[Code of Federal Regulations]
[Title 26, Volume 7]
[Revised as of April 1, 2003]
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 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

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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]