Page:United States Statutes at Large Volume 83.djvu/604

 576

PUBLIC LAW 91-172-DEC. 30, 1969 "(4)

Post, p. 710. •

SPECIAL RULES.— " (A) PROPERTY SUBJECT TO NET LEASE.—For purposes of

this subsection, property subject to a lease shall be treated as property held for investment, and not as property used in a trade or business, for a taxable year, if— "(i) for such taxable year the sum of the deductions with respect to such property which are allowable solely by reason of section 162 is less than 15 percent of the rental income produced by such property, or "(ii) the lessor is either guaranteed a specified return or is guaranteed in whole or m part against loss of income " (B) PARTNERSHIPS.—In the case of a partnership, each partner shall, under regulations prescribed by the Secretary or his delegate, take into account separately his distributive share of the partnership's investment interest and the other items of income and expense taken into account under this subsection. "(C)

26 USC m? "

Post, p. 635. 68A Stat. 320. Post, p. 581.

26 USC 1231.

[33 3^.^^

S H A R E H O L D E R S o r ELECTING SMALL BUSINESS CORPORA-

TioNS.—In the case of an electing small business corporation ^^^ defined in section 1371(b)), the investment interest paid or accrued by such corporation and the other items of income and expense which would be taken into account if this subsection applied to such corporation shall, under regulations prescribed by the Secretary or his delegate, be treated as investment interest paid or accrued by the shareholders of such corporation and as items of such shareholders, and shall be apportioned pro rata among such shareholders in a manner consistent with section 1374(c)(1). " (D) CONSTRUCTION INTEREST.—For purposes of this subsection, interest paid or accrued on indebtedness incurred or continued in the construction of property to be used in a trade or business shall not be treated as investment interest. "(5) CAPITAL GAINS.—For purposes of sections 1201(b) (relat[^g ^Q alternative capital gains tax), 1202 (relating to deduction fQj. capital gains), and 57(a)(9) (relating to treatment of capital gains as a tax preference), an amount equal to the amount of investment interest which is allowable as a deduction under this chapter by reason of subparagraph (C) of paragraph (1) shall be treated as gain from the sale or other disposition of property which is neither a capital asset nor property described in section 1231. " (6) EXCEPTIONS.—This subsection shall not apply with respect to investment interest, investment income, and investment expenses attributable to a specific item of property, if the indebtedness with respect to such property— " (A) is for a specified term, and " (B) was incurred before December 17, 1969, or is incurred after December 16, 1969, pursuant to a written contract or commitment which, on such date and at all times thereafter prior to the incurring of such indebtedness, is binding on the taxpayer." (b) EFFECTIVE DATE.—The amendments made by this section shall apply to taxable years beginning after December 31, 1971.

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