Page:United States Statutes at Large Volume 110 Part 3.djvu/129

 PUBLIC LAW 104-188—AUG. 20, 1996 110 STAT. 1859 "Sec. 860L. Definitions and other special rules. "SEC. 860H. TAXATION OF A FASIT; OTHER GENERAL RULES. "(a) TAXATION OF FASIT. —A F ASIT as such shall not be subject to taxation under this subtitle (and shall not be treated as a trust, partnership, corporation, or taxable mortgage pool). "(b) TAXATION OF HOLDER OF OWNERSHIP INTEREST.— In determining the taxable income of the holder of the ownership interest in a FASIT— "(1) all assets, liabilities, and items of income, gain, deduction, loss, and credit of a FASIT shall be treated as assets, liabilities, and such items (as the case may be) of such holder, "(2) the constant yield method (including the rules of section 1272(a)(6)) shall be applied under an accrual method of accounting in determining all interest, acquisition discount, original issue discount, and market discount and all premium deductions or adjustments with respect to each debt instrument of the FASIT, "(3) there shall not be taken into account any item of income, gain, or deduction allocable to a prohibited transaction, and "(4) interest accrued by the FASIT which is exempt from tax imposed by this subtitle shall, when taken into account by such holder, be treated as ordinary income. "(c) TREATMENT OF REGULAR INTERESTS.— For purposes of this title— "(1) a regular interest in a FASIT, if not otherwise a debt instrument, shall be treated as a debt instrument, "(2) section 163(e)(5) shall not apply to such an interest, and "(3) amounts includible in gross income with respect to such an interest shall be determined under an accrual method of accounting. "SEC. 8601. GAIN RECOGNITION ON CONTRIBUTIONS TO A FASIT AND IN OTHER CASES. "(a) TREATMENT OF PROPERTY ACQUIRED BY FASIT.— " (1) PROPERTY ACQUIRED FROM HOLDER OF OWNERSHIP INTEREST OR RELATED PERSON.— If property is sold or contributed to a FASIT by the holder of the ownership interest in such FASIT (or by a related person) gain (if any) shall be recognized to such holder (or person) in an amount equal to the excess (if any) of such propert^s value under subsection (d) on the date of such sale or contribution over its adjusted basis on such date. " (2) PROPERTY ACQUIRED OTHER THAN FROM HOLDER OF OWNERSHIP INTEREST OR RELATED PERSON.— Property which is acquired by a FASIT other than in a transaction to which paragraph (1) applies shall be treated— "(A) as having been acquired by the holder of the ownership interest in the FASIT for an amount equal to the FASIT's cost of acquiring such property, and "(B) as having been sold by such holder to the FASIT at its value under subsection (d) on such date. "(b) GAIN RECOGNITION ON PROPERTY OUTSIDE FASIT WHICH SUPPORTS REGULAR INTERESTS. —If property held by the holder of the ownership interest in a FASIT (or by any person related to such holder) supports any regular interest in such FASIT— 29-194 0-96-5:QL3Part3

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