Making the Revenue Ruling 70-604 Election

Revenue Ruling 70-604 states that “a meeting is held each year by the stockholder-owners of the corporation at which they decide what is to be done with any excess assessments… “.

This wording is generally interpreted literally to mean that only the members can make the election. The board of directors cannot make the election. This interpretation places the election approval process directly in conflict with state law (for at least every state in which I have researched this issue), which prescribes that only the board of directors may make decisions regarding disposition of association funds; the members cannot do so. That’s why directors were chosen to represent them.

Associations continually tell me that they can’t get a quorum of members to make a legal vote, or that they have difficulty getting the members to approve an election under Revenue Ruling 70-604. The follow-up question is, “Can’t we just have the Board of Directors make the election?”

The answer is probably yes, but that depends on how much risk you want to take or how much money you want to spend fighting the IRS on this issue. An argument made out of context to the IRS that “the board must make the election because only they have the authority to do so” is a losing one. (If you don’t believe me, just ask any IRS agent.)

The IRS interprets this Ruling very literally to mean that the stockholder-owners must make the decision, because that’s what the Ruling says. The IRS is bound by the Internal Revenue Code and Federal Court cases, but is not bound by state law, non-judicial precedent, or any other precedent except those of their own making. The IRS must follow its own Revenue Rulings whenever they apply to a given situation.

The IRS doesn’t care what state law stipulates, or who has the actual authority to make a decision regarding the disposition of association funds. They only care what their Ruling says, and it says “stockholder-owners,” not directors. However, the phrase as stated by the IRS makes sense ONLY if the members have the authority to determine the disposition of association funds.

It takes only a subtle change in interpretation to change the face of the argument entirely. When working under Revenue Ruling 70-604, pay careful attention to the subtleties of phrasing: “A meeting is held each year by the stockholder-owners of the corporation at which they decide what is to be done with any excess assessments… ” The phrase “they decide” clearly implies that the stockholder-owners have the authority to make the decision. In fact, they don’t. The IRS was simply unaware of this aspect of association governance at the time the Ruling was issued.

I discussed this issue several years ago with the national office of the IRS, and they conceded that their only interpretation was a literal one, meaning the members had to make the election. I suggested an alternate interpretation: “A meeting is held each year by the individuals in the association who have the authority to make the decision (the board of directors) at which they decide what is to be done with any excess assessments… “. The IRS agreed that my interpretation had merit because the Ruling has no basis if the individuals making the election do not also have the authority to determine the disposition of association funds.

Winning an argument with the IRS isn’t done by telling them that their Revenue Ruling is wrong. Winning the argument is done by showing them how their Revenue Ruling really conforms to the facts. The board makes the election because they are empowered to do so, and that’s what the Revenue Ruling says (in substance, not literally).

Having now discussed the issues, what is an association to do? Well, do you want to comply with what the IRS requires and have the members make the election, or would you prefer to fight them and have the board of directors make the election?

The fact is, you can take a simple action to satisfy both state law and IRS requirements.

I recommend to clients that the members make the election, usually at the annual meeting, although any legal vote of the members will suffice. Then, have the Board ratify that election at their first meeting after the annual meeting. That way, you’re covered no matter how you interpret the ruling.

Making an Offer on a Beautiful Condo

Evaluate Property Values

To help you decide on the amount of money to offer, find out what the property values are in a given area. There are plenty of locations where you can purchase condo sales. The prices can vary depending on the neighbourhood, square footage, and overall location. Those closest to the downtown area where there are shops and restaurants cost more.

As you compare the property values, you can get a ballpark figure of what they are selling for. You don’t want to offer too little or your request will likely be denied. You don’t want to offer too much though or you can pay more than you really had to. It is always a good idea to try to negotiate with the seller. You don’t have to give them their asking price.

If they decline your offer, you can decide to increase it or not. Think about your budget and stick to what you can afford. Don’t get into a competition where you have to have it for emotional reasons. You need to look for condo sales opportunities you will be able to afford month after month.


Getting the money to buy one doesn’t have to be complicated. It is a good idea to look into financing early on though. Make sure your credit report has accurate details so you aren’t blindsided in this department. Focus on paying down debt and avoiding incurring any new debt as you go through the condo sales process.

If you incur new debt, it can lower your credit score and make it harder for you to get a good loan. You need the amount to be reasonable so you can buy the condo you really want. You also want the interest rate to be as low as possible. This is going to influence your monthly payment. With high interest, you also pay considerably more over the life of the loan.

What is Available?

You have several options when it comes to condo sales. You may have to fill out an application to get approved for one based on a background check too. Look online for listings including photos and videos of the property. Look for signs about them for sale and even locations where they are still being built. It is possible to buy before it is completed!

You can work with a qualified real estate agent too. They stay on top of the various condo sales in the area. They can help you to find the location, price range, and set up you really want. They can also help you to navigate thought the price offering stages and all of the final paper work once you secure the deal! This is a much better option than trying to figure it out.

The reputation of the real estate agency should be very important to you. This information can help you to get your hands on what you want before someone else does. Due to the high demand for condos in this area, you can’t drag your feet. You need to be on top of the new listings as they become available.