State Agency Responsibility for Reporting Property Dispositions
The owner of a low-income housing building is the entity identified on the Form 8609. State agencies should confirm that the ownership has not changed as part of their monitoring and inspection responsibilities.
Example 1: Owners Sells LIHC Building
ABC, a limited partnership, owns and operates an LIHC building, and is identified as the owner on Form 8609. Mr. Jones is the general partner. There are two limited partners, Mr. Smith and the XYZ investment fund. On September 17, 2008, ABC sells the building to E&F, a limited partnership, *which intends to continue operating the building as an LIHC building.* As included in the extended use agreement, the state agency approved the sale. The state agency *is required to* report the disposition on Form 8823.
*Example 2: Owner Loses Ownership in Foreclosure Proceeding
FGH, a limited partnership, owns and operates an LIHC building, and is identified as the owner on Form 8609. Mr. Jones is the general partner and the limited partner is the XYZ investment fund. On December 1, 2008, the partnership lost ownership of the building in a foreclosure proceeding. The new owner will not operate the building as a qualified low-income building. The state agency is required to report the disposition on Form 8823.*
LIHC buildings are generally owned by partnerships and identifying changes in the composition of the ownership entities is not required.
Example 3: State Agency Reviews Owner’s Annual Certification
ABC, a limited partnership, owns and operates an LIHC building, and is identified as the owner on Form 8609. Mr. Jones is the general partner. There are two limited partners, Mr. Smith and the XYZ investment fund. As part of the regular monitoring procedures, the state agency reviews the owner’s annual certification to confirm that ownership has not changed. The state agency is not required to ask whether Mr. Jones, Mr. Smith, or XYZ has disposed of their interest (or a portion of their interest).
IRC §42(j)(6) No recapture on disposition of building which continues in qualified use.
IRC §42(f)(4) Dispositions of property. If a building (or an interest therein) is disposed of during any year for which credit is allowable under subsection (a), such credit shall be allocated between the parties on the basis of the number of days during such year the building (or interest) was held by each. In any such case, proper adjustments shall be made in the application of subsection (j).
Rev. Rul. 91-38, 1991-26 I.R.B. 5, Q&A #5, “…For purposes of section 42(f)(4) of the Code, the owner who has held the property for the longest period during
Revised October 2009