Any excess deductions could not be used to offset, for example, interest earned on the corporation’s reserve fund or rent paid the cooperative for use of a parking garage located in the building. A final area of current interest involves the possible federal tax effects to the corporation if it converts to condominium status.
How does a not for profit housing cooperative work?
Usually they form a not-for-profit cooperative corporation. Each month they pay a fee to cover their share of the operating expenses.
Who is the owner of a cooperative apartment?
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The owner of a condominium apartment owns a parcel of real estate, but the owner of a cooperative apartment owns shares in a corporation which in turn owns real estate. The two ownership forms have similar, yet distinctive, federal tax implications.
How is a Cooperative Housing Corporation different from a condominium?
A cooperative housing corporation is not the same as a condominium. The owner of a condominium apartment owns a parcel of real estate, but the owner of a cooperative apartment owns shares in a corporation which in turn owns real estate.
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How does a cooperative housing corporation pay rent?
Tenant shareholders who purchase shares from the sponsor are entitled to a proprietary lease which allows them to occupy a particular apartment in the building. The lease typically requires the payment of monthly rent called maintenance. The corporation uses the maintenance received to pay for the building’s operating expenses.
Who are the shareholders of a housing cooperative?
The rights and responsibilities of shareholders are outlined in the various cooperative documents, including the bylaws, occupancy agreement/proprietary lease, and articles of incorporation. All shareholders are entitled to copies of these documents. You can request them from your cooperative’s management.
