
From the U.S. Code Online via GPO Access
[wais.access.gpo.gov]
[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 26USC1055]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                        Subtitle A--Income Taxes
 
                  CHAPTER 1--NORMAL TAXES AND SURTAXES
 
          Subchapter O--Gain or Loss on Disposition of Property
 
                         PART IV--SPECIAL RULES
 
Sec. 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).

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

                       References in Text

    Date 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 Provisions

    A prior section 1055 was renumbered section 1061 of this title.


                             Effective Date

    Section 2 of Pub. L. 88-9 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.''

                  Section Referred to in Other Sections

    This section is referred to in sections 163, 7701 of this title.
