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TITLE 26-INTERNAL REVENUE CODE association taxable income were the taxable income referred to in section 11. For purposes of this subsection, the surtax exemption pro- vided by section 11(d) shall not be allowed. (2) Alternative tax in case of capital gains If for any taxable year any homeowners as- sociation has a net capital gain, then in lieu of the tax imposed by paragraph (1), there is hereby imposed a tax (if such tax is less that 1 the tax imposed by paragraph (1)) which shall consist of the sum of- (A) a partial tax, computed as provided by paragraph (1), on the homeowners associ- ation taxable income determined by reduc- ing such income by the amount of such gain, and (B) a tax of 30 percent of such gain. (c) Homeowners association defined For purposes of this section- (1) Homeowners association The term "homeowners association" means an organization which is a condominium man- agement association or a residential real estate management association if- (A) such organization is organized and op- erated to provide for the acquisition, con- struction, management, maintenance, and care of association property, (B) 60 percent or more of the gross income of such organization for the taxable year consists solely of amounts received as membership dues, fees, or assessments from- (i) owners of residential units in the case of a condominium management asso- ciation, or (ii) owners of residences or residential lots in the case of a residential real estate management association. (C) 90 percent or more of the expendi- tures of the organization for the taxable year are expenditures for the acquisition, construction, management, maintenance, and care of association property, (D) no part of the net earnings of such or- ganization inures (other than by acquiring, constructing, or providing management, maintenance, and care of association prop- erty, and other than by a rebate of excess membership dues, fees, or assessments) to the benefit of any private shareholder or in- dividual, and E) such organization elects (at such time and in such manner as the Secretary by reg- ulations prescribes) to have this section apply for the taxable year. (2) Condominium management association The term "condominium management asso- ciation" means any organization meeting the requirement of subparagraph (A) of para- graph (1) with respect to a condominium pro- ject substantially all of the units of which are used as residences. (3) Residential real estate management association The term "residential real estate manage- ment association" means any organization meeting the requirements of subparagraph (A) of paragraph (1) with respect to a subdivi- ISo in original. Probably should read "than". sion, development, or similar area substantial- ly all the lots or buildings of which may only be used by individuals for residences. (4) Association property The term "association property" means- (A) property held by the organization, (B) property commonly held by the mem- bers of the organization, (C) property within the organization pri- vately held by the members of the organiza- tion, and (D) property owned by a governmental unit and used for the benefit of residents of such unit. Cd) Homeowners association taxable income defined (1) Taxable income defined For purposes of this section, the ho- meowners association taxable income of any organization for any taxable year is an amount equal to the excess (if any) of-- (A) the gross income for the taxable year (excluding any exempt function income), over (B) the deductions allowed by this chap- ter which are directly connected with the production of the gross income (excluding exempt function income), computed with the modifications provided in paragraph (2). (2) Modifications For purposes of this subsection- (A) there shall be allowed a specific de- duction of $100, (B) no net operating loss deduction shall be allowed under section 172, and (C) no deduction shall be allowed under part VIII of subchapter B (relating to spe- cial deductions for corporations). (3) Exempt function income For purposes of this subsection, the term "exempt function income" means any amount received as membership dues, fees, or assess- ments from- (A) owners of condominium housing units in the case of a condominium management association, or (B) owners of real property in the case of a residential real estate management associ- ation. (Added Pub. L. 94-455, title XXI, § 2101(a), Oct. 4, 1976, 90 Stat. 1897.) ErFEcTIvE DATE Section 2101(e) of Pub. L. 94-455 provided that: "Except as provided in subsection (f)(2) [set out as a note under section 216 of this title], the amendments made by this section [enacting this section and section 6012(a)(7) of this title and amending section 216(c) of this title] shall apply to taxable years beginning after December 31, 1973." SECTION REFERE TO IN OTHER SECTIONS This section is referred to in section 6012 of this title. Subchapter G-Corporations Used to Avoid Income Tax on Shareholders Part I. Corporations improperly accumulating surplus. II. Personal holding companies. III. Foreign personal holding companies. IV. Deduction for dividends paid. Page 403 § 528