88 STAT. ]
PUBLIC LAW 93-625-JAN. 3, 1975
ring on or after the day on which the real estate investment trust acquired the property) on which— " (A) a lease is entered into with respect to such property which, by its terms, will give rise to income which is not described in subsection (c)(3) (otherthan subparagraph (F) of such subsection), or any amount is received or accrued, directly or indirectly, pursuant to a lease entered into on or after such day which is not described in such subsection, " (B) any construction takes place on such property (other than completion of a building, or completion of any other improvement, where more than 10 percent of the construction of such building or other improvement was completed before default became imminent), or " (C) if such day is more than 90 days after the day on which such property was acquired by the real estate investment trust and the property is used in a trade or business which is conducted by the trust (other than through an independent contractor (within the meaning of section (d)(3)) from whom the trust itself does not derive or receive any income). " (5) TAXPAYER MUST MAKE ELECTION.—Property shall be treated as foreclosure property for purposes of this part only if the real estate investment trust so elects (in the manner provided in regulations prescribed by the Secretary or his delegate) on or before the due date (including any extensions of time) for filing its return of tax under this chapter for the taxable year in which such trust acquires such property. Any such election shall be irrevocable." (b) MODIFICATION or HOLDING FOR SALE RULE.—Section 856(a)(4) (defining real estate investment trust) is amended by inserting after "property" the following:" (other than foreclosure property, as defined in subsection (e)) ". (c) TAX ON INCOME FROM FORECLOSURE PROPERTY.—Section 857(b)
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^6 USC sse. ^"^^' P- 2112. ^^ " ^ ^ *^^'
(relating to method of taxation of real estate investment trusts, etc.) is amended by redesignating paragraph (4) as paragraph (5) and by inserting after paragraph (3) the following new paragraph: " (4) INCOME FROM FORECLOSURE PROPERTY.—
" (A) IMPOSITION OF TAX.—There is hereby imposed for each taxable year on the net income from foreclosure property of every real estate investment trust a tax determined by applying section 11 to such income as if such income constituted the taxable income of a corporation taxable under section 11, For purposes of the preceding sentence, the surtax exemption shall be zero. " (B) N E T INCOME FROM FORECLOSURE PROPERTY.—For pur-
26 USC 11.
"^et income
poses of this part, the term 'net income from foreclosure p'^oper°y!^°^ ^'^^ property' means the excess of— " (i) gain from the sale or other disposition of foreclosure property described in section 1221(1) and the 26 USC 1221. gross income for the taxable year derived from foreclosure property (as defined in section 856(e)), but only ^"'®' P. 2112. to the extent such gross income is not described in subparagraph (A), (B), (C), (D), or (E) of section 856(c)(3), over 26 USC sse. "(ii) the deductions allowed by this chapter which are directly connected with the production of the income referred to in clause (i). "
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