§1055 Redeemable ground rents

Summary

Treat redeemable ground rents as if they were mortgages, and treat land with such rents as if it were held with a mortgage. That change starts the day after the date of enactment and applies to taxable years ending after that date. It applies when figuring the tax basis whether the property was acquired before or after that date. If a redeemable ground rent was created on or before that date during a transfer, the creator’s basis after that date equals the amount reported for Federal income tax as sale consideration; if no amount was reported, figure the basis as if this rule had not been added. A “redeemable ground rent” means a lease that can be assigned by the lessee without the lessor’s consent, runs more than 15 years including renewals, gives the leaseholder under state or local law (not by private agreement) the present or future right to end the lease and buy the lessor’s entire interest for a set or settable amount, and where the lessor’s interest mainly serves as security for the rent. Rentals under such ground rents are treated as interest under section 163(c).