Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 78-31

1978-1 C.B. 76

Sec. 216

IRS Headnote

Cooperative housing corporation; ownership of part of building. A cooperative apartment corporation, otherwise meeting the requirements of section 216(b)(1) of the Code, that owns only a percentage of the condominium apartment units in a building qualifies as a cooperative housing corporation.

Full Text

Rev. Rul. 78-31

Advice has been requested whether the cooperative apartment corporation described below qualifies as a "cooperative housing corporation" within the meaning of section 216(b)(1) of the Internal Revenue Code of 1954.

ABC, a limited partnership, purchased a 55-story building, 15 stories of which are devoted to commercial use and the remaining 40 stories of which are devoted to residential use in the form of apartments. ABC recorded a condominium declaration under which each apartment comprises a separate condominium unit and the commercial space comprises one or more condominium units. ABC sold the 15 commercial stories and 65 percent of the apartment condominium units to the N corporation and the balance, 35 percent of the apartment condominium units, to the P corporation. The P corporation received legal title in fee simple to each unit which it acquired coupled with ownership of an undivided interest in the land and all other parts of the structure held in common with the other owners of the individual units. P and N are unrelated corporations. The P corporation sold shares of stock to individuals each of whom, by virtue of ownership thereof, was entitled to occupy one of the apartment condominium units owned by the P corporation. The apartment condominium units owned by the P corporation and occupied by their tenant-stockholders are located on different floors of the residential part of the building and are not necessarily adjacent to each other.

The specific question is whether each of the stockholders of the P corporation is entitled to occupy for dwelling purposes a house, or an apartment in a building, owned or leased by the P corporation as required by section 216(b)(1)(B) of the Code. The P corporation otherwise qualifies as a cooperative housing corporation within the meaning of section 216(b)(1).

Section 216(a) of the Code provides generally that in the case of a tenant-stockholder, there shall be allowed as a deduction amounts (not otherwise deductible) paid or accrued to a cooperative housing corporation within the taxable year to the extent that such amounts represent a proportionate share of the real estate taxes and interest allowable as a deduction of the corporation.

Section 216(b) of the Code provides, in part, as follows:

(1) Cooperative Housing Corporation.--The term "cooperative housing corporation" means a corporation--

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(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.

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There is no requirement that a cooperative housing corporation must own an entire apartment building in order to satisfy the provisions of section 216(b)(1)(B) of the Code. It is sufficient that the corporation owns the apartments that its tenant-stockholders are entitled to occupy. In addition, the fact that the apartments are condominium units does not preclude the cooperative housing corporation from being considered as owning apartments in a building.

Accordingly, the P corporation satisfies the requirements of section 216(b)(1)(B) of the Code and is a cooperative housing corporation within the meaning of section 216(b)(1).