As used in this section, the terms depreciation and depreciable real property include amortization and amortizable leasehold of real property. As used in this section, the tenant-stockholder's proportionate share is that proportion which stock of the cooperative housing corporation owned by the tenant-stockholder is of the total outstanding stock of the corporation, including any stock held by the corporation. In order to determine whether a tenant-stockholder may use one of the methods of depreciation prescribed in section 167(b) (2), (3), or (4) for purposes of subdivision (i) of this subparagraph, the limitations provided in section 167(c) on the use of such methods of depreciation shall be applied with respect to the depreciable real property owned by the cooperative housing corporation in which the tenant-stockholder has a proprietary lease or right of tenancy, rather than with respect to the stock in the cooperative housing corporation owned by the tenant-stockholder or with respect to the proprietary lease or right of tenancy conferred on the tenant-stockholder by reason of his ownership of such stock. The allowance for depreciation determined under this subparagraph shall be properly adjusted where only a portion of the property occupied under a proprietary lease or right of tenancy is used in a trade or business or for the production of income.
In order to prevent an overstatement or understatement of the basis of the depreciable real property for purposes of the computation required by subparagraph (1)(i) of this paragraph, appropriate adjustment for purposes of the computations described in subdivisions (i) and (ii) of this subparagraph shall be made in respect of prepayments and delinquencies on account of the corporation's mortgage indebtedness. Thus, for purposes of subdivision (i) of this subparagraph, the taxpayer's cost per share shall be reduced by an amount determined by dividing the total mortgage indebtedness prepayments in respect of the shares purchased by the taxpayer by the number of such shares. For purposes of subdivision (ii) of this subparagraph, the mortgage indebtedness shall be increased by the sum of all prepayments applied in reduction of the mortgage indebtedness and shall be decreased by any amount due under the terms of the mortgage and unpaid.
Y's basis in the building | $200,000 |
Less: Estimated salvage value | $20,000 |
Y's basis for depreciation | $180,000 |
Annual straight line depreciation on Y's building (1/50 of $180,000) | $3,600 |
Proportion of outstanding shares of stock of Y corporation (1,000) owned by B (100) | 1/10 |
B's proportionate share of annual depreciation (1/10 of $3,600) | $360 |
Depreciation allowance for 1962 with respect to B's stock (if the limitation in paragraph (c) of this section is not applicable) | $360 |
Y's basis in the building | $200,000 |
Less: Estimated salvage value | 20,000 |
Y's basis for depreciation | 180,000 |
Annual straight line depreciation on Y's building (1/50 of $180,000) | 3,600 |
Less: Amount representing rentable space not subject to proprietary lease but held for rental purposes over total rentable space 2,000 ÷ 12,000 (of $3,600) | 600 |
Annual depreciation, as reduced | 3,000 |
B's proportionate share of annual depreciation (1/10 of $3,000) | 300 |
Depreciation allowance for 1962 with respect to B's stock (if the limitation in paragraph (c) of this section is not applicable) | 300 |
Price paid for each share of stock in Y corporation purchased by C on 1-1-67 ($15,000 ÷ 100) | $150 |
Per share price paid by C multiplied by total shares of stock in Y corporation outstanding on 1-1-67 ($150 * 1,000) | 150,000 |
Y's mortgage indebtedness outstanding on 1-1-67 | 135,000 |
285,000 | |
Less: Amount attributable to land (assumed to be 1/5 of $285,000) | 57,000 |
228,000 | |
Less: Estimated salvage value | 20,000 |
Basis of Y's building for purposes of computing C's depreciation | 208,000 |
Annual straight line depreciation (1/45 of $208,000) | 4,622.22 |
C's proportionate share of annual depreciation (1/10 of $4,622.22) | 462.22 |
Depreciation allowance for 1967 with respect to C's stock (if the limitation in paragraph (c) of this section is not applicable) | 462.22 |
26 C.F.R. §1.216-2