Treasury Regulations · 26 CFR
§ 301.7701-13. Pre-1970 domestic building and loan association.
Regulation text, no changes From the eCFR, current as of October 15, 2026. The eCFR is an authoritative but unofficial editorial compilation of the Code of Federal Regulations; the official text is the annual CFR on govinfo. Compare it with this section on ecfr.gov (external site) or the official annual CFR on govinfo (external site).
Regulation under 26 U.S.C. § 7701
Cite as 26 CFR § 301.7701-13
At a glance
Read from the text and its source citation. Not part of the regulation.
- Status
- In the current eCFR
- Issued
- November 3, 1967 by 32 FR 15241
- Last amended
- May 16, 1979 by T.D. 7622
- Issued under
- 26 U.S.C. § 7701
- Length
- 9,363 words · about 41 min to read
- Defines
- 22 terms
- Cross-references
- cites 4 Code sections and 2 regulations; cited by 2
(a) Interest or dividends on assets defined in subparagraph (2), (3), or (4) of paragraph (d) of this section,
(b) Interest on loans defined in subparagraphs (6) through (10) of paragraph (d) of this section,
(c) Income attributable to the portion of property used in the association's business as defined in paragraph (d)(5) of this section,
(d) Premiums, discounts, commissions, or fees (including late charges and penalties) on loans defined in subparagraphs (6) through (10) of paragraph (d) of this section which have at some time been held by the association, or for which firm commitments have been issued,
(e) Gain or loss on the sale of governmental obligations defined in paragraph (d)(3) of this section, or
(f) Income, gain, or loss attributable to foreclosed property (as defined in paragraph (j)(1) of this section), but not including such income, gain, or loss which, pursuant to section 595 and the regulations thereunder, is not included in gross income.
For the purposes of this subparagraph, gross income shall be computed without regard to gains or losses on the sale of the portion of property used in the association's business (described in paragraph (d)(5) of this section), without regard to gains or losses on the rented portion of property used as the principal or branch office of the association (described in such paragraph), and without regard to gains or losses on the sale of participations and loans (other than governmental obligations defined in paragraph (d)(3) of this section). Examples of types of income which would cause an association to fail to meet the gross income test, if in the aggregate they exceed 15 percent of gross income, are the excess of gains over losses on sale of real estate (other than foreclosed property); rental income (other than on foreclosed property and the portion of property used in the association's business); premiums, commissions, and fees (other than commitment fees) on loans which have never been held by the association; and insurance brokerage fees.
(a) The term loan means loan as defined in paragraph (j)(1) of this section, other than foreclosed property defined in such paragraph and governmental obligations defined in paragraph (d)(3) of this section.
(b) The amount of a loan shall be determined in accordance with the rules contained in paragraph (l) (1) and (2)(ii) of this section.
(c) The term loans acquired for investment during the taxable year means the amount of loans outstanding as of the close of the taxable year, reduced (but not below zero) by the amount of loans outstanding as of the beginning of such year, and increased by the lesser of (1) the amount of repayments made on loans during the taxable year or (2) an amount equal to 20 percent of the amount of loans outstanding as of the beginning of the taxable year. For this purpose, repayments do not include repayments on loans to the extent such loans are refinanced by the association.
(d) The term sales of participations means sales by an association of interests in loans, which sales meet the requirements of the regulations of the Federal Home Loan Bank Board relating to sales of participations, or which meet substantially equivalent requirements of State law or regulations relating to sales of participations.
(e) The term sales of whole loans means sales of loans other than sales of participations as defined in subdivision (d) of this subdivision, but in determining the amount of sales of whole loans, the following sales shall be disregarded: Sales of loans made to other financial institutions pursuant to an arrangement whereunder the association simultaneously enters in a bona fide agreement to repurchase such loans within a period of 18 months from the time of sale if such arrangement conforms to the rules and regulations of applicable supervisory authorities; sales made to the Federal Savings and Loan Insurance Corporation or to a corporation defined in paragraph (d)(4) of this section (relating to deposit insurance company securities); and sales made in the course of liquidation of the association pursuant to Federal or State law.
(b) Use of preceding year's base. If the amount of loans acquired for investment by the association during the preceding taxable year exceeds such amount for the current taxable year, the 15 percent limitation provided in subdivision (iv)(a) of this subparagraph and the 100 percent limitation provided in subdivision (v) of this subparagraph shall be based upon such preceding taxable year's amount. However, the maximum amount of sales of whole loans permitted under subdivision (iv)(a) and the maximum amount of sales of whole loans and participations permitted under subdivision (v) in any taxable year shall be reduced by the amount of the increase in such sales allowed for the preceding taxable year solely by reason of the application of the provisions of the previous sentence. For example, assuming no carryover of sales under subdivision (a) of this subdivision, if the amount of loans acquired for investment by a calendar year association was $1,000,000 in 1965, under subdivision (iv)(a) of this subparagraph the association could make sales of whole loans in 1966 of $150,000 (15 percent of $1,000,000) even though the amount of its loans acquired for investment during 1966 was only $800,000. However, the amount of sales of whole loans permitted in 1967 under subdivision (iv)(a) of this subparagraph would be reduced to the extent that the amount of the sales of whole loans made by the association during 1966 exceeded $120,000 (15 percent of $800,000).
X Association made sales of whole loans in 1964 and 1965 which were 10 percent and 7 percent, respectively, of the amounts of loans outstanding at the beginning of each such year, and which were 25 percent and 17 percent, respectively, of the amounts of loans acquired for investment in each such year. The amount of X's loans outstanding at the beginning of 1966 was $1 million, and the amount of its loans acquired for investment for such year was $300,000. The maximum amount of sales of whole loans which X may make under the percentage of beginning loans limitation for 1966 is $30,000, which is 3 percent (20 percent reduced by the sum of 10 percent and 7 percent) of $1 million. The maximum amount of sales of whole loans permitted under the percentage of loans acquired for investment limitation for 1966 is $45,000 (15 percent of $300,000). X may therefore sell whole loans in an amount up to $45,000 in 1966 and meet the sales of whole loans test. It is assumed that the amount of loans acquired for investment in 1965 did not exceed $300,000, so that the preceding year's base cannot be used to increase the amount of sales permitted in 1966.
Assume the same facts as in the previous example, except that the amount of loans acquired for investment in the preceding year (1965) was $320,000. Since such amount is greater than the $300,000 amount of loans acquired for investment in 1966, X may base its 15 percent limitation for 1966 on the $320,000 amount and sell whole loans in an amount up to $48,000 (15 percent of $320,000) and still meet the sales of whole loans test. However, to the extent that the amount of sales of whole loans exceeds $45,000 (15 percent of the $300,000 amount of loans acquired for investment in 1966), the maximum amount of sales computed under the percentage of loans acquired for investment limitation (but not the 20 percent of beginning loans limitation) for 1967 must be reduced.
Y Association made no sales of whole loans in 1964 and 1965, and made sales of participations in the 2 years in amounts which, in the aggregate, were $50,000 less than the amounts of loans acquired for investment for such years. At the beginning of 1966 the amount of Y's loans outstanding was $1 million, and the amount of its loans acquired for investment in such year was $100,000. Although the maximum amount of sales of whole loans which Y could make under the sales of whole loans test is $200,000 (20 percent of $1 million), nevertheless, in order to meet the sales of whole loans and participations test, the sum of the amounts of sales of whole loans and sales of participations may not exceed $150,000 (100 percent of the $100,000 amount of loans acquired for investment in 1966 plus a carryover of sales from the previous two years of $50,000). It is assumed that the amount of loans acquired for investment in 1965 did not exceed $100,000, so that the preceding year's base cannot be used to increase the amount of sales permitted in 1966.
If, treating the part year as a taxable year, the association meets all the requirements of this paragraph for such part year it will be considered to have met the business operations test for the entire taxable year, providing it operated in all material respects in conformity with applicable rules and regulations of Federal or State supervisory authorities for the entire taxable year. The 20 percent of beginning loans limitation specified in subdivision (iv)(b) of subparagraph (3) of this paragraph (c), shall be applied only on the basis of a taxable year and not the part year. For taxable years beginning after October 16, 1962, and ending before November 1, 1964, an association will be considered to have met the business operations test if it operated in all material respects in conformity with applicable rules and regulations of Federal or State supervisory authorities.
Or a construction loan or improvement loan for such property. A construction loan made for the purpose of financing more than one structure (so-called tract financing) constitutes a home loan, providing no individual structure contains more than 4 family units and it is contemplated that, as soon as possible after completion of construction, the structures will become property described in subdivision (i) of this subparagraph. A construction loan secured by a structure containing more than 4 family units constitutes a home loan only if the structure has been committed to a plan of individual apartment ownership described in subdivision (ii) of this subparagraph and such plan is held out and advertised as such. A loan secured by a cooperative apartment building containing more than 4 family units does not constitute a home loan.
Thus, in years other than its first and second taxable years beginning after October 16, 1962, an association may apply the 41 percent of assets test for 2 consecutive years, but only if it met the 36 percent test (and all other tests) for the year previous to the 2 consecutive years.
An association has 41 percent of its assets invested in assets other than those defined in subparagraphs (2) through (8) of paragraph (d) of this section as of the close of 1963 and 1964. Because 1963 is its first taxable year beginning after October 16, 1962, the 41 percent of assets test applies, and the association therefore qualifies as a domestic building and loan association for 1963. Because 1964 is its second taxable year beginning after such date and the 41 percent of assets test applied for its first taxable year, the 41 percent of assets test applies for 1964 and it therefor qualifies for such year.
An association has 36 percent of its assets invested in assets other than those defined in subparagraphs (2) through (8) of paragraph (d) of this section as of the close of 1964, and 41 percent as of the close of 1965, 1966, and 1967. The association qualifies in 1965 because, as a result of having met the 36 percent of assets test for the immediately preceding taxable year (1964), the 41 percent of assets test applies to 1965. It qualifies in 1966 because as a result of having met the 41 percent of assets test in the immediately preceding taxable year (1965) and the 36 percent of assets test in the second preceding taxable year (1964), the 41 percent of assets test applies to 1966. The association would not qualify in 1967, however, because, although it met the 41 percent of assets test for the immediately preceding taxable year (1966), it did not meet the 36 percent of assets test in the second preceding taxable year (1965), and therefore the 41 percent of assets test does not apply to 1967.
An association has more than 41 percent of its assets invested in assets other than those defined in subparagraphs (2) through (8) of paragraph (d) of this section as of the close of 1963, and 41 percent invested in such assets as of the close of 1964. The association does not qualify in either year. It does not qualify in 1963 because it exceeded the 41 percent limitation, and it does not qualify in 1964 because the 41 percent of assets test does not apply to 1964 since the association did not meet either the 41 percent of assets test or the 36 percent of assets test in the prior year (1963).
(a) First by the portion of property, if any, defined in subparagraph (6), (7), or (8) of paragraph (d) of this section to the extent of the loan value thereof;
(b) Next by the portion of property, if any, defined in subparagraph (9) of paragraph (d) of this section to the extent of the loan value thereof; and
(c) Next by the portion of property, if any, defined in subparagraph (10) of paragraph (d) of this section to the extent of the loan value thereof.
To the extent that the amount of a loan exceeds the amount treated as being secured by property defined in subparagraphs (6) through (10) of paragraph (d) of this section, such loan shall be treated as property not defined in paragraph (d) of this section. If the loan value of any one category of property defined in paragraph (d) of this section exceeds 85 percent of the amount of the loan for which it is security then the entire loan shall be treated as a loan secured by such property.
(a) As of the time a loan is made;
(b) As of the time a loan is increased;
(c) As of the time any portion of the property which was security for the loan is released; and
(d) As of any time required by applicable Federal or State regulatory authorities for reappraisal or reanalysis of such loans.
On July 1, 1963, X makes a single loan of $1 million to M Corporation which loan is secured by real property which is a combination of homes, apartments, and stores. As of the time the loan is made X determines that the loan values of the categories of property are as follows:
| Category of property | Loan value |
|---|---|
| Home | $400,000 |
| Multifamily | 420,000 |
| Nonresidential real property | 240,000 |
| Total | 1,060,000 |
As of the time the loan is made, therefore, the $1,000,000 loan is treated under subparagraph (1)(i) of this paragraph as being secured as follows:
| Category of loan | Amount of loan | Percentage of total |
|---|---|---|
| Home loan | $400,000 | 40 |
| Multifamily loan | 420,000 | 42 |
| Nonresidential real property loan | 180,000 | 18 |
| Total | 1,000,000 | 100 |
Assuming that the $1 million loan to M was reduced to $900,000 as of the close of 1963, that there were no increases in the amount of the loan and no releases of property which was security for the loan, and that there was no regulatory requirement to reappraise or reanalyze the loan, such loan will be considered under subparagraph (2) of this paragraph to be secured, as of the close of 1963, as follows:
| Category | Percentage as of last determination July 1, 1963 | Amount as of Dec. 31, 1963 | |
|---|---|---|---|
| Home | 40 | $360,000 | (40% × $900,000) |
| Multifamily | 42 | 378,000 | (42% × $900,000) |
| Nonresidential real property | 18 | 162,000 | (18% × $900,000) |
| Total | 900,000 | ||
X makes a loan of $40,000 secured by a building which contains a store on the first floor and four family units on the upper floors. The loan value of the part of the building used as a store is $21,000 and the loan value of the residential portion is $23,000. The loan will be treated under subdivision (i) of subparagraph (1) of this paragraph as a loan secured by residential real property containing four or fewer family units to the extent of $23,000, and by nonresidential property to the extent of $17,000, as of the time the loan is made. However, if X exercises the option to treat all loans of $40,000 or less in accordance with subdivision (ii) of subparagraph (1) of this paragraph, this loan would be treated as a home loan to the extent of the full $40,000 because the loan value of the residential portion is larger than the loan value of the nonresidential part.
| Item | Described in paragraph (d), subparagraph | Amount | Percentage |
|---|---|---|---|
| 1. Cash | (2) | $1,000,000 | 1 |
| 2. Governmental obligations 1 | (3) | 8,000,000 | 8 |
| 3. Deposit insurance company securities | (4) | 1,000,000 | 1 |
| Loans outstanding: 2 | |||
| 4. Home | (7) | 59,000,000 | 59 |
| 5. Church | (8) | 1,000,000 | 1 |
| 6. Multifamily | (9) | 20,000,000 | 20 |
| 7. Nonresidential real property | (10) | 5,000,000 | 5 |
| 8. Passbook | (6) | 1,000,000 | 1 |
| 9. Other | 2,000,000 | 2 | |
| Fixed assets (less depreciation reserves): | |||
| 10. Used in the association's business | (5) | 1,000,000 | 1 |
| 11. Rented to others | 500,000 | .5 | |
| 12. Land held for investment | 500,000 | .5 | |
| 13. Total assets included for purposes of this paragraph | 100,000,000 | 100.0% | |
| 14. Accounts receivable | 100,000 | (disregarded) | |
| 15. Prepaid expenses (other than prepaid FSLIC premiums) | 1,000,000 | (disregarded) | |
| 16. Deferred charges | 1,000,000 | (disregarded) | |
| 17. Total assets | 102,100,000 | ||
| 1 Prepaid FSLIC premiums treated as governmental obligations. | |||
| 2 Not including unadvanced portion of loans in process, but including interest receivable and advances with respect to loans. | |||
| The computation of the percentages of assets in the various categories for the purpose of determining whether the percentage of assets tests in the paragraphs in this section are met as of the close of the year are as follows: | |||
| Test and paragraph | Items considered | Percentage |
|---|---|---|
| 90 percent test (d) | the sum of items 1 through 8 and 10 item—13 (total included assets) | = 97 percent |
| 18 percent test (e) | the sum of items 7, 9, 11, and 12—item 13 (total included assets) | = 8 percent |
| 36 percent test (f) | the sum of items 6, 7, 9, 11, and 12—item 13 (total included assets) | = 28 percent |
| 3 percent test (h) | 0—item 13 (total included assets) | = 0 percent |
| At the option of the association, the computations listed above could have been made as of the close of each month, each quarter, or semiannually, and averaged for the entire year. | ||
[32 FR 15241, Nov. 3, 1967, as amended by T.D. 7622, 44 FR 28661, May 16, 1979]
Terms defined here
Where the text says “the term … means”. Select a term to jump to its definition.
- cash § 301.7701-13(d)(2)
- church loan § 301.7701-13(d)(8)
- church purposes § 301.7701-13(d)(8)
- construction loan § 301.7701-13(j)(6)
- deposit insurance company securities § 301.7701-13(d)(4)
- domestic building and loan association § 301.7701-13(a)
- domestic building and loan association § 301.7701-13(m)
- governmental obligations § 301.7701-13(d)(3)
- home loan § 301.7701-13(d)(7)
- improved real property § 301.7701-13(j)(5)
- improvement loan § 301.7701-13(j)(7)
- loan § 301.7701-13(c)(3)(iii)
- loan § 301.7701-13(j)(1)
- loans acquired for investment during the taxable year § 301.7701-13(c)(3)(iii)
- multifamily loan § 301.7701-13(d)(9)
- nonresidential real property loan § 301.7701-13(d)(10)
- passbook loan § 301.7701-13(d)(6)
- property used in the association's business § 301.7701-13(d)(5)(i)
- real property § 301.7701-13(j)(4)
- residential real property § 301.7701-13(j)(8)
- sales of participations § 301.7701-13(c)(3)(iii)
- sales of whole loans § 301.7701-13(c)(3)(iii)
Cross-references
Computed from the citations in the text of 26 CFR.
Code sections it cites
Regulations it cites
Cited by 2 other regulations
Amendment history
From the source citation at the end of the section, newest first. T.D. is a Treasury decision; FR is the Federal Register.
- Amended by T.D. 7622 (44 FR 28661)
- Issued (32 FR 15241)
Where it sits in 26 CFR
- Subchapter F Procedure and administration
- Part 301 Procedure and administration
- Subpart ECFR5ffaf3310af6b61 Definitions
Nearby sections
- § 301.7701-9 Secretary or his delegate.
- § 301.7701-10 District director.
- § 301.7701-11 Social security number.
- § 301.7701-12 Employer identification number.
- § 301.7701-13 Pre-1970 domestic building and loan association.
- § 301.7701-13A Post-1969 domestic building and loan association.
- § 301.7701-14 Cooperative bank.
- § 301.7701-15 Tax return preparer.
- § 301.7701-16 Other terms.