Condominium Cooperative Conversion Tax Adjustment Act of 1981

Condominium-Cooperative Conversion Tax Adjustment Act of 1981 - Amends the Internal Revenue Code to treat gain from the sale or exchange of residential rental property as ordinary income (rather than capital gains) if such property is converted into a condominium or cooperative within three years of the date of such sale or exchange. Treats such gain as capital gain if the sale of the residential rental property is made to a tenants association which represents more than 50 percent of the households residing in the rental property prior to the sale or exchange.

Requires tenant-stockholders of cooperative housing corporations to reside in the cooperatives in which they own shares in order to qualify for preferential tax treatment.

Disallows any amounts of income tax deductions related to the rental of a condominium or cooperative which exceed the gross income of the taxpayer.

Requires 100 percent recapture of depreciation on condominium and cooperative rental units which are rented for more than half of the period in which they are owned.