
From the U.S. Code Online via GPO Access
[wais.access.gpo.gov]
[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 26USC216]

 
                     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
 
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) 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.

                       (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).

(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.)


                               Amendments

    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, Secs. 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 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.''

                  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.
