12 2 STA T . 2 89 8 PUBLIC LA W 11 0– 289 —J UL Y3 0 , 2008 ‘ ‘ (i)any i temof in c ome o rg ain d e s cri b edins u b - section (c)( 3 ) , ‘‘(ii) t h eac q uisition or o w nershi p of ob l igations secured by mortgages on real property or on interests in real property (other than foreign currency gain attributable to any item of income or gain described in clause (i)), or ‘‘(iii) becoming or being the obligor under obliga- tions secured by mortgages on real property or on interests in real property (other than foreign currency gain attributable to any item of income or gain described in clause (i)), ‘‘( B ) section 987 gain attributable to a qualified busi- ness unit (as defined by section 989) of the real estate in v estment trust, but only if such qualified business unit meets the requirements under — ‘‘(i) subsection (c)(3) for the ta x able year, and ‘‘(ii) subsection (c)( 4 )( A ) at the close of each quarter that the real estate investment trust has directly or indirectly held the qualified business unit, and ‘‘( C ) any other foreign currency gain as determined by the S ecretary . ‘‘(3) PAS S IVEFOR EI GN E XCH ANGE GAIN.— F or purposes of this subsection, the term ‘passive foreign exchange gain ’ means— ‘‘(A) real estate foreign exchange gain, ‘‘(B) foreign currency gain (as defined in section 988(b)( 1 )) which is not described in subparagraph (A) and which is attributable to— ‘‘(i) any item of income or gain described in sub- section (c)( 2 ), ‘‘(ii) the acquisition or ownership of obligations (other than foreign currency gain attributable to any item of income or gain described in clause (i)), or ‘‘(iii) becoming or being the obligor under obliga- tions (other than foreign currency gain attributable to any item of income or gain described in clause (i)), and ‘‘(C) any other foreign currency gain as determined by the Secretary. ‘‘(4) E XCE PT ION FOR INCO M EFROMS UB STANTIA L AN D REG- ULAR TRADING.— N otwithstanding this subsection or any other provision of this part, any section 988 gain derived by a corpora- tion, trust, or association from dealing, or engaging in substan- tial and regular trading, in securities (as defined in section 47 5 (c)(2)) shall constitute gross income which does not qualify under paragraph (2) or (3) of subsection (c). T his paragraph shall not apply to income which does not constitute gross income by reason of subsection (c)(5)( G ).’’. (b) ADDITION TO R E I T H EDGING RULE.—Subparagraph (G) of section 85 6 (c)(5) is amended to read as follows
‘‘(G) TREATMENT OF CERTAIN HEDGING INSTRUMENTS.— Except to the extent as determined by the Secretary— ‘‘(i) any income of a real estate investment trust from a hedging transaction (as defined in clause (ii) or (iii) of section 1221(b)(2)(A)) which is clearly identi- fied pursuant to section 1221(a)(7), including gain from
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