3
Petitioner was formed on September 2, 1983, under New York
business corporation law. Petitioner uses the accrual method of
accounting.
Petitioner is a cooperative housing corporation under
section 216(b)(1) and is not tax-exempt under section 501.
Petitioner's certificate of incorporation was filed on
August 30, 1983, and was amended on May 7, 1984. Petitioner's
certificate of incorporation states in part that it was formed to
provide homes for its stockholders by leasing apartments to them
under proprietary leases that entitle them to live in the
building.
Petitioner's certificate of incorporation authorizes
petitioner to issue 70,000 shares of one class of common stock at
a par value of $1 each. Petitioner may make distributions to its
shareholders only from its earnings and profits unless petitioner
is completely or partially liquidated.
Petitioner's bylaws did not authorize it to pay patronage
dividends to its members in the years at issue. Petitioner's
bylaws have no provisions relating to whether petitioner may
distribute net earnings to its tenant-shareholders. Petitioner
has no rules or regulations requiring it to distribute patronage
dividends to its tenant-shareholders.
Petitioner could use net earnings to reduce maintenance.
Petitioner has never paid or allocated "net margins" (the excess
of its operating revenues over its cost of operations) to its
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