26 U.S.C. § 467
In the case of the lessor or lessee under any section 467 rental agreement, there shall be taken into account for purposes of this title for any taxable year the sum of-
Except as provided in paragraph (2), the determination of the amount of the rent under any section 467 rental agreement which accrues during any taxable year shall be made-
In the case of any section 467 rental agreement to which this paragraph applies, the portion of the rent which accrues during any taxable year shall be that portion of the constant rental amount with respect to such agreement which is allocable to such taxable year.
Paragraph (2) applies to any rental payment agreement if-
For purposes of this subsection, the term "disqualified leaseback or long-term agreement" means any section 467 rental agreement if-
The Secretary shall prescribe regulations setting forth circumstances under which agreements will not be treated as disqualified leaseback or long-term agreements, including circumstances relating to-
If-
the recapture amount shall be treated as ordinary income. Such gain shall be recognized notwithstanding any other provision of this subtitle.
For purposes of paragraph (1), the term "recapture amount" means the lesser of-
The amount determined under subparagraph (B) shall be reduced by the amount of any gain treated as ordinary income on the disposition under any other provision of this subtitle.
For purposes of this subsection, the term "prior understated inclusion" means the excess (if any) of-
For purposes of this subsection, the term "leaseback or long-term agreement" means any agreement described in subsection (b)(4)(A).
Under regulations prescribed by the Secretary-
Except as otherwise provided in this subsection, the term "section 467 rental agreements" means any rental agreement for the use of tangible property under which-
This section shall not apply to any amount to be paid for the use of property if the sum of the following amounts does not exceed $250,000-
For purposes of the preceding sentence, rules similar to the rules of clauses (ii) and (iii) of section 1274(c)(4)(C) shall apply.
For purposes of this section-
The term "constant rental amount" means, with respect to any section 467 rental agreement, the amount which, if paid as of the close of each lease period under the agreement, would result in an aggregate present value equal to the present value of the aggregate payments required under the agreement.
A transaction is a leaseback transaction if it involves a leaseback to any person who had an interest in such property at any time within 2 years before such leaseback (or to a related person).
| In the case of: | The statutory recoveryperiod is: |
| 3-year property | 3 years |
| 5-year property | 5 years |
| 7-year property | 7 years |
| 10-year property | 10 years |
| 15-year and 20-year property | 15 years |
| Residential rental property and nonresidential real property | 19 years |
| Any railroad grading or tunnel bore | 50 years. |
In the case of property to which section 168 does not apply, subparagraph (A) shall be applied as if section 168 applies to such property.
For purposes of computing present value and interest under subsection (a)(2), the rate used shall be equal to 110 percent of the applicable Federal rate determined under section 1274(d) (compounded semiannually) which is in effect at the time the agreement is entered into with respect to debt instruments having a maturity equal to the term of the agreement.
The term "related person" has the meaning given to such term by section 465(b)(3)(C).
Except as provided in regulations prescribed by the Secretary, there shall not be taken into account in computing the term of any agreement for purposes of this section any extension which is solely at the option of the lessee.
Under regulations prescribed by the Secretary, rules comparable to the rules of this section shall also apply in the case of any agreement where the amount paid under the agreement for the use of property decreases during the term of the agreement.
Under regulations prescribed by the Secretary, rules comparable to the rules of subsection (a)(2) shall also apply in the case of payments for services which meet requirements comparable to the requirements of subsection (d). The preceding sentence shall not apply to any amount to which section 404 or 404A (or any other provision specified in regulations) applies.
The Secretary shall prescribe such regulations as may be appropriate to carry out the purposes of this section, including regulations providing for the application of this section in the case of contingent payments.
26 U.S.C. § 467
EDITORIAL NOTES
AMENDMENTS2003-Subsec. (c)(5)(C). Pub. L. 108-27 struck out ", 341(e)(12)," after "170(e)". 1988-Subsec. (c)(5)(C). Pub. L. 100-647, §1005(c)(10), made technical correction to directory language of Pub. L. 99-514, §511(d)(2)(A). See 1986 Amendment note below. Subsec. (e)(3)(A). Pub. L. 100-647, §1002(i)(2)(H), at end of table inserted item relating to any railroad grading or tunnel bore. 1986-Subsec. (b)(4)(A). Pub. L. 99-514, §1807(b)(2)(A), substituted "statutory recovery period" for "statutory recover period".Subsec. (c)(4). Pub. L. 99-514, §1807(b)(2)(B), substituted "subsection (b)(4)(A)" for "subsection (b)(3)(A)".Subsec. (c)(5)(C). Pub. L. 99-514, §631(e)(10), struck out "453B(d)(2)," after "341(e)(12),". Pub. L. 99-514, §511(d)(2)(A), as amended by Pub. L. 100-647, §1005(c)(10), struck out "163(d)," after "sections". Subsec. (d)(2). Pub. L. 99-514, §1807(b)(2)(C), substituted "section 1274(c)(4)(C)" for "section 1274(c)(2)(C)".Subsec. (e)(3)(A). Pub. L. 99-514, §201(d)(8)(A), in amending subpar. (A) generally, included in table 7-year property, 15-year and 20-year property, and residential rental property and nonresidential real property having recovery periods of 7, 15, and 19 years, respectively, and struck out from table low-income housing, 15-year public utility property, and 19-year real property having recovery periods of 15, 15, and 19 years, respectively. Pub. L. 99-514, §1879(f)(1), substituted "19-year real property" and "19 years" for "18-year real property" and "18 years", respectively.Subsec. (e)(3)(B). Pub. L. 99-514, §201(d)(8)(A), in amending subpar. (B) generally, substituted in heading "not depreciable under section 168" for "which is not recovery property" and in text "In the case of property to which section 168 does not apply, subparagraph (A) shall be applied as if section 168 applies to such property." for "In the case of any property, which is not recovery property, subparagraph (A) shall be applied as if such property were recovery property."Subsec. (e)(5). Pub. L. 99-514, §201(d)(8)(B), substituted "section 465(b)(3)(C)" for "section 168(e)(4)(D)".Pub. L. 99-514, §1807(b)(2)(D), substituted "section 168(e)(4)(D)" for "section 168(d)(4)(D)".Subsec. (g). Pub. L. 99-514, §1807(b)(1), inserted at end "The preceding sentence shall not apply to any amount to which section 404 or 404A (or any other provision specified in regulations) applies."
STATUTORY NOTES AND RELATED SUBSIDIARIES
EFFECTIVE DATE OF 2003 AMENDMENT Amendment by Pub. L. 108-27 applicable, except as otherwise provided, to taxable years beginning after Dec. 31, 2002, see section 302(f) of Pub. L. 108-27, set out as an Effective and Termination Dates of 2003 Amendment note under section 1 of this title.
EFFECTIVE DATE OF 1988 AMENDMENT Amendment by Pub. L. 100-647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99-514, to which such amendment relates, see section 1019(a) of Pub. L. 100-647, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1986 AMENDMENT Amendment by section 201(d)(8) of Pub. L. 99-514 applicable to property placed in service after Dec. 31, 1986, in taxable years ending after such date, with exceptions, see sections 203 and 204 of Pub. L. 99-514, set out as a note under section 168 of this title.Amendment by section 201(d)(8) of Pub. L. 99-514 not applicable to any property placed in service before Jan. 1, 1994, if such property placed in service as part of specified rehabilitations, and not applicable to certain additional rehabilitations, see section 251(d)(2), (3) of Pub. L. 99-514, set out as a note under section 46 of this title.Amendment by section 511(d)(2)(A) of Pub. L. 99-514 applicable to taxable years beginning after Dec. 31, 1986, see section 511(e) of Pub. L. 99-514, set out as a note under section 163 of this title.Amendment by section 631(e)(10) of Pub. L. 99-514 applicable to any distribution in complete liquidation, and any sale or exchange, made by a corporation after July 31, 1986, unless such corporation is completely liquidated before Jan. 1, 1987, any transaction described in section 338 of this title for which the acquisition date occurs after Dec. 31, 1986, and any distribution, not in complete liquidation, made after Dec. 31, 1986, with exceptions and special and transitional rules, see section 633 of Pub. L. 99-514, set out as an Effective Date note under section 336 of this title.Amendment by section 1807(b) of Pub. L. 99-514 effective, except as otherwise provided, as if included in the provisions of the Tax Reform Act of 1984, Pub. L. 98-369, div. A, to which such amendment relates, see section 1881 of Pub. L. 99-514, set out as a note under section 48 of this title.Pub. L. 99-514, title XVIII, §1879(f)(2), Oct. 22, 1986, 100 Stat. 2906, provided that: "The amendments made by paragraph (1) [amending this section] shall take effect as if included in the amendments made by section 103 of Public Law 99-121."
EFFECTIVE DATEPub. L. 98-369, div. A, title I, §92(c), July 18, 1984, 98 Stat. 612, as amended by Pub. L. 99-514, §2, Oct. 22, 1986, 100 Stat. 2095, provided that: "(1) IN GENERAL.-Except as otherwise provided in this subsection, the amendments made by this section [enacting this section] shall apply with respect to agreements entered into after June 8, 1984."(2) EXCEPTIONS.-The amendments made by this section shall not apply- "(A) to any agreement entered into pursuant to a written agreement which was binding on June 8, 1984, and at all times thereafter, "(B) subject to the provisions of paragraph (3), to any agreement to lease property if-"(i) there was in effect a firm plan, evidenced by a board of directors' resolution, memorandum of agreement, or letter of intent on March 15, 1984, to enter into such an agreement, and"(ii) construction of the property was commenced (but such property was not placed in service) on or before March 15, 1984, and"(C) to any agreement to lease property if- "(i) the lessee of such property adopted a firm plan to lease the property, evidenced by a resolution of the Finance Committee of the Board of Directors of such lessee, on February 10, 1984,"(ii) the sum of the present values of the rents payable by the lessee under the lease at the inception thereof equals at least $91,223,034, assuming for purposes of this clause-"(I) the annual discount rate is 12.6 percent,"(II) the initial payment of rent occurs 12 months after the commencement of the lease, and"(III) subsequent payments of rents occur on the anniversary date of the initial payment, and"(iii) during-"(I) the first 5 years of the lease, at least 9 percent of the rents payable by the lessee under the agreement are paid, and"(II) the second 5 years of the lease, at least 16.25 percent of the rents payable by the lessee under the agreement are paid. Paragraph (3)(B)(ii)(II) shall apply for purposes of clauses (ii) and (iii) of subparagraph (C), as if, as of the beginning of the last stage, the separate agreements were treated as 1 single agreement relating to all property covered by the agreements, including any property placed in service before the property to which the agreement for the last stage relates. If the lessor under the agreement described in subparagraph (C) leases the property from another person, this exception shall also apply to any agreement between the lessor and such person which is integrally related to, and entered into at the same time as, such agreement, and which calls for comparable payments of rent over the primary term of the agreement. "(3) SCHEDULE OF DEEMED RENTAL PAYMENTS.-"(A) IN GENERAL.-In any case to which paragraph (2)(B) applies, for purposes of the Internal Revenue Code of 1986 [formerly I.R.C. 1954], the lessor shall be treated as having received or accrued (and the lessee shall be treated as having paid or incurred) rents equal to the greater of-"(i) the amount of rents actually paid under the agreement during the taxable year, or"(ii) the amount of rents determined in accordance with the schedule under subparagraph (B) for such taxable year. "(B) SCHEDULE.-"(i) IN GENERAL.-The schedule under this subparagraph is as follows:
| "Portion of lease term: | Cumulative percentage of total rent deemed paid: |
| 1st 1/5 | 10 |
| 2nd 1/5 | 25 |
| 3rd 1/5 | 45 |
| 4th 1/5 | 70 |
| Last 1/5 | 100. |
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101-1147 and 1171-1177] or title XVIII [§§1800-1899A] of Pub. L. 99-514 require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after Jan. 1, 1989, see section 1140 of Pub. L. 99-514, as amended, set out as a note under section 401 of this title.
- Internal Revenue Code of 1986
- The term "Internal Revenue Code of 1986" means this title, and the term "Internal Revenue Code of 1939" means the Internal Revenue Code enacted February 10, 1939, as amended.
- Secretary
- The term "Secretary" means the Secretary of the Treasury or his delegate.
- corporation
- The term "corporation" includes associations, joint-stock companies, and insurance companies.
- person
- The term "person" shall be construed to mean and include an individual, a trust, estate, partnership, association, company or corporation.
- taxable year
- The term "taxable year" means the calendar year, or the fiscal year ending during such calendar year, upon the basis of which the taxable income is computed under subtitle A. "Taxable year" means, in the case of a return made for a fractional part of a year under the provisions of subtitle A or under regulations prescribed by the Secretary, the period for which such return is made.
- transaction
- The term "transaction" includes a series of transactions.