PUBLIC LAW 105-206—JULY 22, 1998 112 STAT. 829 (5) TREATMENT OF ENTITIES WHICH ARE NOT STAPLED, ETC. ON MARCH 26, 1998.—Notwithstanding any other provision of this section, all interests in real property held by an exempt REIT or any stapled entity with respect to such REIT (or treated under subsection (c) as held by such REIT or stapled entity) shall be treated as nonqualified real property interests unless— (A) such stapled entity was a stapled entity with respect to such REIT as of March 26, 1998, and at all times thereafter; and (B) as of March 26, 1998, and at all times thereafter, such REIT was a real estate investment trust. (6) QUALIFIED REAL PROPERTY INTEREST. — The term "qualified real property interest" means any interest in real property other than a nonqualified real property interest. (c) TREATMENT OF PROPERTY HELD BY 10-PERCENT SUB- SIDIARIES.— For purposes of this section— (1) IN GENERAL. —Any exempt REIT and any stapled entity shall be treated as holding their proportionate shares of each interest in real property held by any 10-percent subsidiary entity of the exempt REIT or stapled entity, as the case may be. (2) PROPERTY HELD BY IO-PERCENT SUBSIDIARIES TREATED AS NONQUALIFIED.— (A) IN GENERAL.— Except as provided in subparagraph (B), any interest in real property held by a 10-percent subsidiary entity of an exempt REIT or stapled entity shall be treated as a nonqualified real property interest. (B) EXCEPTION FOR INTERESTS IN REAL PROPERTY HELD ON MARCH 26, 1998, ETC.—In the case of an entity which was a 10-percent subsidiary entity of an exempt REIT or stapled entity on March 26, 1998, and at all times thereafter, an interest in real property held by such subsidiary entity shall be treated as a qualified real property interest if such interest would be so treated if held or acquired directly by the exempt REIT or the stapled entity. (3) REDUCTION IN QUALIFIED REAL PROPERTY INTERESTS IF INCREASE IN OWNERSHIP OF SUBSIDIARY. —I f, after March 26, 1998, an exempt REIT or stapled entity increases its ownership y interest in a subsidiary entity to which paragraph (2)(B) applies above its ownership interest in such subsidiary entity as of such date, the additional portion of each interest in real property which is treated as held by the exempt REIT or stapled entity by reason of such increased ownership shall be treated as a nonqualified real property interest. (4) SPECIAL RULES FOR DETERMINING OWNERSHIP.— For purposes of this subsection— (A) percentage ownership of an entity shall be determined in accordance with subsection (e)(4); (B) interests in the entity which are acquired by an exempt REIT or a member of the stapled REIT group in any acquisition described in an agreement, announcement, or filing described in subsection (b)(2) shall be treated as acquired on March 26, 1998; and (C) except as provided in guidance prescribed by the Secretary, any change in proportionate ownership which is attributable solely to fluctuations in the relative fair
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