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| Thursday, January 08, 2009
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| IHG Insurance (National Insurance Provider) |
| Providing Community Association Insurance for over 25 years: D&O Liability, Crime Products, Umbrella Coverage and Property Manager's Errors & Omissions Liability. |
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| You are not authorized to post a reply. |
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| Author |
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AB3
(Arizona)
Posts:39
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| 10/08/2008 2:09 PM |
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Why would a hoa that owns no property pay the attorney net proceeds?
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GlenL
(Ohio)
Posts:1465
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| 10/08/2008 2:28 PM |
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| Net proceeds of what? It is not unusual for an HOA to allow an attorney to keep the fees or penalties charged to a H/O for filing a lien or foreclosure in lieu of paying them for their service directly. |
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AB3
(Arizona)
Posts:39
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| 10/08/2008 2:35 PM |
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It was a net proceed that the hoa paid the attorney. reported on a 1099.
I thought it was strange too. |
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GlenL
(Ohio)
Posts:1465
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| 10/08/2008 2:45 PM |
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| Have you asked the Board what it is for? |
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AB3
(Arizona)
Posts:39
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| 10/08/2008 3:29 PM |
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I'm on it. I will ask again.
Why would an hoa that owns no property or investments which would concern the attorney be paid net proceeds on a 1099? |
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MaryA1
(Arizona)
Posts:2485
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| 10/08/2008 4:01 PM |
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Posted By AB3 on 10/08/2008 3:29 PM
I'm on it. I will ask again.
Why would an hoa that owns no property or investments which would concern the attorney be paid net proceeds on a 1099?
AB,
If the attorney did work for the assn, his fees may have been reported as income on a 1099. Is this what you're talking about?
I find it strange that the HOA owns no property. In a planned community, all the common areas are owned by the HOA. In a condo assn, each unit owner and the HOA together own a portion of each unit and the common areas.
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SusanW1
(Michigan)
Posts:2316
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| 10/08/2008 4:09 PM |
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Did your HOA win a lawsuit? That could be his/her "cut" of the settlement.
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AB3
(Arizona)
Posts:39
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| 10/08/2008 5:59 PM |
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Mary, the 1099 would have been reported as nonemployee compensation but it is reported as net proceeds. Yes, common grounds are owned by the assocaition but like the former president of 1st National stated common grounds have no value and therefore, cannot be used as collateral when the association borrows money from the bank.
Net proceeds are from the sale of property of or from an investment of some sort after all fees are paid. What happens is that net proceeds get reported as capital gains tax. Capital gains are the same as net profits.
The association would not have paid the attorney for any kind of investment or anything like that.
As the message below your says did we win a lawsuit? Not that was disclosed to the members. If there was a suit why would we pay net proceeds to the attorney? It would be a fee for services rendered not net proceeds. Besides that any suits brought by the association and won the funds would be paid to the attorney and distributed to the association.
Had the association sold common ground the members get the net proceeds or profit not the attorney. The attorney would only get paid for service rendered.
Is there really not a situation that could occur to explain this? Otherwise I have to believe that someone messed up when issuing 1099's. |
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AB3
(Arizona)
Posts:39
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| 10/08/2008 6:57 PM |
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Please don't get me wrong; I'm not looking for something wrong. I just want to make sure that no stone goes unturned. If I dismiss it as an error. I don't want someone to go behind me and discover that something was wrong.
Thanks |
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MaryA1
(Arizona)
Posts:2485
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| 10/09/2008 6:48 AM |
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AB3,
The 1099-MISC is used to report non-employee compensation and gross proceeds to attorneys. Is this the 1099 form that was used? Box 7 of the form is used to report non-employee compensation; which would be legal services provided by the attorney (filing liens, offering legal advice, etc.) Box 14 is for attorney's gross proceeds. This is the def. of gross proceeds: "attorneys who receive payments of gross proceeds on behalf of their clients and certain payors (for example, defendants in lawsuits and their insurance companies and agents) that, in the course of their trades or businesses, make payments to these attorneys." Was your assn involved in a lawsuit; perhaps construction defect litigation where they received a large settlement and a portion of it was paid to their attorney. If so, this would be called "gross proceeds". At least that's the way I understand it. |
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