118 STAT. 1606 PUBLIC LAW 108–357—OCT. 22, 2004 ‘‘(A) IN GENERAL.—Sections 1031(a) and 1033(a) shall not apply if— ‘‘(i) the exchanged or converted property is tax exempt use property subject to a lease which was entered into before March 13, 2004, and which would not have met the requirements of subsection (d) had such requirements been in effect when the lease was entered into, or ‘‘(ii) the replacement property is tax exempt use property subject to a lease which does not meet the requirements of subsection (d). ‘‘(B) ADJUSTED BASIS.—In the case of property acquired by the lessor in a transaction to which section 1031 or 1033 applies, the adjusted basis of such property for pur poses of this section shall be equal to the lesser of— ‘‘(i) the fair market value of the property as of the beginning of the lease term, or ‘‘(ii) the amount which would be the lessor’s adjusted basis if such sections did not apply to such transaction. ‘‘(f) OTHER DEFINITIONS.—For purposes of this section— ‘‘(1) RELATED PARTIES.—The terms ‘lessor’, ‘lessee’, and ‘lender’ each include any related party (within the meaning of section 197(f)(9)(C)(i)). ‘‘(2) LEASE TERM.—The term ‘lease term’ has the meaning given to such term by section 168(i)(3). ‘‘(3) LENDER.—The term ‘lender’ means, with respect to any lease, a person that makes a loan to the lessor which is secured (or economically similar to being secured) by the lease or the leased property. ‘‘(4) LOAN.—The term ‘loan’ includes any similar arrange ment. ‘‘(g) REGULATIONS.—The Secretary shall prescribe such regula tions as may be necessary or appropriate to carry out the purposes of this section, including regulations which— ‘‘(1) allow in appropriate cases the aggregation of property subject to the same lease, and ‘‘(2) provide for the determination of the allocation of interest expense for purposes of this section.’’. (b) CONFORMING AMENDMENT.—The table of sections for sub part C of part II of subchapter E of chapter 1 is amended by adding at the end the following new item: ‘‘Sec. 470. Limitation on deductions allocable to property used by govern ments or other tax exempt entities.’’. SEC. 849. EFFECTIVE DATE. (a) IN GENERAL.—Except as provided in this section, the amend ments made by this part shall apply to leases entered into after March 12, 2004. (b) EXCEPTION.— (1) IN GENERAL.—The amendments made by this part shall not apply to qualified transportation property. (2) QUALIFIED TRANSPORTATION PROPERTY.—For purposes of paragraph (1), the term ‘‘qualified transportation property’’ means domestic property subject to a lease with respect to which a formal application— 26 USC 470 note.
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