CH. 1—NORMAL TAXES AND SURTAXES SEC. 109. IMPROVEMENTS BY LESSEE ON LESSOR'S
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PROPERTY.
Gross income does not include income (other than rent) derived by a lessor of real property on the termination of a lease, representing the value of such property attributable to buildings erected or other improvements made by the lessee. SEC. 110. INCOME TAXES PAID BY LESSEE
CORPORATION.
If— (1) a lease was entered into before January 1, 1954, (2) both lessee and lessor are corporations, and (3) under the lease, the lessee is obligated to pay, or to reimburse the lessor for, any part of the tax imposed by this subtitle on the lessor with respect to the rentals derived by the lessor from the lessee, then gross income of the lessor does not include such payment or reimbursement, and no deduction for such payment or reimbursement shall be allowed to the lessee. For purposes of the preceding sentence, a lease shall be considered to have been entered into before January 1, 1954, if it is a renewal or continuance of a lease entered into before such date and if such renewal or continuance was made in accordance with an option contained in the lease on December 31, 1953. SEC. 111.
RECOVERY OF BAD DEBTS, PRIOR TAXES, AND DELINQUENCY AMOUNTS. (a) GENERAL RULE.—Gross income does not include income attrib-
utable to the recovery during the taxable year of a bad debt, prior tax, or delinquency amount, to the extent of the amount of the recovery exclusion with respect to such debt, tax, or amount. (b) DEFINITIONS.—For purposes of subsection (a)— (1) BAD DEBT.—The term " b a d debt" means a debt on account of the worthlessness or partial worthlessness of which a deduction was allowed for a prior taxable year. (2) PRIOR TAX.—The term "prior tax " means a tax on account of which a deduction or credit was allowed for a prior taxable year. (3) DELINQUENCY AMOUNT.—The term "delinquency amount" means an amount paid or accrued on account of which a deduction or credit was allowed for a prior taxable year and which is attributable to failure to file return with respect to a tax, or pay a tax, within the time required by the law under which the tax is imposed, or to failure to file return with respect to a tax or pay a tax. (4) RECOVERY EXCLUSION.—The term "recovery exclusion", with respect to a bad debt, prior tax, or delinquency amount, means the amount, determined in accordance with regulations prescribed by the Secretary or his delegate, of the deductions or credits allowed, on account of such bad debt, prior tax, or delinquency amount, which did not result in a reduction of the taxpayer's tax under this subtitle (not including the accumulated earnings tax imposed by section 531 or the tax on personal holding companies imposed by section 541) or corresponding provisions of prior income tax laws (other than subchapter E of chapter 2 of the Internal Revenue Code of 1939, relating to World War II excess profits tax), reduced by the amount excludable in previous taxable years with respect to such debt, tax, or amount under this section. § 111(b)(4)
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