CAN COOPERATIVE HOUSING CORPORATION STOCKHOLDERS DEDUCT STRUCTURAL DAMAGES DUE TO SANDY?

CAN COOPERATIVE HOUSING CORPORATION STOCKHOLDERS DEDUCT STRUCTURAL DAMAGES DUE TO SANDY?

A HIDDEN PROBLEM FOR MANY PEOPLE WHO EXPERIENCED SANDY

COOPERATIVE HOUSING CORPORATIONS

A 2011 case, Alphonso, U.S. Tax Court, 136 T.C. No. 11, (Mar. 16, 2011) explains why owners of units in cooperative housing corporations are not permitted to deduct casualty losses related to the corporation’s property. A tenant-stockholder in a cooperative housing corporation, “coop” could not deduct a casualty loss for damage that resulted from the collapse of a retaining wall located on the coop property where the taxpayer’s apartment was located. Initially, the taxpayer deducted the coops assessment on each stockholder to repair the wall collapsed. No deduction was allowed under §165, Losses, because the taxpayer had no property rights in the damaged property. The taxpayer’s perpetual lease and other documents did not grant her any fee, leasehold, easement or other property interest in that property. No deduction was allowed under Code section 216(a). That provision allows a deduction for amounts paid to the corporation for real estate taxes paid under Code section 164 or for interest under Code section 163 that is paid or incurred by the corporation on debt that it issued in order to, among other things, acquire or construct the land or buildings that it owns. Under Code section 216(a) no deduction is allowed for casualty losses.

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This material was contributed by John Trapani. A Certified Public Accountant who has assisted taxpayers since 1976, in analyzing and reporting transactions of the type covered in this material.  

Internal Revenue Service Circular 230 Disclosure

This is a general discussion of tax law. The application of the law to specific facts may involve aspects that are not identical to the situations presented in this material. Relying on this material does not qualify as tax advice for purpose of mounting a defense of a tax position with the taxing authorities

The analysis of the tax consequences of any event is based on tax laws in effect at the time of the event.

This material was completed on the date of the posting

© 2013, John Trapani, CPA,