-
LAUREN OSTROW AND JOSEPH TEIGER, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, RespondentOstrow v. Comm'rNo. 6325-03May 21, 2004, Filed
United States Tax Court *21 Deduction allowed under
section 216(a)(1) for petitioner wife's share of real estate taxes paid by cooperative housing corporation did not reduce alternative minimum taxable income.Petitioner wife was a tenant-stockholder in a cooperative
housing corporation. Tenant-stockholders may deduct their
proportionate share of real estate taxes paid by a cooperative
housing corporation of which they are stockholders.
Sec. 216(a)(1), I.R.C. Petitioner wife's proportionate share of real estate taxespaid by the cooperative housing corporation was $ 10,489.
Petitioners deducted $ 10,489 (1) from adjusted gross income for
regular tax purposes and (2) in computing alternative minimum
taxable income for alternative minimum tax purposes.
Held: A deduction under
sec. 216(a)(1), I.R.C. , doesnot reduce alternative minimum taxable income.
Ira Z. Kevelson , for petitioners.Frank J. Jackson , for respondent.Colvin, John O.COLVIN*378 COLVIN, Judge: Respondent determined a deficiency in petitioners' 2001 Federal income tax of $ 3,698.
Petitioner wife was a tenant-stockholder in a cooperative housing corporation. *22 After concessions, the sole issue for decision is whether a deduction allowed under
section 216(a)(1) for petitioner wife's share of the real estate taxes paid by a cooperative housing corporation reduces alternative minimum taxable income. 1 We hold that it does not.Section references are to the Internal Revenue Code in effect for the year in issue. Rule references are to the Tax Court Rules of Practice and Procedure.
FINDINGS OF FACT
The parties submitted this case fully stipulated under
Rule 122 .Petitioners resided in New York, New York, when they filed their petition.
Lauren Ostrow (petitioner) was a tenant-stockholder of a cooperative housing corporation in 2001. Petitioners deducted $ 10,489, which was petitioner's proportionate share of real estate taxes paid by the corporation, as a miscellaneous*23 itemized deduction. In computing their alternative minimum*379 tax liability, petitioners treated the $ 10,489 as deductible in computing their alternative minimum taxable income.
OPINION
A. Background Section 164 provides a deduction for real property taxes and other specified taxes paid or accrued by the taxpayer during the taxable year.Sec. 164(a)(1) . 2 In addition, a tenant- stockholder may deduct amounts paid by or accrued to a cooperative housing corporation within the taxable year, to the extent that the amounts represent the tenant-stockholder's proportionate share of (1) the real estate taxes deductible by the corporation undersection 164 ,sec. 216(a)(1) , and(2) the mortgage interest deductible by the corporation undersection 163 ,sec. 216(a)(2) . 3*24
Section 55 provides for an alternative minimum tax (AMT). In computing alternative minimum taxable income (AMTI), no deduction is allowed to an individual for, inter alia, miscellaneous*380 itemized deductions (as defined insection 67(b) ) or "for any taxes described inparagraph (1) ,(2) , or(3) of section 164(a) " unless such taxes are deductible in computing adjusted gross income; i. e., because incurred in a trade or business.Sec. 56(b)(1)(A)(i) and(ii) . 4 Deductions undersections 163 ,164 , and216 are not miscellaneous itemized deductions,sec. 67(b)(1) , (2) , (12) , and are therefore deductible in computing AMTI,sec. 56(b)(1)(A)(i) .*25 Petitioners contend that amounts deducted under
section 216(a)(1) are deductible in computing AMTI becausesection 216 deductions are not (1) listed insection 56(b)(1)(A)(ii) as deductions denied in computing AMTI; (2) deductions "for any taxes described insection 164(a)(1) "; or (3) miscellaneous itemized deductions.B. Statutory Predecessor to
Section 216 Some historical context may be helpful to understanding the dispute in this case. Before 1942, tenant-stockholders could not deduct their shares of real estate taxes and interest paid by cooperative housing corporations. See
Holmes v. United States, 85 F.3d 956">85 F.3d 956 , 960 (2d Cir. 1996);Holden v. Commissioner, 27 B.T.A. 530">27 B.T.A. 530 , 538 (1933);Wood v. Rasquin, 21 F. Supp. 211">21 F. Supp. 211 , 213-214- 214 (E.D.N.Y. 1937), affd.97 F.2d 1023">97 F.2d 1023 (2d Cir. 1938). This result was consistent with the longstanding rule that a taxpayer generally cannot deduct taxes paid by another taxpayer.Deputy v. duPont, 308 U.S. 488">308 U.S. 488 , 493-494, 84 L. Ed. 416">84 L. Ed. 416, 60 S. Ct. 363">60 S. Ct. 363, 1 C.B. 118">1940-1 C.B. 118 (1940).In 1942, Congress enacted
section 23(z) of the Internal Revenue Code of 1939 .Revenue Act of 1942, ch. 619, sec. 128, 56 Stat. 826">56 Stat. 826 .Section 23(z) was reenacted assection 216 of the Internal Revenue Code *26 of1954, ch. 736, 68A Stat. 730 . The Senate Finance Committee report for the bill that became theRevenue Act of 1942 states in pertinent part:*381 The bill provides for a new deduction in section 23(z) of
taxes and interest paid or accrued by a tenant stockholder to a
cooperative apartment corporation within the taxable year. * * *
The general purpose of this provision is to place the tenant
stockholders of a cooperative apartment in the same position as
the owner of a dwelling house so far as deductions for interest
and taxes are concerned.
S. Rept. 1631, 77th Cong., 2d Sess. 51 (1942),
2 C.B. 504">1942-2 C.B. 504 , 546.Under
section 23(z) of the Internal Revenue Code of 1939 , a stockholder in a cooperative apartment corporation could deduct real estate taxes and interest to the same extent as an individual homeowner. S. Rept. 1622, 83d Cong., 2d Sess. 36 (1954). The Senate Finance Committee intended to treat tenant-stockholders of a cooperative and homeowners similarly with respect to the deduction of real estate taxes and interest. S. Rept. 1631, supra at 51,1942-2 C.B. at 546 .5*27 C. Whether a Deduction Under
Section 216 Reduces AMTI1. Petitioners' Contentions
The deductions allowed under
section 216 are not specifically listed in the relevant alternative minimum tax provision (section 56(b) ) as deductions that are disallowed in computing AMTI. Petitioners contend that if Congress had intended to denysection 216 deductions in computing AMTI, it would have done so expressly.Petitioners point out that, in listing deductions that are not subject to the 2-percent floor of
section 67(a) ,section 67(b) refers separately to "the deduction undersection 164 (relating to taxes)" and "the deduction undersection 216 (relating to deductions in connection with cooperative housing corporations)". Petitioners also point out thatsection 911(c)(2)(A)(ii) refers both to taxes deductible undersection 164 and amounts allowed as deductions undersection 216 . Petitioners contend that those provisions show that where Congress intended to make an Internal Revenue Code provision apply tosection 216 , Congress did so explicitly.Thus, in sum, petitioners contend that Congress's failure to list
section 216 insection 56(b) shows thatsection 216(a)(1) deductions are allowed*28 in computing AMTI. We disagree because ofsection 56(b)(1)(A)(ii) , and because petitioners' *382 position would cause dissimilar tax treatment of homeowners and tenant-stockholders in cooperative housing corporations, a result at odds with longstanding expressions of congressional intent.2. Statutory Analysis
"[T]axes described in"
paragraph (1) ,(2) or(3) of section 164(a) are not deductible in computing AMTI.Sec. 56(b)(1)(A)(ii) . A tenant-stockholder may deduct an amount equal to his or her share of the corporation's real estate taxes deductible undersection 164 .Sec. 216(a)(1) . The phrase "taxes described in"section 164(a)(1) clearly applies to real estate taxes paid by a taxpayer and deductible undersection 164 .If Congress had intended the reference in
section 56(b)(1)(A)(ii) to "taxes described in"section 164(a) not to apply to real estate taxes passed through to tenant-stockholders undersection 216 , Congress could have said "taxes deducted under"paragraph (1) ,(2) , or(3) of section 164(a) . Instead,section 56(b)(1)(A)(ii) refers to "taxes described in"section 164(a) .Petitioners contend that Congress used the phrase "taxes described in
paragraph (1) ,(2) , or(3) *29 ofsection 164(a) " insection 56(b)(1)(A)(ii) to deny deduction of real estate, personal property, and income taxes in computing AMTI while allowing deduction ofsection 59A environmental taxes and generation- skipping transfer taxes in computing AMTI. Whether or notsection 56(b)(1)(A)(ii) has that effect, we do not agree that that reading precludes respondent's claim here; i. e., that a deduction undersection 216(a)(1) based on taxes paid by a cooperative housing corporation is a deduction for taxes "described in"section 164(a) .Petitioners also argue that if deductions under
section 164 include real estate taxes paid by a cooperative housing corporation and deducted by a tenant-stockholder undersection 216 , references insections 67(b) and911(c)(2)(A)(ii) to bothsections 164 and 216 would be redundant. We disagree.Section 67(b) refers to "the deduction under"sections 164 and 216 , andsection 911(c)(2)(A)(ii) refers to taxes "deductible under"section 164 and "a deduction undersection 216(a) ." We agree that a tax deductible undersection 216 is not *383 deductible undersection 164 . However,section 56(b)(1)(A)(ii) , which is at issue here, refers to certain "taxes described in" *30section 164 . We assume Congress used different language because it intended a different meaning.Francisco v. Commissioner, 119 T.C. 317">119 T.C. 317 , 323 (2002).We agree with respondent that the phrase "taxes described in"
section 164(a)(1) applies to a tenant-stockholder's deduction undersection 216(a)(1) because the amount of that deduction is based on the amount of real estate taxes paid by the tenant-stockholder's cooperative housing corporation.3. Avoidance of Anomalous Results
In interpreting a statute, we look first to the language of the statute.
Consumer Product Safety Comm'n v. GTE Sylvania, Inc., 447 U.S. 102">447 U.S. 102 , 108, 64 L. Ed. 2d 766">64 L. Ed. 2d 766, 100 S. Ct. 2051">100 S. Ct. 2051 (1980). We have done so here, and we believe the statute supports respondent's position.If a statute is ambiguous or silent, we may assume that Congress intended policies it explicitly adopted in prior, analogous situations to continue to apply.
Commissioner v. Bilder, 289 F.2d 291">289 F.2d 291 , 302 (3d Cir. 1961), revd. on other grounds369 U.S. 499">369 U.S. 499 , 8 L. Ed. 2d 65">8 L. Ed. 2d 65, 82 S. Ct. 881">82 S. Ct. 881, 1 C.B. 38">1962-1 C.B. 38 (1962);Bowles v. Glick Bros. Lumber Co., 146 F.2d 566">146 F.2d 566 , 571 (9th Cir. 1945); see alsoFullinwider v. S. Pac. R.R. Co., 248 U.S. 409">248 U.S. 409 , 412, 63 L. Ed. 331">63 L. Ed. 331, 39 S. Ct. 130">39 S. Ct. 130 (1919) (policy may*31 be used to resolve uncertainty in law). Thus, even ifsection 56(b)(1)(A)(ii) were ambiguous, we could properly resolve the ambiguity by reference to Congress's explicit adoption of a policy of providing similar treatment of homeowners and tenant-stockholders in cooperative housing corporations.In 1942, Congress enacted the predecessor to
section 216 to treat homeowners and tenant-stockholders of cooperative housing corporations similarly with respect to the deduction of real estate taxes and interest. Adoption of petitioners' position would permit tenant-stockholders of those corporations to deduct from AMTI amounts derived from their share of the real estate taxes paid by the corporations, even though homeowners may not deduct their real estate taxes from AMTI. In 1942, Congress made clear that tenant- stockholders should not be placed at a disadvantage compared to homeowners; it is just as inappropriate that they be given an advantage over homeowners for AMT purposes.*384 4. Conclusion
We conclude that the term "taxes described in"
section 164(a)(1) includes taxes deductible undersection 164(a)(1) as well as taxes deductible by reference tosection 164(a)(1) , such as a tenant-stockholder's*32 share of a cooperative's real estate taxes deductible by the tenant-stockholder undersection 216(a)(1) . 6Accordingly,
Decision will be entered under
Rule 155 .Footnotes
1. Respondent first raised this issue in the answer. See
Rule 142(a)(1)↩ . We need not consider which party bears the burden of proof because the issue is one of law.2.
Sec. 164(a) provides in pertinent part:SEC. 164. TAXES.
(a) General Rule. -- Except as otherwise provided in this
section, the following taxes shall be allowed as a deduction for
the taxable year within which paid or accrued:
(1) State and local, and foreign, real property taxes.
(2) State and local personal property taxes.
(3) State and local, and foreign, income, war profits,
and excess profits taxes.↩
3.
Sec. 216 provides in pertinent part:SEC. 216. DEDUCTION OF TAXES, INTEREST, AND BUSINESS
DEPRECIATION BY COOPERATIVE HOUSING CORPORATION TENANT-
STOCKHOLDER.
(a) Allowance of Deduction. -- In the case of a tenant-
stockholder (as defined in subsection (b)(2)), there shall be
allowed as a deduction amounts (not otherwise deductible) paid
or accrued to a cooperative housing corporation within the
taxable year, but only to the extent that such amounts represent
the tenant-stockholder's proportionate share of --
(1) the real estate taxes allowable as a deduction to
the corporation under section 164 which are paid or
incurred by the corporation on the houses or apartment
building and on the land on which such houses (or building)
are situated, or
(2) the interest allowable as a deduction to the
corporation under section 163 which is paid or incurred by
the corporation on its indebtedness contracted --
(A) in the acquisition, construction, alteration,
rehabilitation, or maintenance of the houses or
apartment buildings, or
(B) in the acquisition of the land on which the
houses (or apartment building) are situated.
Although
sec. 216 refers to taxes or interest, a tenant- stockholder may deduct his or her share of both taxes and interest paid by a cooperative housing corporation. SeeEckstein v. United States, 196 Ct. Cl. 644">196 Ct. Cl. 644 , 452 F.2d 1036">452 F.2d 1036, 1038, 1047-1048 (1971);Park Place, Inc. v. Commissioner, 57 T.C. 767">57 T.C. 767 , 774 (1972); S. Rept. 1631, 77th Cong., 2d Sess. 51(1942), 2 C.B. 504">1942-2 C.B. 504↩ , 546 (" The bill provides for a new deduction * * * of taxes and interest paid or accrued by a tenant stockholder to a cooperative apartment corporation"); IRS Publication 530, Tax Information for First-Time Homeowners 3-4 (2003 ed.).4. Sec.
56(b)(1)(A) provides:SEC. 56. ADJUSTMENTS IN COMPUTING ALTERNATIVE MINIMUM TAXABLE
INCOME.
(b) Adjustments Applicable to Individuals. -- In
determining the amount of the alternative minimum taxable income
of any taxpayer (other than a corporation), the following
treatment shall apply (in lieu of the treatment applicable for
purposes of computing the regular tax):
(1) Limitation on deductions. --
(A) In general. -- No deduction shall be allowed
--
(i) for any miscellaneous itemized deduction
(as defined in section 67(b)), or
(ii) for any taxes described in paragraph
(1), (2), or (3) of section 164(a).
Clause (ii) shall not apply to any amount allowable in
computing adjusted gross income.↩
5. In conference, the House receded to the Senate amendment without substantive comment. H. Rept. 2586, 77th Cong., 2d Sess. 40 (1942),
2 C.B. 701">1942-2 C.B. 701↩ , 705.6. We need not decide whether, in computing AMTI, a tenant-stockholder may deduct his or her proportionate share of a cooperative's interest deduction under
sec. 216(a)(2)↩ .
Document Info
Docket Number: No. 6325-03
Citation Numbers: 122 T.C. 378, 2004 U.S. Tax Ct. LEXIS 21, 122 T.C. No. 21
Judges: \"Colvin, John O.\"
Filed Date: 5/21/2004
Precedential Status: Precedential
Modified Date: 1/13/2023