Rev. Rul. 64-327

Advice has been requested as to whether a lessee or his successor in interest in entitled to deduct the real estate taxes imposed by section 128-4 of the Revised Laws of Hawaii 1955, as amended.

Section 128-4, Revised Laws of Hawaii 1955, as amended by Section 2, H.B. No. 9, approved April 21, 1964, reads as follows:

Real property shall be assessed in its entirety to the owner thereof; provided that where land has been leased for a term of fifteen years or more, the real property shall be assessed in its entirety to the lessee or his successor in interest holding the land for such term under such lease and such lessee or successor in interest shall be deemed the owner of the real property in its entirety for the purposes of this chapter.

Section 4 of H.B. No. 9 provides that this amendment shall take effect on January 1, 1965.

Section 164(a) of the Internal Revenue Code of 1954 provides, with exceptions not here material, that there shall be allowed as a deduction state and local real property taxes paid or accrued within the taxable year.

Section 1.164-1 of the Income Tax Regulations provides that, in general, taxes are deductible only by the person upon whom they are imposed.

Since the amendment to section 128-4, Revised Laws of Hawaii 1955, as amended, causes real property taxes to be imposed upon the lessee holding property for a term of fifteen years or more, or upon his successor in interest, the lessee or his successor in interest may deduct, under section 164(a) of the Code, the real property taxes so imposed upon him on and after January 1, 1965.