Page:United States Statutes at Large Volume 100 Part 3.djvu/384

 100 STAT. 2192

PUBLIC LAW 99-514—OCT. 22, 1986 "(ID DATE OF SUBSTANTIAL IMPROVEMENT.—The date of a substantial improvement is the last day of the 24month period referred to in subclause (III). "(Ill) SUBSTANTIAL IMPROVEMENT.—The term 'substantial improvement' means the improvements added to capital account with respect to the building during any 24-month period, but only if the sum of the amounts added to such account during such period equals or exceeds 25 percent of the adjusted basis of the building (determined without regard to paragraphs (2) and (3) of section 1016(a)) as of the 1st day of such period. "(ii) SPECIAL RULE FOR NONTAXABLE EXCHANGES.—For purposes of determining under subparagraph (B)(ii) when a building was last placed in service, there shall not be taken into account any placement in service in connection with the acquisition of the building in a transaction in which the basis of the building in the hands of the person acquiring it is determined in whole or in part by reference to the adjusted basis of such building in the hands of the person from whom aquired. "(iii) RELATED PERSON, ETC.— "(I) APPLICATION OF SECTION 179.—For purposes of

subparagraph (B)(i), section 179(d) shall be applied by substituting '10 percent' for '50 percent' in section 267(b) and 707(b) and in section 179(b)(7). "(II) RELATED PERSON.—For purposes of subpara-

graph (B)(iii), a person (hereinafter in this subclause referred to as the 'related person') is related to any person if the related person bears a relationship to such person specified in section 267(b) or 707(b)(l), or the related person and such person are engaged in trades or businesses under common control (within the meaning of subsections (a) and (b) of section 52). For purposes of the preceding sentence, in applying section 267(b) or 7070t)Xl), '10 percent' shall be substituted for '50 percent'. "(3) ELIGIBLE BASIS REDUCED WHERE DISPROPORTIONATE STANDARDS FOR UNITS.—The eligible basis of any building shall be reduced by an amount equal to the portion of the adjusted basis of the building which is attributable to residential rental units in the building which are not low-income units and which are above the average quality standard of the low-income units in the building. "(4) SPECIAL RULES RELATING TO DETERMINATION OF ADJUSTED

BASIS.—For purposes of this subsection— "(A) IN GENERAL.—Except as provided in subparagraph (B), the adjusted basis of any building shall be determined without regard to the adjusted basis of any property which is not residential rental property. "(B) BASIS OF PROPERTY IN COMMON AREAS, ETC., IN-

CLUDED.—The adjusted basis of any building shall be determined by taking into account the adjusted basis of property (of a character subject to the allowance for depreciation) used in common areas or provided 2is comparable amenities to all residential rental units in such building.

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