Sold Church Building

by Heather
(Texas)

We sold our church building. Do we owe the IRS any taxes from this sale?

Comments for Sold Church Building

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Pastor
by: Anonymous

Can I use the profit of the sale church building to move in another state?
What EIN is best for a building that is used for ministry but also a supply center, distribution for food,
by: Anonymous

EIN question

The products are under a 501 c 3 but the building is under now a EIN # Domestic Non profit - we do not desire to have the building under a 501 c 3.

we have to have a new EIN for the building which EIN category would give us flexibility - even if we wanted to build on a four apartments or what ever is needed?
U.S. Law
by: Anonymous

I am a lawyer and the U.S. law requires that any proceeds/property from a non-profit including Churches must be donated to other non-profit (tax exempt) groups. The money cannot legally be split up among the members or distributed to individuals in the community.
Sold Church Building
by: MarcusNtexas

The original question was regarding whether the church would have to pay taxes to the IRS for the proceeds received when the building was sold.

If the money received was deposited into the church's bank account to be used for ongoing operations of the church, it would not seem that taxes would be due.

Clearly, if any of the money was paid to individuals (whether church members or not) there could be some tax implications for those individuals, but not for the church unless the money received is somehow determined to fall into the "unrelated business income" category, in which case it would be considered taxable income.
Seek Professional Council if...
by: Vickey

You didn't say what you were doing with the funds from the sale. If you are simply putting the funds from the sale on a new church building, there are no taxes or forms that need to be paid or filed...although you should make sure it well documented especially in your accounting.

However, if you are in the process of closing your church...I agree with Mr. Fry...get professional advice immediately!

You cannot just simply sell the church building and split up the money...especially if the church was incorporated.
sale of church assets
by: D Fry

I am not a lawyer, but I believe that the IRS has a well-defined doctrine restricting private inurement in the case of charitable organizations. In short, it's not allowed. That is, individuals cannot benefit from income received by an organization, except reasonable compensation to employed individuals. So even if you could identify the original donors for the church building (or their estates), and the church was ending all operations, the money could not be "returned" to them.

In such a situation, as with most where it is unclear what the law allows, it is best to get good legal and financial advice from professionals.

It would likely be the purview of any and all remaining board members or church members - depending on the bylaws if it's a corporation - to decide on the disposition of the funds, especially if it is ceasing to exist.
Sold Church Building
by: MarcusNtexas

Since it is very possible that the people who provided the funds for the building being sold are long gone, it would seem that those who remained at the time the building was sold would be the people who would determine where the funds from sale of the property should go. In any case, I don't believe the IRS would become involved. It would help to know approximately how much money was generated from the sale.
Sold Church Building?
by: Lewis in NC

Depends on whether the church continues to exist. If you sold a church building that is no longer used by the church and the proceeds remain in the continuing church treasury for future church operations, then no taxes would be due. If the church is closing down and since the money was donated by community members then (to me, a lay church member, with no law degree) the money should go back to the community. So I suggest to the closing church's governing body to donate all proceeds to a local charity or another church congregation.

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