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Auditing the financial statements of a 2,000+ lot Homeowners' Association situated on over 4,000 acres, in California, may have intimidated some, but Phil approached the engagment without great concern.
The huge Common Interest Realty Association (CIRA), established nearly 40 years prior to Phil's acceptance of the engagement to audit the Association's financial statements, and having undergone as many yearly audits, did present a bit of a surprise, as it was apparent that another esteemed regional CPA firm had passed on the inappropriate reporting, and depreciating, of materially large amounts of property that was not owned by the Association, at all! (The common area property was actually owned by the lot owners and not by the Homeowners' Association.)
Furthermore, nonexempt function income was not segregated from exempt function income, and it was inappropriately exempted from tax using an IRC Section 501(c) non-profit status. Several IRS Revenue Rulings of three and four decades earlier, which precluded such treatment, seemed to have been ignored!
All of this was quite a lot to handle, but the Board of Directors took Phil's findings to the Homeowners' Association attorney, who agreed with the findings, and management thus made the decision to correct the reporting and taxation, as necessary.
Indeed, it was quite a task, that year, to adjust out the inappropriately reported assets and to petition the Internal Revenue Service and California Franchise Tax Board for the purpose of obtaining the proper tax exempt status for the mammoth project. In the end, all was a success.
Homeowners' Associations:
CIRA Financial Statements/Taxation/Budgets
Leslie was the treasurer on the
Board of Directors of Quail Run/Curtner Glen Homeowners Association, a 10-unit planned unit development (PUD), in Campbell, California.
After coming home from a long
day at work, her first priority was to maintain the peace and love
within the walls of her home, rather than to make sure she met all of
the regulations of the Department of Real Estate, Civil
Code Section 1365-1365.6 (Davis-Stirling Act) , the
intricacies of the Internal Revenue Service, and the various standards
of financial statement reporting, promulgated by The American Institute
of Certified Public Accountants.
"Phil has aided the Board of
Directors of our homeowners association in maintaining a realistic
approach to complying with all of its requirements,… since
1988…and without catastrophe! Thank you, Mr.
Foster!”
— Leslie Pano, Campbell, CA
In addition to offering
treasurers of homeowners associations, such as Leslie, peace of mind,
Phil has prepared compliant operating budgets, according to Operating Cost
Manual for Homeowner Associations, and reserve budgets,
according to Reserve
Study Guidelines for Homeowner Association Budgets, for
decades!
Especially noteworthy was that
Phil led the revolution of Common Interest Realty Association (CIRA) accounting and income
taxation, in the early 1980s! Taking advantage of uncommonly-known Tax
Code, Regulations and Official Guidance, Phil reduced the tax rates
homeowners associations were paying from 46% down to 15%, providing a
full two-thirds in income tax savings!
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