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rules] consistent.” S. Rept. 91-552, supra at 70, 1969-3 C.B. at
469.
In sum, the legislative history shows clearly that Congress,
in replacing the former exclusion for real property (and
associated personal property) rental activities with the more
limited exclusion provided in section 502(b)(1), did so to
preserve consistency between the feeder organization rules and
the UBTI rules. Petitioner’s position, by contrast, assumes that
the 1969 legislation introduced inconsistency, where it did not
exist before, between the feeder organization rules and the UBTI
rules. In the light of the legislative history, as well as the
plain meaning of the statute and the regulations, petitioner’s
position is untenable.
4. Does the Section 502(b)(1) Exclusion Apply?
Alternatively, petitioner argues that even if its rental
activity is deemed to be a “trade or business” under section
502(a), it qualifies for the section 502(b)(1) exclusion. As
previously noted, section 502(b)(1) excludes from the definition
of “trade or business” the deriving of rents “which would be
excluded under section 512(b)(3), if section 512 applied to the
organization”. Petitioner contends, and respondent does not
dispute, that petitioner’s rents would be excluded under section
512(b)(3) if that provision were applied in isolation.
Petitioner does not dispute that its rentals, deriving from debt-
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