SERVICE WILL NOW CONSIDER RULINGS ON TRANSFERS OF REAL PROPERTY BY A HOUSING CO-OP TO A NONHOUSING CO-OP IN EXCHANGE FOR STOCK.

Rev. Proc. 88-46

SECTION 1. BACKGROUND

Rev. Proc. 88-3, 1988-1 I.R.B. 29, sets forth areas of the Internal Revenue Code under the jurisdiction of the Associate Chief Counsel (Technical and International) relating to non-international issues in which the Internal Revenue Service will not issue advance rulings or determination letters.

Section 4 of Rev. Proc. 88-3 is entitled " AREAS IN WHICH RULINGS OR DETERMINATION LETTERS WILL NOT ORDINARILY BE ISSUED."

Section 5 of Rev. Proc. 88-3 is entitled "AREA UNDER EXTENSIVE STUDY IN WHICH RULINGS OR DETERMINATION LETTERS WILL NOT BE ISSUED UNTIL THE SERVICE RESOLVES THE ISSUES THROUGH PUBLICATION OF A REVENUE RULING, REVENUE PROCEDURE, REGULATIONS OR OTHERWISE.

SEC. 2. NATURE OF CHANGES

Rev. Proc. 88-3 is modified by deleting sections 5.10, 5.19, and 5.32, and is amplified by adding to section 4.01 the following paragraphs:

Section 216. -- Deduction of Taxes, Interest, and Business Depreciation by Cooperative Housing Corporation Tenant Stockholder. -- If a cooperative housing corporation (CHC), as defined in section 216(b)(1) of the Code, transfers an interest in real property to a corporation (not a CHC) in exchange for stock or securities of the transferee corporation, which engages in commercial activity with respect to the real property interest transferred, whether (1) the income of the transferee corporation derived from the commercial activity, and (2) any cash or property (attributable to the real property interest transferred) distributed by the transferee corporation to the CHC, will be considered as gross income of the CHC for the purpose of determining whether 80 percent or more of the gross income of the CHC is derived from tenant-stockholders within the meaning of section 216(b)(1)(D).

Section 351. -- Transfer of Corporation Controlled by Transferor. -- Whether section 351 of the Code applies to the transfer of an interest in real property by a cooperative housing corporation (as defined in section 216(b)(1)) to a corporation in exchange for stock or securities of the transferee corporation if the transferee engages in commercial activity with respect to the real property interest transferred.

Section 1502. -- Regulations. -- Whether a parent cooperative housing corporation (as defined in section 216(b)(1)) will be permitted to file a consolidated income tax return with its transferee subsidiary if the transferee engages in commercial activity with respect to the real property interest transferred to it by the parent.

SEC. 3 EFFECT ON OTHER REVENUE PROCEDURES

Section 4 of Rev. Proc. 88-3 is amplified, and sections 5.10, 5.19, and 5.32 of Rev. Proc. 88-3 are deleted.

SEC. 4. EFFECTIVE DATE

This revenue procedure will apply to all ruling requests as of September 19, 1988, the date of publication of this revenue procedure in the Internal Revenue Bulletin, as well as requests received thereafter.

DRAFTING INFORMATION

The principal author of this revenue procedure is Leonard H. Friedman of the Individual Tax Division. For further information regarding this revenue procedure contact Mr. Friedman on (202) 343- 8556 (not a toll-free call).