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In the state of TX, if a church organization (unincorporated

religious association) sells a...
In the state of TX, if a church organization (unincorporated religious association) sells a tax exempt property to an individual that is not another non profit, is there a property tax liability for either the buyer or the seller (from the proceeds of the sale) at the time of the sale?
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Answered in 28 minutes by:
8/31/2013
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 12,845
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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NPVAdvisor :

Hi,

NPVAdvisor :

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:

NPVAdvisor :

1. The organization must be organized and operated


exclusively for religious, educational, scientific, or other
charitable purposes,

NPVAdvisor :

2. Net earnings may not inure to the benefit of any


private individual or shareholder,

NPVAdvisor :

3. no substantial part of its activity may be attempting


to influence legislation,

NPVAdvisor :

4. the organization may not intervene in political


campaigns, and

NPVAdvisor :

5. the organization’s purposes and activities may not


be illegal or violate fundamental public policy.

NPVAdvisor :

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

NPVAdvisor :

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

NPVAdvisor :

Questions?

NPVAdvisor :

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

NPVAdvisor :

Hope this helps

NPVAdvisor :

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

NPVAdvisor :

Let me know ...

NPVAdvisor :

Lane

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Hi Shara,

... just checking back in here, as I never saw you come into the chat.

Let me know if you have any questions at all,

Lane
Ask Your Own Tax Question
Customer reply replied 4 years ago

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.

Customer reply replied 4 years ago

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?


That's right.

You won't have an capital gains, because of the tax exempt status.

And once the new (non-tax exempt) owner takes over , they will be taxed normally from that point forward... but wouldn't have any capital gains taxes to pay until they sold.

And there wouldn't be an back-taxes if the seller was tax exempt.

Hope that helps

Lane
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 12,845
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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Lane and 87 other Tax Specialists are ready to help you
Ask your own question now


Thanks Shara,

Let me known if you need anything else

Lane
Ask Your Own Tax Question
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Lane
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 12,845
12,845 Satisfied Customers
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986

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