Sales of Church Real Property to Parishioners

24 Tax’N Exempts 3 (July/Aug. 2012)

Brooklyn Law School, Legal Studies Paper No. 291

16 Pages Posted: 22 Aug 2012

Date Written: August 20, 2012


This Article examines the rules that govern the taxation of sales of property from a tax-exempt entity to its members. The case law and rulings in this area focus on transfers from churches to parishioners, so the article adopts the focus as well. It reveals that if the sales do not make the tax-exempt entity a dealer in real property, any gain the tax-exempt entity recognizes should be excluded from unrelated business taxable income. If the tax-exempt entity is a dealer in real property, the sales may still be excluded from UBTI if the sales are related to the entity’s exempt purpose. Because the rules governing dealer classification do not provide a bright-line demarcation, the Article recommends that Tax-exempt entities that contemplate selling real property may consider a belt and suspender approach and, when possible, structure the sales to satisfy both exclusions.

Keywords: tax-exempt entity, 501(c)(3) entity, dealer property, unrelated business taxable income, unrelated business income tax

Suggested Citation

Borden, Bradley T. and David, Katherine, Sales of Church Real Property to Parishioners (August 20, 2012). 24 Tax’N Exempts 3 (July/Aug. 2012), Brooklyn Law School, Legal Studies Paper No. 291, Available at SSRN:

Bradley T. Borden (Contact Author)

Brooklyn Law School ( email )

250 Joralemon Street
Brooklyn, NY 11201
United States


Katherine David

Strasburger & Price LLP ( email )

San Antonio, TX
United States

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