Low-Income Housing Preservation Tax Act of 1989

Low-Income Housing Preservation Tax Act of 1989 - Amends the Internal Revenue Code (IRC) with respect to gain or loss on dispositions of property to provide that for purposes of determining the allowable depreciation and the amount of gain in connection with qualified low-income housing or its disposition, the adjusted basis shall be increased to equal the adjusted cost of the housing. Modifies accounting rules governing passive losses in connection with low-income housing. Treats the exception from such rules as a tax preference for minimum tax purposes. Recaptures benefits if the taxpayer fails to operate the housing in accordance with the relevant agreement or if there is a disposition of the property.

Excludes from the gross income of a noncorporate taxpayer any passive activity gain realized in connection with the disposition of a qualified low-income housing project to a qualified non-related party that agrees to continue the low-income housing use of the property.

Revises the definition of "cooperative housing corporation" for purposes of the income tax deduction of taxes, interest, and business depreciated by a tenant-stockholder to delete the 80-percent income requirement for limited equity cooperative housing corporations.

Requires that income derived from investment of the mandatory reserves of a limited equity cooperative housing corporation be treated, for purposes of the tax deduction incurred in transactions with members, as income derived by the corporation from its members. Recaptures such amounts if the corporation ceases to be a qualified limited equity cooperative housing corporation. Permits eligible corporations to elect retroactive application of this treatment.