PUBLIC LAW 85-866-SEPT. 2, 1958
1612
26 USC 7121. 26 USC 7122.
[72 S T A T,
made by subsection (a) or (b) is prevented on the date of the enactment of this Act, or within 6 months after such date, by the operation of any law or rule of law (other than section 3760 of the Internal Revenue Code of 1939 or section 7121 of the Internal Revenue Code of 1954, relating to closing agreements, and other than section 3761 of the Internal Revenue Code of 1939 or section 7122 of the Internal Revenue Code of 1954, relating to compromises), refund or credit of such overpayment may, nevertheless, be made or allowed if claim therefor is filed within 6 months after such date. No interest shall be paid or allowed on any overpayment resulting from the application of the amendment made by subsection (a) or (b). SEC. 15. IMPROVEMENTS ON LEASED PROPERTY. (a)
DEDUCTION BY LESSEE FOR DEPRECIATION, ETC.—Part VI
of
26 USC 161-177. subchapter B of chapter 1 (itemized deductions for individuals and corporations) is amended by adding at the end thereof the following new section: "SEC. 178. DEPRECIATION OR AMORTIZATION OF IMPROVEMENTS MADE BY LESSEE ON LESSOR'S PROPERTY. " (a) GENERAL RULE.—Except as provided in subsection (b), in determining the amount allowable to a lessee as a deduction for any taxable year for exhaustion, wear and tear, obsolescence, or amortization— "(1) in respect of any building erected (or other improvement made) on the leased property, if the portion of the term of the lease (excluding any period for which the lease may subsequently be renewed, extended, or continued pursuant to an option exercisable by the lessee) remaining upon the completion of such building or other improvement is less than 60 percent of the useful life of such building or other improvement, or "(2) in respect of any cost of acquiring the lease, if less than 75 percent of such cost is attributable to the portion of the term of the lease (excluding any period for which the lease may subsequently be renewed, extended, or continued pursuant to an option exercisable by the lessee) remaining on the date of its acquisition, the term of the lease shall be treated as including any period for which the lease may be renewed, extended, or continued pursuant to an option exercisable by the lessee, unless the lessee establishes that (as of the close of the taxable year) it is more probable that the lease will not be renewed, extended, or continued for such period than that the lease will be so renewed, extended, or continued. "(b)
RELATED LESSEE AND LESSOR.— "(1) GENERAL RULE.—If a lessee and lessor are related persons
(as determined under paragraph (2)) at any time during the taxable year then, in determining the amount allowable to the lessee as a deduction for such taxable year for exhaustion, wear and tear, obsolescence, or amortization in respect of any building erected (or other improvement made) on the leased property, the lease shall be treated as including a period of not less duration than the remaining useful life of such improvement. "(2) RELATED PERSONS DEFINED.—For purposes of paragraph
(1), a lessor and lessee shall be considered to be related persons 26 USC 1504. 26 USC 267.
" (A) the lessor and the lessee are members of an affiliated group (as defined in section 1504), or " (B) the relationship between the lessor and lessee is one described in subsection (b) of section 267, except that, for purposes of this subparagraph, the phrase '80 percent or more' shall be substituted for the phrase 'more than 50 'percent' each place it appears in such subsection.
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