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S
Smithmd
October 5, 2018
Question

entering in HUD-1 transactions

  • October 5, 2018
  • 6 replies
  • 68 views

how to record HUD-1 transactions correctly and how to account for the lender / investor funds in the transaction. The lender / investor is not a partner or has any interest in the company, they are just an outside source of funds  (loan type).

The MAIN concern is entering in the HUD-1 statement correctly in QuickBooks

 

I just recently received my ProAdvisor badge so I really want to get this right...

 

Thanks,

Mark

    6 replies

    john-pero
    john-pero
    Level 12
    October 25, 2018

    Some will suggest using several transactions including sales receipts and deposits but my procedure has always been (and is signed off  on  by the CPA for a major NHL team) to use a Journal Entry and replicate my entire half or the HUD-1, be it a purchase or a sale.

     

    I always start with the property first, fixed asset = sales price. once I have everything entered and balanced I redistribute building, land, and settlement charges. Now go down through it line by line.

    • debit Fixed Asset Property Name = sales price
    • Property Taxes are an expense (debit Taxes, Property)
    • Utilities pad are Expense (debit Utility Expense)
    • Settlement charges are split between basis (added to fixed asset) and loan amortization if directly loan related and not actual purchase (think of difference if you had won the mega-millions and were paying cash). Loan costs can be amortized over the life of the loan which is usually shorter than the depreciation life of the property.
    • Prior Down Payment in Escrow is a credit (previously should have posted to Escrow for Purchase)
    • Loan from bank is credit (brand new liability, bank = vendor/supplier)
    • any cash provided at closing is credit

    Once you get down through it the debits and credits should be equal and you can save it. It is all in one transaction and will mirror the front page (with some adjustment split of settlement charges) of the HUD-1. Now , either in the same entry or a new journal entry make the adjustment for buildings vs. land by taking the full basis (purchase price plus settlement charges added to basis by splitting out % of land value from county tax  assessment into separate asset account for Land which can never be depreciated, and if you choose, Building for this property or you can leave the remaining basis as is for Building.

     

    One method makes separate sub accounts under your property as a fixed asset for Land and Building, which will total the entire basis, depreciable, amortizable and non-depreciable or keep a separate Fixed Asset for all Land separate form any Buildings.

     

    You can add a sub account for accumulated depreciation or you can keep just a single Accumulated Depreciation account, which can keep your Balance Sheet from becoming cluttered

     

    A
    ATOZOOK
    May 2, 2019

    Good Morning,

     

    I have an additional question.   Our church as recently sold its property.  I have recorded the Hud-1 as described.  However, the treasurer is concerned about the net proceeds not appearing on the P&L as income, which is causing us to be in the red.  I have posted the settlement charges, ie escrow costs, commissions, closing fees, etc back to the asset.  The two expenses - back taxes and a cost incurred to sell the property to the P&L.  So my questions are:

     

    1.  Is there a way to post this net proceeds into an income account?

    2.  If not, how to do I explain in layman's terms, why.  This will have to be explained to our congregation.

     

    Thank you in advance for your time and assistance.


    Vicki

    john-pero
    john-pero
    Level 12
    May 2, 2019

    The HUD-1 has no clue what your basis is in property being sold. But starting with the price received as first entry against the asset account followed by adjustments for new costs of sale, recovery of any depreciation expense taken and addition of land value back to asset at the bottom , once the asset value itself is reduced to zero should be a figure that represents either the gain or the loss on the sale. 

     

    Here is a simple example. Property purchased for 10,000, land value 1,000 building asset is 9,000

    Sells for 15,000 with 1,000 in closing costs, 1,000 in taxes and utilities to be paid at closing.

     

    Asset> Credit 15,000

    Expenses>Debit 1,000

    Closing costs >Debit the Asset 1,000

    Asset >Debit $10,000   (original basis including land)(and when you look after saving the asset value is now zero)

    If you are with me and put those numbers in proper column DR on left, CR on right you should get a bottom line of of a Credit of $3,000 which you post to Gain on Sale Income account

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