PUBLIC LAW 105-34—AUG. 5, 1997 111 STAT. 1035 "For purposes of subparagraph (C), property shall not be treated as used in a trade or business by reason of any activities of the real estate investment trust with respect to such property to the extent that such activities would not result in amounts received or accrued, directly or indirectly, with respect to such property being treated as other than rents from real property.". SEC. 1258. PAYMENTS UNDER HEDGING INSTRUMENTS. Section 856(c)(5)(G) (relating to treatment of certain interest rate agreements), as redesignated by section 1255, is amended to read as follows: "(G) TREATMENT OF CERTAIN HEDGING INSTRUMENTS. — Except to the extent provided by regulations, any— "(i) payment to a real estate investment trust under an interest rate swap or cap agreement, option, futures contract, forward rate agreement, or any similar financial instrument, entered into by the trust in a transaction to reduce the interest rate risks with respect to any indebtedness incurred or to be incurred by the trust to acquire or carry real estate assets, and "(ii) gain from the sale or other disposition of any such investment, shall be treated as income qualifying under paragraph (2). ". SEC. 1259. EXCESS NONCASH INCOME. Section 857(e)(2) (relating to determination of amount of excess noncash income) is amended— (1) by striking subparagraph (B), (2) by striking the period at the end of subparagraph (C) and inserting a comma, (3) by redesignating subparagraph (C) (as amended by paragraph (2)) as subparagraph (B), and (4) by adding at the end the following new subparagraphs: "(C) the amount (if any) by which— "(i) the amounts includible in gross income with respect to instruments to which section 860E(a) or 1272 applies, exceed "(ii) the amount of money and the fair market value of other property received during the taxable year under such instruments, and "(D) amounts includible in income by reason of cancellation of indebtedness.", SEC. 1260. PROHEBITED TRANSACTION SAFE HARBOR. Clause (iii) of section 857(b)(6)(C) (relating to certain sales not to constitute prohibited transactions) is amended by striking "(other than foreclosure property)" in subclauses (I) and (II) and inserting "(other than sales of foreclosure property or sales to which section 1033 applies)". SEC. 1261. SHARED APPRECIATION MORTGAGES. (a) BANKRUPTCY SAFE HARBOR. —Section 856(j) (relating to treatment of shared appreciation mortgages) is amended by redesignating paragraph (4) as paragraph (5) and by inserting after paragraph (3) the following new paragraph: "(4) COORDINATION WITH 4-YEAR HOLDING PERIOD.—
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