<enum>I</enum><header>Qualified timber gain</header> <section id="H95C3FA9C163C42AC82757200A00238E"><enum>101.</enum><header>Deduction for qualified timber gain</header> <subsection id="HED2BCB520EC6470FA651D0F61B34FD3D"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Part I of subchapter P of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> of the Internal Revenue Code of 1986 is amended by adding at the end the following new section:</text> <quoted-block style="OLC" id="H9E7ECEDD4804428A9DDDF5D9FD7BC809" display-inline="no-display-inline"> <section id="H854C0622F887483BAD579B096C5BC7C3"><enum>1203.</enum><header>Deduction for qualified timber gain</header> <subsection id="HB2AD16CCE4E94DE1004DDF79947D00EC"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">In the case of a taxpayer which elects the application of this section for a taxable year, there shall be allowed a deduction against gross income in an amount equal to 60 percent of the lesser of—</text> <paragraph id="H77EF7C01FF3F49A68B9C8194D5D8B944"><enum>(1)</enum><text display-inline="yes-display-inline">the taxpayer's qualified timber gain for such year, or</text></paragraph> <paragraph id="HC88E1B63626F4B5CB1B6AC8CD4B53C8E"><enum>(2)</enum><text display-inline="yes-display-inline">the taxpayer's net capital gain for such year.</text></paragraph></subsection> <subsection id="HF525C327F7BD4A9C8F60BE4612750023"><enum>(b)</enum><header>Qualified timber gain</header><text display-inline="yes-display-inline">For purposes of this section, the term <quote>qualified timber gain</quote> means, with respect to any taxpayer for any taxable year, the excess (if any) of—</text> <paragraph id="H641C7B3197F54D82BC21BB966DD2B4F8"><enum>(1)</enum><text display-inline="yes-display-inline">the sum of the taxpayer's gains described in subsections (a) and (b) of section 631 for such year, over</text></paragraph> <paragraph id="H05A2EB0D9D9649AE87227EF1FEA37A8"><enum>(2)</enum><text display-inline="yes-display-inline">the sum of the taxpayer's losses described in such subsections for such year.</text></paragraph></subsection> <subsection id="H4C4635AD80B14F9897053910BD289E3"><enum>(c)</enum><header>Special rules for pass-thru entities</header> <paragraph id="H283779970F3C4BB3A5ADD78B23941834"><enum>(1) </enum><text display-inline="yes-display-inline">In the case of any qualified timber gain of a pass-thru entity (as defined in section 1(h)(10)) other than a real estate investment trust, the election under this section shall be made separately by each taxpayer subject to tax on such gain.</text></paragraph> <paragraph id="HB343422E8BCC4177A2ED1B47F21B78AE"><enum>(2)</enum><text display-inline="yes-display-inline">In the case of any qualified timber gain of a real estate investment trust, the election under this section shall be made by the real estate investment trust.</text></paragraph></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block></subsection> <subsection id="HCD85D5E494E54EC7B790B94DB066B753"><enum>(b)</enum><header>Coordination with maximum capital gains rates</header> <paragraph id="HC058E96E6CDA4F0CB98C9945D06EE17B"><enum>(1)</enum><header>Taxpayers other than corporations</header><text display-inline="yes-display-inline">Paragraph (2) of <external-xref legal-doc="usc" parsable-cite="usc/26/1">section 1(h)</external-xref> of the Internal Revenue Code of 1986 is amended to read as follows:</text> <quoted-block style="OLC" id="H38CFE4EF4F0249E30070D442FEAFE7F3" display-inline="no-display-inline"> <paragraph id="H204B43194D1C4A8683F567B8089FC2AB"><enum>(2)</enum><header>Reduction of net capital gain</header><text display-inline="yes-display-inline">For purposes of this subsection, the net capital gain for any taxable year shall be reduced (but not below zero) by the sum of—</text> <subparagraph id="H5341A45474174696B579539FF96FF3D6"><enum>(A)</enum><text display-inline="yes-display-inline">the amount which the taxpayer takes into account as investment income under section 163(d)(4)(B)(iii), and</text></subparagraph> <subparagraph id="H07CE82209B9842B69F6307C2829500B6"><enum>(B)</enum><text display-inline="yes-display-inline">in the case of a taxable year with respect to which an election is in effect under section 1203, the lesser of—</text> <clause id="H17F4BE15C1A8440999971B945146C66E"><enum>(i)</enum><text display-inline="yes-display-inline">the amount described in paragraph (1) of section 1203(a), or</text></clause> <clause id="H8A56AFE6F86942BBB5FD6156F9573F62"><enum>(ii)</enum><text display-inline="yes-display-inline">the amount described in paragraph (2) of such section.</text></clause></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block></paragraph> <paragraph id="H248B02216C75401D80D3FCDDAD3D3385"><enum>(2)</enum><header>Corporations</header><text display-inline="yes-display-inline">Section 1201 of such Code is amended by redesignating subsection (b) as subsection (c) and inserting after subsection (a) the following new subsection:</text> <quoted-block style="OLC" id="HEC3269511A784978B0CA6282DA0085FC" display-inline="no-display-inline"> <subsection id="H31EB0C12037C48AABD85BE0186DACE50"><enum>(b)</enum><header>Qualified timber gain not taken into account</header><text display-inline="yes-display-inline">For purposes of this section, in the case of a corporation with respect to which an election is in effect under section 1203, the net capital gain for any taxable year shall be reduced (but not below zero) by the corporation's qualified timber gain (as defined in section 1203(b)).</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block></paragraph></subsection> <subsection id="H077CFB6B864A4F7C9473CC4900218D00"><enum>(c)</enum><header>Deduction allowed whether or not individual itemizes other deductions</header><text display-inline="yes-display-inline">Subsection (a) of <external-xref legal-doc="usc" parsable-cite="usc/26/62">section 62</external-xref> of the Internal Revenue Code of 1986 is amended by inserting before the last sentence the following new paragraph:</text> <quoted-block style="OLC" id="H95B500840657489F006ED6D78FEA8793" display-inline="no-display-inline"> <paragraph id="HD4F9769CCC8C4EBEB16504DCFAA20640"><enum>(22)</enum><header>Qualified timber gains</header><text display-inline="yes-display-inline">The deduction allowed by section 1203.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block></subsection> <subsection id="H2F40A37631F346C681061180A96B51AF"><enum>(d)</enum><header>Deduction allowed in computing adjusted current earnings</header><text display-inline="yes-display-inline">Subparagraph (C) of <external-xref legal-doc="usc" parsable-cite="usc/26/56">section 56(g)(4)</external-xref> of the Internal Revenue Code of 1986 is amended by adding at the end the following new clause: </text> <quoted-block style="OLC" id="HFFC6FAFCFB344586A2EE51DC73001ED" display-inline="no-display-inline"> <clause id="H8C4BE26D506645B6004BFEF3BC39C200"><enum>(vii)</enum><header>Deduction for qualified timber gain</header><text display-inline="yes-display-inline">Clause (i) shall not apply to any deduction allowed under section 1203.</text></clause><after-quoted-block>.</after-quoted-block></quoted-block></subsection> <subsection id="H63FA14C8AA014E668799D3AD2C79737D"><enum>(e)</enum><header>Deduction allowed in computing taxable income of electing small business trusts</header><text display-inline="yes-display-inline">Subparagraph (C) of <external-xref legal-doc="usc" parsable-cite="usc/26/641">section 641(c)(2)</external-xref> of the Internal Revenue Code of 1986 is amended by inserting after clause (iii) the following new clause:</text> <quoted-block style="OLC" id="H356124FD3AD8472581BD2EC38D5C12C7" display-inline="no-display-inline"> <clause id="H24F3CB6C488B403982D5CA62C371ECA"><enum>(iv)</enum><text display-inline="yes-display-inline">The deduction allowed under section 1203.</text></clause><after-quoted-block>.</after-quoted-block></quoted-block></subsection> <subsection id="H0897ADE209274853A15016067C03061F"><enum>(f)</enum><header>Treatment of qualified timber gain of real estate investment trusts</header><text display-inline="yes-display-inline">Paragraph (3) of <external-xref legal-doc="usc" parsable-cite="usc/26/857">section 857(b)</external-xref> of the Internal Revenue Code of 1986 is amended by inserting after subparagraph (F) the following new subparagraph: </text> <quoted-block style="OLC" id="H614B10CF0C544055A4460066F59DC3F4" display-inline="no-display-inline"> <subparagraph id="HAFE4777ECAF44A839BD7A8004BDE8F66"><enum>(G)</enum><header>Treatment of qualified timber gain</header><text display-inline="yes-display-inline">For purposes of this part, in the case of a real estate investment trust with respect to which an election is in effect under section 1203—</text> <clause id="HDDAF7973A41A4DB7AB4BBFF5E360431"><enum>(i)</enum><header>Reduction of net capital gain</header><text display-inline="yes-display-inline">The net capital gain of the real estate investment trust for any taxable year shall be reduced (but not below zero) by the real estate investment trust's qualified timber gain (as defined in section 1203(b)).</text></clause> <clause id="H496F48FF17D2472B8F94DA5C00201CAA"><enum>(ii)</enum><header>Adjustment to shareholder’s basis attributable to deduction for qualified timber gains</header> <subclause id="H537B6574919D448081105623BF0569F7"><enum>(I)</enum><header>In general</header><text display-inline="yes-display-inline">The adjusted basis of shares in the hands of the shareholder shall be increased by the amount of the deduction allowable under section 1203(a) as provided in subclauses (II) and (III).</text></subclause> <subclause id="H43002507C73F4926A00003B8CF7862A2"><enum>(II)</enum><header>Allocation of basis increase for distributions made during taxable year</header><text display-inline="yes-display-inline">For any taxable year of a real estate investment trust for which an election is in effect under section 1203, in the case of a distribution made with respect to shares during such taxable year of amounts attributable to the deduction allowable under section 1203(a), the adjusted basis of such shares shall be increased by the amount of such distributions.</text></subclause> <subclause id="HCEE3871786E64C26BAC2FE04BEFD3B5E"><enum>(III)</enum><header>Allocation of excess</header><text display-inline="yes-display-inline">If the deduction allowable under section 1203(a) for a taxable year exceeds the amount of distributions described in subclause (II), the excess shall be allocated to every shareholder of the real estate investment trust at the close of the trust’s taxable year in the same manner as if a distribution of such excess were made with respect to such shares.</text></subclause> <subclause id="H3263AFBF53B540D892FFEE3100F4086C"><enum>(IV)</enum><header>Designations</header><text display-inline="yes-display-inline">To the extent provided in regulations, a real estate investment trust shall designate the amounts described in subclauses (II) and (III) in a manner similar to the designations provided with respect to capital gains described in subparagraphs (C) and (D). </text></subclause> <subclause id="HB440B336D3D44B008D5D29A0EA09CAAB"><enum>(V)</enum><header>Definitions</header><text display-inline="yes-display-inline">As used in this subparagraph, the terms <quote>share</quote> and <quote>shareholder</quote> shall include beneficial interests and holders of beneficial interests, respectively.</text></subclause></clause> <clause id="H8DA354C9997C449FAC222F00BE225F30"><enum>(iii)</enum><header>Earnings and profits deduction for qualified timber gains</header><text display-inline="yes-display-inline">The deduction allowable under section 1203(a) for a taxable year shall be allowed as a deduction in computing the earnings and profits of the real estate investment trust for such taxable year. The earnings and profits of any such shareholder which is a corporation shall be appropriately adjusted in accordance with regulations prescribed by the Secretary.</text></clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block></subsection> <subsection id="HCADF52DADBFF4E63964567779F05394D"><enum>(g)</enum><header>Loss attributable to basis adjustment for deduction for qualified timber gain of real estate investment trusts</header> <paragraph id="H02365B46EE0047A292D23425BBFFA2C"><enum>(1)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/857">Section 857(b)(8)</external-xref> of the Internal Revenue Code of 1986 is amended by redesignating subparagraphs (B) and (C) as subparagraphs (C) and (D), respectively, and by inserting after subparagraph (A) the following new subparagraph:</text> <quoted-block style="OLC" id="HFBFCAC30F15249E7ACECC251EDE403DA" display-inline="no-display-inline"> <subparagraph id="H58B5727FF63F4ACEAAC894C2E717578B"><enum>(B)</enum><header>Loss attributable to basis adjustment for deduction for qualified timber gain</header><text>If—</text> <clause id="H32639D2F51E34E21B4C099100312FC37"><enum>(i)</enum><text display-inline="yes-display-inline">a shareholder of a real estate investment trust receives a basis adjustment provided under subsection (b)(3)(G)(ii), and</text></clause> <clause id="HB7C23EBB0F66470ABCBEF6E700EF14D7"><enum>(ii)</enum><text display-inline="yes-display-inline">the taxpayer has held such share or interest for 6 months or less, </text></clause><continuation-text continuation-text-level="subparagraph">then any loss on the sale or exchange of such share or interest shall, to the extent of the amount described in clause (i), be disallowed.</continuation-text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block></paragraph> <paragraph id="H6161DEEB83F34BC087062ECAFAB5338"><enum>(2)</enum><text display-inline="yes-display-inline">Subparagraph (D) of section 857(b)(8) of such Code, as redesignated by paragraph (1), is amended by striking <quote>subparagraph (A)</quote> and inserting <quote>subparagraphs (A) and (B)</quote>.</text></paragraph> </subsection> <subsection id="H9807CEEFBABE484699D1310000120043"><enum>(h)</enum><header>Conforming amendments</header> <paragraph id="H5DC5A29332FC40BD9D00FE241F404C05"><enum>(1)</enum><text display-inline="yes-display-inline">Subparagraph (B) of <external-xref legal-doc="usc" parsable-cite="usc/26/172">section 172(d)(2)</external-xref> of the Internal Revenue Code of 1986 is amended to read as follows:</text> <quoted-block style="OLC" id="HCCCE0E193477456B8516E3BD252130DD" display-inline="no-display-inline"> <subparagraph id="H7BCBBD1CD8EA4D429319F39F76C032ED"><enum>(B)</enum><text display-inline="yes-display-inline">the exclusion under section 1202, and the deduction under section 1203, shall not be allowed.</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block></paragraph> <paragraph id="HC1B87DD4DEB3480E99FB59322EAC5EC"><enum>(2)</enum><text display-inline="yes-display-inline">Paragraph (4) of section 642(c) of such Code is amended by striking the first sentence and inserting <quote>To the extent that the amount otherwise allowable as a deduction under this subsection consists of gain described in section 1202(a) or qualified timber gain (as defined in section 1203(b)), proper adjustment shall be made for any exclusion allowable to the estate or trust under section 1202 and for any deduction allowable to the estate or trust under section 1203.</quote></text></paragraph> <paragraph id="H7BAB39EA1FD54F3099494D7757FE0505"><enum>(3)</enum><text display-inline="yes-display-inline">Paragraph (3) of section 643(a) of such Code is amended by striking the last sentence and inserting <quote>The exclusion under section 1202 and the deduction under section 1203 shall not be taken into account.</quote>.</text></paragraph> <paragraph id="H2EB72422B9A044CCA112AA90CFB4EADB"><enum>(4)</enum><text display-inline="yes-display-inline">Subparagraph (C) of section 643(a)(6) of such Code is amended to read as follows:</text> <quoted-block style="OLC" id="H0B4AB86441CF41EAB800789D4E6DE813" display-inline="no-display-inline"> <subparagraph id="H20012112967A4450B56356CD87681F04"><enum>(C)</enum><text display-inline="yes-display-inline">Paragraph (3) shall not apply to a foreign trust. In the case of such a trust—</text> <clause id="H1442A1EE65304A4B8F7870A3B4517000"><enum>(i)</enum><text display-inline="yes-display-inline">there shall be included gains from the sale or exchange of capital assets, reduced by losses from such sales or exchanges to the extent such losses do not exceed gains from such sales or exchanges, and</text></clause> <clause id="H1C46E5658481492B91178B79CB67BFFF"><enum>(ii)</enum><text display-inline="yes-display-inline">the deduction under section 1203 shall not be taken into account.</text></clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block></paragraph> <paragraph id="H62F98E5D2F324470B957A8B7D325677E"><enum>(5)</enum><text display-inline="yes-display-inline">Paragraph (4) of section 691(c) of such Code is amended by inserting <quote>1203,</quote> after <quote>1202,</quote>.</text></paragraph> <paragraph id="H35101559AD994F93A22B01FC4C07B0D0"><enum>(6)</enum><text display-inline="yes-display-inline">Paragraph (2) of section 871(a) of such Code is amended by inserting <quote>or 1203,</quote> after <quote>1202,</quote>.</text></paragraph> <paragraph id="H297CF690BE7A4DDFB005693E4099AEB0"><enum>(7)</enum><text display-inline="yes-display-inline">The table of sections for part I of subchapter P of chapter 1 of such Code is amended by adding at the end the following new item:</text> <toc regeneration="no-regeneration"> <toc-entry level="section"><quote>Sec. 1203. Deduction for qualified timber gain.</quote>.</toc-entry></toc></paragraph></subsection> <subsection id="H1C287D348BB043778B36881C58CC6742"><enum>(i)</enum><header>Effective date</header> <paragraph id="H8044D6500B9248E9A6009361B8B14153"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to taxable years ending after the date of the enactment of this Act.</text></paragraph> <paragraph id="H8444A923EF7F4C3CBF035760FA2BE7B4"><enum>(2)</enum><header>Taxable years which include date of enactment</header><text display-inline="yes-display-inline">In the case of any taxable year which includes the date of the enactment of this Act, for purposes of the Internal Revenue Code of 1986, the taxpayer's qualified timber gain shall not exceed the excess that would be described in section 1203(b) of such Code, as added by this section, if only dispositions of timber after such date were taken into account.</text></paragraph></subsection></section> <section id="H35D391E8A989457AA1B3B7357CA09DF0"><enum>102.</enum><header>Excise tax not applicable to section 1203 deduction of real estate investment trusts</header> <subsection id="H7899DAC686144D7AA48BB59D968455DA"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subparagraphs (A) and (B) of <external-xref legal-doc="usc" parsable-cite="usc/26/4981">section 4981(b)(1)</external-xref> of the Internal Revenue Code of 1986 are amended to read as follows:</text> <quoted-block style="OLC" id="HD61E8A7C129E4C998436F9B3FDD6447" display-inline="no-display-inline"> <subparagraph id="H803B62E97B324F349179F4FAE6E8C1C7"><enum>(A)</enum><text display-inline="yes-display-inline">85 percent of the real estate investment trust’s ordinary income, without regard to any deduction allowable under section 1203, for such calendar year, plus</text></subparagraph> <subparagraph id="HDCB9E01460244B60A4C1DE658515CFA0"><enum>(B)</enum><text display-inline="yes-display-inline">95 percent of the real estate investment trust’s capital gain net income, reduced for any deduction allowable under section 1203, for such calendar year.</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block></subsection> <subsection id="HD10BF31CD3C741C8AF12709D16083475"><enum>(b)</enum><header>Effective date</header> <paragraph id="HF854A17DA6ED467A915F2BA689347E65"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to taxable years ending after the date of the enactment of this Act.</text></paragraph> <paragraph id="H728254FF45D840D991D984EEA542B4D7"><enum>(2)</enum><header>Taxable years which include date of enactment</header><text display-inline="yes-display-inline">In the case of any taxable year which includes the date of the enactment of this Act, for purposes of the Internal Revenue Code of 1986, the taxpayer's qualified timber gain shall not exceed the excess that would be described in section 1203(b) of such Code, as added by this Act, if only dispositions of timber after such date were taken into account.</text></paragraph></subsection></section>

110 HR 1937 IH: Timber Revitalization and Economic Enhancement (TREE) Act of 2007 U.S. House of Representatives 2007-04-19 text/xml EN Pursuant to Title 17 Section 105 of the United States Code, this file is not subject to copyright protection and is in the public domain.

Short title

This Act may be cited as the

Timber Revitalization and Economic Enhancement (TREE) Act of 2007

<enum>I</enum><header>Qualified timber gain</header> <section id="H95C3FA9C163C42AC82757200A00238E"><enum>101.</enum><header>Deduction for qualified timber gain</header> <subsection id="HED2BCB520EC6470FA651D0F61B34FD3D"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Part I of subchapter P of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> of the Internal Revenue Code of 1986 is amended by adding at the end the following new section:</text> <quoted-block style="OLC" id="H9E7ECEDD4804428A9DDDF5D9FD7BC809" display-inline="no-display-inline"> <section id="H854C0622F887483BAD579B096C5BC7C3"><enum>1203.</enum><header>Deduction for qualified timber gain</header> <subsection id="HB2AD16CCE4E94DE1004DDF79947D00EC"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">In the case of a taxpayer which elects the application of this section for a taxable year, there shall be allowed a deduction against gross income in an amount equal to 60 percent of the lesser of—</text> <paragraph id="H77EF7C01FF3F49A68B9C8194D5D8B944"><enum>(1)</enum><text display-inline="yes-display-inline">the taxpayer's qualified timber gain for such year, or</text></paragraph> <paragraph id="HC88E1B63626F4B5CB1B6AC8CD4B53C8E"><enum>(2)</enum><text display-inline="yes-display-inline">the taxpayer's net capital gain for such year.</text></paragraph></subsection> <subsection id="HF525C327F7BD4A9C8F60BE4612750023"><enum>(b)</enum><header>Qualified timber gain</header><text display-inline="yes-display-inline">For purposes of this section, the term <quote>qualified timber gain</quote> means, with respect to any taxpayer for any taxable year, the excess (if any) of—</text> <paragraph id="H641C7B3197F54D82BC21BB966DD2B4F8"><enum>(1)</enum><text display-inline="yes-display-inline">the sum of the taxpayer's gains described in subsections (a) and (b) of section 631 for such year, over</text></paragraph> <paragraph id="H05A2EB0D9D9649AE87227EF1FEA37A8"><enum>(2)</enum><text display-inline="yes-display-inline">the sum of the taxpayer's losses described in such subsections for such year.</text></paragraph></subsection> <subsection id="H4C4635AD80B14F9897053910BD289E3"><enum>(c)</enum><header>Special rules for pass-thru entities</header> <paragraph id="H283779970F3C4BB3A5ADD78B23941834"><enum>(1) </enum><text display-inline="yes-display-inline">In the case of any qualified timber gain of a pass-thru entity (as defined in section 1(h)(10)) other than a real estate investment trust, the election under this section shall be made separately by each taxpayer subject to tax on such gain.</text></paragraph> <paragraph id="HB343422E8BCC4177A2ED1B47F21B78AE"><enum>(2)</enum><text display-inline="yes-display-inline">In the case of any qualified timber gain of a real estate investment trust, the election under this section shall be made by the real estate investment trust.</text></paragraph></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block></subsection> <subsection id="HCD85D5E494E54EC7B790B94DB066B753"><enum>(b)</enum><header>Coordination with maximum capital gains rates</header> <paragraph id="HC058E96E6CDA4F0CB98C9945D06EE17B"><enum>(1)</enum><header>Taxpayers other than corporations</header><text display-inline="yes-display-inline">Paragraph (2) of <external-xref legal-doc="usc" parsable-cite="usc/26/1">section 1(h)</external-xref> of the Internal Revenue Code of 1986 is amended to read as follows:</text> <quoted-block style="OLC" id="H38CFE4EF4F0249E30070D442FEAFE7F3" display-inline="no-display-inline"> <paragraph id="H204B43194D1C4A8683F567B8089FC2AB"><enum>(2)</enum><header>Reduction of net capital gain</header><text display-inline="yes-display-inline">For purposes of this subsection, the net capital gain for any taxable year shall be reduced (but not below zero) by the sum of—</text> <subparagraph id="H5341A45474174696B579539FF96FF3D6"><enum>(A)</enum><text display-inline="yes-display-inline">the amount which the taxpayer takes into account as investment income under section 163(d)(4)(B)(iii), and</text></subparagraph> <subparagraph id="H07CE82209B9842B69F6307C2829500B6"><enum>(B)</enum><text display-inline="yes-display-inline">in the case of a taxable year with respect to which an election is in effect under section 1203, the lesser of—</text> <clause id="H17F4BE15C1A8440999971B945146C66E"><enum>(i)</enum><text display-inline="yes-display-inline">the amount described in paragraph (1) of section 1203(a), or</text></clause> <clause id="H8A56AFE6F86942BBB5FD6156F9573F62"><enum>(ii)</enum><text display-inline="yes-display-inline">the amount described in paragraph (2) of such section.</text></clause></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block></paragraph> <paragraph id="H248B02216C75401D80D3FCDDAD3D3385"><enum>(2)</enum><header>Corporations</header><text display-inline="yes-display-inline">Section 1201 of such Code is amended by redesignating subsection (b) as subsection (c) and inserting after subsection (a) the following new subsection:</text> <quoted-block style="OLC" id="HEC3269511A784978B0CA6282DA0085FC" display-inline="no-display-inline"> <subsection id="H31EB0C12037C48AABD85BE0186DACE50"><enum>(b)</enum><header>Qualified timber gain not taken into account</header><text display-inline="yes-display-inline">For purposes of this section, in the case of a corporation with respect to which an election is in effect under section 1203, the net capital gain for any taxable year shall be reduced (but not below zero) by the corporation's qualified timber gain (as defined in section 1203(b)).</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block></paragraph></subsection> <subsection id="H077CFB6B864A4F7C9473CC4900218D00"><enum>(c)</enum><header>Deduction allowed whether or not individual itemizes other deductions</header><text display-inline="yes-display-inline">Subsection (a) of <external-xref legal-doc="usc" parsable-cite="usc/26/62">section 62</external-xref> of the Internal Revenue Code of 1986 is amended by inserting before the last sentence the following new paragraph:</text> <quoted-block style="OLC" id="H95B500840657489F006ED6D78FEA8793" display-inline="no-display-inline"> <paragraph id="HD4F9769CCC8C4EBEB16504DCFAA20640"><enum>(22)</enum><header>Qualified timber gains</header><text display-inline="yes-display-inline">The deduction allowed by section 1203.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block></subsection> <subsection id="H2F40A37631F346C681061180A96B51AF"><enum>(d)</enum><header>Deduction allowed in computing adjusted current earnings</header><text display-inline="yes-display-inline">Subparagraph (C) of <external-xref legal-doc="usc" parsable-cite="usc/26/56">section 56(g)(4)</external-xref> of the Internal Revenue Code of 1986 is amended by adding at the end the following new clause: </text> <quoted-block style="OLC" id="HFFC6FAFCFB344586A2EE51DC73001ED" display-inline="no-display-inline"> <clause id="H8C4BE26D506645B6004BFEF3BC39C200"><enum>(vii)</enum><header>Deduction for qualified timber gain</header><text display-inline="yes-display-inline">Clause (i) shall not apply to any deduction allowed under section 1203.</text></clause><after-quoted-block>.</after-quoted-block></quoted-block></subsection> <subsection id="H63FA14C8AA014E668799D3AD2C79737D"><enum>(e)</enum><header>Deduction allowed in computing taxable income of electing small business trusts</header><text display-inline="yes-display-inline">Subparagraph (C) of <external-xref legal-doc="usc" parsable-cite="usc/26/641">section 641(c)(2)</external-xref> of the Internal Revenue Code of 1986 is amended by inserting after clause (iii) the following new clause:</text> <quoted-block style="OLC" id="H356124FD3AD8472581BD2EC38D5C12C7" display-inline="no-display-inline"> <clause id="H24F3CB6C488B403982D5CA62C371ECA"><enum>(iv)</enum><text display-inline="yes-display-inline">The deduction allowed under section 1203.</text></clause><after-quoted-block>.</after-quoted-block></quoted-block></subsection> <subsection id="H0897ADE209274853A15016067C03061F"><enum>(f)</enum><header>Treatment of qualified timber gain of real estate investment trusts</header><text display-inline="yes-display-inline">Paragraph (3) of <external-xref legal-doc="usc" parsable-cite="usc/26/857">section 857(b)</external-xref> of the Internal Revenue Code of 1986 is amended by inserting after subparagraph (F) the following new subparagraph: </text> <quoted-block style="OLC" id="H614B10CF0C544055A4460066F59DC3F4" display-inline="no-display-inline"> <subparagraph id="HAFE4777ECAF44A839BD7A8004BDE8F66"><enum>(G)</enum><header>Treatment of qualified timber gain</header><text display-inline="yes-display-inline">For purposes of this part, in the case of a real estate investment trust with respect to which an election is in effect under section 1203—</text> <clause id="HDDAF7973A41A4DB7AB4BBFF5E360431"><enum>(i)</enum><header>Reduction of net capital gain</header><text display-inline="yes-display-inline">The net capital gain of the real estate investment trust for any taxable year shall be reduced (but not below zero) by the real estate investment trust's qualified timber gain (as defined in section 1203(b)).</text></clause> <clause id="H496F48FF17D2472B8F94DA5C00201CAA"><enum>(ii)</enum><header>Adjustment to shareholder’s basis attributable to deduction for qualified timber gains</header> <subclause id="H537B6574919D448081105623BF0569F7"><enum>(I)</enum><header>In general</header><text display-inline="yes-display-inline">The adjusted basis of shares in the hands of the shareholder shall be increased by the amount of the deduction allowable under section 1203(a) as provided in subclauses (II) and (III).</text></subclause> <subclause id="H43002507C73F4926A00003B8CF7862A2"><enum>(II)</enum><header>Allocation of basis increase for distributions made during taxable year</header><text display-inline="yes-display-inline">For any taxable year of a real estate investment trust for which an election is in effect under section 1203, in the case of a distribution made with respect to shares during such taxable year of amounts attributable to the deduction allowable under section 1203(a), the adjusted basis of such shares shall be increased by the amount of such distributions.</text></subclause> <subclause id="HCEE3871786E64C26BAC2FE04BEFD3B5E"><enum>(III)</enum><header>Allocation of excess</header><text display-inline="yes-display-inline">If the deduction allowable under section 1203(a) for a taxable year exceeds the amount of distributions described in subclause (II), the excess shall be allocated to every shareholder of the real estate investment trust at the close of the trust’s taxable year in the same manner as if a distribution of such excess were made with respect to such shares.</text></subclause> <subclause id="H3263AFBF53B540D892FFEE3100F4086C"><enum>(IV)</enum><header>Designations</header><text display-inline="yes-display-inline">To the extent provided in regulations, a real estate investment trust shall designate the amounts described in subclauses (II) and (III) in a manner similar to the designations provided with respect to capital gains described in subparagraphs (C) and (D). </text></subclause> <subclause id="HB440B336D3D44B008D5D29A0EA09CAAB"><enum>(V)</enum><header>Definitions</header><text display-inline="yes-display-inline">As used in this subparagraph, the terms <quote>share</quote> and <quote>shareholder</quote> shall include beneficial interests and holders of beneficial interests, respectively.</text></subclause></clause> <clause id="H8DA354C9997C449FAC222F00BE225F30"><enum>(iii)</enum><header>Earnings and profits deduction for qualified timber gains</header><text display-inline="yes-display-inline">The deduction allowable under section 1203(a) for a taxable year shall be allowed as a deduction in computing the earnings and profits of the real estate investment trust for such taxable year. The earnings and profits of any such shareholder which is a corporation shall be appropriately adjusted in accordance with regulations prescribed by the Secretary.</text></clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block></subsection> <subsection id="HCADF52DADBFF4E63964567779F05394D"><enum>(g)</enum><header>Loss attributable to basis adjustment for deduction for qualified timber gain of real estate investment trusts</header> <paragraph id="H02365B46EE0047A292D23425BBFFA2C"><enum>(1)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/857">Section 857(b)(8)</external-xref> of the Internal Revenue Code of 1986 is amended by redesignating subparagraphs (B) and (C) as subparagraphs (C) and (D), respectively, and by inserting after subparagraph (A) the following new subparagraph:</text> <quoted-block style="OLC" id="HFBFCAC30F15249E7ACECC251EDE403DA" display-inline="no-display-inline"> <subparagraph id="H58B5727FF63F4ACEAAC894C2E717578B"><enum>(B)</enum><header>Loss attributable to basis adjustment for deduction for qualified timber gain</header><text>If—</text> <clause id="H32639D2F51E34E21B4C099100312FC37"><enum>(i)</enum><text display-inline="yes-display-inline">a shareholder of a real estate investment trust receives a basis adjustment provided under subsection (b)(3)(G)(ii), and</text></clause> <clause id="HB7C23EBB0F66470ABCBEF6E700EF14D7"><enum>(ii)</enum><text display-inline="yes-display-inline">the taxpayer has held such share or interest for 6 months or less, </text></clause><continuation-text continuation-text-level="subparagraph">then any loss on the sale or exchange of such share or interest shall, to the extent of the amount described in clause (i), be disallowed.</continuation-text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block></paragraph> <paragraph id="H6161DEEB83F34BC087062ECAFAB5338"><enum>(2)</enum><text display-inline="yes-display-inline">Subparagraph (D) of section 857(b)(8) of such Code, as redesignated by paragraph (1), is amended by striking <quote>subparagraph (A)</quote> and inserting <quote>subparagraphs (A) and (B)</quote>.</text></paragraph> </subsection> <subsection id="H9807CEEFBABE484699D1310000120043"><enum>(h)</enum><header>Conforming amendments</header> <paragraph id="H5DC5A29332FC40BD9D00FE241F404C05"><enum>(1)</enum><text display-inline="yes-display-inline">Subparagraph (B) of <external-xref legal-doc="usc" parsable-cite="usc/26/172">section 172(d)(2)</external-xref> of the Internal Revenue Code of 1986 is amended to read as follows:</text> <quoted-block style="OLC" id="HCCCE0E193477456B8516E3BD252130DD" display-inline="no-display-inline"> <subparagraph id="H7BCBBD1CD8EA4D429319F39F76C032ED"><enum>(B)</enum><text display-inline="yes-display-inline">the exclusion under section 1202, and the deduction under section 1203, shall not be allowed.</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block></paragraph> <paragraph id="HC1B87DD4DEB3480E99FB59322EAC5EC"><enum>(2)</enum><text display-inline="yes-display-inline">Paragraph (4) of section 642(c) of such Code is amended by striking the first sentence and inserting <quote>To the extent that the amount otherwise allowable as a deduction under this subsection consists of gain described in section 1202(a) or qualified timber gain (as defined in section 1203(b)), proper adjustment shall be made for any exclusion allowable to the estate or trust under section 1202 and for any deduction allowable to the estate or trust under section 1203.</quote></text></paragraph> <paragraph id="H7BAB39EA1FD54F3099494D7757FE0505"><enum>(3)</enum><text display-inline="yes-display-inline">Paragraph (3) of section 643(a) of such Code is amended by striking the last sentence and inserting <quote>The exclusion under section 1202 and the deduction under section 1203 shall not be taken into account.</quote>.</text></paragraph> <paragraph id="H2EB72422B9A044CCA112AA90CFB4EADB"><enum>(4)</enum><text display-inline="yes-display-inline">Subparagraph (C) of section 643(a)(6) of such Code is amended to read as follows:</text> <quoted-block style="OLC" id="H0B4AB86441CF41EAB800789D4E6DE813" display-inline="no-display-inline"> <subparagraph id="H20012112967A4450B56356CD87681F04"><enum>(C)</enum><text display-inline="yes-display-inline">Paragraph (3) shall not apply to a foreign trust. In the case of such a trust—</text> <clause id="H1442A1EE65304A4B8F7870A3B4517000"><enum>(i)</enum><text display-inline="yes-display-inline">there shall be included gains from the sale or exchange of capital assets, reduced by losses from such sales or exchanges to the extent such losses do not exceed gains from such sales or exchanges, and</text></clause> <clause id="H1C46E5658481492B91178B79CB67BFFF"><enum>(ii)</enum><text display-inline="yes-display-inline">the deduction under section 1203 shall not be taken into account.</text></clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block></paragraph> <paragraph id="H62F98E5D2F324470B957A8B7D325677E"><enum>(5)</enum><text display-inline="yes-display-inline">Paragraph (4) of section 691(c) of such Code is amended by inserting <quote>1203,</quote> after <quote>1202,</quote>.</text></paragraph> <paragraph id="H35101559AD994F93A22B01FC4C07B0D0"><enum>(6)</enum><text display-inline="yes-display-inline">Paragraph (2) of section 871(a) of such Code is amended by inserting <quote>or 1203,</quote> after <quote>1202,</quote>.</text></paragraph> <paragraph id="H297CF690BE7A4DDFB005693E4099AEB0"><enum>(7)</enum><text display-inline="yes-display-inline">The table of sections for part I of subchapter P of chapter 1 of such Code is amended by adding at the end the following new item:</text> <toc regeneration="no-regeneration"> <toc-entry level="section"><quote>Sec. 1203. Deduction for qualified timber gain.</quote>.</toc-entry></toc></paragraph></subsection> <subsection id="H1C287D348BB043778B36881C58CC6742"><enum>(i)</enum><header>Effective date</header> <paragraph id="H8044D6500B9248E9A6009361B8B14153"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to taxable years ending after the date of the enactment of this Act.</text></paragraph> <paragraph id="H8444A923EF7F4C3CBF035760FA2BE7B4"><enum>(2)</enum><header>Taxable years which include date of enactment</header><text display-inline="yes-display-inline">In the case of any taxable year which includes the date of the enactment of this Act, for purposes of the Internal Revenue Code of 1986, the taxpayer's qualified timber gain shall not exceed the excess that would be described in section 1203(b) of such Code, as added by this section, if only dispositions of timber after such date were taken into account.</text></paragraph></subsection></section> <section id="H35D391E8A989457AA1B3B7357CA09DF0"><enum>102.</enum><header>Excise tax not applicable to section 1203 deduction of real estate investment trusts</header> <subsection id="H7899DAC686144D7AA48BB59D968455DA"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subparagraphs (A) and (B) of <external-xref legal-doc="usc" parsable-cite="usc/26/4981">section 4981(b)(1)</external-xref> of the Internal Revenue Code of 1986 are amended to read as follows:</text> <quoted-block style="OLC" id="HD61E8A7C129E4C998436F9B3FDD6447" display-inline="no-display-inline"> <subparagraph id="H803B62E97B324F349179F4FAE6E8C1C7"><enum>(A)</enum><text display-inline="yes-display-inline">85 percent of the real estate investment trust’s ordinary income, without regard to any deduction allowable under section 1203, for such calendar year, plus</text></subparagraph> <subparagraph id="HDCB9E01460244B60A4C1DE658515CFA0"><enum>(B)</enum><text display-inline="yes-display-inline">95 percent of the real estate investment trust’s capital gain net income, reduced for any deduction allowable under section 1203, for such calendar year.</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block></subsection> <subsection id="HD10BF31CD3C741C8AF12709D16083475"><enum>(b)</enum><header>Effective date</header> <paragraph id="HF854A17DA6ED467A915F2BA689347E65"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to taxable years ending after the date of the enactment of this Act.</text></paragraph> <paragraph id="H728254FF45D840D991D984EEA542B4D7"><enum>(2)</enum><header>Taxable years which include date of enactment</header><text display-inline="yes-display-inline">In the case of any taxable year which includes the date of the enactment of this Act, for purposes of the Internal Revenue Code of 1986, the taxpayer's qualified timber gain shall not exceed the excess that would be described in section 1203(b) of such Code, as added by this Act, if only dispositions of timber after such date were taken into account.</text></paragraph></subsection></section> <enum>II</enum><header>Timber reit modernization</header> <section id="H8BBB0A3B56E447478E4F1F6C23B725E7"><enum>201.</enum><header>Timber gain qualifying income for reits</header> <subsection id="H75E293459C074CE7915F4BD27EBAA4BF"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/856">Section 856(c)(5)</external-xref> of the Internal Revenue Code of 1986 is amended by adding after subparagraph (G) the following new subparagraph:</text> <quoted-block style="OLC" id="HB57B79C0BC994D13AEEAD4C59D7251A5" display-inline="no-display-inline"> <subparagraph id="H4FEAAF25D5A94A3CAA33F8532F460069"><enum>(H)</enum><header>Treatment of timber gains</header> <clause id="HCAD6071ACC7249068DD5887F824C7CBF"><enum>(i)</enum><header>In general</header><text display-inline="yes-display-inline">For purposes of this part, gain from the sale of real property described in paragraph (2)(D) and (3)(C) shall include gain which is—</text> <subclause id="HB19A7ABDCCC54335B17DB4B67318A28B"><enum>(I)</enum><text display-inline="yes-display-inline">recognized by an election under section 631(a) from timber owned by the real estate investment trust, the cutting of which is provided by a taxable REIT subsidiary of the real estate investment trust;</text></subclause> <subclause id="HB925D4DDCC3B4DA8A33445585950C1C6"><enum>(II)</enum><text display-inline="yes-display-inline">recognized under section 631(b); or</text></subclause> <subclause id="H48DA7211EFD245E49245B0F7EC39BB00"><enum>(III)</enum><text display-inline="yes-display-inline">income which would constitute gain under subclause (I) or (II) but for the failure to meet the 1-year holding period requirement.</text></subclause></clause> <clause id="HA17A141AB10E42C68F64711E372900F1"><enum>(ii)</enum><header>Special rules</header> <subclause id="H6377D73CEAA3493493DD00C2FCA9CB07"><enum>(I)</enum><text display-inline="yes-display-inline">For purposes of this subtitle, cut timber, the gain of which is recognized by a real estate investment trust pursuant to an election under section 631(a) described in clause (i)(I) or so much of clause (i)(III) as relates to clause (i)(I), shall be deemed to be sold to the taxable REIT subsidiary of the real estate investment trust on the first day of the taxable year.</text></subclause> <subclause id="H81ABF99ADD0042EA9DD2C54D2FFEF578"><enum>(II)</enum><text display-inline="yes-display-inline">For purposes of this subtitle, income described in this subparagraph shall not be treated as gain from the sale of property described in section 1221(a)(1).</text></subclause></clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block></subsection> <subsection id="HD99F12C2C87D4F40BB6F5E94007211DA"><enum>(b)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to dispositions after the date of the enactment of this Act.</text></subsection></section> <section id="H122993E688694552ABCACEE6C38705B0"><enum>202.</enum><header>Mineral royalty income qualifying income for timber reits</header> <subsection id="HCB1AB48083ED4D36A955CC9030D95600"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/856">Section 856(c)(2)</external-xref> of the Internal Revenue Code of 1986 is amended by adding after subparagraph (H) the following new subparagraph:</text> <quoted-block style="OLC" id="HF7922B5CA58D4447BB7DCC5B69F1AE09" display-inline="no-display-inline"> <subparagraph id="H07C7AC57C7904034ACB025864C2E3E4"><enum>(I)</enum><text display-inline="yes-display-inline">mineral royalty income from real property owned by a timber real estate investment trust (as defined in paragraph (5)(I)) held, or once held, in connection with the trade or business of producing timber by such real estate investment trust;</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block></subsection> <subsection id="HA33936507DD546009D467EA3BE01C845"><enum>(b)</enum><header>Timber real estate investment trust</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/856">Section 856(c)(5)</external-xref> of the Internal Revenue Code of 1986 is amended by adding after subparagraph (H) the following new subparagraph:</text> <quoted-block style="OLC" id="HB1B7B498C6774F5C9058E2DFB4F1C06" display-inline="no-display-inline"> <subparagraph id="H7A0FD97DE2CF40E594BC5BCC07966B6D"><enum>(I)</enum><header>Timber real estate investment trust</header><text display-inline="yes-display-inline">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.</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block></subsection> <subsection id="HDBED783151EB4FC0A0FF1B291C7686D0"><enum>(c)</enum><header>Effective dates</header> <paragraph id="H28BDDCF114B743069FDE2EBD653000BF"><enum>(1)</enum><header>Subsection <enum-in-header>(a)</enum-in-header></header><text>The amendment made by subsection (a) shall apply to income earned after the date of the enactment of this Act.</text></paragraph> <paragraph id="H9700B0305317488ABFD914FF023F23B4"><enum>(2)</enum><header>Subsection <enum-in-header>(b)</enum-in-header></header><text>The amendments made by subsection (b) shall apply to taxable years ending after the date of the enactment of this Act. </text></paragraph></subsection></section> <section id="HD2E7CBF2E25746169F30ABE4042E3B28"><enum>203.</enum><header>Conforming taxable reit subsidiary asset test for timber reits</header> <subsection id="H1063F7C8C77B493C99C4B5320928CBA"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/856">Section 856(c)(4)(B)(ii)</external-xref> of the Internal Revenue Code of 1986 is amended by inserting <quote>(25 percent in the case of a timber real estate investment trust)</quote> after <quote>not more than 20 percent of the value of its total assets is represented by securities of one or more taxable REIT subsidiaries</quote>.</text></subsection> <subsection id="HCDE1EB1B04254E4D92F544B86257613F"><enum>(b)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendment made by this section shall be effective after the date of the enactment of this Act.</text></subsection></section> <section id="HD79DE28D1C904FA899731E56DD0A510"><enum>204.</enum><header>Safe harbor for timber property</header> <subsection id="H4A6E4E5F2CA0492CA135A112557EECB"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/857">Section 857(b)(6)</external-xref> of the Internal Revenue Code of 1986 (relating to income from prohibited transactions) is amended—</text> <paragraph id="H7812D08CA43D4878A22FD36FA3904B42"><enum>(1)</enum><text display-inline="yes-display-inline">by striking <quote>4 years</quote> in subparagraph (D)(i) and inserting <quote>2 years</quote>, and</text></paragraph> <paragraph id="H8568D01AAA0146DCADA79D0101446709"><enum>(2)</enum><text display-inline="yes-display-inline">by striking <quote>4-year period</quote> in subparagraphs (D)(ii) and (D)(iii) and inserting <quote>2-year period</quote>.</text></paragraph></subsection> <subsection id="H27A8910CEACF48FFA2CCDF97736338CB"><enum>(b)</enum><header>Prohibited transactions</header><text display-inline="yes-display-inline">Section 857(b)(6)(D)(v) of such Code is amended by inserting <quote>or a taxable REIT subsidiary</quote> after <quote>independent contractor (as defined in section 856(d)(3)) from whom the trust itself does not derive or receive any income</quote>.</text></subsection> <subsection id="H82D427645B7F4E818B2396807C9023D3"><enum>(c)</enum><header>Sales that are not prohibited transactions</header><text display-inline="yes-display-inline">Section 857(b)(6) of such Code is amended by adding at the end the following new subparagraph:</text> <quoted-block style="OLC" id="H61283D3CCC7D42578CD2EA44C0B63F92" display-inline="no-display-inline"> <subparagraph id="HEE23B518F9214E79B0F9DD4D3567B99C"><enum>(G)</enum><header>Sales of property that are not a prohibited transaction</header><text display-inline="yes-display-inline">The sale of property which is not a prohibited transaction through application of subparagraph (D) shall be considered property held for investment or for use in a trade or business and not property described in section 1221(a)(1) for all purposes of this subtitle.</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block></subsection> <subsection id="H2C496A6D68A449CD8500A0E6F665336E"><enum>(d)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this section shall be effective for dispositions after the date of the enactment of this Act.</text></subsection></section>