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.
 

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