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Old 12-18-2015, 03:57 PM
amm502 amm502 is offline
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Nonprofit - annual asset reassignments

During the year, new assets were purchased by the 501(c)(3) parent company. What entries should be made to remove the asset from the parent company and record it in the 501(c)(2) holdings company?
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Old 12-20-2015, 01:12 AM
Lorin Lorin is offline
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A few questions before attempting an answer:

What exactly is the relationship between the two companies? Are their financials combined at year-end or at tax time?

Is the "parent" company gifting the asset to the "holdings" company? Is there any consideration involved in the transfer of ownership?
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Old 12-26-2015, 08:59 AM
amm502 amm502 is offline
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Nonprofit -Annual asset reassignment for churches

The 501(c)(3) is a church and is not required to file at this time.
However, the holdings is required to file the 990N.

Yes, the church "parent" is gifting the asset and no consideration is involved.
The church leases back buildings and assets from the "holdings" corporation yearly.
I have these corporations set up as two companies.
What QuickBook entries do I make to reflect this type of movement of assets and their cost, from the church "parent" that does business with the public, to the "holdings" corporation that does no business with the public?

Thank you.
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Old 01-06-2016, 01:43 PM
Lorin Browning Lorin Browning is offline
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If I understand correctly what you are saying, there are two separate corporations. Let’s call them A, for the church and B for the holding company, and that B qualifies as a supporting organization for A under Treasury Regulation 1.509(a)-4 and Temp. Reg. 1.509(a)-4T. More than likely, the relationship is the Type I relationship described in that Regulation.

For accounting purposes, there are two distinct types of transactions between A and B that are to be recorded on the books:

(1) The transfer of the property by A and the receipt of the property by B (which is a one-time transaction)
(2) The payment of the lease by A and the receipt of the lease payment by B (which will be a series of recurring transactons)

Property transfer and receipt of property

A has to get the property and accumulated depreciation off its books. For A’s books, you will need a credit entity for the value placed on the property when it was received (which will be found in a Fixed Asset account on the Balance Sheet), and a debit entry for Accumulated Depreciation (if any), plus a credit entry for the net donated amount to B which will be recorded just like you do other donations by or from the church one of its Vendors (to use QuickBooks odd terminology).

B has to show receipt of the donated property. For B's books, you will need a debit entry to an appropriate Fixed Asset account for the net donated amount plus a credit entry to donations received (which is a QuickBooks income account).

Both of these are one-time entries, but B will also record depreciation.

For B, depreciation will be recorded annually through a debit to Depreciation Expense plus a credit entry for that same amount to Accumulated Depreciation. Depreciation is an expense account (an Income Statement account) and Accumulated Depreciation is a Balance Sheet account.

The lease payment by A and the receipt of the lease payment by B

Each period as A writes a check to B, the record on A's books will show a debit to Lease Expense and a credit to the bank account on which the check was written.

Each period as B receives a lease check from A, the record on B's books will show a debit to the appropriate bank account as a credit to Lease Income (an income account on the Income Statement.
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Last edited by Lorin Browning; 01-06-2016 at 10:39 PM.
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  #5  
Old 01-14-2016, 06:46 AM
amm502 amm502 is offline
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Thank you, Lorin. This is very helpful.
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