I 111th CONGRESS 1st Session H. R. 3497 IN THE HOUSE OF REPRESENTATIVES July 31, 2009 Mr. Levin (for himself, Mr. Van Hollen, and Mr. McDermott) introduced the following bill; which was referred to the Committee on Ways and Means A BILL To amend the Internal Revenue Code of 1986 to provide that indebtedness incurred by a partnership in acquiring securities and commodities is not treated as acquisition indebtedness for purposes of determining the unrelated business taxable income of organizations which are partners with limited liability.

1.

Indebtedness incurred by a partnership in acquiring securities and commodities not treated as acquisition indebtedness for purposes of determining unrelated business taxable income of organizations which are partners with limited liability

(a)

In general

Subsection (c) of section 514 of the Internal Revenue Code of 1986 (relating to acquisition indebtedness) is amended by adding at the end the following new paragraph: (10)

Securities and commodities acquired by partnerships in which an organization is a partner with limited liability

(A)

In general

In the case of any organization which is a partner with limited liability in a partnership, the term acquisition indebtedness does not, for purposes of this section, include indebtedness incurred or continued by such partnership in purchasing or carrying any qualified security or commodity. (B)

Qualified security or commodity

For purposes of this paragraph, the term qualified security or commodity means any security (as defined in section 475(c)(2) without regard to the last sentence thereof), any commodity (as defined in section 475(e)(2)), or any option or derivative contract with respect to such a security or commodity. (C)

Application to tiered partnerships and other pass-thru entities

Rules similar to the rules of subparagraph (A) shall apply in the case of tiered partnerships and other pass-thru entities. (D)

Regulations

The Secretary may prescribe such regulations as may be necessary or appropriate to carry out the purposes of this paragraph, including regulations to prevent the abuse of this paragraph. . (b)

Effective date

The amendment made by this section shall apply to taxable years beginning after the date of the enactment of this Act.