Page:United States Statutes at Large Volume 100 Part 3.djvu/433

 PUBLIC LAW 99-514—OCT. 22, 1986

100 STAT. 2241

For purposes of this subparagraph, the deduction equivalent (within the meaning of subsection (j)(5)) of a passive activity credit shall be taken into account. "(B) PRE-ENACTMENT INTEREST.—

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"(i) IN GENERAL.—The term 'pre-enactment interest' means any interest in a passive activity held by a taxpayer on the date of the enactment of the Tax Reform Act of 1986, and at all times thereafter. "(ii) BINDING CONTRACT EXCEPTION.—For purposes of

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clause (i), any interest acquired after such date of enactment pursuant to a written binding contract in effect on such date, and at all times thereafter, shall be treated as held on such date. "(iii) INTEREST IN ACTIVITIES.—The term 'pre-enactment interest' shall not include an interest in a passive activity unless such activity was being conducted on such date of enactment. The preceding sentence shall not apply to an activity commencing after such date if— "(I) the property used in such activity is acquired pursuant to a written binding contract in effect on % August 16, 1986, and at all times thereafter, or "(II) construction of property used in such activity began on or before August 16, 1986." (b) CONFORMING AMENDMENT.—The table of sections for subpart C of part II of subchapter E of chapter 1 is amended by adding at the end thereof the following new item: "Sec. 469. Passive activity losses and credits limited." (c) EFFECTIVE DATE.—

(1) IN GENERAL.—The amendments made by this section shall apply to taxable years beginning after December 31, 1986. (2) SPECIAL RULE FOR CARRYOVERS.—The amendments made by this section shall not apply to any loss, deduction, or credit carried to a taxable year beginning after December 31, 1986, from a taxable year beginning before January 1, 1987. (3) SPECIAL RULE FOR LOW-INCOME HOUSING.—

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(A) IN GENERAL.—Except as provided in subparagraph (B), section 469(i)(6)(B)(i) of the Internal Revenue Code of 1986 (as added by this section) shall not apply to any property placed in service after December 31, 1989. (B) EXCEPTION WHERE AT LEAST lO PERCENT OF COSTS IN-

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CURRED.—In the case of property placed in service after December 31, 1989, and before January 1, 1991, section 469(i)(6)(B)(i) of such Code shall apply to such property if at least 10 percent of the costs of such property were incurred before January 1, 1989.

SEC. 502. TRANSITIONAL RULE FOR LOW-INCOME HOUSING.

(a) GENERAL RULE.—Any loss sustained by a qualified investor with respect to an interest in a qualified low-income housing project for any taxable year in the relief period shall not be treated as a loss from a psissive activity for purposes of section 469 of the Internal Revenue Code of 1986. (b) R E U E F PERIOD.—For purposes of subsection (a), the term "relief period" means the period beginning with the taxable year in which the investor made his initial investment in the qualified low-income

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