US Code

Public Law 119-73 (01/23/2026)

26 U.S.C. § 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).

Aug. 16, 1954, ch. 73668A Stat. 71Pub. L. 87–834, § 28(a)76 Stat. 1068Pub. L. 91–172, title IX, § 913(a)83 Stat. 723Pub. L. 94–455, title XIX, § 1906(b)(13)(A)90 Stat. 1834Pub. L. 95–600, title V, § 531(a)92 Stat. 2886Pub. L. 96–222, title I, § 105(a)(6)94 Stat. 219Pub. L. 99–514, title VI, § 644(a)100 Stat. 2285Pub. L. 100–647, title VI, § 6282(a)102 Stat. 3755Pub. L. 101–508, title XI, § 11702(i)104 Stat. 1388–516Pub. L. 105–34, title III, § 312(d)(4)111 Stat. 840Pub. L. 110–142, § 4(a)121 Stat. 1804(, ; , , ; , , ; , title XXI, § 2101(b), (f)(1), , , 1899; , , ; , , ; –(d), , , 2286; , , ; , , ; , , ; , , .)

Editorial Notes

Amendments

Pub. L. 110–1422007—Subsec. (b)(1)(D). amended subpar. (D) generally. Prior to amendment, subpar. (D) read as follows: “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.”

Pub. L. 105–341997—Subsec. (e). 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)”.

Pub. L. 101–5081990—Subsec. (e). substituted “corporations” for “associations” in heading and “corporation” for “association” after “housing” in text.

Pub. L. 100–6471988—Subsec. (e). added subsec. (e).

Pub. L. 99–514, § 644(a)(1)1986—Subsec. (b)(2). , substituted “a person” and “such person” for “an individual” and “such individual”, respectively.

Pub. L. 99–514, § 644(d)Subsec. (b)(3). , 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).”

Pub. L. 99–514, § 644(a)(2)Subsec. (b)(5). , 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.”

Pub. L. 99–514, § 644(a)(2)Subsec. (b)(6). , 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).

Pub. L. 99–514, § 644(b)Subsec. (c). , 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.”

Pub. L. 99–514, § 644(c)Subsec. (d). , added subsec. (d).

Pub. L. 96–222, § 105(a)(6)(A)1980—Subsec. (b)(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.

Pub. L. 96–222, § 105(a)(6)(A)Subsec. (b)(6)(B) to (D). , (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.

Pub. L. 95–6001978—Subsec. (b)(6). , added par. (6).

Pub. L. 94–455, § 1906(b)(13)(A)1976—Subsec. (b)(2). , struck out “or his delegate” after “Secretary”.

Pub. L. 94–455, § 2101(f)Subsec. (b)(5). , added par. (5).

Pub. L. 94–455Subsec. (c). , §§ 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.”

Pub. L. 91–1721969—Subsec. (b)(4). added par. (4).

Pub. L. 87–8341962— 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).

Statutory Notes and Related Subsidiaries

Effective Date of 2007 Amendment

Pub. L. 110–142, § 4(b)121 Stat. 1804

“The amendment made by this section [amending this section] shall apply to taxable years ending after the date of the enactment of this Act [].”
, , , provided that:

Effective Date of 1997 Amendment

Pub. L. 105–34Pub. L. 105–34section 121 of this titleAmendment by applicable to sales and exchanges after , with certain exceptions, see section 312(d)[(e)] of , set out as a note under .

Effective Date of 1990 Amendment

Pub. L. 101–508Pub. L. 100–647section 11702(j) of Pub. L. 101–508section 59 of this titleAmendment by effective as if included in the provision of the Technical and Miscellaneous Revenue Act of 1988, , to which such amendment relates, see , set out as a note under .

Effective Date of 1988 Amendment

Pub. L. 100–647, title VI, § 6282(b)102 Stat. 3755

section 631 of Pub. L. 99–514“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 [, see Tables for classification].”
, , , provided that:

Effective Date of 1986 Amendment

Pub. L. 99–514, title VI, § 644(f)100 Stat. 2289

“(1)

In general .—

The amendments made by this section [amending this section] shall apply to taxable years beginning after .
“(2)

Subsection (e).—

“(A)
Except as provided in subparagraph (B), subsection (e) [set out below] shall apply to taxable years beginning before .
“(B)
Subsection (e)(7) [set out below] shall apply to amounts paid or incurred, and property acquired, in taxable years beginning, after .”
, , , provided that:

Effective Date of 1980 Amendment

Pub. L. 96–222Pub. L. 95–600section 201 of Pub. L. 96–222section 32 of this titleAmendment by effective, except as otherwise provided, as if it had been included in the provisions of the Revenue Act of 1978, , to which such amendment relates, see , set out as a note under .

Effective Date of 1978 Amendment

Pub. L. 95–600, title V, § 531(b)92 Stat. 2887

“The amendment made by this section [amending this section] shall apply to stock acquired after the date of the enactment of this Act [].”
, , , provided that:

Effective Date of 1976 Amendment

Pub. L. 94–455, title XXI, § 2101(f)(2)90 Stat. 1900

“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 [].”
, , , provided that:

Effective Date of 1969 Amendment

Pub. L. 91–172, title IX, § 913(b)83 Stat. 723

“The amendment made by subsection (a) [amending this section] shall apply to taxable years beginning after .”
, , , provided that:

Effective Date of 1962 Amendment

Pub. L. 87–834, § 28(c)76 Stat. 1068

“The amendments made by subsection (a) [amending this section] shall be effective with respect to taxable years beginning after .”
, , , provided that:

Treatment of Amounts Received in Connection With Refinancing of Indebtedness of Certain Cooperative Housing Corporations; Treatment of Amounts Paid From Qualified Refinancing-Related Reserve

Pub. L. 99–514, title VI, § 644(e)100 Stat. 2287

“(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 , on a second mortgage loan made by a city housing development agency or corporation in connection with a qualified refinancing, and
“(B)
reported (before ) 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 , or
“(II)
filed for incorporation on .
“(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 , or
“(ii)
with respect to a qualified cooperative housing corporation described in paragraph (4)(A)(iii)(II) on , 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.”
, , , provided that: