Page:United States Statutes at Large Volume 68A.djvu/213

 CH. 1—NORMAL TAXES AND SURTAXES

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as (A) the business lease indebtedness, at the close of the taxable year, with respect to the premises covered by such lease is of (B) the adjusted basis, at the close of the taxable year, of such premises. (2) PERCENTAGE OF DEDUCTIONS TAKEN INTO ACCOUNT.—There

shall be allowed with respect to each business lease, as a deduction to be taken into account in computing unrelated business taxable income, an amount determined by applying the percentage derived under paragraph (1) to the sum determined under paragraph (3). (3) DEDUCTIONS ALLOWABLE.—The sum referred to in paragraph

(2) is the sum of the following deductions allowable under this chapter: (A) Taxes and other expenses paid or accrued during the taxable year on or with respect to the real property subject to the business lease. (B) Interest paid or accrued during the taxable year on the business lease indebtedness. (C) A reasonable allowance for exhaustion, wear and tear (including a reasonable allowance for obsolescence) of the real property subject to such lease. Where only a portion of the real property is subject to the business lease, there shall be taken into account under subparagraphs (A), (B), and (C) only those amounts which are properly allocable to the premises covered by such lease, (b) DEFINITION OF B U S I N E S S L E A S E. — (1) GENERAL RULE.—For purposes of

this section, the term "business lease" means a lease for a term of more than 5 years of real property by an organization (or by a partnership of which it is a member), if at the close of the lessor's taxable year there is a business lease indebtedness (as defined in subsection (c)) with respect to such property. (2) SPECIAL RULES FOR APPLYING PARAGRAPH (i).—For purposes of paragraph (1)— (A) I n computing the term of a lease which contains an option for renewal or extension, the term of such lease shall be considered as including any period for which such option may be exercised; and the term of any lease made pursuant to an exercise of such option shall include the period during which the prior lease was in effect. If real property is acquired subject to a lease, the term of such lease shall be considered to begin on the date of such acquisition. (B) If the property has been occupied by the same lessee for a total period of more than 5 years commencing not earlier than the date of acquisition of the property by the organization or trust (whether such occupancy is under one or more leases, renewals, extensions, or continuations thereof), the occupancy of such lessee shall be considered to be under a lease for a term of more than 5 years within the meaning of paragraph (1), However, subsection (a) shall apply in the case of a tenancy described in this subparagraph (and not within subparagraph (A)) only with respect to the sixth and succeeding years of occupancy by the same lessee. For purposes of this subparagraph, the term ''same lessee" shall include any lessee of the § 514(b)(2)(B)

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