ARTICLE: SHOULD INTERNAL REVENUE CODE SECTION 277 BE APPLIED TO COOPERATIVE HOUSING ORGANIZATIONS? Skip over navigation
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Copyright (c) 1990 Akron Tax Journal 
Akron Tax Journal

ARTICLE: SHOULD INTERNAL REVENUE CODE SECTION 277 BE APPLIED TO COOPERATIVE HOUSING ORGANIZATIONS?

1990

7 Akron Tax J. 87

Author

By Nina J. Crimm 1

Excerpt

As a result of the enactment of the Tax Reform Act of 1986, the taxable income of corporations is currently subject to taxation at rates of near historic heights. While corporations are anxious to lessen their tax burdens, the Internal Revenue Service (IRS) has demonstrated an increased conviction to assuring that corporations shoulder their fair share of income taxes. Cooperative housing organizations treated as corporations for income tax purposes have not been immune (nor should they be) to this stance. 2 With accelerating frequency, the IRS has construed the deduction restrictions of Internal Revenue Code (IRC) section 277 as applicable to cooperative housing corporations. 3 The direct results to those cooperatives have been a rise in their taxable income and an accompanying increase in their corporate tax liability. 4

Whether IRC section 277 should be applied to cooperative housing corporations is the subject addressed by this article. First, the article explores the terms of the statute and Congress' intent in adopting it. In doing so, the article assesses the functions of cooperative housing organizations and the connections that such organizations and section 277 have with other federal tax provisions. Finally, the article considers whether the application of IRC section 277 to cooperative housing corporations is fair.

THE TERMS OF IRC SECTION 277 AND THE CONGRESSIONAL INTENT

The language of IRC section 277 provides that it is applicable to "a social club or other membership organization which is not tax-exempt and which is operated primarily to furnish services or goods to ...
 
 
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