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TITLE 26-INTERNAL REVENUE CODE AMENDMENTS 1976-Subsec. Cd). Pub. L. 94-455, § 1305(a), added subsec. (d). Subsec. (e). Pub. L. 94-455, § 1311(a), added subsec. e). 1969-Subsec. (a)(2). Pub. L. 91-172, § 121(b)(4), added reference to local associations of employees de- scribed in section 501(c)(4) of this title and organized before May 27, 1969. Subsec. (c). Pub. L. 91-172, § 121(c), substituted "Ad- vertising, etc., activities" for "Special rule for certain publishing businesses", in subsec. catchline, and, in text, substituted provisions extending the definition of trade or business to include any activity carried on for the production of income from the sale of goods or the performance of services, for provisions referring to publishing businesses carried on by an organization during a taxable year beginning before Jan. 1. 1953. 1960-Subsec. (b)(2). Pub. L. 86-667 included trusts described in section 501(c)(17). ErncTivE DATE OF 1976 AmENDME1NT Section 1305(b) of Pub. L. 94-455 provided that: "The amendments made by subsection (a) [enacting subsec. (d) of this section] apply to qualified public en- tertainment activities in taxable years beginning after December 31, 1962, and to qualified convention and trade show activities in taxable years beginning after the date of enactment of this Act [Oct. 4, 1976]." Section 1311(b) of Pub. L. 94-455 provided that: "The amendment made by this section [enacting subsec. (e) of this section] shall apply to all taxable years to which the Internal Revenue Code of 1954 (this title] applies." ErncTrE DATE OF 1969 AMENDmENr Amendment by section 121(c) of Pub. L. 91-172 ap- plicable to taxable years beginning after Dec. 31, 1969, see section 121(g) of Pub. L. 91-172, set out as an Ef- fective Date of 1969 Amendment note under section 511 of this title. EFFECTIVE DATE OF 1960 AMENDMENT Amendment by Pub. L. 86-667 applicable to taxable years beginning after Dec. 31, 1959, see section 6 of Pub. L. 86-667, set out as an Effective Date of 1960 Amendments note under section 501 of this title. SECTION REFERIUED TO IN OTHER SECTIONS This section is referred to in sections 103, 414, 509, 512, 514. 1245, 1250, 4942 of this title; title 29 section 1002. § 514. Unrelated debt-financed income (a) Unrelated debt-financed income and deductions In computing under section 512 the unrelated business taxable income for any taxable year- (1) Percentage of income taken into account There shall be included with respect to each debt-financed property as an item of gross income derived from an unrelated trade or business an amount which is the same per- centage (but not in excess of 100 percent) of the total gross income derived during the tax- able year from or on account of such property as CA) the average acquisition indebtedness (as defined in subsection (c)(7)) for the tax- able year with respect to the property is of (B) the average amount (determined under regulations prescribed by the Secretary) of the adjusted basis of such property during the period It Is held by the organization during such taxable year. (2) Percentage of deductions taken Into account There shall be allowed as a deduction with respect to each debt-financed property an amount determined by applying (except as provided in the last sentence of this para. graph) the percentage derived under para- graph (1) to the sum determined under para- graph (3). The percentage derived under this paragraph shall not be applied with respect to the deduction of any capital loss resulting from the carryback or carryover of net capital losses under section 1212. (3) Deductions allowable The sum referred to in paragraph (2) is the sum of the deductions under this chapter which are directly connected with the debt-fi- nanced property or the income thereform, except that if the debt-financed property is of a character which is subject to the allowance for depreciation provided in section 167, the allowance shall be computed only by use of the straight-line method. (b) Definition of debt-financed property (1) In general For purposes of this section, the term "debt-financed property" means any property which is held to produce income and with re- spect to which there is an acquisition indebt- edness (as defined in subsection (0)) at any time during the taxable year (or, if the prop- erty was disposed of during the taxable year, with respect to which there was an acquisi- tion indebtedness at any time during the 12- month period ending with the date of such disposition), except that such term does not include- (A)(i) any property substantially all the use of which is substantially related (aside from the need of the organization for income or funds) to the exercise or perfor- mance by such organization of its charita- ble, educational, or other purpose or func- tion constituting the basis for its exemption under section 501 (or, In the case of an orga- nization described in section 511(a)(2)(B), to the exercise or performance of any purpose or function designated in section 501(c)(3)), or (ii) any property to which clause (1) does not apply, to the extent that its use is so substantially related; (B) except in the case of income excluded under section 512(b)(5), any property to the extent that the income from such property Is taken Into account in computing the gross income of any unrelated trade or busi- ness; (C) any property to the extent that the income from such property is excluded by reason of the provisions of paragraph (7), (8), or (9) of section 512(b) in computing the gross income of any unrelated trade or busi- ness; or (D) any property to the extent that it is used in any trade or business described in paragraph (1), (2), or (3) of section 513(a). For purposes of subparagraph (A), substan- tially all the use of a property shall be consid- ered to be substantially related to the exer- cise or performance by an organization of its charitable, educational, or other purpose or function constituting the basis for its exemp- tion under section 501 if such property is real property subject to a lease to a medical clinic entered into primarily for purposes which are § 514 Page 396