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in service after December 31, 1985. The repeal was subject to a
limited number of transitional ITC rules. TRA section 204(a),
100 Stat. 2146, contains a number of specific transition rules.
There are also three general transition rules contained in TRA
section 203(b), 100 Stat. 2143.5 TRA section 211 generally
repealed the regular investment tax credit by adding section 49
to the Code. See TRA sec. 211(a). Section 49(e) provides an
exception for “transition property”, which is defined as property
placed in service after December 31, 1985, to which the
amendments made by TRA section 201, 100 Stat. 2121, do not apply.
Sec. 49(e)(1).
World Headquarters Rule
One of the transitional rules in TRA section 204(a) deals
with property used in a leased building that serves as “world
headquarters” of the lessee and its affiliates. TRA section
204(a)(7) provides:
(7) Certain Leasehold Improvements.--The
amendments made by section 201 shall not apply to any
reasonable leasehold improvements, equipment and
furnishings placed in service by a lessee or its
affiliates if--
(A) the lessee or an affiliate is the
original lessee of each building in which
such property is to be used,
5The rules found in TRA sec. 203(b) are known as the binding
contract rule, the self-constructed property rule, and the
equipped building rule. See TRA sec. 203(b)(A), (B), and (C).
Only the equipped building rule, TRA sec. 203(b)(C), is relevant
to this case.
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Last modified: May 25, 2011