5. Sam has a proprietary lease on an apartment in a cooperative project. He makes monthly payments that include his proportionate share of principal, interest, taxes, insurance, and association fees. In this situation, which of the following is true?
A. He cannot deduct interest and property taxes on his income tax return
B. Any special assessments will be made against all the residents of the building, not against the building itself
C. He will receive his own real property tax assessment for his unit
D. If any other residents default on their leases, he could lose equity on his investment
- Answer: D
- Explanation: Because a cooperative project is financed with one single mortgage and taxed as one single property, the failure of one tenant to pay his share of the cooperative's operating expenses can harm all the tenants -- particularly if it leads to a foreclosure.