder,
3. no substantial part of its activity may be attempting
to influence legislation,
4. the organization may not intervene in political
5. the organization’s purposes and activities may not
be illegal or violate fundamental public policy.
Now, the buyer will include what was paid for the property, and if the bujyer is NOT a tax exempt enity, will pay capital gains tax on the sales gains if and when the property is sold for more that his/her/ it's basis in it
The buyer will also pay property tax, again assuming that the buyer is NOT a tax exempt entity, but this will be paid based on the state/county's deadlines for paying property taxes ...There may be a first year pro-ration of the property taxes for the buyer if, for example, the buyer , again is not a tax exempt entity, and only owns the property for a part of the property tax assessment period
Assuming that the religious organization is exempt from property taxes in TX, there would be not pro-rated portion to pay at time of sale by the tax exempt church association, ... and the whether or not the buyer may have to pre-pay property tax for the first partial year of ownership MAY have to do with the escrow and financing arrangements made by the buyer
Hope this helps
I still don't see you coming into the chat here, so I'll move us to the "Q&A mode," so tat you can ask any follow-up questions
Let me know ...
Hi Lane, I'm back, I had to take a phone call. I need to read it again and then I'll be back with questions.
Hi Lane, I'm back, I had to take a phone call. So, capital gains are paid, and the new owner (if an individual, not a non profit) assumes the property and the property taxes, but there is no assumption of any back taxes by either party? The non profit tax exempt status ends and the new status takes over, that's it?