118 STAT. 1430 PUBLIC LAW 108–357—OCT. 22, 2004 in service, such improvement shall be qualified leasehold improvement property (if at all) only so long as such improvement is held by such person. ‘‘(B) EXCEPTION FOR CHANGES IN FORM OF BUSINESS.— Property shall not cease to be qualified leasehold improve ment property under subparagraph (A) by reason of— ‘‘(i) death, ‘‘(ii) a transaction to which section 381(a) applies, ‘‘(iii) a mere change in the form of conducting the trade or business so long as the property is retained in such trade or business as qualified leasehold improvement property and the taxpayer retains a substantial interest in such trade or business, ‘‘(iv) the acquisition of such property in an exchange described in section 1031, 1033, or 1038 to the extent that the basis of such property includes an amount representing the adjusted basis of other property owned by the taxpayer or a related person, or ‘‘(v) the acquisition of such property by the tax payer in a transaction described in section 332, 351, 361, 721, or 731 (or the acquisition of such property by the taxpayer from the transferee or acquiring cor poration in a transaction described in such section), to the extent that the basis of the property in the hands of the taxpayer is determined by reference to its basis in the hands of the transferor or distributor.’’. (c) QUALIFIED RESTAURANT PROPERTY.—Subsection (e) of section 168 (as amended by subsection (b)) is further amended by adding at the end the following new paragraph: ‘‘(7) QUALIFIED RESTAURANT PROPERTY.—The term ‘qualified restaurant property’ means any section 1250 property which is an improvement to a building if— ‘‘(A) such improvement is placed in service more than 3 years after the date such building was first placed in service, and ‘‘(B) more than 50 percent of the building’s square footage is devoted to preparation of, and seating for on premises consumption of, prepared meals.’’. (d) REQUIREMENT TO USE STRAIGHT LINE METHOD.— (1) Paragraph (3) of section 168(b) is amended by adding at the end the following new subparagraphs: ‘‘(G) Qualified leasehold improvement property described in subsection (e)(6). ‘‘(H) Qualified restaurant property described in sub section (e)(7).’’. (2) Subparagraph (A) of section 168(b)(2) is amended by inserting before the comma ‘‘not referred to in paragraph (3)’’. (e) ALTERNATIVE SYSTEM.—The table contained in section 168(g)(3)(B) is amended by adding at the end the following new items: ‘‘(E)(iv) ................................................................................... 39 ‘‘(E)(v) .................................................................................... 39’’. (f) EFFECTIVE DATE.—The amendments made by this section shall apply to property placed in service after the date of the enactment of this Act. 26 USC 168 note.
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