Subchapter J. REAL ESTATE COMPANY
Sec.
91.201. Real estate company.
91.202. Acquired real estate company.
91.203. Declaration of acquisition.§ 91.201. Real estate company.
(a) A corporation or association is a real estate company when it is primarily engaged in the business of holding, selling or leasing realty 90% or more of the ownership interest in which is held by 35 or fewer persons and which does one of the following:
(1) Derives 60% or more of its annual gross receipts from the ownership or disposition of realty.
(2) Holds realty, the value which comprises 90% or more of its entire tangible asset holdings, exclusive of tangible assets which are freely transferable and actively traded on an established market.
(b) For the purpose of subsection (a), the following apply:
(1) The current monetary worth of assets is used in determining whether an enterprise meets the asset test.
(2) Interests in an enterprise owned by another corporation, or by a partnership, limited partnership or other association are not considered owned by the individuals who comprise the stockholders of the other corporation or partners or members of the partnership, limited partnership or other association.
(3) Interests in an enterprise owned by a trust are considered owned proportionately by the remaindermen.
(4) Interests in an enterprise owned by a decedent’s estate are considered owned by the specific devisee, or by the residuary devisee where there is no specific devise.
(5) The gross receipts test shall be applied with respect to the last completed fiscal year of the enterprise immediately preceding the valuation date.
(6) When, as part of its original capitalization, a newly formed corporation or association has contracted to sell a preorganization subscription, the subscribers to the preorganizational subscription shall, upon organization of the corporation or association, be considered the owners of the interests to which they subscribed.
Authority The provisions of this § 91.201 issued under section 1107-C of the Tax Reform Code of 1971 (72 P. S. § 8107-C).
Source The provisions of this § 91.201 adopted September 9, 1988, effective September 10, 1988, 18 Pa.B. 4096.
Cross References This section cited in 61 Pa. Code § 91.211 (relating to family farm corporation).
§ 91.202. Acquired real estate company.
(a) A real estate company becomes acquired upon a change in the ownership of the company, if the change in the ownership interest:
(1) Does not affect the continuity of the company.
(2) Together with prior changes within the preceding 3 years, has the effect of transferring, directly or indirectly, 90% or more of the total capital and profits ownership interest in the company.
(b) An ownership interest may be changed by any of the following:
(1) A member’s or shareholder’s sale, exchange, gift, bequest or other transfer of the ownership interest.
(2) A member’s withdrawal or the addition of a new member.
(3) An issuance or cancellation of stock.
Example 1:
A and B are equal partners in their partnership. Over a period of 2 years, the partnership adds 18 new equal partners. As A and B own only 10% of the total ownership interest at the end of the 2-year period, the addition of the new members has the effect of transferring 90% of the total ownership interest in the partnership. The partnership, therefore, became an acquired company upon the admittance of the 20th partner.
Example 2:
C and D are equal partners in their partnership. C transfers her 50% partnership interest to E. One year later, E transfers the 50% partnership interest to F. The partnership does not become acquired as a result of these changes. As D still retains his 50% interest, 50% of the total ownership interest remains the same. The series of transactions relating to C’s interest has the effect only of transferring 50% of the total ownership interest.
(c) A transfer of ownership interest between members of the same family is not considered a change in ownership interest.
Example: C and D each own all of the stock of a corporation in equal shares. C and D transfer their stock to E, C’s son, over a 3-year period. As C and E are members of the same family, the transfer between C and E is not a change in ownership interest. Thus, the stock transfers have the effect of transferring only 50% of the total ownership interest in the corporation and the corporation is not acquired.
(d) An acquired real estate company can become acquired again upon a change in ownership interest in the company, if the change:
(1) Does not affect the continuity of the company.
(2) Together with prior changes within the preceding 3-year period commencing with the date that it became acquired, has the effect of transferring, directly or indirectly, 90% or more of the total capital and profits ownership interest in the company.
(e) Changes in ownership interests which occurred prior to July 1, 1986, shall be taken into account in determining whether a real estate company becomes acquired.
Authority The provisions of this § 91.202 issued under section 1107-C of the Tax Reform Code of 1971 (72 P. S. § 8107-C).
Source The provisions of this § 91.202 adopted September 9, 1988, effective September 10, 1988, 18 Pa.B. 4096; amended December 14, 2007, effective December 15, 2007, 37 Pa.B. 6516. Immediately preceding text appears at serial pages (233383) to (233384).
Cross References This section cited in 61 Pa. Code § 91.113 (relating to imposition of tax on declarations of acquisition); and 61 Pa. Code § 91.193 (relating to excluded transactions).
§ 91.203. Declaration of acquisition.
Within 30 days of its becoming an acquired real estate company, the company shall present for recording a completed declaration of acquisition with the recorder of a county in which it held real estate on the date it became an acquired real estate company. If the company fails to present a completed declaration of acquisition within 30 days after becoming an acquired company, the company may be liable for penalty.
Authority The provisions of this § 91.203 issued under section 1107-C of the Tax Reform Code of 1971 (72 P. S. § 8107-C).
Source The provisions of this § 91.203 adopted September 9, 1988, effective September 10, 1988, 18 Pa.B. 4096.
Cross References This section cited in 61 Pa. Code § 91.213 (relating to declaration of acquisition).
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