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Our church is considering renting our class rooms to a

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Our church is considering...

Our church is considering renting our class rooms to a pre-school run by another church school. Will our church have to pay taxes for the rental income.

Accountant's Assistant: The Expert will know how to help. Please tell me more, so we can help you best.

Our church is still paying a loan for the classrooms

Accountant's Assistant: Is there anything else the Expert should be aware of?

The total rent will be about $20.000 per year. or 18 months

Submitted: 11 months ago.Category: Tax
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Answered in 4 hours by:
9/18/2017
Tax Professional: Barbara, Enrolled Agent replied 11 months ago
Barbara
Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 6,655
Experience: 20+ years of experience in tax preparation; 30+ years of experience as a real estate/corporate paralegal.
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Welcome to Just Answer. My name is ***** ***** I will be happy to assist you.

Generally, income derived from the rental of real property and incidental personal property is excluded from unrelated business income. However, there are certain situations in which rental income may be unrelated business taxable income:

if a church rents out property on which there is debt outstanding (for example, a mortgage note), the rental income may constitute unrelated debt-financed income subject to UBIT. (However, if a church or convention or association of churches acquires debt-financed land and intends to use it for exempt purposes within 15 years of the time of acquisition, then income from the rental of the land may not constitute unrelated business income.)

if personal services are rendered in connection with the rental, then the income may be unrelated business taxable income.

The following link contains additional information you will find helpful:

https://www.irs.gov/pub/irs-pdf/p1828.pdf

Please let me know if I can assist you further.

Thank you and best regards,

Barb

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Tax Professional: Barbara, Enrolled Agent replied 11 months ago

Just following up with you to see if you have any other questions or concerns. If so, please let me know so I can continue to help you.

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