Can a Loss in Our Operating Fund or From Commercial Venture Be Used to Offset Interest Income?

Answer- Interest (and other nonmembership or taxable income) is almost always taxable. This is the IRS’ number one reason for auditing Community Associations. There are many associations and many tax preparers who prepare tax returns offsetting membership losses against nonmember income. This is very succinctly and specifically disallowed in IRS law (it is one of the very few absolutely clear areas of CA tax law). Those losses, either from members or nonmember/commercial ventures, can offset future member and nonmember gains. The IRS is also very sensitive about net operating losses from commercial ventures and requires strict accounting with regards to these entities. They want to be sure those membership assessments are not “subsidizing” potentially taxable income.