Page:United States Statutes at Large Volume 118.djvu/1472

 118 STAT. 1442 PUBLIC LAW 108–357—OCT. 22, 2004 ‘‘(II) at the time of each extension of the lease, including a failure to exercise a right to terminate, and ‘‘(III) at the time of any modification of the lease between the trust and the taxable REIT sub sidiary if the rent under such lease is effectively increased pursuant to such modification. With respect to subclause (III), if the taxable REIT subsidiary of the trust is a controlled taxable REIT subsidiary of the trust, the term ‘rents from real prop erty’ shall not in any event include rent under such lease to the extent of the increase in such rent on account of such modification. ‘‘(iv) CONTROLLED TAXABLE REIT SUBSIDIARY.—For purposes of clause (iii), the term ‘controlled taxable REIT subsidiary’ means, with respect to any real estate investment trust, any taxable REIT subsidiary of such trust if such trust owns directly or indirectly— ‘‘(I) stock possessing more than 50 percent of the total voting power of the outstanding stock of such subsidiary, or ‘‘(II) stock having a value of more than 50 percent of the total value of the outstanding stock of such subsidiary. ‘‘(v) CONTINUING QUALIFICATION BASED ON THIRD PARTY ACTIONS.—If the requirements of clause (i) are met at a time referred to in clause (iii), such require ments shall continue to be treated as met so long as there is no increase in the space leased to any taxable REIT subsidiary of such trust or to any person described in paragraph (2)(B). ‘‘(vi) CORRECTION PERIOD.—If there is an increase referred to in clause (v) during any calendar quarter with respect to any property, the requirements of clause (iii) shall be treated as met during the quarter and the succeeding quarter if such requirements are met at the close of such succeeding quarter.’’. (c) DELETION OF CUSTOMARY SERVICES EXCEPTION.—Subpara graph (B) of section 857(b)(7) (relating to redetermined rents) is amended by striking clause (ii) and by redesignating clauses (iii), (iv), (v), (vi), and (vii) as clauses (ii), (iii), (iv), (v), and (vi), respec tively. (d) CONFORMITY WITH GENERAL HEDGING DEFINITION.— Subparagraph (G) of section 856(c)(5) (relating to treatment of certain hedging instruments) is amended to read as follows: ‘‘(G) TREATMENT OF CERTAIN HEDGING INSTRUMENTS.— Except to the extent provided by regulations, any income of a real estate investment trust from a hedging transaction (as defined in clause (ii) or (iii) of section 1221(b)(2)(A)) which is clearly identified pursuant to section 1221(a)(7), including gain from the sale or disposition of such a trans action, shall not constitute gross income under paragraph (2) to the extent that the transaction hedges any indebted ness incurred or to be incurred by the trust to acquire or carry real estate assets.’’. (e) CONFORMITY WITH REGULATED INVESTMENT COMPANY RULES.—Clause (i) of section 857(b)(5)(A) (relating to imposition

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