COM 0458.003 1996-1998 - Laserfiche WebLink

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Y L w There may also be same risk of an impermissible private -ement or private benefit resulting from the transfer of the ~erty. The presence of an impermissible private inurement or gate benefit could cause the IRS to rP a Hamakua Housing's exemption under Code §501(cj(3). If this were to occur, gkua Housing would jeopardize its present and future funding n_the Federal and State governments, as well as from private -exempt nonprofit organizations. In order to resolve these issues, we recommend that akua Housing apply for a private letter ruling from the IRS. advantage of applying for a private letter ruling is that a oral~le ruling from the IRS will allow Hamakua Housing to carry _£hs_alternative without the fear of.s~verytax .sequences. The disadv~ A of applying for a private letter .ingis"the time (at least 9 months, unless Congressional ;istance is receivedj'arid.expense (approximately .510,000- i~ OOO• plus filing fees of ;2,500) of..obtaininq such a ruling. addition, there is no.guarantee that a favorable ruling will obtained. If the TRS.doe_s not issue a favorable ruling, nakua Housina'w~ i!~e jj,~o +h; fed from transferring the Property _the__O.c~upants . (2) Title. Since the Occupants will each hold title _ _the Camps, their undivided interest will be subject to the ens of the Occupants' creditors. For example, the IRS or any her credifor could impose a lye o_ n_an Occupant';~.interest_i n e Cam_p.~ Unless the lien .was removed, each Occ_upant's Property uld be subject to the'lien upon conveyance of the Property to e Occupants. In addition to potential problems with liens on the mps, it will be time consuming and cost to obtain title orts for the Camps, since there will be numerou's owners on tle. Transfer of Property to the Occupants on an Acreement of Sale {Alternative 2). The second alternative is for each Camp to be transferred :om Hamakua Sugar to Hamakua Housing. Hamakua Housing would Z~~mmed.iately transfer. the_ Pro~erty...ta._each._Q~cupant on an ~reement. of sale. Hamal~uA ~El~usng would continue to pu'=sue- ibdivision of the Camps pursuant to a manag'eme'nt agreement with Ze Occupants. Once the subdivision_Qrocess_is completed, smakua Housing would convey legal title to the Property to the ~cupants and would convey the common-areas to a nonprofit ~rporation formed for each Camp. -5-