[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: 26CFR1.528-4]

[Page 237-238]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.528-4  Substantiality test.

    (a) In general. In order for an organization to be considered a 
condominium management association or a residential real estate 
management association (and therefore in order for it to be considered a 
homeowners association), substantially all of its units, lots or 
buildings must be used by individuals for residences. For the purposes 
of applying paragraph (b) or (c) of this section, and organization which 
has attributes of both a condominium management association and a 
residential real estate management association shall be considered that 
association which, based on all the facts and circumstances, it more 
closely resembles. In addition, those paragraphs shall be applied based 
on conditions existing on the last day of the organization's taxable 
year.
    (b) Condominium management associations. Substantially all of the 
units of a condominium management association will be considered as used 
by individuals for residences if at least 85% of the total square 
footage of all units within the project is used by individuals for 
residential purposes. If a completed unit has never been occupied, it 
will nonetheless be considered as used for residential purposes if, 
based on all the facts and circumstances, it appears to have been 
constructed for use as a residence. Similarly, a unit which is not 
occupied but which has been in the past will be considered as used for 
residential purposes if, based on all the facts and circumstances, it 
appears that it was constructed for use as a residence, and the last 
individual to occupy it did in fact use it as a residence. Units which 
are used for purposes auxiliary to residential use (such as laundry 
areas, swimming pools, tennis courts, storage rooms and areas used by 
maintenance personnel) shall be considered used for residential 
purposes.
    (c) Residential real estate management associations. Substantially 
all of the lots or buildings of a residential real estate managment 
association (including unimproved lots) will be considered as used by 
individuals as residences if at least 85% of the lots are zoned for 
residential purposes. Lots shall be treated as zoned for residential 
purposes even if under such zoning lots may be used for parking spaces, 
swimming pools, tennis courts, schools, fire stations, libraries, 
churches and other similar purposes which are auxiliary to residential 
use. However, commercial shopping areas (and their auxiliary parking 
areas) are not lots zoned for residential purposes.
    (d) Exception. Notwithstanding any other provision of this section, 
a unit, or building will not be considerd used for residential purposes, 
if for more

[[Page 238]]

than one-half the days in the association's taxable year, such unit, or 
building is occupied by a person or series of persons, each of whom so 
occupies such unit, or building for less than 30 days.

[T.D. 7692, 45 FR 26322, Apr. 18, 1980; T.D. 7692, 45 FR 24879, May 23, 
1980]