Internal Revenue Code:Sec. 216. Deduction of taxes, interest, and business depreciation by cooperative housing corporation tenant-stockholder
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Contents |
Location in Internal Revenue Code
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART VII - ADDITIONAL ITEMIZED DEDUCTIONS FOR INDIVIDUALS
Statute
Sec. 216. Deduction of taxes, interest, and business depreciation
by cooperative housing corporation tenant-stockholder
(a) Allowance of deduction
In the case of a tenant-stockholder (as defined in subsection
(b)(2)), there shall be allowed as a deduction amounts (not
otherwise deductible) paid or accrued to a cooperative housing
corporation within the taxable year, but only to the extent that
such amounts represent the tenant-stockholder's proportionate share
of -
(1) the real estate taxes allowable as a deduction to the
corporation under section 164 which are paid or incurred by the
corporation on the houses or apartment building and on the land
on which such houses (or building) are situated, or
(2) the interest allowable as a deduction to the corporation
under section 163 which is paid or incurred by the corporation on
its indebtedness contracted -
(A) in the acquisition, construction, alteration,
rehabilitation, or maintenance of the houses or apartment
building, or
(B) in the acquisition of the land on which the houses (or
apartment building) are situated.
(b) Definitions
For purposes of this section -
(1) Cooperative housing corporation
The term ''cooperative housing corporation'' means a
corporation -
(A) having one and only one class of stock outstanding,
(B) each of the stockholders of which is entitled, solely by
reason of his ownership of stock in the corporation, to occupy
for dwelling purposes a house, or an apartment in a building,
owned or leased by such corporation,
(C) no stockholder of which is entitled (either conditionally
or unconditionally) to receive any distribution not out of
earnings and profits of the corporation except on a complete or
partial liquidation of the corporation, and
(D) meeting 1 or more of the following
requirements for the taxable year in which the taxes and
interest described in subsection (a) are paid or
incurred:
(i) 80 percent or more of the corporation's
gross income for such taxable year is derived from
tenant-stockholders.
(ii) At all times during such taxable year,
80 percent or more of the total square footage of
the corporation's property is used or available
for use by the tenant-stockholders for residential
purposes or purposes ancillary to such residential
use.
(iii) 90 percent or more of the expenditures
of the corporation paid or incurred during such
taxable year are paid or incurred for the
acquisition, construction, management,
maintenance, or care of the corporation's property
for the benefit of the tenant-stockholders.
(2) Tenant-stockholder
The term ''tenant-stockholder'' means a person who is a
stockholder in a cooperative housing corporation, and whose stock
is fully paid-up in an amount not less than an amount shown to
the satisfaction of the Secretary as bearing a reasonable
relationship to the portion of the value of the corporation's
equity in the houses or apartment building and the land on which
situated which is attributable to the house or apartment which
such person is entitled to occupy.
(3) Tenant-stockholder's proportionate share
(A) In general
Except as provided in subparagraph (B), the term
''tenant-stockholder's proportionate share'' means that
proportion which the stock of the cooperative housing
corporation owned by the tenant-stockholder is of the total
outstanding stock of the corporation (including any stock held
by the corporation).
(B) Special rule where allocation of taxes or interest reflect
cost to corporation of stockholder's unit
(i) In general
If, for any taxable year -
(I) each dwelling unit owned or leased by a cooperative
housing corporation is separately allocated a share of such
corporation's real estate taxes described in subsection
(a)(1) or a share of such corporation's interest described
in subsection (a)(2), and
(II) such allocations reasonably reflect the cost to such
corporation of such taxes, or of such interest,
attributable to the tenant-stockholder's dwelling unit (and
such unit's share of the common areas),
then the term ''tenant-stockholder's proportionate share''
means the shares determined in accordance with the
allocations described in subclause (II).
(ii) Election by corporation required
Clause (i) shall apply with respect to any cooperative
housing corporation only if such corporation elects its
application. Such an election, once made, may be revoked
only with the consent of the Secretary.
(4) Stock owned by governmental units
For purposes of this subsection, in determining whether a
corporation is a cooperative housing corporation, stock owned and
apartments leased by the United States or any of its possessions,
a State or any political subdivision thereof, or any agency or
instrumentality of the foregoing empowered to acquire shares in a
cooperative housing corporation for the purpose of providing
housing facilities, shall not be taken into account.
(5) Prior approval of occupancy
For purposes of this section, in the following cases there
shall not be taken into account the fact that (by agreement with
the cooperative housing corporation) the person or his nominee
may not occupy the house or apartment without the prior approval
of such corporation:
(A) In any case where a person acquires stock of a
cooperative housing corporation by operation of law.
(B) In any case where a person other than an individual
acquires stock of a cooperative housing corporation.
(C) In any case where the original seller acquires any stock
of the cooperative housing corporation from the corporation not
later than 1 year after the date on which the apartments or
houses (or leaseholds therein) are transferred by the original
seller to the corporation.
(6) Original seller defined
For purposes of paragraph (5), the term ''original seller''
means the person from whom the corporation has acquired the
apartments or houses (or leaseholds therein).
(c) Treatment as property subject to depreciation
(1) In general
So much of the stock of a tenant-stockholder in a cooperative
housing corporation as is allocable, under regulations prescribed
by the Secretary, to a proprietary lease or right of tenancy in
property subject to the allowance for depreciation under section
167(a) shall, to the extent such proprietary lease or right of
tenancy is used by such tenant-stockholder in a trade or business
or for the production of income, be treated as property subject
to the allowance for depreciation under section 167(a). The
preceding sentence shall not be construed to limit or deny a
deduction for depreciation under section 167(a) by a cooperative
housing corporation with respect to property owned by such a
corporation and leased to tenant-stockholders.
(2) Deduction limited to adjusted basis in stock
(A) In general
The amount of any deduction for depreciation allowable under
section 167(a) to a tenant-stockholder with respect to any
stock for any taxable year by reason of paragraph (1) shall not
exceed the adjusted basis of such stock as of the close of the
taxable year of the tenant-stockholder in which such deduction
was incurred.
(B) Carryforward of disallowed amount
The amount of any deduction which is not allowed by reason of
subparagraph (A) shall, subject to the provisions of
subparagraph (A), be treated as a deduction allowable under
section 167(a) in the succeeding taxable year.
(d) Disallowance of deduction for certain payments to the
corporation
No deduction shall be allowed to a stockholder in a cooperative
housing corporation for any amount paid or accrued to such
corporation during any taxable year (in excess of the stockholder's
proportionate share of the items described in subsections (a)(1)
and (a)(2)) to the extent that, under regulations prescribed by the
Secretary, such amount is properly allocable to amounts paid or
incurred at any time by the corporation which are chargeable to the
corporation's capital account. The stockholder's adjusted basis in
the stock in the corporation shall be increased by the amount of
such disallowance.
(e) Distributions by cooperative housing corporations
Except as provided in regulations no gain or loss shall be
recognized on the distribution by a cooperative housing corporation
of a dwelling unit to a stockholder in such corporation if such
distribution is in exchange for the stockholder's stock in such
corporation and such dwelling unit is used as his principal
residence (within the meaning of section 121).
Sources
(Aug. 16, 1954, ch. 736, 68A Stat. 71; Pub. L. 87-834, Sec. 28(a),
Oct. 16, 1962, 76 Stat. 1068; Pub. L. 91-172, title IX, Sec.
913(a), Dec. 30, 1969, 83 Stat. 723; Pub. L. 94-455, title XIX,
Sec. 1906(b)(13)(A), title XXI, Sec. 2101(b), (f)(1), Oct. 4, 1976,
90 Stat. 1834, 1899; Pub. L. 95-600, title V, Sec. 531(a), Nov. 6,
1978, 92 Stat. 2886; Pub. L. 96-222, title I, Sec. 105(a)(6), Apr.
1, 1980, 94 Stat. 219; Pub. L. 99-514, title VI, Sec. 644(a)-(d),
Oct. 22, 1986, 100 Stat. 2285, 2286; Pub. L. 100-647, title VI,
Sec. 6282(a), Nov. 10, 1988, 102 Stat. 3755; Pub. L. 101-508, title
XI, Sec. 11702(i), Nov. 5, 1990, 104 Stat. 1388-516; Pub. L.
105-34, title III, Sec. 312(d)(4), Aug. 5, 1997, 111 Stat. 840.)
Miscellaneous
AMENDMENTS
2007 - PL 110-142
SEC. 4. ALTERNATIVE TESTS FOR QUALIFYING AS COOPERATIVE HOUSING
CORPORATION.
(a) In General.--Subparagraph (D) of section 216(b)(1) of the
Internal Revenue Code of 1986 (defining cooperative housing corporation)
is amended to read as follows:
``(D) meeting 1 or more of the following
requirements for the taxable year in which the taxes and
interest described in subsection (a) are paid or
incurred:
``(i) 80 percent or more of the corporation's
gross income for such taxable year is derived from
tenant-stockholders.
``(ii) At all times during such taxable year,
80 percent or more of the total square footage of
the corporation's property is used or available
for use by the tenant-stockholders for residential
purposes or purposes ancillary to such residential
use.
``(iii) 90 percent or more of the expenditures
of the corporation paid or incurred during such
taxable year are paid or incurred for the
acquisition, construction, management,
maintenance, or care of the corporation's property
for the benefit of the tenant-stockholders.''.
1997 - Subsec. (e). Pub. L. 105-34 substituted ''such dwelling
unit is used as his principal residence (within the meaning of
section 121)'' for ''such exchange qualifies for nonrecognition of
gain under section 1034(f)''.
1990 - Subsec. (e). Pub. L. 101-508 substituted ''corporations''
for ''associations'' in heading and ''corporation'' for
''association'' after ''housing'' in text.
1988 - Subsec. (e). Pub. L. 100-647 added subsec. (e).
1986 - Subsec. (b)(2). Pub. L. 99-514, Sec. 644(a)(1),
substituted ''a person'' and ''such person'' for ''an individual''
and ''such individual'', respectively.
Subsec. (b)(3). Pub. L. 99-514, Sec. 644(d), added heading and
amended text generally. Prior to amendment, text read as follows:
''The term 'tenant-stockholder's proportionate share' means that
proportion which the stock of the cooperative housing corporation
owned by the tenant-stockholder is of the total outstanding stock
of the corporation (including any stock held by the corporation).''
Subsec. (b)(5). Pub. L. 99-514, Sec. 644(a)(2), substituted
''Prior approval of occupancy'' for ''Stock acquired through
foreclosure by lending institution'' in heading and amended text
generally. Prior to amendment, text read as follows: ''If a bank
or other lending institution acquires by foreclosure (or by
instrument in lieu of foreclosure) the stock of a
tenant-stockholder, and a lease or the right to occupy an apartment
or house to which such stock is appurtenant, such bank or other
lending institution shall be treated as a tenant-stockholder for a
period not to exceed three years from the date of acquisition. The
preceding sentence shall apply even though, by agreement with the
cooperative housing corporation, the bank (or other lending
institution) or its nominee may not occupy the house or apartment
without the prior approval of such corporation.''
Subsec. (b)(6). Pub. L. 99-514, Sec. 644(a)(2), amended par. (6)
generally, substituting provisions defining ''original seller'' for
purposes of par. (5) for provisions relating to stock owned by
person from whom corporation acquired its property, subpar. (A)
thereof providing for general rule, subpar. (B) providing that
stock acquisition must take place not later than 1 year after
transfer of dwelling units, subpar. (C) providing that original
seller must have right to occupy apartment or house, and subpar.
(D) defining ''original seller'' for purposes of former par. (6).
Subsec. (c). Pub. L. 99-514, Sec. 644(b), amended subsec. (c)
generally. Prior to amendment, subsec. (c) read as follows: ''So
much of the stock of a tenant-stockholder in a cooperative housing
corporation as is allocable, under regulations prescribed by the
Secretary, to a proprietary lease or right of tenancy in property
subject to the allowance for depreciation under section 167(a)
shall, to the extent such proprietary lease or right of tenancy is
used by such tenant-stockholder in a trade or business or for the
production of income, be treated as property subject to the
allowance for depreciation under section 167(a). The preceding
sentence shall not be construed to limit or deny a deduction for
depreciation under 167(a) by a cooperative housing corporation with
respect to property owned by such a corporation and leased to
tenant-stockholders.''
Subsec. (d). Pub. L. 99-514, Sec. 644(c), added subsec. (d).
1980 - Subsec. (b)(6)(A). Pub. L. 96-222, Sec. 105(a)(6)(A),
added subpar. (A). Former subpar. (A), which required the original
seller who acquired stock of the corporation from the corporation
by purchase or foreclosure to be treated as a tenant-stockholder
for a period not to exceed 3 years from the date of acquisition,
was struck out.
Subsec. (b)(6)(B) to (D). Pub. L. 96-222, Sec. 105(a)(6)(A), (B),
added subpar. (B), redesignated former subpars. (B) and (C) as (C)
and (D), and, in subpar. (D) as so redesignated, inserted
provisions requiring that the estate of the original seller succeed
to, and take into account, the tax treatment of the original seller
under this paragraph.
1978 - Subsec. (b)(6). Pub. L. 95-600, added par. (6).
1976 - Subsec. (b)(2). Pub. L. 94-455, Sec. 1906(b)(13)(A),
struck out ''or his delegate'' after ''Secretary''.
Subsec. (b)(5). Pub. L. 94-455, Sec. 2101(f), added par. (5).
Subsec. (c). Pub. L. 94-455, Sec. 1906(b)(13)(A), 2101(b), struck
out ''or his delegate'' after ''Secretary'' and inserted at end
''The preceding sentence shall not be construed to limit or deny a
deduction for depreciation under 167(a) by a cooperative housing
corporation with respect to property owned by such corporation and
leased to tenant-stockholders.''
1969 - Subsec. (b)(4). Pub. L. 91-172 added par. (4).
1962 - Pub. L. 87-834 substituted ''Deduction of taxes, interest,
and business depreciation by cooperative housing corporation
tenant-stockholders'' for ''Amounts representing taxes and interest
paid to cooperative housing corporation'' in section catchline, and
added subsec. (c).
EFFECTIVE DATE OF 2007 AMENDMENT
2007 - PL 110-142
SEC. 4. ALTERNATIVE TESTS FOR QUALIFYING AS COOPERATIVE HOUSING
CORPORATION.
(b) Effective Date.--The <<NOTE: 26 USC 216 note.>> amendment made
by this section shall apply to taxable years ending after the date of
the enactment of this Act.
EFFECTIVE DATE OF 1997 AMENDMENT
Amendment by Pub. L. 105-34 applicable to sales and exchanges
after May 6, 1997, with certain exceptions, see section 312(d)((e))
of Pub. L. 105-34, set out as a note under section 121 of this
title.
EFFECTIVE DATE OF 1990 AMENDMENT
Amendment by Pub. L. 101-508 effective as if included in the
provision of the Technical and Miscellaneous Revenue Act of 1988,
Pub. L. 100-647, to which such amendment relates, see section
11702(j) of Pub. L. 101-508, set out as a note under section 59 of
this title.
EFFECTIVE DATE OF 1988 AMENDMENT
Section 6282(b) of Pub. L. 100-647 provided that: ''The amendment
made by this section (amending this section) shall take effect as
if included in the amendments made by section 631 of the Tax Reform
Act of 1986 (section 631 of Pub. L. 99-514, see Tables for
classification).''
EFFECTIVE DATE OF 1986 AMENDMENT
Section 644(f) of Pub. L. 99-514 provided that:
''(1) In general. - The amendments made by this section (amending
this section) shall apply to taxable years beginning after December
31, 1986.
''(2) Subsection (e). -
''(A) Except as provided in subparagraph (B), subsection (e)
(set out below) shall apply to taxable years beginning before
January 1, 1986.
''(B) Subsection (e)(7) (set out below) shall apply to amounts
paid or incurred, and property acquired, in taxable years
beginning, after December 31, 1985.''
EFFECTIVE DATE OF 1980 AMENDMENT
Amendment by Pub. L. 96-222 effective, except as otherwise
provided, as if it had been included in the provisions of the
Revenue Act of 1978, Pub. L. 95-600, to which such amendment
relates, see section 201 of Pub. L. 96-222, set out as a note under
section 32 of this title.
EFFECTIVE DATE OF 1978 AMENDMENT
Section 531(b) of Pub. L. 95-600 provided that: ''The amendment
made by this section (amending this section) shall apply to stock
acquired after the date of the enactment of this Act (Nov. 6,
1978).''
EFFECTIVE DATE OF 1976 AMENDMENT
Section 2101(f)(2) of Pub. L. 94-455 provided that: ''The
amendment made by paragraph (1) (amending this section) shall apply
to stock acquired by banks or other lending institutions after the
date of the enactment of this Act (Oct. 4, 1976).''
EFFECTIVE DATE OF 1969 AMENDMENT
Section 913(b) of Pub. L. 91-172 provided that: ''The amendment
made by subsection (a) (amending this section) shall apply to
taxable years beginning after December 31, 1969.''
EFFECTIVE DATE OF 1962 AMENDMENT
Section 28(c) of Pub. L. 87-834 provided that: ''The amendments
made by subsection (a) (amending this section) shall be effective
with respect to taxable years beginning after December 31, 1961.''
TREATMENT OF AMOUNTS RECEIVED IN CONNECTION WITH REFINANCING OF
INDEBTEDNESS OF CERTAIN COOPERATIVE HOUSING CORPORATIONS; TREATMENT
OF AMOUNTS PAID FROM QUALIFIED REFINANCING-RELATED RESERVE
Section 644(e) of Pub. L. 99-514 provided that:
''(1) Payment of closing costs and creation of reserve excluded
from gross income. - For purposes of the Internal Revenue Code of
1954 (now 1986), no amount shall be included in the gross income of
a qualified cooperative housing corporation by reason of the
payment or reimbursement by a city housing development agency or
corporation of amounts for -
''(A) closing costs, or
''(B) the creation of reserves for the qualified cooperative
housing corporation,
in connection with a qualified refinancing.
''(2) Income from reserve fund treated as member income. -
''(A) In general. - Income from a qualified refinancing-related
reserve shall be treated as derived from its members for purposes
of -
''(i) section 216 of the Internal Revenue Code of 1954 (now
1986) (relating to deduction of taxes, interest, and business
depreciation by cooperative housing corporation
tenant-stockholder), and
''(ii) section 277 of such Code (relating to deductions
incurred by certain membership organizations in transactions
with members).
''(B) No inference. - Nothing in the provisions of this
paragraph shall be construed to infer that a change in law is
intended with respect to the treatment of deductions under
section 277 of the Internal Revenue Code of 1954 (now 1986) with
respect to cooperative housing corporations, and any
determination of such issue shall be made as if such provisions
had not been enacted.
''(3) Treatment of certain interest claimed as deduction. - Any
amount -
''(A) claimed (on a return of tax imposed by chapter 1 of the
Internal Revenue Code of 1954 (now 1986)) as a deduction by a
qualified cooperative housing corporation for interest for any
taxable year beginning before January 1, 1986, on a second
mortgage loan made by a city housing development agency or
corporation in connection with a qualified refinancing, and
''(B) reported (before April 16, 1986) by the qualified
cooperative housing corporation to its tenant-stockholders as
interest described in section 216(a)(2) of such Code,
shall be treated for purposes of such Code as if such amount were
paid by such qualified cooperative housing corporation during such
taxable year.
''(4) Qualified cooperative housing corporation. -
''(A) In general. - For purposes of this subsection, the term
'qualified cooperative housing corporation' means any corporation
if -
''(i) such corporation is, after the application of
paragraphs (1) and (2), a cooperative housing corporation (as
defined in section 216(b) of the Internal Revenue Code of 1954
(now 1986)),
''(ii) such corporation is subject to a qualified
limited-profit housing companies law, and
''(iii) such corporation either -
''(I) filed for incorporation on July 22, 1965, or
''(II) filed for incorporation on March 5, 1964.
''(B) Qualified limited-profit housing companies law. - For
purposes of subparagraph (A), the term 'qualified limited-profit
housing companies law' means any limited-profit housing companies
law which limits the resale price for a tenant-stockholder's
stock in a cooperative housing corporation to the sum of his
basis for such stock plus his proportionate share of part or all
of the amortization of any mortgage on the building owned by such
corporation.
''(5) Qualified refinancing. - For purposes of this subsection,
the term 'qualified refinancing' means any refinancing -
''(A) which occurred -
''(i) with respect to a qualified cooperative housing
corporation described in paragraph (4)(A)(iii)(I) on September
20, 1978, or
''(ii) with respect to a qualified cooperative housing
corporation described in paragraph (4)(A)(iii)(II) on November
21, 1978, and
''(B) in which a qualified cooperative housing corporation
refinanced a first mortgage loan made to such corporation by a
city housing development agency with a first mortgage loan made
by a city housing development corporation and insured by an
agency of the Federal Government and a second mortgage loan made
by such city housing development agency, in the process of which
a reserve was created (as required by such Federal agency) and
closing costs were paid or reimbursed by such city housing
development agency or corporation.
''(6) Qualified refinancing-related reserve. - For purposes of
this subsection, the term 'qualified refinancing-related reserve'
means any reserve of a qualified cooperative housing corporation
with respect to the creation of which no amount was included in the
gross income of such corporation by reason of paragraph (a).
''(7) Treatment of amounts paid from qualified
refinancing-related reserve. -
''(A) In general. - With respect to any payment from a
qualified refinancing-related reserve out of amounts excluded
from gross income by reason of paragraph (1) -
''(i) no deduction shall be allowed under chapter 1 of such
Code, and
''(ii) the basis of any property acquired with such payment
(determined without regard to this subparagraph) shall be
reduced by the amount of such payment.
''(B) Ordering rules. - For purposes of subparagraph (A),
payments from a reserve shall be treated as being made -
''(i) first from amounts excluded from gross income by reason
of paragraph (1) to the extent thereof, and
''(ii) then from other amounts in the reserve.''
References
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 67, 121, 143, 163, 860G,
911, 6050H of this title; title 12 sections 1451, 1717.
