Page:United States Statutes at Large Volume 100 Part 3.djvu/324

 100 STAT. 2132

PUBLIC LAW 99-514—OCT. 22, 1986 .:;,rQ f ,

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"(B) QUALIFIED ALLOCATION.—For purposes of subparagraph (A), the term 'qualified allocation' means any allocation to a tax-exempt entity which— "(i) is consistent with such entity's being allocated the same distributive share of each item of income, gain, loss, deduction, credit, and basis and such share remains the same during the entire period the entity is a partner in the partnership, and "(ii) has s u b s t a n t i a l economic effect within the meaning of section 704(b)(2). For purposes of this subparagraph, items allocated under section 704(c) shall not be t a k e n into account. "(C) DETERMINATION OF PROPORTIONATE SHARE.— "(i) IN GENERAL.—For purposes of subparagraph (A), a tax-exempt entity's proportionate s h a r e of any property owned by a partnership shall be determined on the basis of such entity's s h a r e of partnership items of income or gain (excluding gain allocated under section 704(c)), whichever results in the largest proportionate

share. "(ii) DETERMINATION WHERE ALLOCATIONS VARY.—For

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purposes of clause (i), if a tax-exempt entity's share of partnership items of income or gain (excluding gain allocated under section 704(c)) may vary during the period such entity is a partner in the partnership, such share shall be the highest share such entity may receive. "(D) DETERMINATION OF WHETHER PROPERTY USED IN UNRELATED TRADE OR BUSINESS.—For purposes of this subsec-

tion, in the case of any property which is owned by a partnership which has both a tax-exempt entity and a person who is not a tax-exempt entity as partners, the determination of whether such property is used in an unrelated trade or business of such an entity shall be made without regard to section 514. "(E) OTHER PASS-THRU ENTITIES; TIERED ENTITIES.—Rules

similar to the rules of subparagraphs (A), (B), (C), and (D) shall also apply in the case of any pass-thru entity other than a partnership and in the case of tiered partnerships and other entities. "(F) TREATMENT OF CERTAIN TAXABLE ENTITIES.—

"(i) IN GENERAL.—For purposes of this paragraph and paragraph (5), except as otherwise provided in this subparagraph, any tax-exempt controlled entity shall be treated as a tax-exempt entity. .,i "(ii) ELECTION.—If a tax-exempt controlled entity makes an election under this clause— vj "(I) such entity shall not be treated as a taxexempt entity for purposes of this paragraph and paragraph (5), and "(II) any gain recognized by a tax-exempt entity on any disposition of an interest in such entity (and any dividend or interest received or accrued by a ,y.,, ', tax-exempt entity from such tax-exempt controlled -*-;. ' J,:* entity) shall be treated as unrelated business taxable income for purposes of section 511.

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