Ill STAT. 1034 PUBLIC LAW 105-34—AUG. 5, 1997 (3) by redesignating paragraphs (5), (6), and (7) as paragraphs (4), (5), and (6), respectively, (b) CONFORMING AMENDMENTS.— (1) Subparagraph (G) of section 856(c)(5), as redesignated by subsection (a), is amended by striking "and such agreement shall be treated as a security for purposes of paragraph (4)(A)". (2) Paragraph (5) of section 857(b) is amended by striking "section 856(c)(7)" and inserting "section 856(c)(6)". (3) Subparagraph (C) of section 857(b)(6) is amended by striking "section 856(c)(6)(B)" and inserting "section 856(c)(5)(B)". SEC. 1256. MODIFICATION OF EARNINGS AND PROFITS RULES FOR DETERMINING WHETHER REIT HAS EARNINGS AND PROFITS FROM NON-REIT YEAR. Subsection (d) of section 857 is amended by adding at the end the following new paragraph: "(3) DISTRIBUTIONS TO MEET REQUIREMENTS OF SUBSECTION (a)(2)(B).—Any distribution which is made in order to comply with the requirements of subsection (a)(2)(B)— "(A) shall be treated for purposes of this subsection and subsection (a)(2)(B) as made from the earliest accumulated earnings and profits (other than earnings and profits to which subsection (a)(2)(A) applies) rather than the most recently accumulated earnings and profits, and "(B) to the extent treated under subparagraph (A) as made from accumulated earnings and profits, shall not be treated as a distribution for purposes of subsection (b)(2)(B).". SEC. 1257. TREATMENT OF FORECLOSURE PROPERTY. (a) GRACE PERIODS.— (1) INITIAL PERIOD. — Paragraph (2) of section 856(e) (relating to special rules for foreclosure property) is amended by striking "on the date which is 2 years after the date the trust acquired such property" and inserting "as of the close of the 3d taxable year following the taxable year in which the trust acquired such property'. (2) EXTENSION.— Paragraph (3) of section 856(e) is amended— (A) by striking "or more extensions" and inserting "extension", and (B) by striking the last sentence and inserting: "Any such extension shall not extend the grace period beyond the close of the 3d taxable year following the last taxable year in the period under paragraph (2).". (b) REVOCATION OF ELECTION. —Paragraph (5) of section 856(e) is amended by striking the last sentence and inserting: "A real estate investment trust may revoke any such election for a taxable year by filing the revocation (in the manner provided by the Secretary) on or before the due date (including any extension of time) for filing its return of tax under this chapter for the taxable year. If a trust revokes an election for any property, no election may be made by the trust under this paragraph with respect to the property for any subsequent taxable year.". (c) CERTAIN ACTIVITIES NOT TO DISQUALIFY PROPERTY. — Paragraph (4) of section 856(e) is amended by adding at the end the following new flush sentence:
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