100 STAT. 2300
PUBLIC LAW 99-514—OCT. 22, 1986 "(i) paragraph (2) of section 544(a) shall be applied as if such paragraph did not contain the phrase 'or by or for his partner', and "(ii) sections 544(a)(4)(A) and 544(b)(l) shall be applied by substituting 'the entity meet the stock ownership requirement of section 542(a)(2)' for 'the corporation a personal holding company'. "(2) SUBSECTIONS (a)
(5) AND (6) NOT TO APPLY TO IST YEAR.—
Paragraphs (5) and (6) of subsection (a) shall not apply to the 1st taxable year for which an election is made under subsection (c)(1) by any corporation, trust, or association." (b) REQUIREMENT OF N O EARNINGS AND PROFITS ACCUMULATED IN
NoN-REIT YEARS.—Subsection (a) of section 857 is amended by striking out "and" at the end of paragraph (1), by striking out the period at the end of paragraph (2) and inserting in lieu thereof ", and", and by adding at the end thereof the following: "(3) either— "(A) the provisions of this part apply to the real estate investment trust for all taxable years beginning after February 28, 1986, or "(B) as of the close of the taxable year, the real estate investment trust has no earnings and profits accumulated in any non-REIT year. For purposes of the preceding sentence, the term *non-REIT year' means any taxable year to which the provisions of this part did not apply with respect to the entity." (c) INITIAL CHANGE IN ANNUAL ACCOUNTING PERIOD PERMITTED.—
(1) Section 859 is amended by adding at the end thereof the following new subsection: "(b) CHANGE OF ACCOUNTING PERIOD WITHOUT APPROVAL.—Not-
withstanding section 442, an entity which has not engaged in any active trade or business may change its accounting period to a calendar year without the approval of the Secretary if such change is in connection with an election under section 856(c)." (2) Section 859 is amended by striking out "For purposes o f and inserting in lieu thereof "(a) GENERAL RULE.—For purposes of. SEC. 662. ASSET AND INCOME REQUIREMENTS. (a) TREATMENT OF CERTAIN WHOLLY OWNED SUBSIDIARIES.—Sec-
tion 856 (defining real estate investment trust) is amended by adding at the end thereof the following new subsection: "(i) TREATMENT OF CERTAIN WHOLLY OWNED SUBSIDIARIES.—
"(1) IN GENERAL.—For purposes of this title— "(A) a corporation which is a qualified REIT subsidiary shall not be treated as a separate corporation, and "(B) all assets, liabilities, and items of income, deduction, and credit of a qualified REIT subsidiary shall be treated as assets, liabilities, and such items (as the case may be) of the real estate investment trust. "(2) QUALIFIED REIT SUBSIDIARY.—For purposes of this subsection, the term 'qualified REIT subsidiary' means any corporation if 100 percent of the stock of such corporation is held by the real estate investment trust at all times during the period such corporation was in existence. "(3)
TREATMENT OF TERMINATION OF QUALIFIED SUBSIDIARY
STATUS.—For purposes of this subtitle, if any corporation which
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