Preparing a Homeowner's Association return using optimization (1120)

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Homeowner's associations file Form 1120-H to take advantage of certain tax benefits. These benefits allow the association to exclude exempt function income and deductions from the determination of taxable income. If the association does not elect to use Form 1120-H, the association must file Form 1120, U.S. Corporation Income Tax Return (or other applicable income tax return).

Use the following procedures to prepare a Homeowner's Association return and allow UltraTax CS to compare the total tax calculated on Form 1120 with the total tax calculated on Form 1120-H and print the form that results in the lowest tax.

  1. Proforma or add a new client to UltraTax CS with the entity type Homeowner’s Association.
  2. Depending on the condition, do one of the following:
    1. If this is a new client, click the General folder in the folders block, then click the 1120 tab and enter the applicable information.
    2. If this was an existing client, click the General folder in the folders block, then click the 1120 tab and review the information that was transferred from the prior-year client.
  3. Click the Income & Deductions folder in the folders block and enter the applicable income and deduction amounts.
  4. Click the 1120H folder in the folders block, then click the H tab, and complete the following information.
    • Total exempt function income — UltraTax CS transfers this amount to Form 1120-H, Line B;
    • Total expenditures made for purposes described in 90% expenditure test — UltraTax CS transfers this amount to Form 1120-H, Line C;
    • Income — Enter any income that is not exempt function income in this data section. When these fields are left blank, UltraTax CS uses the corresponding totals from the Income & Deduction folder to complete the Gross Income section of Form 1120-H;
    • Deductions — Enter any deductions that are directly connected to the production of taxable gross income in this data section. UltraTax CS uses this information to complete the Deductions section of Form 1120-H.
  5. Click the Payments folder in the folders block, then click the PmtExt tab, and enter the applicable payment information. UltraTax CS uses this information to complete the Tax and Payments section of Form 1120-H.
  6. If Form 1120 results in the lowest tax, enter any additional information as needed to complete the supporting schedules required with this return.

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