REAL ESTATE PROPERTY ACQUIRED BY A QUALIFIED ORGANIZATION.

SEC. 13144. REAL ESTATE PROPERTY ACQUIRED BY A QUALIFIED ORGANIZATION. (a) Modifications of Exceptions.— Paragraph (9) of section 514(c) (relating to real property acquired by a qualified organization) is amended by adding at the end thereof the following new subparagraphs: “(G) Special rules for purposes of the exceptions.— Except as otherwise provided by regulations— “(i) Small leases disregarded.— For purposes of clauses (iii) and (iv) of subparagraph (B), a lease to a person described in such clause (iii) or (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) 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) and (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 acquires property described in clause (iii) from a financial institution and any gain recognized by the financial institution with respect to the property is ordinary income, “(II) the stated principal amount of the financing provided by the financial institution does not 107 STAT. 442exceed the amount of the outstanding indebtedness (including accrued but unpaid interest) of the financial institution with respect to the property described in clause (iii) immediately before the acquisition referred to in clause (iii) or (v), whichever is applicable, and “(III) the present value (determined as of the time of the sale and by using the applicable Federal rate determined under section 1274(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 cannot exceed 30 percent of the total purchase price of the property (including the contingent payments). “(iii) Property to which subparagraph applies.— Property is described in this clause if such property is foreclosure property, or is real property which— “(I) was acquired by the qualified organization 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 or 591(a), “(II) any other corporation which is a direct or indirect subsidiary of an institution referred to in subclause (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), and “(III) any person acting as a conservator or receiver of an entity referred to in subclause (I) or (II) (or any government agency or corporation succeeding to the rights or interest of such person), “(v) Foreclosure property.—For purposes of this subparagraph, the term ‘foreclosure property’ means any real property acquired by the financial institution as the result of having bid on such property at fore-closure, 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 secured.”. (b) Conforming Amendment.— Paragraph (9) of section 514(c) is amended— (1) by adding the following new sentence at the end of subparagraph (A): “For purposes of this paragraph, an interest in a mortgage shall in no event be treated as real property.”, and (2) by striking the last sentence of subparagraph (B). (c) Effective Dates.— 107 STAT. 443 (1) In general.— The amendments made by this section shall apply to acquisitions on or after January 1, 1994. (2) 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.