[Code of Federal Regulations]
[Title 26, Volume 7]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.501(c)(2)-1]

[Page 10-11]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.501(c)(2)-1  Corporations organized to hold title to property 
for exempt organizations.

    (a) A corporation described in section 501(c)(2) and otherwise 
exempt from tax under section 501(a) is taxable upon its unrelated 
business taxable income. For taxable years beginning before January 1, 
1970, see Sec. 1.511-2(c)(4). Since a corporation described in section 
501(c)(2) cannot be exempt under section 501(a) if it engages in any 
business other than that of holding title to property and

[[Page 11]]

collecting income therefrom, it cannot have unrelated business taxable 
income as defined in section 512 other than income which is treated as 
unrelated business taxable income solely because of the applicability of 
section 512(a)(3)(C); or debt financed income which is treated as 
unrelated business taxable income solely because of section 514; or 
certain interest, annuities, royalties, or rents which are treated as 
unrelated business taxable income solely because of section 512(b) 
(3)(B)(ii) or (13). Similarly, exempt status under section 501(c)(2) 
shall not be affected where certain rents from personal property leased 
with real property are treated as unrelated business taxable income 
under section 512(b)(3)(A)(ii) solely because such rents attributable to 
such personal property are more than incidental when compared to the 
total rents received or accrued under the lease, or under section 
512(b)(3)(B)(i) solely because such rents attributable to such personal 
property exceed 50 percent of the total rents received or accrued under 
the lease.
    (b) A corporation described in section 501(c)(2) cannot accumulate 
income and retain its exemption, but it must turn over the entire amount 
of such income, less expenses, to an organization which is itself exempt 
from tax under section 501(a).

[T.D. 6500, 25 FR 11737, Nov. 26, 1960, as amended by T.D. 7658, 45 FR 
33972, May 21, 1980]