Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 67-31

1967-1 C.B. 49

Sec. 164

IRS Headnote

For purposes of section 164(d)(1) of the Internal Revenue Code of 1954, the `real property tax year' of the State of Michigan and local governmental units thereof is the calendar year.

Full Text

Rev. Rul. 67-31

Advice has been requested as to what period is considered the `real property tax year' of the State of Michigan for purposes of apportioning real property taxes between a seller and a purchaser of property situated within the State under section 164(d)(1) of the Internal Revenue Code of 1954.

Section 164(a) of the Code provides, in part, that State and local real property taxes shall be allowed as a deduction for the taxable year within which paid or accrued.

The rules set forth in section 164(d) of the Code, relating to the apportionment between seller and purchaser of the allowable deduction, however, are applicable when real property is sold during any `real property tax year.' Section 164(d)(1) of the Code provides the general rule that if real property is sold during any `real property tax year' then so much of the tax as is properly allocable to that part of such year which ends on the day before the date of the sale shall be treated as imposed on the seller, and so much of the tax as is properly allocable to the part of such year which begins on the date of the sale shall be treated as imposed on the purchaser.

Section 1.164-6(c) of the Income Tax Regulations provides that the term `real property tax year,' as used in section 164(d) of the Code, refers to the period which, under the law imposing the tax, is regarded as the period to which the tax imposed relates. Where the State and one or more local governmental units impose a tax on real property, the real property tax year for each tax must be determined for purposes of applying the rule of apportionment of section 164(d)(1) of the Code to each tax. The time when the tax rate is determined, the time when the assessment is made, the time when the tax becomes a lien, or the time when the tax becomes due or delinquent does not necessarily determine the real property tax year. The real property tax year may or may not correspond to the fiscal year of the governmental unit imposing the tax. In each case, the State or local law determines what constitutes the real property tax year.

The provisions relating to the taxation of property in Michigan, both real and personal, are contained in the General Property Tax Law, Michigan Stat. Ann. ch. 59, sections 7.1, et seq. (1960). Although the Michigan law does not specifically state what period constitutes the real property tax year the Michigan attorney general opinions on this issue state that such taxes are levied for a calendar year and are collected for the calendar year in which the levy is made. See Opinion No. 2074 (1955) Report of the Attorney General of Michigan, Vol. 1, 257; Opinion No. 4463 of the Michigan Attorney General, dated February 21, 1966, and the case of Pere Marquette Railroad Co. v. Kalamazoo Lake Shore Railway Co. , 122 N.W. 356 (1909), cited therein. Therefore, it follows that the taxes assessed and levied on real property are for the calendar year.

Accordingly, for purposes of section 164(d)(1) of the Code, the `real property tax year' of the State of Michigan and local governmental units thereof is the calendar year.