Page:United States Statutes at Large Volume 98 Part 1.djvu/658

 98 STAT. 610

PUBLIC LAW 98-369—JULY 18, 1984 "(2) interest for the year on the amounts which were taken into account under this subsection for prior taxable years and which are unpaid. "(b) ACCRUAL OF RENTAL PAYMENTS.— "(1) ALLOCATION FOLLOWS AGREEMENT.—Except as provided in

paragraph (2), the determination of the amount of the rent under any section 467 rental agreement which accrues during any taxable year shall be made— "(A) by allocating rents in accordance with the agreement, and "(B) by taking into account any rent to be paid after the close of the period in an amount determined under regulations which shall be based on present value concepts. "(2)

CONSTANT RENTAL ACCRUAL IN CASE OF CERTAIN TAX

AVOIDANCE TRANSACTIONS, ETC.—In the case of any section 467 rental agreement to which this paragraph applies, the portion of the rent which accrues during any taxable year shall be that portion of the constant rental amount with respect to such agreement which is allocable to such taxable year. "(3) AGREEMENTS TO WHICH PARAGRAPH (2)

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APPLIES.—Para-

graph (2) applies to any rental payment agreement if— "(A) such agreement is a disqualified leaseback or longterm agreement, or "(B) such agreement does not provide for the allocation referred to in paragraph (1)(A). "(4) DISQUALIFIED LEASEBACK OR LONG-TERM AGREEMENT.—For

purposes of this subsection, the term 'disqualified leaseback or long-term agreement' means any section 467 rental agreement if— "(A) such agreement is part of a leaseback transaction or such agreement is for a term in excess of 75 percent of the statutory recover period for the property, and "(B) a principal purpose for providing increasing rents under the agreement is the avoidance of tax imposed by this subtitle. Regulations.

"(5) EXCEPTIONS TO DISQUALIFICATION IN CERTAIN CASES.—The

Secretary shall prescribe regulations setting forth circumstances under which agreements will not be treated as disqualified leaseback or long-term agreements, including circumstances relating to— "(A) changes in amounts paid determined by reference to price indices, "(B) rents based on a fixed percentage of lessee receipts or similar amounts, "(C) reasonable rent holidays, or "(D) changes in amounts paid to unrelated 3rd parties. "(c) RECAPTURE OF PRIOR UNDERSTATED INCLUSIONS UNDER LEASEBACK OR LONG-TERM AGREEMENTS.— "(1) IN GENERAL.—If—

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"(A) the lessor under any section 467 rental agreement disposes of any property subject to such agreement during the term of such agreement, and "(B) such agreement is a leaseback or long-term agreement to which paragraph (2) of subsection (b) did not apply, the recapture amount shall be treated as ordinary income. Such gain shall be recognized notwithstanding any other provision of this subtitle.

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