Page:United States Statutes at Large Volume 90 Part 2.djvu/280

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PUBLIC LAW 94-000—MMMM. DD, 1976

90 STAT. 1748

PUBLIC LAW 94-455—OCT. 4, 1976 SEC. 1603. TREATMENT OF PROPERTY HELD FOR SALE TO CUSTOMERS. (a)

ELIMINATION OF HOLDING FOR SALE RULE AS QUALIFICATION

26 USC 856.

REQUIREMENT.—Section 856(a) (defining real estate investment trust) is amended by striking out paragraph (4). (b) TAX ON INCOME FROM PROPERTY DESCRIBED IN SECTION 1221(1)

26 USC 857.

THAT I S NOT FORECLOSURE PROPERTY.—Section 857(b) (relating to

method of taxation of real estate investment trusts, etc.) is amended by inserting after paragraph (5) (as added by section 1602(b)(1) of this Act) the following new paragraph: " (6) I N C O M E FROM P R O H I B I T E D TRANSACTIONS.—

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"(A) IMPOSITION OF TAX.—There is hereby imposed for each taxable year of every real estate investment trust a tax equal to 100 percent of the net income derived from prohibited transactions. " (B) DEFINITIONS.—For purposes of this part— "(i) the term 'net income derived from prohibited transactions' means the excess of the gain from prohibited transactions over the deductions allowed by this chapter which are directly connected with prohibited transactions; "(ii) the term 'net loss derived from prohibited transactions' means the excess of the deductions allowed by this chapter which are directly connected with prohibited transactions over the gain from prohibited transactions; and "(iii) the term 'prohibited transaction' means a sale or other disposition of property described in section 1221 (1) which is not foreclosure property." (c) TECHNICAL AMENDMENTS.—

26 USC 856.

26 USC 857.

(1) So much of paragraph (3) of section 856(c) (relating to limitations) as precedes subparagraph (A) thereof is amended to read as follows: "(3) at least 75 percent of its gross income (excluding gross income from prohibited transactions) is derived from—". (2) Section 856(c)(2) (relating to limitations) is amended by inserting before the semicolon m subparagraph (D) thereof "which is not property described in section 1221(1)". (3) Section 856(c)(3) (relating to limitations) is amended by inserting before the semicolon in subparagraph (C) thereof "which IS not property described in section 1221(1)". (4) Section 856(e)(1) (defining foreclosure property) is amended by adding at the end thereof the following sentence: "Such term does not include property acquired by the real estate investment trust as a result of indebtedness arising from the sale or other disposition of property of the trust described in section 1221(1) which was not originally acquired as foreclosure property." (5) Section 857(b)(2) (relating to real estate investment trust taxable income) is amended by adding a new subparagraph (F) immediately after subparagraph (E) (as added by section 1602 (b)(2) of this Act), to read as follows: " (F) There shall be excluded an amount equal to any net income derived from prohibited transactions and there shall be included an amount equal to any net loss derived from prohibited transactions."