Page:United States Statutes at Large Volume 100 Part 3.djvu/377

 PUBLIC LAW 99-514—OCT. 22, 1986

100 STAT. 2185

"(iii) LESSEES.—The Secretary shall prescribe by regulation rules for applying this subparagraph to lessees. "(D) RECONSTRUCTION.—Rehabilitation includes reconstruction. "(2)

QUALIFIED REHABIUTATION EXPENDITURE DEFINED.—For

purposes of this section— "(A) IN GENERAL.—The term 'qualified rehabilitation expenditure' means any amount properly chargeable to capital account— "(i) for property for which depreciation is allowable under section 168 and which is— "(I) nonresidential real property, "(II) residential rental property, "(III) real property which has a class life of more than 12.5 years, or "(IV) an addition or improvement to property or housing described in subclause (I), (II), or (III), and "(ii) in connection with the rehabilitation of a qualified rehabilitated building. "(B) CERTAIN EXPENDITURES NOT INCLUDED.—The term 'qualified rehabilitation expenditure' does not include— "(i) STRAIGHT LINE DEPRECIATION MUST BE USED.—Any

expenditure with respect to which the taxpayer does not use the straight line method over a recovery period determined under subsection (c) or (g) of section 168. The preceding sentence shall not apply to any expenditure to the extent the alternative depreciation system of section 168(g) applies to such expenditure by reason of subparagraph (B) or (C) of section 168(g)(l). "(ii) COST OF ACQUISITION.—The cost of acquiring any building or interest therein. "(iii) ENLARGEMENTS.—Any expenditure attributable to the enlargement of an existing building. "(iv)

CERTIFIED

HISTORIC

STRUCTURE,

ETC.—Any

expenditure attributable to the rehabilitation of a certified historic structure or a building in a registered historic district, unless the rehabilitation is a certified rehabilitation (within the meaning of subparagraph (O). The preceding sentence shall not apply to a building in a registered historic district if— "(I) such building was not a certified historic structure, "(II) the Secretary of the Interior certified to the Secretary that such building is not of historic significance to the district, and "(III) if the certification referred to in subclause (II) occurs after the beginning of the rehabilitation of such building, the taxpayer certifies to the Secretary that, at the beginning of such rehabilitation, he in good faith was not aware of the requirement of subclause (II). "(v) TAX-EXEMPT USE PROPERTY.—

"(I) IN GENERAL.—Any expenditure in connection with the rehabilitation of a building which is allocable to that portion of such building which is

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