TREATMENT OF FORECLOSURE PROPERTY.

SEC. 1257. TREATMENT OF FORECLOSURE PROPERTY. (a) Grace Periods.— (1) Initial period.—Paragraph (2) of section 856(e) (relating to special rules for foreclosure property) is amended by striking “on the date which is 2 years after the date the trust acquired such property” and inserting “as of the close of the 3d taxable year following the taxable year in which the trust acquired such property”. (2) Extension.—Paragraph (3) of section 856(e) is amended— (A) by striking “or more extensions” and inserting “extension”, and (B) by striking the last sentence and inserting: “Any such extension shall not extend the grace period beyond the close of the 3d taxable year following the last taxable year in the period under paragraph (2).”. (b) Revocation of Election.—Paragraph (5) of section 856(e) is amended by striking the last sentence and inserting: “A real estate investment trust may revoke any such election for a taxable year by filing the revocation (in the manner provided by the Secretary) on or before the due date (including any extension of time) for filing its return of tax under this chapter for the taxable year. If a trust revokes an election for any property, no election may be made by the trust under this paragraph with respect to the property for any subsequent taxable year.”. (c) Certain Activities Not To Disqualify Property.—Paragraph (4) of section 856(e) is amended by adding at the end the following new flush sentence:111 STAT. 1035 “For purposes of subparagraph (C), property shall not be treated as used in a trade or business by reason of any activities of the real estate investment trust with respect to such property to the extent that such activities would not result in amounts received or accrued, directly or indirectly, with respect to such property being treated as other than rents from real property.”.