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TITLE 26-INTERNAL REVENUE CODE included in gross income, and the amount of the deduction attributable to any unamortized discount (computed as of the first day of the taxable year in which such discharge occurred) with respect to such indebtedness shall not be allowed as a deduction. (Aug. 16, 1954, ch. 736, 68A Stat. 32; June 29, 1956, ch. 463, § 5, 70 Stat. 403; June 8, 1960, Pub. L. 88-496, § l(a), 74 Stat. 164; Oct. 4, 1976, Pub. L. 94-455, title XIX, §§ 1906(b)(13)(A), 1951(b)(2)(A), 90 Stat. 1834, 1836.) AMENDMENTS 1976-Pub. L. 94-455, § 1951(b)(2)(A), struck out "(a) Special rule of exclusion.-" following "Income from discharge of indebtedness" and struck out subsec. (b) which related to discharge, cancellation, or modifica. tion of indebtedness of certain railroad corporations. Pub. L. 94-455, § 1906(b)(13)(A), struck out "or his delegate" following "Secretary". 1960-Subsec. (b. Pub. L. 86-496 provided that if the discharge, cancellation, or modification of any indebt- edness is effected pursuant to a court order in a receiv- ership proceeding or in a proceeding under section 77 of the Bankruptcy Act, commenced before Jan. 1, 1960, then no amount is to be included in gross income with respect to it, and eliminated provisions which made subsection inapplicable to discharges occurring in a taxable year beginning after Dec. 31, 1957. 1956-Subsec. (b). Act June 29, 1956, substituted "December 31, 1957" for "December 31, 1955". EFFECTIVE DATE OF 1976 AMENDMENT Amendment by section 1951(b)(2)(A) of Pub. L. 94- 455 applicable with respect to taxable years beginning after Dec. 31, 1976, see section 1951(d) of Pub. L. 94- 455, set out as an Effective Date of 1976 Amendment note under section 72 of this title. EFFECTIVE DATE OF 1960 AMENDMENT Section 1(b) of Pub. L. 86-496 provided that: "The amendment made by subsection (a) [to subsec. (b) of this section] shall apply to taxable years ending after December 31, 1959, but only with respect to discharges occurring after such date." SAVINGS PROVISION Section 1951(b)(2)(B) of Pub. L. 94-455 provided that: "If any discharge, cancellation, or modification of indebtedness of a railroad corporation occurs in a taxable year beginning after December 31, 1976, pur- suant to an order of a court in a proceeding referred to in section 108(b)(A) or (B) which commenced before January 1, 1960, then, notwithstanding the amend. ments made by subparagraph (A) [repealing subsec. (b) of this section], the provisions of subsection (b) of section 108 shall be considered as not repealed with re- spect to such discharge, cancellation, or modification of indebtedness." SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 1017 of this title. § 109. Improvements by lessee on lessor's property Gross income does not include income (other than rent) derived by a lessor of real property on the termination of a lease, representing the value of such property attributable to buildings erected or other improvements made by the lessee. (Aug. 16, 1954, ch. 736, 68A Stat. 33.) CROSS REFERENCES Basic rule for property on which lessee has made im- provements, see section 1019 of this title. SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 1019 of this title. § 110. Income taxes paid by lessee corporation If- (1) a lease was entered into before January 1, 1954, (2) both lessee and lessor are corporations, and (3) under the lease, the lessee Is obligated to pay, or to reimburse the lessor for, any part of the tax imposed by this subtitle on the lessor with respect to the rentals derived by the lessor from the lessee, then gross income of the lessor does not include such payment or reimbursement, and no deduc- tion for such payment or reimbursement shall be allowed to the lessee. For purposes of the preceding sentence, a lease shall be considered to have been entered into before January 1, 1954, if it is a renewal or continuance of a lease entered into before such date and if such re- newal or continuance was made in accordance with an option contained in the lease on De- cember 31, 1953. (Aug. 16, 1954, ch. 736, 68A Stat. 33.) § 111. Recovery of bad debts, prior taxes, and delin- quency amounts (a) General rule Gross income does not include Income attrib- utable to the recovery during the taxable year of a bad debt, prior tax, or delinquency amount, to the extent of the amount of the recovery ex- clusion with respect to such debt, tax, or amount. (b Definitions For purposes of subsection (a)- (1) Bad debt The term "bad debt" means a debt ou ac- count of the worthlessness or partial worth- lessness of which a deduction was allowed for a prior taxable year. (2) Prior tax The term "prior tax" means a tax on ac- count of which a deduction or credit was al- lowed for a prior taxable year. (3) Delinquency amount The term "delinquency amount" means an amount paid or accrued on account of which a deduction or credit was allowed for a prior taxable year and which is attributable to fail- ure to file return with respect to a tax, or pay a tax, within the time required by the law under which the tax is imposed, or to failure to file return with respect to a tax or pay a tax. (4) Recovery exclusion The term "recovery exclusion", with respect to a bad debt, prior tax, or delinquency amount, means the amount, determined in ac- cordance with regulations prescribed by the Secretary, of the deductions or credits al- lowed, on account of such bad debt, prior tax, or delinquency amount, which did not result in a reduction of the taxpayer's tax under this subtitle (not including the accumulated § 109 Page 120