Surplus and the tax code

TO ALL ASSOCIATON OFFICERS, DELLEGATES, AND BOARD OF DIRECTORS

HOW CAN YOU BELIEVE ANYTHING THAT DAVID ISRAEL SAYS, HE JUST LIED BY SAYING YES TO A FORENSIC AT THE FRIDAY   DEC 5^TH DELEGATE MEETING FOR A FREE FORENSIC FOUR YEAR AUDIT  AND ON MONDAY DEC 7^TH WOULD NOT LET THE AUDITORS IN.

POLITICS ASSIDE DUE YOUR FIDUCIARY DUTY AND VOTE NO TO THE PROPOSED 2015 BUDGET 

Keeping surplus funds might cause some tax ramifications

Gary A. Poliakoff and Ryan Poliakoff New Neighborhoods: The Condo Consultants

Dear Poliakoffs,

What is deemed "surplus funds" in a condo­minium association? If the amount is substan­tial, how is it treated?   How is it shown on the ensuing year's budget for presentation to the mem­bers? Signed, R.L.

Dear R.L.,

Your question has a sig­nificant accounting ele­ment, in addition to the legal element, and while we aren't accountants, we'll take a stab at an an­swer.

 If you were to start with a zero sum in the operating account of an as­sociation, and the associa­tion were to collect funds during the year, and at the end of the year there were funds left over, we would consider those funds to be surplus. 

Or, as explained by the Condo Act, "com­mon surplus" means the amount of all receipts or revenues, including as­sessments, rents or prof­its, collected, by a condo­minium association which exceeds common expens­es." Every owner in a con­dominium owns an undi­vided share of the com­mon surplus. And, wheth­er the amount is significant or not, this surplus would generally either be returned to owners, or applied as a credit to the next year's maintenance. 

There are tax consequenc­es for keeping what would amount to a profit — while condominiums are not for profit, they are not tax ex­empt, and surplus income would generally be tax­able if not returned or ap­plied as a credit.