§110 — Title 26 Internal Revenue Code | U.S. Code

Summary

Money a tenant gets from a landlord to build or improve long-term parts of a retail space under a lease of 15 years or less is not counted as the tenant’s gross income. The improvements are treated as the landlord’s nonresidential property for tax rules. Definitions: "qualified long-term real property" = nonresidential parts of the retail space that go back to the landlord at lease end; "short-term lease" = 15 years or less; "retail space" = property used to sell goods or services to the public. The tenant and landlord must give the IRS information about the amounts (or rent reductions) and any other details the IRS requires.

Title 26, §110

Internal Revenue Code — Source: USLM XML via OLRC

(a)Gross income of a lessee does not include any amount received in cash (or treated as a rent reduction) by a lessee from a lessor—

(1)under a short-term lease of retail space, and

(2)for the purpose of such lessee’s constructing or improving qualified long-term real property for use in such lessee’s trade or business at such retail space,

(b)Qualified long-term real property constructed or improved in connection with any amount excluded from a lessee’s income by reason of subsection (a) shall be treated as nonresidential real property of the lessor (including for purposes of section 168(i)(8)(B)).

(c)For purposes of this section—

(1)The term “qualified long-term real property” means nonresidential real property which is part of, or otherwise present at, the retail space referred to in subsection (a) and which reverts to the lessor at the termination of the lease.

(2)The term “short-term lease” means a lease (or other agreement for occupancy or use) of retail space for 15 years or less (as determined under the rules of section 168(i)(3)).

(3)The term “retail space” means real property leased, occupied, or otherwise used by a lessee in its trade or business of selling tangible personal property or services to the general public.

(d)Under regulations, the lessee and lessor described in subsection (a) shall, at such times and in such manner as may be provided in such regulations, furnish to the Secretary—

(1)information concerning the amounts received (or treated as a rent reduction) and expended as described in subsection (a), and

(2)any other information which the Secretary deems necessary to carry out the provisions of this section.

Notes & Related Subsidiaries

Editorial Notes

Prior Provisions

A prior section 110, act Aug. 16, 1954, ch. 736, 68A Stat. 33, related to income taxes paid by lessee corporations, prior to repeal by Pub. L. 101–508, title XI, § 11801(a)(6), Nov. 5, 1990, 104 Stat. 1388–520.

Statutory Notes and Related Subsidiaries

Effective Date

Pub. L. 105–34, title XII, § 1213(e), Aug. 5, 1997, 111 Stat. 1001, provided that: “The

Amendments

made by this section [enacting this section and amending section 168 and 6724 of this title] shall apply to leases entered into after the date of the enactment of this Act [Aug. 5, 1997].”

§110 Qualified Lessee Construction Allowances for Short-term Leases