MinistryCPA - Corey A. Pfaffe, CPA, LLC

Question: A church wishes to sell a five acre lot of land. The church obtained the property 15 years ago and had the plan of building on the property, but it since abandoned those plans. If it sells the property will it be taxed on the gain? Answer: This gain will not be taxed s ince the church did not hold the property primarily for investment or as inventory in the sense that a real estate developer might purchase and improve property for eventual sale. The  26 U.S. Code § 512 - Unrelated business taxable income  lays out what income can be taxed to a tax-exempt organization. According to  26 U.S. Code § 512 - Unrelated business taxable income , "T here shall be excluded all gains or losses from the sale, exchange, or other disposition of property other than— (A)  stock in trade or other property of a kind which would properly be includible in inventory if on hand at the close of the taxable year, or (B)  property held prima...

Question: When is the sale of a parsonage taxable to a minister? When is it taxable to the church? Answer: We have recently received questions concerning the sale of church property, specifically related to parsonages. This blog post will try and tackle three possible scenarios of selling a parsonage, and how the owner should treat the gain or loss of the sale. Scenario #1 will assume that the minister (or taxpayer) is 100% owner of the parsonage. Scenario #2 will assume that the church is 100% owner of the parsonage. Scenario #3 will assume that the minister is 50% owner and the church is 50% owner of the parsonage. Scenario #1 If the minister (taxpayer) is the 100% owner of the parsonage at the time of sale, then a number of factors must be analyzed to determine the gain or loss. IRS Publication 523 has complete details on Selling Your Home . In this recent, associated blog posting , we provide a quick overview of how to determine a gain or loss on the sale of a home. ...

Question: Does a minister need to report the gain or loss on the sale of his personal residence? Answer: IRS Publication 523 has complete details on Selling Your Home, but we will provide a quick overview. The minister must know the selling price , the amount realized , and the adjusted basis in order to determine the gain or loss. The following formula can be used by a resident to determine his or her gain or loss:   Selling Price - Selling Expenses = Amount realized - Adjusted basis = Gain or loss The selling price is the total amount the minister receives for the home. The amount realized is found by subtracting selling expenses from the selling price. Some common selling expenses include commissions and fees that were directly related to the sale of the home. The adjusted basis consists of the increases or decreases of value that the home has incurred over the period of ownership by the resident. Look at IRS Publication 523 for inst...