26 C.F.R. § 1.42-4 : Internal Revenue — INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY — INCOME TAX — INCOME TAXES —CREDITS AGAINST TAX —CREDITS ALLOWABLE UNDER SECTIONS 30 THROUGH 45D —4 - Application of not-for-profit rules of section 183 to low-income housing credit activities

(a) Inapplicability to section 42. In the case of a qualified low-income building with respect to which the low-income housing credit under section 42 is allowable, section 183 does not apply to disallow losses, deductions, or credits attributable to the ownership and operation of the building.
(b) Limitation. Notwithstanding paragraph (a) of this section, losses, deductions, or credits attributable to the ownership and operation of a qualified low-income building with respect to which the low-income housing credit under section 42 is allowable may be limited or disallowed under other provisions of the Code or principles of tax law. See, e.g., sections 38(c), 163(d), 465, 469; Knetsch v. United States,364 U.S. 361(1960), 1961-1 C.B. 34 ("sham" or "economic substance" analysis); and Frank Lyon Co. v. Commissioner,435 U.S. 561(1978), 1978-1 C.B. 46 ("ownership" analysis).
(c) Effective date. The rules set forth in paragraphs (a) and (b) of this section are effective with respect to buildings placed in service after December 31, 1986.

26 C.F.R. §1.42-4

T.D. 8420, 57 FR 24729, 6/11/1992