I.R.C. § 216(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—
I.R.C. § 216(a)(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
I.R.C. § 216(a)(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—
I.R.C. § 216(a)(2)(A) —
in the acquisition, construction, alteration, rehabilitation, or maintenance of
the houses or apartment building, or
I.R.C. § 216(a)(2)(B) —
in the acquisition of the land on which the houses (or apartment building) are situated.
I.R.C. § 216(b) Definitions —
For purposes of this section—
I.R.C. § 216(b)(1) Cooperative Housing Corporation —
The term “cooperative housing corporation” means a corporation—
I.R.C. § 216(b)(1)(A) —
having one and only one class of stock outstanding,
I.R.C. § 216(b)(1)(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,
I.R.C. § 216(b)(1)(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
I.R.C. § 216(b)(1)(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.R.C. § 216(b)(1)(D)(i) —
80 percent or more of the corporation's gross income for such taxable year is derived
from tenant-stockholders.
I.R.C. § 216(b)(1)(D)(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.
I.R.C. § 216(b)(1)(D)(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.
I.R.C. § 216(b)(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.
I.R.C. § 216(b)(3) Tenant-Stockholder's Proportionate Share
I.R.C. § 216(b)(3)(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).
I.R.C. § 216(b)(3)(B) Special Rule Where Allocation Of Taxes Or Interest Reflect Cost To Corporation Of
Stockholder's Unit
I.R.C. § 216(b)(3)(B)(i) In General —
If, for any taxable year—
I.R.C. § 216(b)(3)(B)(i)(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
I.R.C. § 216(b)(3)(B)(i)(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).
I.R.C. § 216(b)(3)(B)(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.
I.R.C. § 216(b)(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.
I.R.C. § 216(b)(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:
I.R.C. § 216(b)(5)(A) —
In any case where a person acquires stock of a cooperative housing corporation by
operation of law.
I.R.C. § 216(b)(5)(B) —
In any case where a person other than an individual acquires stock of a cooperative
housing corporation.
I.R.C. § 216(b)(5)(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.
I.R.C. § 216(b)(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).
I.R.C. § 216(c) Treatment As Property Subject To Depreciation
I.R.C. § 216(c)(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.
I.R.C. § 216(c)(2) Deduction Limited To Adjusted Basis In Stock
I.R.C. § 216(c)(2)(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.
I.R.C. § 216(c)(2)(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.
I.R.C. § 216(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.
I.R.C. § 216(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).
(Aug. 16, 1954, ch. 736, 68A Stat. 71; Oct. 16, 1962,
Pub. L. 87-834, Sec. 28(a), 76 Stat. 1068; Dec. 30, 1969, Pub. L. 91-172, title IX,
Sec. 913(a), 83 Stat. 723; Oct. 4, 1976, Pub. L. 94-455, title XIX, Sec. 1906(b)(13)(A),
title XXI, Sec. 2101(b),
(f)(1), 90 Stat. 1834, 1899; Nov. 6, 1978, Pub. L. 95-600, title V, Sec. 531(a),
92 Stat. 2886; Apr. 1, 1980, Pub. L. 96-222, title I, Sec. 105(a)(6), 94 Stat. 219;
Oct. 22, 1986, Pub. L. 99-514, title VI, Sec. 644(a)-(d), 100 Stat. 2285, 2286;
Nov. 10, 1988, Pub. L. 100-647, title VI, Sec. 6282(a), 102 Stat. 3755; Nov. 5, 1990,
Pub. L. 101-508, title XI, Sec. 11702(i), 104 Stat. 1388-516; Pub. L. 105-34, title
III, Sec. 312(d)(4), Aug. 5, 1997, 111 Stat 788; Pub. L. 110-142, Sec. 4(a), Dec.
20, 2007, 121 Stat. 1803.)
BACKGROUND NOTES
AMENDMENTS
2007 - Subsec. (b)(1)(D). Pub. L. 110-142, Sec. 4(a), amended subpar. (D). Before
amendment, it read as follows: “
(D) 80 percent or more of the gross income of which for the taxable year in which
the taxes and interest described in subsection (a)
are paid or incurred is derived from tenant-stockholders.”
1997 - Subsec. (e). Pub. L. 105-34, Sec. 312(d)(4), amended subsec. (e) by substituting
“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 1997 AMENDMENTS
Amendment by Sec. 312(d)(4) of Pub. L. 105-34 effective for sales and exchanges after
May 6, 1997. Sec. 312(d)[e] provided special rules which are set out in section 121.
EFFECTIVE DATE OF 2007 AMENDMENT
Amendment by Sec. 4(a) of Pub. L. 110-142 effective for taxable years ending after
the date of the enactment of this Act [Enacted: Dec. 20, 2007].
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 as a note below) shall apply to taxable years beginning
before January 1, 1986.
‘(B) Subsection (e)(7) (set out as a note 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.’
