118 STAT. 1439 PUBLIC LAW 108–357—OCT. 22, 2004 ‘‘(C) SPECIAL RULES RELATING TO RECOMPUTATION YEARS.—If the adjusted basis of any property is determined under this paragraph, paragraph (4) shall be applied by substituting ‘for each taxable year in such period’ for ‘for such period’. ‘‘(D) OTHER SPECIAL RULES.— ‘‘(i) PARTICIPATIONS AND RESIDUALS.—Notwith standing subparagraph (A), the taxpayer may exclude participations and residuals from the adjusted basis of such property and deduct such participations and residuals in the taxable year that such participations and residuals are paid. ‘‘(ii) COORDINATION WITH OTHER RULES.—Deduc tions computed in accordance with this paragraph shall be allowable notwithstanding paragraph (1)(B), section 263, 263A, 404, 419, or 461(h). ‘‘(E) AUTHORITY TO MAKE ADJUSTMENTS.—The Sec retary shall prescribe appropriate adjustments to the basis of property and to the look back method for the additional amounts allowable as a deduction solely by reason of this paragraph.’’. (b) DETERMINATION OF INCOME.—Section 167(g)(5) (relating to special rules) is amended by redesignating subparagraphs (E) and (F) as subparagraphs (F) and (G), respectively, and inserting after subparagraph (D) the following new subparagraph: ‘‘(E) TREATMENT OF DISTRIBUTION COSTS.—For purposes of this subsection, the income with respect to any property shall be the taxpayer’s gross income from such property.’’. (c) EFFECTIVE DATE.—The amendments made by this section shall apply to property placed in service after the date of the enactment of this Act. SEC. 243. IMPROVEMENTS RELATED TO REAL ESTATE INVESTMENT TRUSTS. (a) EXPANSION OF STRAIGHT DEBT SAFE HARBOR.—Section 856 (defining real estate investment trust) is amended— (1) in subsection (c) by striking paragraph (7), and (2) by adding at the end the following new subsection: ‘‘(m) SAFE HARBOR IN APPLYING SUBSECTION (c)(4).— ‘‘(1) IN GENERAL.—In applying subclause (III) of subsection (c)(4)(B)(iii), except as otherwise determined by the Secretary in regulations, the following shall not be considered securities held by the trust: ‘‘(A) Straight debt securities of an issuer which meet the requirements of paragraph (2). ‘‘(B) Any loan to an individual or an estate. ‘‘(C) Any section 467 rental agreement (as defined in section 467(d)), other than with a person described in sub section (d)(2)(B). ‘‘(D) Any obligation to pay rents from real property (as defined in subsection (d)(1)). ‘‘(E) Any security issued by a State or any political subdivision thereof, the District of Columbia, a foreign government or any political subdivision thereof, or the Commonwealth of Puerto Rico, but only if the determina tion of any payment received or accrued under such security does not depend in whole or in part on the profits of 26 USC 167 note.
�
