r/title-26-INTERNAL-REVENUE-CODE wiki — defined terms

“applicable statutory premium recognition pattern” applies in that section

The term “applicable statutory premium recognition pattern” means the statutory premium recognition pattern— (I) which is in effect for the calendar year in which the premiums are received, and (II) which is based on the statutory premium recognition pattern which applies to premiums received by the taxpayer in such calendar year. For purposes of the preceding sentence, premiums received during any calendar year shall be treated as received in the middle of such year.

“dividends and similar distributions” applies in that section

the term “dividends and similar distributions” includes amounts returned or credited to policyholders on cancellation or expiration of policies described in subsection (b)(1)(D). For purposes of this paragraph, the term “paid or declared” shall be construed according to the method of accounting regularly employed in keeping the books of the insurance company; (12) the special deductions allowed by part VIII of subchapter B (sec. 241 and following, relating to dividends received); and (13) in the case of a company which writes mortgage guaranty insurance, the deduction allowed by subsection (e).

“expenses incurred” applies in that section

The term “expenses incurred” means all expenses shown on the annual statement approved by the National Association of Insurance Commissioners, and shall be computed as follows: To all expenses paid during the taxable year, add expenses unpaid at the end of the taxable year and deduct expenses unpaid at the end of the preceding taxable year. For purposes of this subchapter, the term “expenses unpaid” shall not include any unpaid loss adjustment expenses shown on the annual statement, but such unpaid loss adjustment expenses shall be included in unpaid losses.

“gross income” applies in that section

The term “gross income” means the sum of— (A) the combined gross amount earned during the taxable year, from investment income and from underwriting income as provided in this subsection, computed on the basis of the underwriting and investment exhibit of the annual statement approved by the National Association of Insurance Commissioners, (B) gain during the taxable year from the sale or other disposition of property, (C) all other items constituting gross income under subchapter B, except that, in the case of a mutual fire insurance company exclusively issuing perpetual policies, the amount of single deposit premiums paid to such company shall not be included in gross income, (D) in the …

“investment income” applies in that section

The term “investment income” means the gross amount of income earned during the taxable year from interest, dividends, and rents, computed as follows: To all interest, dividends, and rents received during the taxable year, add interest, dividends, and rents due and accrued at the end of the taxable year, and deduct all interest, dividends, and rents due and accrued at the end of the preceding taxable year. (3) Underwriting income

“losses incurred” applies in that section

The term “losses incurred” means losses incurred during the taxable year on insurance contracts computed as follows: (i) To losses paid during the taxable year, deduct salvage and reinsurance recovered during the taxable year. (ii) To the result so obtained, add all unpaid losses on life insurance contracts plus all discounted unpaid losses (as defined in section 846) outstanding at the end of the taxable year and deduct all unpaid losses on life insurance contracts plus all discounted unpaid losses outstanding at the end of the preceding taxable year.

“premiums earned on insurance contracts during the taxable year” applies in that section

The term “premiums earned on insurance contracts during the taxable year” means an amount computed as follows: (A) From the amount of gross premiums written on insurance contracts during the taxable year, deduct return premiums and premiums paid for reinsurance. (B) To the result so obtained, add 80 percent of the unearned premiums on outstanding business at the end of the preceding taxable year and deduct 80 percent of the unearned premiums on outstanding business at the end of the taxable year.

“prorated amounts” applies in that section

The term “prorated amounts” means tax-exempt interest and dividends with respect to which a deduction is allowable under section 243 or 245 (other than 100 percent dividends). (ii) 100 percent dividend (I) In general

“savings credited to subscriber accounts” applies in that section

the term “savings credited to subscriber accounts” means such portion of the surplus as is credited to the individual accounts of subscribers before the 16th day of the 3rd month following the close of the taxable year, but only if the company would be obligated to pay such amount promptly to such subscriber if he terminated his contract at the close of the company’s taxable year. For purposes of determining his taxable income, the subscriber shall treat any such savings credited to his account as a dividend paid or declared.

“taxable income” applies in that section

the term “taxable income” means the gross income as defined in subsection (b)(1) less the deductions allowed by subsection (c). (b) Definitions In the case of an insurance company subject to the tax imposed by section 831— (1) Gross income

“underwriting income” applies in that section

The term “underwriting income” means the premiums earned on insurance contracts during the taxable year less losses incurred and expenses incurred. (4) Premiums earned

“undiscounted unearned premiums” applies in that section

The term “undiscounted unearned premiums” means the unearned premiums shown in the yearly statement filed by the taxpayer for the year ending with or within such taxable year. (ii) Applicable interest rate

“adjusted net operating loss” applies in that section

The term “adjusted net operating loss” means the net operating loss for any taxable year determined with the adjustments set forth in subparagraph (C). (E) Net exempt income

“adjusted taxable income” applies in that section

The term “adjusted taxable income” means taxable income determined— (i) without regard to the deduction determined under this subsection, (ii) without regard to any carryforward or carryback to such taxable year, and (iii) by increasing gross income by an amount equal to the net exempt income for the taxable year. (D) Adjusted net operating loss

“existing Blue Cross or Blue Shield organization” applies in that section

The term “existing Blue Cross or Blue Shield organization” means any Blue Cross or Blue Shield organization if— (A) such organization was in existence on August 16, 1986 , (B) such organization is determined to be exempt from tax for its last taxable year beginning before January 1, 1987 , and (C) no material change has occurred in the operations of such organization or in its structure after August 16, 1986 , and before the close of the taxable year.

“net exempt income” applies in that section

The term “net exempt income” means— (i) any tax-exempt interest received or accrued during the taxable year, reduced by any amount (not otherwise deductible) which would have been allowable as a deduction for the taxable year if such interest were not tax-exempt, and (ii) the aggregate amount allowed as a deduction for the taxable year under sections 243 and 245. The amount determined under clause (ii) shall be reduced by the amount of any decrease in deductions allowable for the taxable year by reason of section 832(b)(5)(B) to the extent such decrease is attributable to deductions under sections 243 and 245.

“small group” applies in that section

the term “small group” means the lesser of— (i) 15 individuals, or (ii) the number of individuals required for a small group under applicable State law. (C) Special rule for determining adjusted surplus For purposes of subsection (b), the adjusted surplus of any organization meeting the requirements of this paragraph as of the beginning of the 1st taxable year for which it meets such requirements shall be its surplus as of such time. (4) Treatment as existing Blue Cross or Blue Shield organization (A) In general Paragraph (2) shall be applied to an organization described in subparagraph (B) as if it were a Blue Cross or Blue Shield organization.

“surplus” applies in that section

the term “surplus” means the excess of the total assets over total liabilities as shown on the annual statement. (C) Adjusted taxable income

“dividends to policyholders” applies throughout its part

The term “dividends to policyholders” means dividends and similar distributions paid or declared to policyholders. For purposes of the preceding sentence, the term “paid or declared” shall be construed according to the method regularly employed in keeping the books of the insurance company.

“gross investment income” applies in that section

the term “gross investment income” means the sum of the following: (1) The gross amount of income during the taxable year from— (A) interest, dividends, rents, and royalties, (B) the entering into of any lease, mortgage, or other instrument or agreement from which the insurance company derives interest, rents, or royalties, (C) the alteration or termination of any instrument or agreement described in subparagraph (B), and (D) gains from sales or exchanges of capital assets to the extent provided in subchapter P (relating to capital gains and losses).

“net premiums” applies throughout its part

The term “net premiums” means gross premiums (including deposits and assessments) written or received on insurance contracts during the taxable year less return premiums and premiums paid or incurred for reinsurance. Amounts returned where the amount is not fixed in the insurance contract but depends on the experience of the company or the discretion of the management shall not be included in return premiums but shall be treated as dividends to policyholders under paragraph (2). (2) Dividends to policyholders

“taxable investment income” applies in that section

the term “taxable investment income” means the gross investment income, minus the deductions provided in subsection (c). (b) Gross investment income For purposes of subsection (a),

“net investment income” applies in that section

the term “net investment income” means— (A) gross investment income (within the meaning of section 834(b)), reduced by (B) expenses allocable to such income. (c) Special rules for purposes of subsection (b) (1) Reduction in section 881 taxes (A) In general The tax under section 881 (determined without regard to this paragraph) shall be reduced (but not below zero) by an amount which bears the same ratio to such tax as— (i) the amount of the increase in effectively connected income of the company resulting from subsection (b), bears to (ii) the amount which would be subject to tax under section 881 if the amount taxable under such section were determined without regard to sections 103 and …

“total insurance liabilities” applies in that section

the term “total insurance liabilities” means the sum of the total reserves (as defined in section 816(c)) plus (to the extent not included in total reserves) the items referred to in paragraphs (3), (4), (5), and (6) of section 807(c). (ii) Companies taxable under part II In the case of a company taxable under part II,

“worldwide current investment yield” applies in that section

the term “worldwide current investment yield” means the percentage obtained by dividing— (i) the net investment income of the company from all sources, by (ii) the mean of all assets of the company (whether or not held in the United States). (C) Election An election under this paragraph shall apply to the taxable year for which made and all subsequent taxable years unless revoked with the consent of the Secretary. (5) Net investment income For purposes of this subsection,

“accident year” applies in that section

The term “accident year” means the calendar year in which the incident occurs which gives rise to the related unpaid loss. (2) Unpaid loss adjustment expenses

“annual statement” applies in that section

The term “annual statement” means the annual statement approved by the National Association of Insurance Commissioners which the taxpayer is required to file with insurance regulatory authorities of a State. (4) Line of business

“determination year” applies in that section

the term “determination year” means calendar year 1987 and each 5th calendar year thereafter. (e) Other definitions and special rules For purposes of this section— (1) Accident year

“line of business” applies in that section

The term “line of business” means a category for the reporting of loss payment patterns determined on the basis of the annual statement for fire and casualty insurance companies for the calendar year ending with or within the taxable year, except that the multiple peril lines shall be treated as a single line of business. (5) Multiple peril lines

“multiple peril lines” applies in that section

The term “multiple peril lines” means the lines of business relating to farmowners multiple peril, homeowners multiple peril, commercial multiple peril, ocean marine, aircraft (all perils) and boiler and machinery.

“undiscounted unpaid losses” applies in that section

the term “undiscounted unpaid losses” means the unpaid losses shown in the annual statement filed by the taxpayer for the year ending with or within the taxable year of the taxpayer. (2) Adjustment if losses discounted on annual statement If— (A) the amount of unpaid losses shown in the annual statement is determined on a discounted basis, and (B) the extent to which the losses were discounted can be determined on the basis of information disclosed on or with the annual statement, the amount of the unpaid losses shall be determined without regard to any reduction attributable to such discounting.

“unpaid losses” applies in that section

The term “unpaid losses” includes any unpaid loss adjustment expenses shown on the annual statement. (3) Annual statement

“controlled group” applies in that section

the term “controlled group” means any controlled group of corporations as defined in section 1563(a); except that subsections (a)(4) and (b)(2)(D) of section 1563 shall not apply, and subsection (b)(2)(C) of section 1563 shall not apply to the extent it excludes a foreign corporation to which section 842 applies. (4) Exception for acquisition expenses attributable to certain reinsurance contracts Paragraph (1) shall not apply to any specified policy acquisition expenses for any taxable year which are attributable to premiums or other consideration under any reinsurance contract. (c) Specified policy acquisition expenses For purposes of this section— (1) In general

“general deductions” applies in that section

The term “general deductions” means the deductions provided in part VI of subchapter B (sec. 161 and following, relating to itemized deductions) and in part I of subchapter D (sec. 401 and following, relating to pension, profit sharing, stock bonus plans, etc.). (d) Net premiums For purposes of this section— (1) In general

“group life insurance contract” applies in that section

The term “group life insurance contract” means any life insurance contract— (A) which covers a group of individuals defined by reference to employment relationship, membership in an organization, or similar factor, (B) the premiums for which are determined on a group basis, and (C) the proceeds of which are payable to (or for the benefit of) persons other than the employer of the insured, an organization to which the insured belongs, or other similar person.

“negative capitalization amount” applies in that section

the term “negative capitalization amount” means, with respect to any category of specified insurance contracts, the percentage (applicable under subsection (c)(1) to such category) of the amount (if any) by which— (A) the amount determined under subparagraph (B) of subsection (d)(1) with respect to such category, exceeds (B) the amount determined under subparagraph (A) of subsection (d)(1) with respect to such category.

“net premiums” applies in that section

The term “net premiums” means, with respect to any category of specified insurance contracts set forth in subsection (c)(1), the excess (if any) of— (A) the gross amount of premiums and other consideration on such contracts, over (B) return premiums on such contracts and premiums and other consideration incurred for reinsurance of such contracts. The rules of section 803(b) shall apply for purposes of the preceding sentence.

“specified insurance contract” applies in that section

the term “specified insurance contract” means any life insurance, annuity, or noncancellable accident and health insurance contract (or any combination thereof). (B) Exceptions The term “specified insurance contract” shall not include— (i) any pension plan contract (as defined in section 818(a)), (ii) any flight insurance or similar contract, (iii) any qualified foreign contract (as defined in section 807(e)(3) without regard to paragraph (5) of this subsection), (iv) any contract which is an Archer MSA (as defined in section 220(d)), and (v) any contract which is a health savings account (as defined in section 223(d)). (2) Group life insurance contract

“specified policy acquisition expenses” applies in that section

The term “specified policy acquisition expenses” means, with respect to any taxable year, so much of the general deductions for such taxable year as does not exceed the sum of— (A) 2.09 percent of the net premiums for such taxable year on specified insurance contracts which are annuity contracts, (B) 2.45 percent of the net premiums for such taxable year on specified insurance contracts which are group life insurance contracts, and (C) 9.2 percent of the net premiums for such taxable year on specified insurance contracts not described in subparagraph (A) or (B). (2) General deductions

“controlled group” applies in that section

The term “controlled group” means one or more chains of corporations connected through stock ownership with the taxpayer if— (A) 20 percent or more of the total combined voting power of all classes of stock entitled to vote of each of the corporations (except the taxpayer) is owned directly by one or more of the other corporations, and (B) the taxpayer owns directly 20 percent or more of the total combined voting power of all classes of stock entitled to vote, of at least one of the other corporations.;

“controls” applies in that section

The term “controls” means the ownership in a corporation of 20 percent or more of the total combined voting power of all classes of stock entitled to vote.;

“fund” applies throughout this title

the term “fund” means a segregated portfolio of assets, the beneficial interests in which are owned by the holders of a class or series of stock of the regulated investment company that is preferred over all other classes or series in respect of such portfolio of assets. (h) Qualified publicly traded partnership For purposes of this section,

“outstanding voting securities of such issuer” applies in that section

The term “outstanding voting securities of such issuer” shall include the equity securities of a qualified publicly traded partnership (as defined in subsection (h)). (6) All other terms shall have the same meaning as when used in the Investment Company Act of 1940, as amended.

“qualified publicly traded partnership” applies in that section

the term “qualified publicly traded partnership” means a publicly traded partnership described in section 7704(b) other than a partnership which would satisfy the gross income requirements of section 7704(c)(2) if qualifying income included only income described in subsection (b)(2)(A).

“regulated investment company” applies in that section

the term “regulated investment company” means any domestic corporation— (1) which, at all times during the taxable year— (A) is registered under the Investment Company Act of 1940, as amended ( 15 U.S.C. 80a–1 to 80b–2) as a management company or unit investment trust, or (B) has in effect an election under such Act to be treated as a business development company, or (2) which is a common trust fund or similar fund excluded by section 3(c)(3) of such Act ( 15 U.S.C. 80a–3(c) ) from the definition of “investment company” and is not included in the definition of “common trust fund” by section 584(a).

“value” applies in that section

The term “value” means, with respect to securities (other than those of majority-owned subsidiaries) for which market quotations are readily available, the market value of such securities; and with respect to other securities and assets, fair value as determined in good faith by the board of directors, except that in the case of securities of majority-owned subsidiaries which are investment companies such fair value shall not exceed market value or asset value, whichever is higher.;

“aggregate reported amount” applies throughout its part

The term “aggregate reported amount” means the aggregate amount of dividends reported by the company under clause (i) as capital gain dividends for the taxable year (including capital gain dividends paid after the close of the taxable year described in section 855). (IV) Post-December reported amount

“determination” applies in that section

the term “determination” has the meaning given to such term by section 860(e). Such term also includes a determination by the investment company filed with the Secretary that the provisions of this part do not apply to the investment company for a taxable year.

“excess reported amount” applies throughout its part

The term “excess reported amount” means the excess of the aggregate reported amount over the net capital gain of the company for the taxable year. (III) Aggregate reported amount

“exempt interest” applies in that section

The term “exempt interest” means, with respect to any regulated investment company, the excess of the amount of interest excludable from gross income under section 103(a) over the amounts disallowed as deductions under sections 265 and 171(a)(2). (B) Treatment of exempt-interest dividends by shareholders An exempt-interest dividend shall be treated by the shareholders for all purposes of this subtitle as an item of interest excludable from gross income under section 103(a).

“late-year ordinary loss” applies in that section

the term “late-year ordinary loss” means the sum of any post-October specified loss and any post-December ordinary loss. (E) Post-October specified loss For purposes of this paragraph,

“load charge” applies in that section

The term “load charge” means any sales or similar charge incurred by a person in acquiring stock of a regulated investment company. Such term does not include any charge incurred by reason of the reinvestment of a dividend. (B) Reinvestment right

“post-December ordinary loss” applies in that section

the term “post-December ordinary loss” means the excess (if any) of— (i) the ordinary losses not described in subparagraph (E)(i) and attributable to the portion of the taxable year after December 31, over (ii) the ordinary income not described in subparagraph (E)(ii) and attributable to such portion of the taxable year.

“post-December reported amount” applies throughout its part

The term “post-December reported amount” means the aggregate reported amount determined by taking into account only dividends paid after December 31 of the taxable year. (v) Adjustment for determinations If there is an increase in the excess described in subparagraph (A) for the taxable year which results from a determination (as defined in section 860(e)), the company may, subject to the limitations of this subparagraph, increase the amount of capital gain dividends reported under clause (i). (vi) Special rule for losses late in the calendar year For special rule for certain losses after October 31, see paragraph (8).

“post-October capital loss” applies in that section

the term “post-October capital loss” means— (i) any net capital loss attributable to the portion of the taxable year after October 31, or (ii) if there is no such loss— (I) any net long-term capital loss attributable to such portion of the taxable year, or (II) any net short-term capital loss attributable to such portion of the taxable year. (D) Late-year ordinary loss For purposes of this paragraph,

“post-October specified loss” applies in that section

the term “post-October specified loss” means the excess (if any) of— (i) the specified losses (as defined in section 4982(e)(5)(B)(ii)) attributable to the portion of the taxable year after October 31, over (ii) the specified gains (as defined in section 4982(e)(5)(B)(i)) attributable to such portion of the taxable year. (F) Post-December ordinary loss For purposes of this paragraph,

“qualified designated distribution” applies in that section

the term “qualified designated distribution” means any distribution made by the investment company if— (i) section 301 applies to such distribution, and (ii) such distribution is designated (at such time and in such manner as the Secretary shall by regulations prescribe) as being taken into account under this paragraph with respect to the non-RIC year. (C) Effect on dividends paid deduction Any qualified designated distribution shall not be included in the amount of dividends paid for purposes of computing the dividends paid deduction for any taxable year.

“qualified fund of funds” applies in that section

the term “qualified fund of funds” means a regulated investment company if (at the close of each quarter of the taxable year) at least 50 percent of the value of its total assets is represented by interests in other regulated investment companies.

“qualified late-year loss” applies in that section

the term “qualified late-year loss” means— (i) any post-October capital loss, and (ii) any late-year ordinary loss. (C) Post-October capital loss For purposes of this paragraph,

“regulated investment company” applies in that section

the term “regulated investment company” includes a domestic corporation which is a regulated investment company determined without regard to the requirements of subsection (a). (d) Distributions in redemption of interests in unit investment trusts In the case of a unit investment trust— (1) which is registered under the Investment Company Act of 1940 ( 15 U.S.C.

“reinvestment right” applies in that section

The term “reinvestment right” means any right to acquire stock of 1 or more regulated investment companies without the payment of a load charge or with the payment of a reduced charge. (C) Nonrecognition transactions If the taxpayer acquires stock in a regulated investment company from another person in a transaction in which gain or loss is not recognized, the taxpayer shall succeed to the treatment of such other person under this subsection.

“reported capital gain dividend amount” applies throughout its part

The term “reported capital gain dividend amount” means the amount reported to its shareholders under clause (i) as a capital gain dividend. (II) Excess reported amount

“reported exempt-interest dividend amount” applies in that section

The term “reported exempt-interest dividend amount” means the amount reported to its shareholders under clause (i) as an exempt-interest dividend. (II) Excess reported amount

“applicable date” applies in that section

The term “applicable date” means— (i) in the case of a qualified tax credit bond or a bond described in subparagraph (A)(iii), any credit allowance date (as defined in section 54A(e)(1)), 1 and (ii) in the case of a build America bond (as defined in section 54AA(d)), 1 any interest payment date (as defined in section 54AA(e)). 1 (2) Stripped tax credit bonds If the ownership of a tax credit bond is separated from the credit with respect to such bond, subsection (a) shall be applied by reference to the instruments evidencing the entitlement to the credit rather than the tax credit bond. (f) Regulations, etc.

“tax credit bond” applies in that section

The term “tax credit bond” means— (i) a qualified tax credit bond (as defined in section 54A(d)), 1 (ii) a build America bond (as defined in section 54AA(d)) 1 other than a qualified bond described in section 54AA(g), 1 and (iii) any bond for which a credit is allowable under subpart H of part IV of subchapter A of this chapter. 1 (B) Applicable date

“gross income” applies in that section

the term “gross income” includes only the excess of— (I) the net short-term capital gain from such sales or dispositions, over (II) the net long-term capital loss from such sales or dispositions. (C) Limitations (i) Subparagraph (a) The aggregate amount which may be reported as dividends under subparagraph (A) shall not exceed the aggregate dividends received by the company for the taxable year.

“qualified dividend income” applies in that section

the term “qualified dividend income” has the meaning given such term by section 1(h)(11)(B).

“cash” applies throughout its part

the term “cash” includes such foreign currency but only to the extent such foreign currency— (i) is held for use in the normal course of the activities of the trust or qualified business unit which give rise to items of income or gain described in paragraph (2) or (3) of subsection (c) or are directly related to acquiring or holding assets described in subsection (c)(4), and (ii) is not held in connection with an activity described in subsection (n)(4). (L) Definitions related to debt instruments of publicly offered reits.— (i) Publicly offered reit .—

“controlled taxable REIT subsidiary” applies in that section

the term “controlled taxable REIT subsidiary” means, with respect to any real estate investment trust, any taxable REIT subsidiary of such trust if such trust owns directly or indirectly— (I) stock possessing more than 50 percent of the total voting power of the outstanding stock of such subsidiary, or (II) stock having a value of more than 50 percent of the total value of the outstanding stock of such subsidiary.

“eligible independent contractor” applies in that section

The term “eligible independent contractor” means, with respect to any qualified lodging facility or qualified health care property (as defined in subsection (e)(6)(D)(i)), any independent contractor if, at the time such contractor enters into a management agreement or other similar service contract with the taxable REIT subsidiary to operate such qualified lodging facility or qualified health care property, such contractor (or any related person) is actively engaged in the trade or business of operating qualified lodging facilities or qualified health care properties, respectively, for any person who is not a related person with respect to the real estate investment trust or the taxable …

“foreclosure property” applies throughout its part

the term “foreclosure property” means any real property (including interests in real property), and any personal property incident to such real property, acquired by the real estate investment trust as the result of such trust having bid in such property at foreclosure, or having otherwise reduced such property to ownership or possession by agreement or process of law, after there was default (or default was imminent) on a lease of such property or on an indebtedness which such property secured.

“health care facility” applies in that section

the term “health care facility” means a hospital, nursing facility, assisted living facility, congregate care facility, qualified continuing care facility (as defined in section 7872(g)(4)), or other licensed facility which extends medical or nursing or ancillary services to patients and which, immediately before the termination, expiration, default, or breach of the lease of or mortgage secured by such facility, was operated by a provider of such services which was eligible for participation in the medicare program under title XVIII of the Social Security Act with respect to such facility.

“impermissible tenant service income” applies in that section

The term “impermissible tenant service income” means, with respect to any real or personal property, any amount received or accrued directly or indirectly by the real estate investment trust for— (i) services furnished or rendered by the trust to the tenants of such property, or (ii) managing or operating such property.

“independent contractor” applies in that section

the term “independent contractor” means any person— (A) who does not own, directly or indirectly, more than 35 percent of the shares, or certificates of beneficial interest, in the real estate investment trust; and (B) if such person is a corporation, not more than 35 percent of the total combined voting power of whose stock (or 35 percent of the total shares of all classes of whose stock), or, if such person is not a corporation, not more than 35 percent of the interest in whose assets or net profits is owned, directly or indirectly, by one or more persons owning 35 percent or more of the shares or certificates of beneficial interest in the trust.

“interests in real property” applies throughout its part

The term “interests in real property” includes fee ownership and co-ownership of land or improvements thereon, leaseholds of land or improvements thereon, options to acquire land or improvements thereon, and options to acquire leaseholds of land or improvements thereon, but does not include mineral, oil, or gas royalty interests. (D) Qualified temporary investment income.— (i) In general .—

“lodging facility” applies in that section

The term “lodging facility” means a— (I) hotel, (II) motel, or (III) other establishment more than one-half of the dwelling units in which are used on a transient basis. (iii) Customary amenities and facilities

“new capital” applies throughout its part

The term “new capital” means any amount received by the real estate investment trust— (I) in exchange for stock (or certificates of beneficial interests) in such trust (other than amounts received pursuant to a dividend reinvestment plan), or (II) in a public offering of debt obligations of such trust which have maturities of at least 5 years.

“nonqualified publicly offered REIT debt instrument” applies throughout its part

The term “nonqualified publicly offered REIT debt instrument” means any real estate asset which would cease to be a real estate asset if subparagraph (B) were applied without regard to the reference to “debt instruments issued by publicly offered REITs”.

“passive foreign exchange gain” applies in that section

the term “passive foreign exchange gain” means— (A) real estate foreign exchange gain, (B) foreign currency gain (as defined in section 988(b)(1)) which is not described in subparagraph (A) and which is attributable to— (i) any item of income or gain described in subsection (c)(2), (ii) the acquisition or ownership of obligations (other than foreign currency gain attributable to any item of income or gain described in clause (i)), or (iii) becoming or being the obligor under obligations (other than foreign currency gain attributable to any item of income or gain described in clause (i)), and (C) any other foreign currency gain as determined by the Secretary.

“publicly offered REIT” applies throughout its part

The term “publicly offered REIT” has the meaning given such term by section 562(c)(2). (ii) Nonqualified publicly offered reit debt instrument .—

“qualified health care property” applies in that section

The term “qualified health care property” means any real property (including interests therein), and any personal property incident to such real property, which— (I) is a health care facility, or (II) is necessary or incidental to the use of a health care facility. (ii) Health care facility For purposes of clause (i),

“qualified lodging facility” applies in that section

The term “qualified lodging facility” means any lodging facility unless wagering activities are conducted at or in connection with such facility by any person who is engaged in the business of accepting wagers and who is legally authorized to engage in such business at or in connection with such facility. (ii) Lodging facility

“qualified REIT subsidiary” applies in that section

the term “qualified REIT subsidiary” means any corporation if 100 percent of the stock of such corporation is held by the real estate investment trust. Such term shall not include a taxable REIT subsidiary. (3) Treatment of termination of qualified subsidiary status For purposes of this subtitle, if any corporation which was a qualified REIT subsidiary ceases to meet the requirements of paragraph (2), such corporation shall be treated as a new corporation acquiring all of its assets (and assuming all of its liabilities) immediately before such cessation from the real estate investment trust in exchange for its stock.

“qualified rents” applies in that section

the term “qualified rents” means any amount which would be treated as rents from real property if received by the real estate investment trust. (7) Impermissible tenant service income For purposes of paragraph (2)(C)— (A) In general

“qualified temporary investment income” applies throughout its part

The term “qualified temporary investment income” means any income which— (I) is attributable to stock or a debt instrument (within the meaning of section 1275(a)(1)), (II) is attributable to the temporary investment of new capital, and (III) is received or accrued during the 1-year period beginning on the date on which the real estate investment trust receives such capital. (ii) New capital .—

“qualified trust” applies in that section

the term “qualified trust” means any trust described in section 401(a) and exempt from tax under section 501(a). (i) Treatment of certain wholly owned subsidiaries (1) In general For purposes of this title— (A) a corporation which is a qualified REIT subsidiary shall not be treated as a separate corporation, and (B) all assets, liabilities, and items of income, deduction, and credit of a qualified REIT subsidiary shall be treated as assets, liabilities, and such items (as the case may be) of the real estate investment trust. (2) Qualified REIT subsidiary For purposes of this subsection,

“real estate assets” applies throughout its part

The term “real estate assets” means real property (including interests in real property and interests in mortgages on real property or on interests in real property), shares (or transferable certificates of beneficial interest) in other real estate investment trusts which meet the requirements of this part, and debt instruments issued by publicly offered REITs. Such term also includes any property (not otherwise a real estate asset) attributable to the temporary investment of new capital, but only if such property is stock or a debt instrument, and only for the 1-year period beginning on the date the real estate trust receives such capital.;

“real estate foreign exchange gain” applies in that section

the term “real estate foreign exchange gain” means— (A) foreign currency gain (as defined in section 988(b)(1)) which is attributable to— (i) any item of income or gain described in subsection (c)(3), (ii) the acquisition or ownership of obligations secured by mortgages on real property or on interests in real property (other than foreign currency gain attributable to any item of income or gain described in clause (i)), or (iii) becoming or being the obligor under obligations secured by mortgages on real property or on interests in real property (other than foreign currency gain attributable to any item of income or gain described in clause (i)), (B) section 987 gain attributable to a …

“real estate investment trust” applies throughout this title

the term “real estate investment trust” means a corporation, trust, or association— (1) which is managed by one or more trustees or directors; (2) the beneficial ownership of which is evidenced by transferable shares, or by transferable certificates of beneficial interest; (3) which (but for the provisions of this part) would be taxable as a domestic corporation; (4) which is neither (A) a financial institution referred to in section 582(c)(2), nor (B) an insurance company to which subchapter L applies; (5) the beneficial ownership of which is held by 100 or more persons; (6) subject to the provisions of subsection (k), which is not closely held (as determined under subsection (h)); and (7) …

“rents from real property” applies in that section

the term “rents from real property” includes (subject to paragraph (2))— (A) rents from interests in real property, (B) charges for services customarily furnished or rendered in connection with the rental of real property, whether or not such charges are separately stated, and (C) rent attributable to personal property which is leased under, or in connection with, a lease of real property, but only if the rent attributable to such personal property for the taxable year does not exceed 15 percent of the total rent for the taxable year attributable to both the real and personal property leased under, or in connection with, such lease.

“secured property” applies in that section

The term “secured property” means the real property referred to in subparagraph (A). (k) Requirement that entity not be closely held treated as met in certain cases A corporation, trust, or association— (1) which for a taxable year meets the requirements of section 857(f)(1), and (2) which does not know, or exercising reasonable diligence would not have known, whether the entity failed to meet the requirement of subsection (a)(6), shall be treated as having met the requirement of subsection (a)(6) for the taxable year. (l) Taxable REIT subsidiary For purposes of this part— (1) In general

“shared appreciation provision” applies in that section

The term “shared appreciation provision” means any provision— (i) which is in connection with an obligation which is held by the real estate investment trust and is secured by an interest in real property, and (ii) which entitles the real estate investment trust to receive a specified portion of any gain realized on the sale or exchange of such real property (or of any gain which would be realized if the property were sold on a specified date) or appreciation in value as of any specified date. (B) Secured property

“taxable REIT subsidiary” applies throughout its part

The term “taxable REIT subsidiary” means, with respect to a real estate investment trust, a corporation (other than a real estate investment trust) if— (A) such trust directly or indirectly owns stock in such corporation, and (B) such trust and such corporation jointly elect that such corporation shall be treated as a taxable REIT subsidiary of such trust for purposes of this part. Such an election, once made, shall be irrevocable unless both such trust and corporation consent to its revocation. Such election, and any revocation thereof, may be made without the consent of the Secretary. (2) Thirty-five percent ownership in another taxable REIT subsidiary

“termination date” applies in that section

the term “termination date” means, with respect to any taxpayer, the last day of the taxpayer’s first taxable year beginning after the date of the enactment of this paragraph and before the date that is 1 year after such date of enactment. (d) Rents from real property defined (1) Amounts included For purposes of paragraphs (2) and (3) of subsection (c),

“timber real estate investment trust” applies throughout its part

The term “timber real estate investment trust” means a real estate investment trust in which more than 50 percent in value of its total assets consists of real property held in connection with the trade or business of producing timber.

“value” applies throughout its part

The term “value” means, with respect to securities for which market quotations are readily available, the market value of such securities; and with respect to other securities and assets, fair value as determined in good faith by the trustees, except that in the case of securities of real estate investment trusts such fair value shall not exceed market value or asset value, whichever is higher.;

“3-year average adjusted bases percentage” applies throughout its part

The term “3-year average adjusted bases percentage” means, with respect to any taxable year, the ratio (expressed as a percentage) of— (i) the aggregate adjusted bases (as determined for purposes of computing earnings and profits) of property (other than sales of foreclosure property or sales to which section 1033 applies) sold during the 3 taxable year period ending with such taxable year, divided by (ii) the sum of the aggregate adjusted bases (as so determined) of all of the assets of the trust as of the beginning of each of the 3 taxable years which are part of the period referred to in clause (i). (H) 3-year average fair market value percentage

“3-year average fair market value percentage” applies throughout its part

The term “3-year average fair market value percentage” means, with respect to any taxable year, the ratio (expressed as a percentage) of— (i) the fair market value of property (other than sales of foreclosure property or sales to which section 1033 applies) sold during the 3 taxable year period ending with such taxable year, divided by (ii) the sum of the fair market value of all of the assets of the trust as of the beginning of each of the 3 taxable years which are part of the period referred to in clause (i).

“excess interest” applies in that section

The term “excess interest” means any deductions for interest payments by a taxable REIT subsidiary of a real estate investment trust to such trust to the extent that the interest payments are in excess of a rate that is commercially reasonable. (E) Redetermined TRS service income (i) In general

“excess noncash income” applies in that section

the term “excess noncash income” means the excess (if any) of— (A) the amount determined under paragraph (2) for the taxable year, over (B) 5 percent of the real estate investment trust taxable income for the taxable year determined without regard to the deduction for dividends paid (as defined in section 561) and by excluding any net capital gain.

“net income derived from prohibited transactions” applies throughout its part

the term “net income derived from prohibited transactions” means the excess of the gain (including any foreign currency gain, as defined in section 988(b)(1)) from prohibited transactions over the deductions (including any foreign currency loss, as defined in section 988(b)(2)) allowed by this chapter which are directly connected with prohibited transactions; (ii) in determining the amount of the net income derived from prohibited transactions, there shall not be taken into account any item attributable to any prohibited transaction for which there was a loss; and;

“net income from foreclosure property” applies throughout its part

the term “net income from foreclosure property” means the excess of— (i) gain (including any foreign currency gain, as defined in section 988(b)(1)) from the sale or other disposition of foreclosure property described in section 1221(a)(1) and the gross income for the taxable year derived from foreclosure property (as defined in section 856(e)), but only to the extent such gross income is not described in (or, in the case of foreign currency gain, not attributable to gross income described in) section 856(c)(3) other than subparagraph (F) thereof, over (ii) the deductions allowed by this chapter which are directly connected with the production of the income referred to in clause (i).

“non-REIT year” applies in that section

the term “non-REIT year” means any taxable year to which the provisions of this part did not apply with respect to the entity. The Secretary may waive the requirements of paragraph (1) for any taxable year if the real estate investment trust establishes to the satisfaction of the Secretary that it was unable to meet such requirements by reason of distributions previously made to meet the requirements of section 4981.

“prohibited transaction” applies throughout its part

the term “prohibited transaction” means a sale or other disposition of property described in section 1221(a)(1) which is not foreclosure property. (C) Certain sales not to constitute prohibited transactions For purposes of this part, the term “prohibited transaction” does not include a sale of property which is a real estate asset (as defined in section 856(c)(5)(B)) if— (i) the trust has held the property for not less than 2 years; (ii) aggregate expenditures made by the trust, or any partner of the trust, during the 2-year period preceding the date of sale which are includible in the basis of the property do not exceed 30 percent of the net selling price of the property; (iii) (I) during …

“qualified dividend income” applies in that section

the term “qualified dividend income” has the meaning given such term by section 1(h)(11)(B). (d) Earnings and profits (1) In general The earnings and profits of a real estate investment trust for any taxable year (but not its accumulated earnings) shall not be reduced by any amount which— (A) is not allowable in computing its taxable income for such taxable year, and (B) was not allowable in computing its taxable income for any prior taxable year.

“real estate investment trust” applies in that section

the term “real estate investment trust” includes a domestic corporation, trust, or association which is a real estate investment trust determined without regard to the requirements of subsection (a). (5) Special rules for determining earnings and profits for purposes of the deduction for dividends paid For special rules for determining the earnings and profits of a real estate investment trust for purposes of the deduction for dividends paid, see section 562(e)(1). (e) Excess noncash income (1) In general For purposes of subsection (a)(1)(B),

“real estate investment trust taxable income” applies throughout its part

the term “real estate investment trust taxable income” means the taxable income of the real estate investment trust, adjusted as follows: (A) The deductions for corporations provided in part VIII (except section 248) of subchapter B (section 241 and following, relating to the deduction for dividends received, etc.) shall not be allowed. (B) The deduction for dividends paid (as defined in section 561) shall be allowed, but shall be computed without regard to that portion of such deduction which is attributable to the amount excluded under subparagraph (D).

“redetermined deductions” applies in that section

The term “redetermined deductions” means deductions (other than redetermined rents) of a taxable REIT subsidiary of a real estate investment trust to the extent the amount of such deductions would (but for subparagraph (F)) be decreased on distribution, apportionment, or allocation under section 482 to clearly reflect income as between such subsidiary and such trust. (D) Excess interest

“redetermined rents” applies in that section

The term “redetermined rents” means rents from real property (as defined in section 856(d)) to the extent the amount of the rents would (but for subparagraph (F)) be reduced on distribution, apportionment, or allocation under section 482 to clearly reflect income as a result of services furnished or rendered by a taxable REIT subsidiary of the real estate investment trust to a tenant of such trust. (ii) Exception for de minimis amounts Clause (i) shall not apply to amounts described in section 856(d)(7)(A) with respect to a property to the extent such amounts do not exceed the one percent threshold described in section 856(d)(7)(B) with respect to such property.

“redetermined TRS service income” applies in that section

The term “redetermined TRS service income” means gross income of a taxable REIT subsidiary of a real estate investment trust attributable to services provided to, or on behalf of, such trust (less deductions properly allocable thereto) to the extent the amount of such income (less such deductions) would (but for subparagraph (F)) be increased on distribution, apportionment, or allocation under section 482. (ii) Coordination with redetermined rents Clause (i) shall not apply with respect to gross income attributable to services furnished or rendered to a tenant of the real estate investment trust (or to deductions properly allocable thereto).

“shareholders” applies throughout this title

the terms “shares” and “shareholders” shall include beneficial interests and holders of beneficial interests, respectively. (D) Coordination with net operating loss provisions For purposes of section 172, if a real estate investment trust pays capital gain dividends during any taxable year, the amount of the net capital gain for such taxable year (to the extent such gain does not exceed the amount of such capital gain dividends) shall be excluded in determining— (i) the net operating loss for the taxable year, and (ii) the amount of the net operating loss of any prior taxable year which may be carried through such taxable year under section 172(b)(2) to a succeeding taxable year.

“shares” applies throughout this title

the terms “shares” and “shareholders” shall include beneficial interests and holders of beneficial interests, respectively. (D) Coordination with net operating loss provisions For purposes of section 172, if a real estate investment trust pays capital gain dividends during any taxable year, the amount of the net capital gain for such taxable year (to the extent such gain does not exceed the amount of such capital gain dividends) shall be excluded in determining— (i) the net operating loss for the taxable year, and (ii) the amount of the net operating loss of any prior taxable year which may be carried through such taxable year under section 172(b)(2) to a succeeding taxable year.

“termination date” applies in that section

the term “termination date” has the meaning given such term by section 856(c)(10). (7) Income from redetermined rents, redetermined deductions, and excess interest (A) Imposition of tax There is hereby imposed for each taxable year of the real estate investment trust a tax equal to 100 percent of redetermined rents, redetermined deductions, excess interest, and redetermined TRS service income. (B) Redetermined rents (i) In general

“undistributed capital gain” applies in that section

the term “undistributed capital gain” means the excess of the net capital gain over the deduction for dividends paid (as defined in section 561) determined with reference to capital gain dividends only. (4) Income from foreclosure property (A) Imposition of tax A tax is hereby imposed for each taxable year on the net income from foreclosure property of every real estate investment trust. Such tax shall be computed by multiplying the net income from foreclosure property by the highest rate of tax specified in section 11(b). (B) Net income from foreclosure property For purposes of this part,

“adjustment” applies in that section

the term “adjustment” means— (A) any increase in the investment company taxable income of the regulated investment company (determined without regard to the deduction for dividends paid (as defined in section 561)), (B) any increase in the amount of the excess described in section 852(b)(3)(A) (relating to the excess of the net capital gain over the deduction for capital gain dividends paid), and (C) any decrease in the deduction for dividends paid (as defined in section 561) determined without regard to capital gains dividends. (2) Adjustment in the case of real estate investment trust In the case of any real estate investment trust,

“deficiency dividends” applies in that section

the term “deficiency dividends” means a distribution of property made by the qualified investment entity on or after the date of the determination and before filing claim under subsection (g), which would have been includible in the computation of the deduction for dividends paid under section 561 for the taxable year with respect to which the liability for tax resulting from the determination exists if distributed during such taxable year.

“determination” applies in that section

the term “determination” means— (1) a decision by the Tax Court, or a judgment, decree, or other order by any court of competent jurisdiction, which has become final; (2) a closing agreement made under section 7121; (3) under regulations prescribed by the Secretary, an agreement signed by the Secretary and by, or on behalf of, the qualified investment entity relating to the liability of such entity for tax; or (4) a statement by the taxpayer attached to its amendment or supplement to a return of tax for the relevant tax year. (f) Deficiency dividends (1) Definition For purposes of this section,

“qualified investment entity” applies in that section

the term “qualified investment entity” means— (1) a regulated investment company, and (2) a real estate investment trust. (c) Rules for application of section (1) Interest and additions to tax determined with respect to the amount of deficiency dividend deduction allowed For purposes of determining interest, additions to tax, and additional amounts— (A) the tax imposed by this chapter (after taking into account the deduction allowed by subsection (a)) on the qualified investment entity for the taxable year with respect to which the determination is made shall be deemed to be increased by an amount equal to the deduction allowed by subsection (a) with respect to such taxable year, (B) the …

“disqualified organization” applies in that section

the term “disqualified organization” means— (A) the United States, any State or political subdivision thereof, any foreign government, any international organization, or any agency or instrumentality of any of the foregoing, (B) any organization (other than a cooperative described in section 521) which is exempt from tax imposed by this chapter unless such organization is subject to the tax imposed by section 511, and (C) any organization described in section 1381(a)(2)(C).

“excess inclusion” applies in that section

The term “excess inclusion” means, with respect to any residual interest in a REMIC for any calendar quarter, the excess (if any) of— (A) the amount taken into account with respect to such interest by the holder under section 860C(a), over (B) the sum of the daily accruals with respect to such interest for days during such calendar quarter while held by such holder. To the extent provided in regulations, if residual interests in a REMIC do not have significant value, the excess inclusions with respect to such interests shall be the amount determined under subparagraph (A) without regard to subparagraph (B).

“Federal long-term rate” applies in that section

the term “Federal long-term rate” means the Federal long-term rate which would have applied to the residual interest under section 1274(d) (determined without regard to paragraph (2) thereof) if it were a debt instrument.

“pass-thru entity” applies in that section

the term “pass-thru entity” means— (i) any regulated investment company, real estate investment trust, or common trust fund, (ii) any partnership, trust, or estate, and (iii) any organization to which part I of subchapter T applies. Except as provided in regulations, a person holding an interest in a pass-thru entity as a nominee for another person shall, with respect to such interest, be treated as a pass-thru entity.

“liquidation period” applies throughout its part

The term “liquidation period” means the period— (i) beginning on the date of the adoption of the plan of liquidation, and (ii) ending at the close of the 90th day after such date. (5) Exceptions Notwithstanding subparagraphs (A) and (D) of paragraph (2), the term “prohibited transaction” shall not include any disposition— (A) required to prevent default on a regular interest where the threatened default resulted from a default on 1 or more qualified mortgages, or (B) to facilitate a clean-up call (as defined in regulations).

“net income derived from prohibited transactions” applies throughout its part

the term “net income derived from prohibited transactions” means the excess of the gross income from prohibited transactions over the deductions allowed by this chapter which are directly connected with such transactions; except that there shall not be taken into account any item attributable to any prohibited transaction for which there was a loss. (4) Qualified liquidation For purposes of this part— (A) In general

“prohibited transaction” applies throughout its part

the term “prohibited transaction” means— (A) Disposition of qualified mortgage The disposition of any qualified mortgage transferred to the REMIC other than a disposition pursuant to— (i) the substitution of a qualified replacement mortgage for a qualified mortgage (or the repurchase in lieu of substitution of a defective obligation), (ii) a disposition incident to the foreclosure, default, or imminent default of the mortgage, (iii) the bankruptcy or insolvency of the REMIC, or (iv) a qualified liquidation. (B) Income from nonpermitted assets The receipt of any income attributable to any asset which is neither a qualified mortgage nor a permitted investment.

“qualified liquidation” applies throughout its part

The term “qualified liquidation” means a transaction in which— (i) the REMIC adopts a plan of complete liquidation, (ii) such REMIC sells all its assets (other than cash) within the liquidation period, and (iii) all proceeds of the liquidation (plus the cash), less assets retained to meet claims, are credited or distributed to holders of regular or residual interests on or before the last day of the liquidation period. (B) Liquidation period

“cash flow investment” applies throughout its part

The term “cash flow investment” means any investment of amounts received under qualified mortgages for a temporary period before distribution to holders of interests in the REMIC. (7) Qualified reserve asset (A) In general

“foreclosure property” applies throughout its part

The term “foreclosure property” means property— (A) which would be foreclosure property under section 856(e) (without regard to paragraph (5) thereof) if acquired by a real estate investment trust, and (B) which is acquired in connection with the default or imminent default of a qualified mortgage held by the REMIC. Solely for purposes of section 860D(a), the determination of whether any property is foreclosure property shall be made without regard to section 856(e)(4). (9) Startup day

“net income from foreclosure property” applies throughout its part

the term “net income from foreclosure property” means the amount which would be the REMIC’s net income from foreclosure property under section 857(b)(4)(B) if the REMIC were a real estate investment trust. (d) Tax on contributions after startup date (1) In general Except as provided in paragraph (2), if any amount is contributed to a REMIC after the startup day, there is hereby imposed a tax for the taxable year of the REMIC in which the contribution is received equal to 100 percent of the amount of such contribution.

“permitted investments” applies throughout its part

The term “permitted investments” means any— (A) cash flow investment, (B) qualified reserve asset, or (C) foreclosure property. (6) Cash flow investment

“qualified mortgage” applies throughout its part

The term “qualified mortgage” means— (A) any obligation (including any participation or certificate of beneficial ownership therein) which is principally secured by an interest in real property and which— (i) is transferred to the REMIC on the startup day in exchange for regular or residual interests in the REMIC, (ii) is purchased by the REMIC within the 3-month period beginning on the startup day if, except as provided in regulations, such purchase is pursuant to a fixed-price contract in effect on the startup day, or (iii) represents an increase in the principal amount under the original terms of an obligation described in clause (i) or (ii) if such increase— (I) is attributable to an …

“qualified replacement mortgage” applies throughout its part

The term “qualified replacement mortgage” means any obligation— (A) which would be a qualified mortgage if transferred on the startup day in exchange for regular or residual interests in the REMIC, and (B) which is received for— (i) another obligation within the 3-month period beginning on the startup day, or (ii) a defective obligation within the 2-year period beginning on the startup day. (5) Permitted investments

“qualified reserve asset” applies throughout its part

The term “qualified reserve asset” means any intangible property which is held for investment and as part of a qualified reserve fund. (B) Qualified reserve fund For purposes of subparagraph (A),

“qualified reserve fund” applies throughout its part

the term “qualified reserve fund” means any reasonably required reserve to— (i) provide for full payment of expenses of the REMIC or amounts due on regular interests in the event of defaults on qualified mortgages or lower than expected returns on cash flow investments, or (ii) provide a source of funds for the purchase of obligations described in clause (ii) or (iii) of paragraph (3)(A).

“regular interest” applies throughout its part

The term “regular interest” means any interest in a REMIC which is issued on the startup day with fixed terms and which is designated as a regular interest if— (A) such interest unconditionally entitles the holder to receive a specified principal amount (or other similar amount), and (B) interest payments (or other similar amount), if any, with respect to such interest at or before maturity— (i) are payable based on a fixed rate (or to the extent provided in regulations, at a variable rate), or (ii) consist of a specified portion of the interest payments on qualified mortgages and such portion does not vary during the period such interest is outstanding.

“residual interest” applies throughout its part

The term “residual interest” means an interest in a REMIC which is issued on the startup day, which is not a regular interest, and which is designated as a residual interest. (3) Qualified mortgage

“startup day” applies throughout its part

The term “startup day” means the day on which the REMIC issues all of its regular and residual interests. To the extent provided in regulations, all interests issued (and all transfers to the REMIC) during any period (not exceeding 10 days) permitted in such regulations shall be treated as occurring on the day during such period selected by the REMIC for purposes of this paragraph.

“international communications income” applies in that section

the term “international communications income” includes all income derived from the transmission of communications or data from the United States to any foreign country (or possession of the United States) or from any foreign country (or possession of the United States) to the United States.

“space or ocean activity” applies in that section

The term “space or ocean activity” means— (i) any activity conducted in space, and (ii) any activity conducted on or under water not within the jurisdiction (as recognized by the United States) of a foreign country, possession of the United States, or the United States. Such term includes any activity conducted in Antarctica.

“transportation income” applies in that section

the term “transportation income” means any income derived from, or in connection with— (A) the use (or hiring or leasing for use) of a vessel or aircraft, or (B) the performance of services directly related to the use of a vessel or aircraft. For purposes of the preceding sentence,

“vessel or aircraft” applies in that section

the term “vessel or aircraft” includes any container used in connection with a vessel or aircraft. (d) Source rules for space and certain ocean activities (1) In general Except as provided in regulations, any income derived from a space or ocean activity— (A) if derived by a United States person, shall be sourced in the United States, and (B) if derived by a person other than a United States person, shall be sourced outside the United States. (2) Space or ocean activity For purposes of paragraph (1)— (A) In general

“affiliated group” applies in that section

the term “affiliated group” has the meaning given such term by section 1504. Notwithstanding the preceding sentence, a foreign corporation shall be treated as a member of the affiliated group if— (i) more than 50 percent of the gross income of such foreign corporation for the taxable year is effectively connected with the conduct of a trade or business within the United States, and (ii) at least 80 percent of either the vote or value of all outstanding stock of such foreign corporation is owned directly or indirectly by members of the affiliated group (determined with regard to this sentence).

“nonaffiliated 10-percent owned corporation” applies in that section

the term “nonaffiliated 10-percent owned corporation” means any corporation if— (i) such corporation is not included in the taxpayer’s affiliated group, and (ii) members of such affiliated group own 10 percent or more of the total combined voting power of all classes of stock of such corporation entitled to vote.

“produced” applies throughout its part

the term “produced” includes created, fabricated, manufactured, extracted, processed, cured, or aged. (b) Trade or business within the United States For purposes of this part, part II, and chapter 3,

“qualified research and experimental expenditures” applies in that section

the term “qualified research and experimental expenditures” means amounts which are foreign research or experimental expenditures within the meaning of section 174 or domestic research or experimental expenditures within the meaning of section 174A. For purposes of this paragraph, rules similar to the rules of subsection (c) of section 174 shall apply. Any qualified research and experimental expenditures allowed as an amortization deduction under section 174(a) or section 174A(c), shall be taken into account under this subsection for the taxable year for which such expenditures are allowed as a deduction under such section (as the case may be).

“related person” applies in that section

the term “related person” means— (A) any person who is a related person (within the meaning of section 267(b)), and (B) any United States shareholder (as defined in section 951(b)) and any person who is a related person (within the meaning of section 267(b)) to such a shareholder. (5) Certain provisions not to apply The following provisions shall not apply to any amount treated as interest under paragraph (1) or (6): (A) Section 904(d)(2)(B)(iii)(I) (relating to exceptions for export financing interest). (B) Subparagraph (A) of section 954(b)(3) (relating to exception where foreign base company income is less than 5 percent or $1,000,000).

“sale or exchange” applies in that section

the term “sale or exchange” means any sale, exchange, or other disposition. (E) Secretarial authority The Secretary shall prescribe such regulations or other guidance as the Secretary determines appropriate for the application of this paragraph, including with respect to exchanges described in section 332, 351, 354, 355, 356, or 361.

“trade or business within the United States” applies throughout its part

the term “trade or business within the United States” includes the performance of personal services within the United States at any time within the taxable year, but does not include— (1) Performance of personal services for foreign employer The performance of personal services— (A) for a nonresident alien individual, foreign partnership, or foreign corporation, not engaged in trade or business within the United States, or (B) for an office or place of business maintained in a foreign country or in a possession of the United States by an individual who is a citizen or resident of the United States or by a domestic partnership or a domestic corporation, by a nonresident alien individual …

“trade or service receivable” applies in that section

the term “trade or service receivable” means any account receivable or evidence of indebtedness arising out of— (A) the disposition by a related person of property described in section 1221(a)(1), or (B) the performance of services by a related person. (4) Related person For purposes of this subsection,

“affiliate” applies in that section

The term “affiliate” means a member of the same affiliated group (within the meaning of section 1504(a) without regard to section 1504(b)). (5) Treatment of partnerships In the case of a partnership, except as provided in regulations, this section shall be applied at the partner level.