---
kind: "section"
citation: "26 U.S.C. § 514"
title: "26"
title_heading: "Internal Revenue Code"
number: "514"
heading: "Unrelated debt-financed income"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/26/514"
units:
  - "Subtitle A — Income Taxes"
  - "Chapter 1 — Normal Taxes and Surtaxes"
  - "Subchapter F — Exempt Organizations"
  - "Part III — Taxation of Business Income of Certain Exempt Organizations"
---

# §514. Unrelated debt-financed income

- (a) **Unrelated debt-financed income and deductions—** In computing under [section 512](/usc/26/512.md) the unrelated business [taxable income](/usc/26/63.md?p=a) for any taxable year—
  - (1) **Percentage of income taken into account—** There shall be included with respect to each debt-financed [property](/usc/26/317.md?p=a) as an item of gross income derived from an unrelated [trade or business](/usc/26/1402.md?p=c) 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](/usc/26/317.md?p=a) as (A) the average acquisition indebtedness (as defined in [subsection (c)(7)](#c-7)) for the taxable year with respect to the [property](/usc/26/317.md?p=a) is of (B) the average amount (determined under regulations prescribed by the Secretary) of the adjusted basis of such [property](/usc/26/317.md?p=a) during the period it is held by the [organization](/usc/26/414.md?p=m-6-A) 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](/usc/26/317.md?p=a) an amount determined by applying (except as provided in the last sentence of this paragraph) the percentage derived under [paragraph (1)](#a-1) to the sum determined under [paragraph (3)](#a-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)](#a-2) is the sum of the deductions under this chapter which are directly connected with the debt-financed [property](/usc/26/317.md?p=a) or the income therefrom, except that if the debt-financed [property](/usc/26/317.md?p=a) is of a character which is subject to the allowance for depreciation provided in [section 167](/usc/26/167.md), 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 “debt-financed [property](/usc/26/317.md?p=a)” means any [property](/usc/26/317.md?p=a) which is held to produce income and with respect to which there is an acquisition indebtedness (as defined in [subsection (c)](#c)) at any time during the taxable year (or, if the [property](/usc/26/317.md?p=a) 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](/usc/26/424.md?p=c-1)), except that such term does not include—
    - (A)
      - (i) any [property](/usc/26/317.md?p=a) substantially all the use of which is substantially related (aside from the need of the [organization](/usc/26/414.md?p=m-6-A) for income or [funds](/usc/26/851.md?p=g-2)) to the exercise or performance by such [organization](/usc/26/414.md?p=m-6-A) of its charitable, educational, or other purpose or function constituting the basis for its exemption under [section 501](/usc/26/501.md) (or, in the case of an [organization](/usc/26/414.md?p=m-6-A) described in [section 511(a)(2)(B)](/usc/26/511.md?p=a-2-B), to the exercise or performance of any purpose or function designated in [section 501(c)(3)](/usc/26/501.md?p=c-3)), or (ii) any [property](/usc/26/317.md?p=a) to which [clause (i)](#b-1-A-i) does not apply, to the extent that its use is so substantially related;
    - (B) except in the case of income excluded under [section 512(b)(5)](/usc/26/512.md?p=b-5), any [property](/usc/26/317.md?p=a) to the extent that the income from such [property](/usc/26/317.md?p=a) is taken into account in computing the gross income of any unrelated [trade or business](/usc/26/1402.md?p=c);
    - (C) any [property](/usc/26/317.md?p=a) to the extent that the income from such [property](/usc/26/317.md?p=a) is excluded by reason of the provisions of paragraph [(7)](/usc/26/512.md?p=b-7), [(8)](/usc/26/512.md?p=b-8), or [(9)](/usc/26/512.md?p=b-9) of section 512(b) in computing the gross income of any unrelated [trade or business](/usc/26/1402.md?p=c);
    - (D) any [property](/usc/26/317.md?p=a) to the extent that it is used in any [trade or business](/usc/26/1402.md?p=c) described in paragraph [(1)](/usc/26/513.md?p=a-1), [(2)](/usc/26/513.md?p=a-2), or [(3)](/usc/26/513.md?p=a-3) of section 513(a); or
    - (E) any [property](/usc/26/317.md?p=a) the gain or loss from the sale, exchange, or other [disposition](/usc/26/424.md?p=c-1) of which would be excluded by reason of the provisions of [section 512(b)(19)](/usc/26/512.md?p=b-19) in computing the gross income of any unrelated [trade or business](/usc/26/1402.md?p=c).

    For purposes of [subparagraph (A)](#b-1-A), substantially all the use of a [property](/usc/26/317.md?p=a) shall be considered to be substantially related to the exercise or performance by an [organization](/usc/26/414.md?p=m-6-A) of its charitable, educational, or other purpose or function constituting the basis for its exemption under [section 501](/usc/26/501.md) if such [property](/usc/26/317.md?p=a) is real [property](/usc/26/317.md?p=a) subject to a lease to a medical clinic entered into primarily for purposes which are substantially related (aside from the need of such [organization](/usc/26/414.md?p=m-6-A) for income or [funds](/usc/26/851.md?p=g-2) or the use it makes of the rents derived) to the exercise or performance by such [organization](/usc/26/414.md?p=m-6-A) of its charitable, educational, or other purpose or function constituting the basis for its exemption under section 501.

  - (2) **Special rule for related uses—** For purposes of applying [paragraphs (1)](#b-1) (A), (C), and (D), the use of any [property](/usc/26/317.md?p=a) by an exempt [organization](/usc/26/414.md?p=m-6-A) which is related to an [organization](/usc/26/414.md?p=m-6-A) shall be treated as use by such [organization](/usc/26/414.md?p=m-6-A).
  - (3) **Special rules when land is acquired for exempt use within 10 years—**
    - (A) **Neighborhood land—** If an [organization](/usc/26/414.md?p=m-6-A) acquires real [property](/usc/26/317.md?p=a) for the principal purpose of using the land (commencing within 10 years of the time of acquisition) in the manner described in [paragraph (1)(A)](#b-1-A) and at the time of acquisition the [property](/usc/26/317.md?p=a) is in the neighborhood of other [property](/usc/26/317.md?p=a) owned by the [organization](/usc/26/414.md?p=m-6-A) which is used in such manner, the real [property](/usc/26/317.md?p=a) acquired for such future use shall not be treated as debt-financed [property](/usc/26/317.md?p=a) so long as the [organization](/usc/26/414.md?p=m-6-A) does not abandon its intent to so use the land within the 10-year period. The preceding sentence shall not apply for any period after the expiration of the 10-year period, and shall apply after the first 5 years of the 10-year period only if the [organization](/usc/26/414.md?p=m-6-A) establishes to the satisfaction of the Secretary that it is reasonably certain that the land will be used in the described manner before the expiration of the 10-year period.
    - (B) **Other cases—** If the first sentence of [subparagraph (A)](#b-3-A) is inapplicable only because—
      - (i) the acquired land is not in the neighborhood referred to in [subparagraph (A)](#b-3-A), or
      - (ii) the [organization](/usc/26/414.md?p=m-6-A) (for the period after the first 5 years of the 10-year period) is unable to establish to the satisfaction of the Secretary that it is reasonably certain that the land will be used in the manner described in [paragraph (1)(A)](#b-1-A) before the expiration of the 10-year period,

      but the land is converted to such use by the [organization](/usc/26/414.md?p=m-6-A) within the 10-year period, the real [property](/usc/26/317.md?p=a) (subject to the provisions of [subparagraph (D)](#b-3-D)) shall not be treated as debt-financed [property](/usc/26/317.md?p=a) for any period before such conversion. For purposes of this subparagraph, land shall not be treated as used in the manner described in [paragraph (1)(A)](#b-1-A) by reason of the use made of any structure which was on the land when acquired by the [organization](/usc/26/414.md?p=m-6-A).

    - (C) **Limitations—** Subparagraphs [(A)](#b-3-A) and [(B)](#b-3-B)—
      - (i) shall apply with respect to any structure on the land when acquired by the [organization](/usc/26/414.md?p=m-6-A), or to the land occupied by the structure, only if (and so long as) the intended future use of the land in the manner described in [paragraph (1)(A)](#b-1-A) requires that the structure be demolished or removed in order to use the land in such manner;
      - (ii) shall not apply to structures erected on the land after the acquisition of the land; and
      - (iii) shall not apply to [property](/usc/26/317.md?p=a) subject to a lease which is a business lease (as defined in this section immediately before the enactment of the Tax Reform Act of 1976).
    - (D) **Refund of taxes when subparagraph (B) applies—** If an [organization](/usc/26/414.md?p=m-6-A) for any taxable year has not used land in the manner to satisfy the actual use condition of [subparagraph (B)](#b-3-B) before the time prescribed by law (including extensions thereof) for filing the return for such taxable year, the tax for such year shall be computed without regard to the application of [subparagraph (B)](#b-3-B), but if and when such use condition is satisfied, the provisions of [subparagraph (B)](#b-3-B) shall then be applied to such taxable year. If the actual use condition of [subparagraph (B)](#b-3-B) is satisfied for any taxable year after such time for filing the return, and if credit or refund of any overpayment for the taxable year resulting from the satisfaction of such use condition is prevented at the close of the taxable year in which the use condition is satisfied, by the operation of any law or rule of law (other than [chapter 74](/usc/26/chstF/ch74.md), relating to closing agreements and compromises), credit or refund of such overpayment may nevertheless be allowed or made if claim therefor is filed before the expiration of 1 year after the close of the taxable year in which the use condition is satisfied.
    - (E) **Special rule for churches—** In applying this paragraph to a [church or convention or association of churches](/usc/26/414.md?p=z-4-A), in lieu of the 10-year period referred to in subparagraphs [(A)](#b-3-A) and [(B)](#b-3-B) a 15-year period shall be applied, and subparagraphs [(A)](#b-3-A) and [(B)(ii)](#b-3-B-ii) shall apply whether or not the acquired land meets the neighborhood test.
- (c) **Acquisition indebtedness—**
  - (1) **General rule—** For purposes of this section, the term “acquisition indebtedness” means, with respect to any debt-financed [property](/usc/26/317.md?p=a), the unpaid amount of—
    - (A) the indebtedness incurred by the [organization](/usc/26/414.md?p=m-6-A) in acquiring or improving such [property](/usc/26/317.md?p=a);
    - (B) the indebtedness incurred before the acquisition or improvement of such [property](/usc/26/317.md?p=a) if such indebtedness would not have been incurred but for such acquisition or improvement; and
    - (C) the indebtedness incurred after the acquisition or improvement of such [property](/usc/26/317.md?p=a) if such indebtedness would not have been incurred but for such acquisition or improvement and the incurrence of such indebtedness was reasonably foreseeable at the time of such acquisition or improvement.
  - (2) **Property acquired subject to mortgage, etc.** For purposes of this subsection—
    - (A) **General rule—** Where [property](/usc/26/317.md?p=a) (no matter how acquired) is acquired subject to a mortgage or other similar lien, the amount of the indebtedness secured by such mortgage or lien shall be considered as an indebtedness of the [organization](/usc/26/414.md?p=m-6-A) incurred in acquiring such [property](/usc/26/317.md?p=a) even though the [organization](/usc/26/414.md?p=m-6-A) did not assume or agree to pay such indebtedness.
    - (B) **Exceptions—** Where [property](/usc/26/317.md?p=a) subject to a mortgage is acquired by an [organization](/usc/26/414.md?p=m-6-A) by bequest or devise, the indebtedness secured by the mortgage shall not be treated as acquisition indebtedness during a period of 10 years following the date of the acquisition. If an [organization](/usc/26/414.md?p=m-6-A) acquires [property](/usc/26/317.md?p=a) by gift subject to a mortgage which was placed on the [property](/usc/26/317.md?p=a) more than 5 years before the gift, which [property](/usc/26/317.md?p=a) was held by the donor more than 5 years before the gift, the indebtedness secured by such mortgage shall not be treated as acquisition indebtedness during a period of 10 years following the date of such gift. This subparagraph shall not apply if the [organization](/usc/26/414.md?p=m-6-A), in order to acquire the equity in the [property](/usc/26/317.md?p=a) by bequest, devise, or gift, assumes and agrees to pay the indebtedness secured by the mortgage, or if the [organization](/usc/26/414.md?p=m-6-A) makes any payment for the equity in the [property](/usc/26/317.md?p=a) owned by the decedent or the donor.
    - (C) **Liens for taxes or assessments—** Where State law provides that—
      - (i) a lien for taxes, or
      - (ii) a lien for assessments,

      made by a State or a political subdivision thereof attaches to [property](/usc/26/317.md?p=a) prior to the time when such taxes or assessments become due and payable, then such lien shall be treated as similar to a mortgage (within the meaning of [subparagraph (A)](#c-2-A)) but only after such taxes or assessments become due and payable and the [organization](/usc/26/414.md?p=m-6-A) has had an opportunity to pay such taxes or assessments in accordance with State law.

  - (3) **Extension of obligations—** For purposes of this section, an extension, renewal, or refinancing of an obligation evidencing a pre-existing indebtedness shall not be treated as the creation of a new indebtedness.
  - (4) **Indebtedness incurred in performing exempt purpose—** For purposes of this section, the term “acquisition indebtedness” does not include indebtedness the incurrence of which is inherent in the performance or exercise of the purpose or function constituting the basis of the [organization](/usc/26/414.md?p=m-6-A)’s exemption, such as the indebtedness incurred by a credit union described in [section 501(c)(14)](/usc/26/501.md?p=c-14) in accepting deposits from its members.
  - (5) **Annuities—** For purposes of this section, the term “acquisition indebtedness” does not include an obligation to pay an annuity which—
    - (A) is the sole consideration (other than a mortgage to which [paragraph (2)(B)](#c-2-B) applies) issued in exchange for [property](/usc/26/317.md?p=a) if, at the time of the exchange, the [value](/usc/26/851.md?p=c-4) of the annuity is less than 90 percent of the [value](/usc/26/851.md?p=c-4) of the [property](/usc/26/317.md?p=a) received in the exchange,
    - (B) is payable over the life of one individual in being at the time the annuity is issued, or over the lives of two individuals in being at such time, and
    - (C) is payable under a [contract](/usc/26/101.md?p=f-3-A) which—
      - (i) does not guarantee a minimum amount of payments or specify a maximum amount of payments, and
      - (ii) does not provide for any adjustment of the amount of the annuity payments by reference to the income received from the transferred [property](/usc/26/317.md?p=a) or any other [property](/usc/26/317.md?p=a).
  - (6) **Certain Federal financing—**
    - (A) **In general—** For purposes of this section, the term “acquisition indebtedness” does not include—
      - (i) an obligation, to the extent that it is [insured](/usc/26/101.md?p=j-5-B) by the Federal Housing Administration, to finance the [purchase](/usc/26/1361.md?p=e-1-C), rehabilitation, or construction of housing for low and moderate income persons, or
      - (ii) indebtedness incurred by a small business [investment company](/usc/26/368.md?p=a-2-F-iii) licensed after the date of the enactment of the American Jobs Creation Act of 2004 under the Small Business Investment Act of 1958 if such indebtedness is evidenced by a debenture—
        - (I) issued by such [company](/usc/26/812.md?p=a) under [section 303(a)](/usc/26/303.md?p=a) of such Act, and
        - (II) held or guaranteed by the Small Business Administration.
    - (B) **Limitation—** [Subparagraph (A)(ii)](#c-6-A-ii) shall not apply with respect to any small business [investment company](/usc/26/368.md?p=a-2-F-iii) during any period that—
      - (i) any [organization](/usc/26/414.md?p=m-6-A) which is exempt from tax under this title (other than a [governmental unit](/usc/26/150.md?p=a-2)) owns more than 25 percent of the capital or profits [interest](/usc/26/856.md?p=f-1) in such [company](/usc/26/812.md?p=a), or
      - (ii) [organizations](/usc/26/414.md?p=m-6-A) which are exempt from tax under this title (including [governmental units](/usc/26/150.md?p=a-2) other than any agency or instrumentality of the [United States](/usc/26/993.md?p=g)) own, in the aggregate, 50 percent or more of the capital or profits [interest](/usc/26/856.md?p=f-1) in such [company](/usc/26/812.md?p=a).
  - (7) **Average acquisition indebtedness—** For purposes of this section, the term “average acquisition indebtedness” for any taxable year with respect to a debt-financed [property](/usc/26/317.md?p=a) means the average amount, determined under regulations prescribed by the Secretary of the acquisition indebtedness during the period the [property](/usc/26/317.md?p=a) is held by the [organization](/usc/26/414.md?p=m-6-A) during the taxable year, except that for the purpose of computing the percentage of any gain or loss to be taken into account on a sale or other [disposition](/usc/26/424.md?p=c-1) of debt-financed [property](/usc/26/317.md?p=a), such term means the highest amount of the acquisition indebtedness with respect to such [property](/usc/26/317.md?p=a) during the 12-month period ending with the date of the sale or other [disposition](/usc/26/424.md?p=c-1).
  - (8) **Securities subject to loans—** For purposes of this section—
    - (A) payments with respect to [securities](/usc/26/368.md?p=a-2-F-vii) loans (as defined in [section 512(a)(5)](/usc/26/512.md?p=a-5)) shall be deemed to be derived from the [securities](/usc/26/368.md?p=a-2-F-vii) loaned and not from collateral security or the investment of collateral security from such loans,
    - (B) any deductions which are directly connected with collateral security for such loan, or with the investment of collateral security, shall be deemed to be deductions which are directly connected with the [securities](/usc/26/368.md?p=a-2-F-vii) loaned, and
    - (C) an obligation to return collateral security shall not be treated as acquisition indebtedness (as defined in [paragraph (1)](#c-1)).
  - (9) **Real property acquired by a qualified organization—**
    - (A) **In general—** Except as provided in [subparagraph (B)](#c-9-B), the term “acquisition indebtedness” does not, for purposes of this section, include indebtedness incurred by a qualified [organization](/usc/26/414.md?p=m-6-A) in acquiring or improving any real [property](/usc/26/317.md?p=a). For purposes of this paragraph, an [interest](/usc/26/856.md?p=f-1) in a mortgage shall in no event be treated as real [property](/usc/26/317.md?p=a).
    - (B) **Exceptions—** The provisions of [subparagraph (A)](#c-9-A) shall not apply in any case in which—
      - (i) the price for the acquisition or improvement is not a fixed amount determined as of the date of the acquisition or the completion of the improvement;
      - (ii) the amount of any indebtedness or any other amount payable with respect to such indebtedness, or the time for making any payment of any such amount, is [dependent](/usc/26/152.md?p=a), in whole or in part, upon any revenue, income, or profits derived from such real [property](/usc/26/317.md?p=a);
      - (iii) the real [property](/usc/26/317.md?p=a) is at any time after the acquisition leased by the qualified [organization](/usc/26/414.md?p=m-6-A) to the person selling such [property](/usc/26/317.md?p=a) to such [organization](/usc/26/414.md?p=m-6-A) or to any person who bears a relationship described in section [267(b)](/usc/26/267.md?p=b) or [707(b)](/usc/26/707.md?p=b) to such person;
      - (iv) the real [property](/usc/26/317.md?p=a) is acquired by a [qualified trust](/usc/26/856.md?p=h-3-E) from, or is at any time after the acquisition leased by such trust to, any person who—
        - (I) bears a relationship which is described in subparagraph [(C)](/usc/26/4975.md?p=e-2-C), [(E)](/usc/26/4975.md?p=e-2-E), or [(G)](/usc/26/4975.md?p=e-2-G) of section 4975(e)(2) to any plan with respect to which such trust was formed, or
        - (II) bears a relationship which is described in subparagraph [(F)](/usc/26/4975.md?p=e-2-F) or [(H)](/usc/26/4975.md?p=e-2-H) of section 4975(e)(2) to any person described in [subclause (I)](#c-9-B-iv-I);
      - (v) any person described in clause [(iii)](#c-9-B-iii) or [(iv)](#c-9-B-iv) provides the qualified [organization](/usc/26/414.md?p=m-6-A) with financing in connection with the acquisition or improvement; or
      - (vi) the real [property](/usc/26/317.md?p=a) is held by a [partnership](/usc/26/761.md?p=a) unless the [partnership](/usc/26/761.md?p=a) meets the requirements of clauses [(i)](#c-9-B-i) through [(v)](#c-9-B-v) and unless—
        - (I) all of the [partners](/usc/26/761.md?p=b) of the [partnership](/usc/26/761.md?p=a) are qualified [organizations](/usc/26/414.md?p=m-6-A),
        - (II) each allocation to a [partner](/usc/26/761.md?p=b) of the [partnership](/usc/26/761.md?p=a) which is a qualified [organization](/usc/26/414.md?p=m-6-A) is a qualified allocation (within the meaning of [section 168(h)(6)](/usc/26/168.md?p=h-6)), or
        - (III) such [partnership](/usc/26/761.md?p=a) meets the requirements of [subparagraph (E)](#c-9-E).

      For purposes of [subclause (I)](#c-9-B-vi-I) of clause (vi), an [organization](/usc/26/414.md?p=m-6-A) shall not be treated as a qualified [organization](/usc/26/414.md?p=m-6-A) if any income of such [organization](/usc/26/414.md?p=m-6-A) is unrelated business [taxable income](/usc/26/63.md?p=a).

    - (C) **Qualified organization—** For purposes of this paragraph, the term “qualified [organization](/usc/26/414.md?p=m-6-A)” means—
      - (i) an [organization](/usc/26/414.md?p=m-6-A) described in [section 170(b)(1)(A)(ii)](/usc/26/170.md?p=b-1-A-ii) and its affiliated [support](/usc/26/509.md?p=d) [organizations](/usc/26/414.md?p=m-6-A) described in [section 509(a)(3)](/usc/26/509.md?p=a-3);
      - (ii) any trust which constitutes a [qualified trust](/usc/26/856.md?p=h-3-E) under [section 401](/usc/26/401.md);
      - (iii) an [organization](/usc/26/414.md?p=m-6-A) described in [section 501(c)(25)](/usc/26/501.md?p=c-25); or
      - (iv) a retirement income account described in [section 403(b)(9)](/usc/26/403.md?p=b-9).
    - (D) **Other pass-thru entities; tiered entities—** Rules similar to the rules of [subparagraph (B)(vi)](#c-9-B-vi) shall also apply in the case of any pass-thru entity other than a [partnership](/usc/26/761.md?p=a) and in the case of tiered [partnerships](/usc/26/761.md?p=a) and other entities.
    - (E) **Certain allocations permitted—**
      - (i) **In general—** A [partnership](/usc/26/761.md?p=a) meets the requirements of this subparagraph if—
        - (I) the allocation of items to any [partner](/usc/26/761.md?p=b) which is a qualified [organization](/usc/26/414.md?p=m-6-A) cannot result in such [partner](/usc/26/761.md?p=b) having a share of the overall [partnership](/usc/26/761.md?p=a) income for any taxable year greater than such [partner](/usc/26/761.md?p=b)’s share of the overall [partnership](/usc/26/761.md?p=a) loss for the taxable year for which such [partner](/usc/26/761.md?p=b)’s loss share will be the smallest, and
        - (II) each allocation with respect to the [partnership](/usc/26/761.md?p=a) has substantial economic effect within the meaning of [section 704(b)(2)](/usc/26/704.md?p=b-2).

      For purposes of this clause, items allocated under [section 704(c)](/usc/26/704.md?p=c) shall not be taken into account.

      - (ii) **Special rules—**
        - (I) **Chargebacks—** Except as provided in regulations, a [partnership](/usc/26/761.md?p=a) may without violating the requirements of this subparagraph provide for chargebacks with respect to disproportionate losses previously allocated to qualified [organizations](/usc/26/414.md?p=m-6-A) and disproportionate income previously allocated to other [partners](/usc/26/761.md?p=b). Any chargeback referred to in the preceding sentence shall not be at a ratio in excess of the ratio under which the loss or income (as the case may be) was allocated.
        - (II) **Preferred rates of return, etc.** To the extent provided in regulations, a [partnership](/usc/26/761.md?p=a) may without violating the requirements of this subparagraph provide for reasonable preferred returns or reasonable guaranteed payments.
      - (iii) **Regulations—** The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this subparagraph, including regulations which may provide for exclusion or segregation of items.
    - (F) **Special rules for organizations described in section 501(c)(25)—**
      - (i) **In general—** In computing under [section 512](/usc/26/512.md) the unrelated business [taxable income](/usc/26/63.md?p=a) of a disqualified holder of an [interest](/usc/26/856.md?p=f-1) in an [organization](/usc/26/414.md?p=m-6-A) described in [section 501(c)(25)](/usc/26/501.md?p=c-25), there shall be taken into account—
        - (I) as gross income derived from an unrelated [trade or business](/usc/26/1402.md?p=c), such holder’s pro rata share of the items of income described in [clause (ii)(I)](#c-9-F-ii-I) of such [organization](/usc/26/414.md?p=m-6-A), and
        - (II) as deductions allowable in computing unrelated business [taxable income](/usc/26/63.md?p=a), such holder’s pro rata share of the items of deduction described in [clause (ii)(II)](#c-9-F-ii-II) of such [organization](/usc/26/414.md?p=m-6-A).

      Such amounts shall be taken into account for the taxable year of the holder in which (or with which) the taxable year of such [organization](/usc/26/414.md?p=m-6-A) ends.

      - (ii) **Description of amounts—** For purposes of [clause (i)](#c-9-F-i)—
        - (I) gross income is described in this clause to the extent such income would (but for this paragraph) be treated under [subsection (a)](#a) as derived from an unrelated [trade or business](/usc/26/1402.md?p=c), and
        - (II) any deduction is described in this clause to the extent it would (but for this paragraph) be allowable under [subsection (a)(2)](#a-2) in computing unrelated business [taxable income](/usc/26/63.md?p=a).
      - (iii) **Disqualified holder—** For purposes of this subparagraph, the term “disqualified holder” means any shareholder (or beneficiary) which is not described in clause [(i)](#c-9-C-i) or [(ii)](#c-9-C-ii) of subparagraph (C).
    - (G) **Special rules for purposes of the exceptions—** Except as otherwise provided by regulations—
      - (i) **Small leases disregarded—** For purposes of clauses [(iii)](#c-9-B-iii) and [(iv)](#c-9-B-iv) of subparagraph (B), a lease to a person described in such clause [(iii)](#c-9-B-iii) or [(iv)](#c-9-B-iv) shall be disregarded if no more than 25 percent of the leasable floor space in a building (or complex of buildings) is covered by the lease and if the lease is on commercially reasonable terms.
      - (ii) **Commercially reasonable financing—** [Clause (v)](#c-9-B-v) of subparagraph (B) shall not apply if the financing is on commercially reasonable terms.
    - (H) **Qualifying sales by financial institutions—**
      - (i) **In general—** In the case of a qualifying sale by a financial institution, except as provided in regulations, clauses [(i)](#c-9-B-i) and [(ii)](#c-9-B-ii) of subparagraph (B) shall not apply with respect to financing provided by such institution for such sale.
      - (ii) **Qualifying sale—** For purposes of this clause, there is a qualifying sale by a financial institution if—
        - (I) a qualified [organization](/usc/26/414.md?p=m-6-A) acquires [property](/usc/26/317.md?p=a) described in [clause (iii)](#c-9-H-iii) from a financial institution and any gain recognized by the financial institution with respect to the [property](/usc/26/317.md?p=a) is ordinary income,
        - (II) the stated principal amount of the financing provided by the financial institution does not exceed the amount of the outstanding indebtedness (including accrued but unpaid [interest](/usc/26/856.md?p=f-1)) of the financial institution with respect to the [property](/usc/26/317.md?p=a) described in [clause (iii)](#c-9-H-iii) immediately before the acquisition referred to in clause [(iii)](#c-9-H-iii) or [(v)](#c-9-H-v), whichever is applicable, and
        - (III) the present [value](/usc/26/851.md?p=c-4) (determined as of the time of the sale and by using the applicable Federal rate determined under [section 1274(d)](/usc/26/1274.md?p=d)) of the maximum amount payable pursuant to the financing that is determined by reference to the revenue, income, or profits derived from the [property](/usc/26/317.md?p=a) cannot exceed 30 percent of the total [purchase](/usc/26/1361.md?p=e-1-C) price of the [property](/usc/26/317.md?p=a) (including the contingent payments).
      - (iii) **Property to which subparagraph applies—** [Property](/usc/26/317.md?p=a) is described in this clause if such [property](/usc/26/317.md?p=a) is [foreclosure property](/usc/26/856.md?p=e-1), or is real [property](/usc/26/317.md?p=a) which—
        - (I) was acquired by the qualified [organization](/usc/26/414.md?p=m-6-A) from a financial institution which is in conservatorship or receivership, or from the conservator or receiver of such an institution, and
        - (II) was held by the financial institution at the time it entered into conservatorship or receivership.
      - (iv) **Financial institution—** For purposes of this subparagraph, the term “financial institution” means—
        - (I) any financial institution described in section [581](/usc/26/581.md) or [591(a)](/usc/26/591.md?p=a),
        - (II) any other corporation which is a direct or indirect subsidiary of an institution referred to in [subclause (I)](#c-9-H-iv-I) but only if, by virtue of being affiliated with such institution, such other corporation is subject to supervision and examination by a Federal or State agency which regulates institutions referred to in [subclause (I)](#c-9-H-iv-I), and
        - (III) any person acting as a conservator or receiver of an entity referred to in subclause [(I)](#c-9-H-iv-I) or [(II)](#c-9-H-iv-II) (or any government agency or corporation succeeding to the rights or [interest](/usc/26/856.md?p=f-1) of such person).
      - (v) **Foreclosure property—** For purposes of this subparagraph, the term “[foreclosure property](/usc/26/856.md?p=e-1)” means any real [property](/usc/26/317.md?p=a) acquired by the financial institution as the result of having bid on such [property](/usc/26/317.md?p=a) at foreclosure, or by operation of an agreement or process of law, after there was a default (or a default was imminent) on indebtedness which such [property](/usc/26/317.md?p=a) secured.
- (d) **Basis of debt-financed property acquired in corporate liquidation—** For purposes of this subtitle, if the [property](/usc/26/317.md?p=a) was acquired in a complete or partial liquidation of a corporation in exchange for its [stock](/usc/26/1504.md?p=a-4), the basis of the [property](/usc/26/317.md?p=a) shall be the same as it would be in the hands of the transferor corporation, increased by the amount of gain recognized to the transferor corporation upon such distribution and by the amount of any gain to the [organization](/usc/26/414.md?p=m-6-A) which was included, on account of such distribution, in unrelated business [taxable income](/usc/26/63.md?p=a) under [subsection (a)](#a).
- (e) **Allocation rules—** Where debt-financed [property](/usc/26/317.md?p=a) is held for purposes described in subsection [(b)(1)(A)](#b-1-A), (B), (C), or (D) as well as for other purposes, proper allocation shall be made with respect to basis, indebtedness, and income and deductions. The allocations required by this section shall be made in accordance with regulations prescribed by the Secretary to the extent proper to carry out the purposes of this section.
- (f) **Personal property leased with real property—** For purposes of this section, the term “real [property](/usc/26/317.md?p=a)” includes personal [property](/usc/26/317.md?p=a) of the lessor leased by it to a lessee of its real [estate](/usc/26/1361.md?p=c-3) if the lease of such personal [property](/usc/26/317.md?p=a) is made under, or in connection with, the lease of such real [estate](/usc/26/1361.md?p=c-3).
- (g) **Regulations—** The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section, including regulations to prevent the circumvention of any provision of this section through the use of segregated asset accounts.

## Source credit

(Aug. 16, 1954, ch. 736, 68A Stat. 172; Pub. L. 86–667, § 5, July 14, 1960, 74 Stat. 536; Pub. L. 91–172, title I, § 121(d)(1), (3)(A), (B), Dec. 30, 1969, 83 Stat. 543, 548; Pub. L. 93–625, § 7(b)(2), Jan. 3, 1975, 88 Stat. 2115; Pub. L. 94–455, title XIII, § 1308(a), title XIX, §§ 1901(a)(72), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1729, 1776, 1834; Pub. L. 95–345, § 2(c), Aug. 15, 1978, 92 Stat. 482; Pub. L. 96–605, title I, § 110(a), Dec. 28, 1980, 94 Stat. 3525; Pub. L. 98–369, div. A, title I, § 174(b)(5)(B), title X, § 1034(a), (b), July 18, 1984, 98 Stat. 707, 1039, 1040; Pub. L. 99–514, title II, § 201(d)(9), title XVI, § 1603(b), title XVIII, § 1878(e), Oct. 22, 1986, 100 Stat. 2141, 2768, 2903; Pub. L. 100–203, title X, § 10214(a), (b), Dec. 22, 1987, 101 Stat. 1330–407; Pub. L. 100–647, title I, §§ 1016(a)(5)(A), (6), 1018(u)(13), title II, § 2004(h), Nov. 10, 1988, 102 Stat. 3574, 3575, 3590, 3603; Pub. L. 101–239, title VII, § 7811(l), Dec. 19, 1989, 103 Stat. 2412; Pub. L. 103–66, title XIII, § 13144(a), (b), Aug. 10, 1993, 107 Stat. 441, 442; Pub. L. 108–357, title II, § 247(a), title VII, § 702(b), Oct. 22, 2004, 118 Stat. 1449, 1546; Pub. L. 109–135, title IV, § 412(ee)(2), Dec. 21, 2005, 119 Stat. 2639; Pub. L. 109–280, title VIII, § 866(a), Aug. 17, 2006, 120 Stat. 1025.)

## Notes

### Editorial Notes

### References in Text

The Tax Reform Act of 1976, referred to in subsec. (b)(3)(C)(iii), is Pub. L. 94–455, Oct. 4, 1976, 90 Stat. 1520, which was enacted Oct. 4, 1976. For complete classification of this Act to the Code, see Tables.

The date of the enactment of the American Jobs Creation Act of 2004, referred to in subsec. (c)(6)(A)(ii), is the date of enactment of Pub. L. 108–357, which was approved Oct. 22, 2004.

The Small Business Investment Act of 1958, referred to in subsec. (c)(6)(A)(ii), is Pub. L. 85–699, Aug. 21, 1958, 72 Stat. 689, which is classified principally to chapter 14B (§ 661 et seq.) of Title 15, Commerce and Trade. Section 303(a) of the Act is classified to section 683(a) of Title 15. For complete classification of this Act to the Code, see Short Title note set out under section 661 of Title 15 and Tables.

### Amendments

2006—Subsec. (c)(9)(C)(iv). Pub. L. 109–280 added cl. (iv).

2005—Subsec. (b)(1)(E). Pub. L. 109–135 substituted “section 512(b)(19)” for “section 512(b)(18)”.

2004—Subsec. (b)(1)(E). Pub. L. 108–357, § 702(b), added subpar. (E).

Subsec. (c)(6). Pub. L. 108–357, § 247(a), reenacted heading without change and amended text of par. (6) generally. Prior to amendment, text read as follows: “For purposes of this section, the term ‘acquisition indebtedness’ does not include an obligation, to the extent that it is insured by the Federal Housing Administration, to finance the purchase, rehabilitation, or construction of housing for low and moderate income persons.”

1993—Subsec. (c)(9)(A). Pub. L. 103–66, § 13144(b)(1), inserted at end “For purposes of this paragraph, an interest in a mortgage shall in no event be treated as real property.”

Subsec. (c)(9)(B). Pub. L. 103–66, § 13144(b)(2), struck out at end “For purposes of this paragraph, an interest in a mortgage shall in no event be treated as real property.”

Subsec. (c)(9)(G), (H). Pub. L. 103–66, § 13144(a), added subpars. (G) and (H).

1989—Subsec. (c)(9)(E), (F). Pub. L. 101–239 redesignated the subpar. (E), relating to special rules for organizations described in section 501(c)(25), as (F).

1988—Subsec. (c)(9)(B). Pub. L. 100–647, § 1016(a)(6), substituted “this paragraph” for “clause (vi)” in last sentence.

Pub. L. 100–647, § 1018(u)(13)(A), amended directory language of Pub. L. 99–514, § 1878(e)(1), (3), to clarify that general amendment by section 1878(e)(3) included concluding provision as well as cl. (vi) and that amendment by section 1878(e)(1) should have been to the concluding provisions as amended by section 1878(e)(3).

Subsec. (c)(9)(E). Pub. L. 100–647, § 1016(a)(5)(A), added subpar. (E) relating to special rules for organizations described in section 501(c)(25).

Subsec. (c)(9)(E)(i). Pub. L. 100–647, § 2004(h)(2), in subsec. (c)(9)(E), relating to certain allocations permitted, redesignated subcls. (II) and (III) as (I) and (II), respectively, and struck out former subcl. (I) which read as follows: “the allocation of items to any partner other than a qualified organization cannot result in such partner having a share of the overall partnership loss for any taxable year greater than such partner’s share of the overall partnership income for the taxable year for which such partner’s income share will be the smallest,”.

Subsec. (c)(9)(E)(iii). Pub. L. 100–647, § 2004(h)(1), in subsec. (c)(9)(E) relating to certain allocations permitted, added cl. (iii).

1987—Subsec. (c)(9)(B)(vi). Pub. L. 100–203, § 10214(a), amended cl. (vi) generally. Prior to amendment, cl. (vi) read as follows: “the real property is held by a partnership (which does not fail to meet the requirements of clauses (i) through (v)), and—

“(I) any partner of the partnership is not a qualified organization, and

“(II) the principal purpose of any allocation to any partner of the partnership which is a qualified organization which is not a qualified allocation (within the meaning of section 168(h)(6)) is the avoidance of income tax.”

Subsec. (c)(9)(E). Pub. L. 100–203, § 10214(b), added subpar. (E).

1986—Subsec. (c)(9)(B). Pub. L. 99–514, § 1878(e)(1), as amended by Pub. L. 100–647, § 1018(u)(13)(A), which directed amendment of penultimate sentence by substituting “is unrelated business taxable income” for “would be unrelated business taxable income (determined without regard to this paragraph)”, was executed by making the substitution for “would be unrelated business taxable income (determined without regard to this paragraph”, as the probable intent of Congress.

Pub. L. 99–514, § 1878(e)(3), as amended by Pub. L. 100–647, § 1018(u)(13)(B), amended concluding provisions generally. Prior to amendment, concluding provisions read as follows: “For purposes of clause (vi)(I), an organization shall not be treated as a qualified organization if any income of such organization would be unrelated business taxable income (determined without regard to this paragraph).”

Subsec. (c)(9)(B)(vi). Pub. L. 99–514, § 1878(e)(3), as amended by Pub. L. 100–647, § 1018(u)(13)(B), amended cl. (vi) generally. Prior to amendment, cl. (vi) read as follows: “the real property is held by a partnership unless the partnership meets the requirements of clauses (i) through (v) and unless—

“(I) all of the partners of the partnership are qualified organizations, or

“(II) each allocation to a partner of the partnership which is a qualified organization is a qualified allocation (within the meaning of section 168(j)(9)).”

Subsec. (c)(9)(B)(vi)(II). Pub. L. 99–514, § 201(d)(9), substituted “section 168(h)(6)” for “section 168(j)(9)”.

Subsec. (c)(9)(C)(i). Pub. L. 99–514, § 1878(e)(2), substituted “section 509(a)(3)” for “section 509(a)”.

Subsec. (c)(9)(C)(iii). Pub. L. 99–514, § 1603(b), added cl. (iii).

1984—Subsec. (c)(9). Pub. L. 98–369, § 1034(a), amended par. (9) generally, substituting provisions relating to real property acquired by a qualified organization for provisions relating to real property acquired by a qualified trust, with “qualified organization” expanded to include trusts constituting qualified trusts under section 401 of this title as well as organizations described in section 170(b)(1)(A)(ii) of this title and their affiliated support organizations described in section 509(a) of this title.

Subsec. (c)(9)(B)(iii). Pub. L. 98–369, § 174(b)(5)(B), inserted reference to section 707(b).

Subsec. (g). Pub. L. 98–369, § 1034(b), added subsec. (g).

1980—Subsec. (c)(9). Pub. L. 96–605 added par. (9).

1978—Subsec. (c)(8). Pub. L. 95–345 added par. (8).

1976—Subsecs. (a)(1), (b)(3)(A), (B)(ii). Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary”.

Subsec. (b)(3)(C)(iii). Pub. L. 94–455, § 1901(a)(72)(C), substituted “(as defined in this section immediately before the enactment of the Tax Reform Act of 1976)” for “as (defined in subsection (f))” after “is a business lease”.

Subsec. (c)(1). Pub. L. 94–455, § 1901(a)(72)(A), struck out exception following subpar. (C) that in any taxable year beginning before January 1, 1972, any acquisition indebtedness incurred prior to June 28, 1966, would not be taken into account except for business lease indebtedness of certain organizations.

Subsec. (c)(2)(C). Pub. L. 94–455, § 1308(a), added subpar. (C).

Subsecs. (c)(7), (e). Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary”.

Subsec. (f). Pub. L. 94–455, § 1901(a)(72(B), struck out subsec. (f) relating to definition of business lease, special rules applicable to such leases, and exceptions to the definition and applicable rules, and redesignated subsec. (h) as (f).

Subsec. (g). Pub. L. 94–455, § 1901(a)(72)(B), struck out subsec. (g) relating to definition and special rules applicable to business lease indebtedness.

Subsec. (h). Pub. L. 94–455, § 1901(a)(72)(B), redesignated subsec. (h) as (f).

1975—Subsec. (b)(3)(D). Pub. L. 93–625 struck out last sentence providing for allowance and payment of interest on any overpayment for a taxable year resulting from application of subpar. (B) after actual use condition was satisfied at rate of 4 in lieu of 6 percent per annum.

1969—Subsec. (a). Pub. L. 91–172, § 121(d)(1), substituted “Unrelated debt-financed income” for “Business leases” in heading and substituted in text material covering unrelated debt-financed income and deductions for material covering business lease rents and deductions.

Subsecs. (b) to (e). Pub. L. 91–172, § 121(d)(1), (3)(A), added subsecs. (b), (c), (d) and (e). Former subsecs. (b), (c), and (d) redesignated (f), (g), and (h), respectively.

Subsec. (f). Pub. L. 91–172, § 121(d)(3)(A), (B), redesignated subsec. (b) as subsec. (f), and, in par. (1) of subsec. (f) as so redesignated, substituted reference to subsec. (g) for reference to subsec. (c).

Subsecs. (g), (h). Pub. L. 91–172, § 121(d)(3)(A), redesignated subsecs. (c) and (d) as (g) and (h), respectively.

1960—Subsec. (c)(8). Pub. L. 86–667 added par. (8).

### Statutory Notes and Related Subsidiaries

### Effective Date of 2006 Amendment

Pub. L. 109–280, title VIII, § 866(b), Aug. 17, 2006, 120 Stat. 1025, provided that: “The amendment made by subsection (a) [amending this section] shall apply to taxable years beginning on or after the date of enactment of this Act [Aug. 17, 2006].”

### Effective Date of 2004 Amendment

Pub. L. 108–357, title II, § 247(b), Oct. 22, 2004, 118 Stat. 1449, provided that: “The amendment made by this section [amending this section] shall apply to indebtedness incurred after the date of the enactment of this Act [Oct. 22, 2004] by a small business investment company licensed after the date of the enactment of this Act.”

Amendment by section 702(b) of Pub. L. 108–357 applicable to any gain or loss on the sale, exchange, or other disposition of any property acquired by the taxpayer after Dec. 31, 2004, see section 702(d) of Pub. L. 108–357, set out as a note under section 512 of this title.

### Effective Date of 1993 Amendment

Pub. L. 103–66, title XIII, § 13144(c), Aug. 10, 1993, 107 Stat. 442, provided that: In general.—The amendments made by this section [amending this section] shall apply to acquisitions on or after January 1, 1994. Small leases.—The provisions of section 514(c)(9)(G)(i) of the Internal Revenue Code of 1986 shall, in addition to any leases to which the provisions apply by reason of paragraph (1), apply to leases entered into on or after January 1, 1994.”

### Effective Date of 1989 Amendment

Amendment by Pub. L. 101–239 effective, except as otherwise provided, as if included in the provision of the Technical and Miscellaneous Revenue Act of 1988, Pub. L. 100–647, to which such amendment relates, see section 7817 of Pub. L. 101–239, set out as a note under section 1 of this title.

### Effective Date of 1988 Amendment

Pub. L. 100–647, title I, § 1016(a)(5)(B), Nov. 10, 1988, 102 Stat. 3575, provided that: “The amendment made by subparagraph (A) [amending this section] shall apply with respect to interests in the organization acquired after June 10, 1987, except that such amendment shall not apply to any such interest acquired after June 10, 1987, pursuant to a binding written contract in effect on June 10, 1987, and at all times thereafter before such acquisition.”

Amendment by sections 1016(a)(6) and 1018(u)(13) of Pub. L. 100–647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) of Pub. L. 100–647, set out as a note under section 1 of this title.

Amendment by section 2004(h) of Pub. L. 100–647 effective, except as otherwise provided, as if included in the provisions of the Revenue Act of 1987, Pub. L. 100–203, title X, to which such amendment relates, see section 2004(u) of Pub. L. 100–647, set out as a note under section 56 of this title.

### Effective Date of 1987 Amendment

Pub. L. 100–203, title X, § 10214(c), Dec. 22, 1987, 101 Stat. 1330–408, provided that: “The amendments made by this section [amending this section] shall apply to— property acquired by the partnership after October 13, 1987, and partnership interests acquired after October 13, 1987,except that such amendments shall not apply in the case of any property (or partnership interest) acquired pursuant to a written binding contract in effect on October 13, 1987, and at all times thereafter before such property (or interest) is acquired.”

### Effective Date of 1986 Amendment

Amendment by section 201(d)(9) of Pub. L. 99–514 applicable to property placed in service after Dec. 31, 1986, in taxable years ending after such date, with exceptions, see sections 203 and 204 of Pub. L. 99–514, set out as a note under section 168 of this title.

Amendment by section 201(d)(9) of Pub. L. 99–514 not applicable to any property placed in service before Jan. 1, 1994, if such property placed in service as part of specified rehabilitations, and not applicable to certain additional rehabilitations, see section 251(d)(2), (3) of Pub. L. 99–514, set out as a note under section 46 of this title.

Amendment by section 1603(b) of Pub. L. 99–514 applicable to taxable years beginning after Dec. 31, 1986, see section 1603(c) of Pub. L. 99–514, set out as a note under section 501 of this title.

Amendment by section 1878(e) of Pub. L. 99–514 effective, except as otherwise provided, as if included in the provisions of the Tax Reform Act of 1984, Pub. L. 98–369, div. A, to which such amendment relates, see section 1881 of Pub. L. 99–514, set out as a note under section 48 of this title.

### Effective Date of 1984 Amendment

Amendment by section 174(b)(5)(B) of Pub. L. 98–369 applicable to transactions after Dec. 31, 1983, in taxable years ending after that date, see section 174(c)(2)(A) of Pub. L. 98–369, set out as a note under section 267 of this title.

Pub. L. 98–369, div. A, title X, § 1034(c), July 18, 1984, 98 Stat. 1040, provided that: In general.—The amendments made by this section [amending this section] shall apply to indebtedness incurred after the date of the enactment of this Act [July 18, 1984].Exception for indebtedness on certain property acquired before january 1, 1985.— The amendment made by subsection (a) [amending this section] shall not apply to any indebtedness incurred before January 1, 1985, by a partnership described in subparagraph (B) if such indebtedness is incurred with respect to property acquired (directly or indirectly) by such partnership before such date. A partnership is described in this subparagraph if— before October 21, 1983, the partnership was organized, a request for exemption with respect to such partnership was filed with the Department of Labor, and a private placement memorandum stating the maximum number of units in the partnership that would be offered had been circulated, the interest in the property to be acquired, directly or indirectly (including through acquiring an interest in another partnership) by such partnership was described in such private placement memorandum, and the marketing of partnership interests in such partnership is completed not later than 2 years after the later of the date of enactment of this Act [July 18, 1984] or the date of publication in the Federal Register of such exemption by the Department of Labor and the aggregate number of units in such partnership sold does not exceed the amount described in clause (i).Exception for indebtedness on certain property acquired before january 1, 1986.— The amendment made by subsection (a) [amending this section] shall not apply to any indebtedness incurred before January 1, 1986, by a partnership described in subparagraph (B) if such indebtedness is incurred with respect to property acquired (directly or indirectly) by such partnership before such date. A partnership is described in this paragraph if— before March 6, 1984, the partnership was organized and publicly announced, the maximum amount of interests which would be sold in such partnership, and the marketing of partnership interests in such partnership is completed not later than the 90th day after the date of the enactment of this Act [July 18, 1984] and the aggregate amount of interests in such partnership sold does not exceed the maximum amount described in clause (i).For purposes of clause (i), the maximum amount taken into account shall be the greatest of the amounts shown in the registration statement, prospectus, or partnership agreement. Binding contracts.—For purposes of this paragraph, property shall be deemed to have been acquired before January 1, 1986, if such property is acquired pursuant to a written contract which, on January 1, 1986, and at all times thereafter, required the acquisition of such property and such property is placed in service not later than 6 months after the date such contract was entered into.”

### Effective Date of 1980 Amendment

Pub. L. 96–605, title I, § 110(c), Dec. 28, 1980, 94 Stat. 3526, provided that: “The amendment made by subsection (a) [amending this section] shall apply to taxable years beginning after December 31, 1980.”

### Extension of 1980 Amendment of This Section to Other Persons

Pub. L. 96–605, title I, § 110(b), Dec. 28, 1980, 94 Stat. 3526, provided that: “The amendment made by subsection (a) [amending this section] shall not be considered a precedent with respect to extending such amendment (or similar rules) to any other person.”

### Effective Date of 1978 Amendment

Amendment by Pub. L. 95–345 applicable with respect to amounts received after Dec. 31, 1976, as payments with respect to securities loans (as defined in section 512(a)(5) of this title), and transfers of securities, under agreements described in section 1058 of this title, occurring after such date, see section 2(e) of Pub. L. 95–345, set out as a note under section 509 of this title.

### Effective Date of 1976 Amendment

Pub. L. 94–455, title XIII, § 1308(b), Oct. 4, 1976, 90 Stat. 1729, provided that: “The amendment made by this section [amending this section] shall apply to taxable years ending after December 31, 1969.”

Amendment by section 1901(a)(72) of Pub. L. 94–455 applicable with respect to taxable years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94–455, set out as a note under section 2 of this title.

### Effective Date of 1975 Amendment

Amendment by Pub. L. 93–625 effective July 1, 1975, and applicable to amounts outstanding on such date or arising thereafter, see section 7(e) of Pub. L. 93–625, set out as an Effective Date note under section 6621 of this title.

### Effective Date of 1969 Amendment

Amendment by Pub. L. 91–172 applicable to taxable years beginning after Dec. 31, 1969, and to the manner of treatment to be accorded indebtednesses secured by certain mortgages on properties bargain-purchased before Oct. 9, 1969, see section 121(g) of Pub. L. 91–172, set out as a note under section 511 of this title.

### Effective Date of 1960 Amendment

Amendment by Pub. L. 86–667 applicable to taxable years beginning after Dec. 31, 1959, see section 6 of Pub. L. 86–667, set out as a note under section 501 of this title.

### Plan Amendments Not Required Until January 1, 1989

For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§ 1101–1147 and 1171–1177] or title XVIII [§§ 1800–1899A] of Pub. L. 99–514 require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after Jan. 1, 1989, see section 1140 of Pub. L. 99–514, as amended, set out as a note under section 401 of this title.

### Transition Rule for Acquisition Indebtedness With Respect to Certain Land

Pub. L. 99–514, title XVI, § 1607, Oct. 22, 1986, 100 Stat. 2771, provided that: “For purposes of applying section 514(c) of the Internal Revenue Code of 1986, with respect to a disposition during calendar year 1986 or calendar year 1987 of land acquired during calendar year 1984, the term ‘acquisition indebtedness’ does not include indebtedness incurred in connection with bonds issued after January 1, 1984, and before July 19, 1984, on behalf of an organization which is a community college and which is described in section 511(a)(2)(B) of such Code.”