26 U.S.C. § 1055

Current through P.L. 118-107 (published on www.congress.gov on 11/21/2024)

Section 1055 - Redeemable ground rents

(a) Character

For purposes of this subtitle-

(1) a redeemable ground rent shall be treated as being in the nature of a mortgage, and

(2) real property held subject to liabilities under a redeemable ground rent shall be treated as held subject to liabilities under a mortgage.

(b) Application of subsection (a)

(1) In general

Subsection (a) shall take effect on the day after the date of the enactment of this section and shall apply with respect to taxable years ending after such date of enactment.

(2) Basis of holder

In determining the basis of real property held subject to liabilities under a redeemable ground rent, subsection (a) shall apply whether such real property was acquired before or after the enactment of this section.

(3) Basis of reserved redeemable ground rent

In the case of a redeemable ground rent reserved or created on or before the date of the enactment of this section in connection with a transfer of the right to hold real property subject to liabilities under such ground rent, the basis of such ground rent after such date in the hands of the person who reserved or created the ground rent shall be the amount taken into account in respect of such ground rent for Federal income tax purposes as consideration for the disposition of such real property. If no such amount was taken into account, such basis shall be determined as if this section had not been enacted.

(c) Redeemable ground rent defined

For purposes of this subtitle, the term "redeemable ground rent" means only a ground rent with respect to which-

(1) there is a lease of land which is assignable by the lessee without the consent of the lessor and which (together with periods for which the lease may be renewed at the option of the lessee) is for a term in excess of 15 years,

(2) the leaseholder has a present or future right to terminate, and to acquire the entire interest of the lessor in the land, by payment of a determined or determinable amount, which right exists by virtue of State or local law and not because of any private agreement or privately created condition, and

(3) the lessor's interest in the land is primarily a security interest to protect the rental payments to which the lessor is entitled under the lease.

(d) Cross reference

For treatment of rentals under redeemable ground rents as interest, see section 163(c).

26 U.S.C. § 1055

Added Pub. L. 88-9, §1(b), Apr. 10, 1963, 77 Stat. 7.

EDITORIAL NOTES

REFERENCES IN TEXTDate of the enactment of this section, referred to in subsec. (b)(1), (3), means Apr. 10, 1963, the date of approval of Pub. L. 88-9.

PRIOR PROVISIONSA prior section 1055 was renumbered section 1062 of this title.

STATUTORY NOTES AND RELATED SUBSIDIARIES

EFFECTIVE DATEPub. L. 88-9, §2, Apr. 10, 1963, 77 Stat. 8, provided that: "The amendments made by subsection (a) of the first section of this Act [amending section 163 of this title] shall take effect as of January 1, 1962, and shall apply with respect to taxable years ending on or after such date. The amendments made by subsection (b) of the first section of this Act [enacting this section] shall take effect on the day after the date of the enactment of this Act [Apr. 10, 1963] and shall apply with respect to taxable years ending after such date of enactment."

State

The term "State" shall be construed to include the District of Columbia, where such construction is necessary to carry out provisions of this title.

person

The term "person" shall be construed to mean and include an individual, a trust, estate, partnership, association, company or corporation.