Texas Reserve Funding

Started by DWayneD • 1 replies • 2217 views

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DWayneD (Texas)
Posts: 11

Posted:

1. Developer is filing U. S. Partnership federal tax returns and at year end is showing a profit. What is the correct return to be filed?
2. Developer is taking the profits without placing any money in Reserves. Is this legal in Texas?
3. Can assessments be used to produce a profit for a developer? If yes, under what statutue?

RogerB (Colorado)
Posts: 5,067

Posted:

DWayne, if you are refering to an HOA:

1. Developer is filing U. S. Partnership federal tax returns and at year end is showing a profit. What is the correct return to be filed?

IRS form 1120H is probably the better choice, otherwise IRS form 1120 should be used for HOAs.

2. Developer is taking the profits without placing any money in Reserves. Is this legal in Texas?

All HOA funds must be kept in the HOA. If there is no reserve budget then all funds can be kept in an operating account.

3. Can assessments be used to produce a profit for a developer? If yes, under what statutue?

Sometimes the developer hires one of his companies to do work for the HOA which would result in a profit. This is a conflict of interest unless there were competative sealed bids opened by a third party and his company had the best bid. Otherwise the answer is absolutely not.

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