Page:United States Statutes at Large Volume 83.djvu/571

 83 STAT. ]

PUBLIC LAW 91-172-DEC. 30, 1969

543

profit constitutes an unrelated trade or business, no part of such trade or business shall be excluded from such classification merely because it does not result in profit." (d) UNRELATED DEBT-FINANCED INCOME.—

(1) IN GENERAL.—Section 514 (relating to business leases) is amended by striking out so much thereof as precedes subsection (b) and inserting in lieu thereof the following: "SEC. 514. UNRELATED DEBT-FINANCED INCOME. "(a)

26'^us'c*5i4^^'

L'NRELATED DEBT-FINANCED INCOME AND DEDUCTIONS.—In

computing under section 512 the unrelated business taxable income for 53"^"'*' ^^- ^^^' any taxable year— "(1)

PERCENTAGE OF INCOME TAKEN INTO ACCOUNT.—There

shall be included with respect to each debt-financed property as an item of gross income derived from an unrelated trade or business an amount which is the same percentage (but not in excess of 100 percent) of the total gross income derived during the taxable year from or on account of such property as (A) the average acquisition indebtedness (as defined in subsection (c)(7)) for the taxable year with respect to the property is of (B) the average amount (determined under regulations prescribed by the Secretary or his delegate) of the adjusted basis of such property during the period it is held by the organization during such taxable year. "(2)

PERCENTAGE OF DEDUCTIONS TAKEN INTO ACCOUNT.—There

shall be allowed as a deduction with respect to each debt-financed property an amount determined by applying (except as provided in the last sentence of this paragraph) the percentage derived under paragraph (1) to the sum determined under paragraph (3). The percentage derived under this paragraph shall not be applied with respect to the deduction of any capital loss resulting from the carryback or carryover of net capital losses under section 1212. "(3) DEDUCTIONS ALLOWABLE.—The sum referred to in paragraph (2) is the sum of the deductions under this chapter which are directly connected with the debt-financed property or the income therefrom, except that if the debt-financed property is of a character which is subject to the allowance for depreciation provided in section 167, the allowance shall be computed only by use of the straight-line method. "(b)

DEFINITION OF DEBT-FINANCED PROPERTY.—

" (1) IN GENERAL.—For purposes of this section, the term 'debtfinanced property' means any property which is held to produce income and with respect to which there is an acquisition indebtedness (as defined in subsection (c)) at any time during the taxable year (or, if the property was disposed of during the taxable year, with respect to which there was an acquisition indebtedness at any time during the 12-month period ending with the date of such disposition), except that such term does not include— " (A)(i) any property substantially all the use of which is substantially related (aside from the need of the organization for income or funds) to the exercise or performance by such organization of its charitable, educational, or other purpose or function constituting the basis for its exemption under section 501 (or, in the case of an organization described in section 511(a)(2)(B),totheexerciseorperformanceof any purpose or function designated in section 501(c)(3)), or (ii) any property to which clause (i) does not apply, to the extent that its use is so substantially related;

Post, pp. 638, 639, 642.

Post,

p. 649.

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