Page:United States Statutes at Large Volume 102 Part 4.djvu/447

 PUBLIC LAW 100-647—NOV. 10, 1988

102 STAT. 3417

apply to taxable years beginning after December 31, 1986, but only in the case of obligations acquired after October 22, 1986. (3) Subsection (c) of section 856 of the 1986 Code is amended by adding at the end thereof the following new paragraph: "(8) TREATMENT OF UQUIDATING GAINS.—In the case of the taxable year in which a real estate investment trust is completely liquidated, there shall not be taken into account under paragraph (4) any gain from the sale, exchange, or distribution of any property after the adoption of the plan of complete liquidation. (4)(A) Paragraph (6) of section 856(c) of the 1986 Code is amended by adding at the end thereof the following new subparagraph: "(G)

TREATMENT OF CERTAIN INTEREST

RATE AGREE-

MENTS.—Except to the extent provided by regulations. Real property. any— "(i) payment to a real estate investment trust under a bona fide interest rate swap or cap agreement entered into by the real estate investment trust to hedge any variable rate indebtedness of such trust incurred or to be incurred to acquire or carry real estate assets, and "(ii) any gain from the sale or other disposition of such agreement, shall be treated as income qualifying under paragraph (2) and such agreement shall be treated as a security for purposes of paragraph (4)(A)." (B) The gunendment made by subparagraph (A) shall apply to 26 USC 856 note. taxable years ending after the date of the enactment of this Act. (5) Subclause (I) of section 856(c)(6)(D)(ii) of the 1986 Code (as added by section 662 of the Reform Act) is amended by striking out "stock in" and inserting in lieu thereof "stock (or certificates of beneficial interests) in", (q) AMENDMENTS RELATED TO SECTION 663 OF THE REFORM ACT.— Real property. (1) Subparagraph (A) of section 856(d)(6) of the 1986 C!ode is amended to read as follows: "(A) IN GENERAL.—If—

"(i) a real estate investment trust receives or accrues, with respect to real or personal property, amounts from a tenant which derives substantially all of its income with respect to such property from the subleasing of substantially all of such property, and "(ii) a portion of the amount such tenant receives or accrues, directly or indirectly, from subtenants consists of qualified rents, then the amounts which the trust receives or accrues from the tenant shall not be excluded from the term 'rents from real property' by reason of being based on the income or profits of such tenant to the extent the amounts so received or accrued are attributable to qualified rents received or accrued by such tenant." (2) Subsection (f) of section 856 of the 1986 Code is amended to read as follows: "(f) INTEREST.—

"(1) IN GENERAL.—For purposes of paragraphs (2)(B) and (3)(B) of subsection (c), the term 'interest' does not include any amount received or accrued, directly or indirectly, if the deter-

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