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TITLE 26-INTERNAL REVENUE CODE (c)(1) for any taxable year prior to the fifth taxable year which begins after the first tax- able year for which such termination or revo- cation is effective. (4) Exception If the election of a corporation, trust, or as- sociation has been terminated under para- graph (1), paragraph (3) shall not apply if- (A) the corporation, trust, or association does not willfully fall to file within the time prescribed by law an income tax return for the taxable year with respect to which the termination of the election under subsec- tion (c)(1) occurs; (B) the inclusion of any incorrect infor- mation in the return referred to in subpara- graph (A) is not due to fraud with intent to evade tax; and (C) the corporation, trust, or association establishes to the satisfaction of the Secre- tary that Its failure to qualify as a real estate investment trust to which the provi- sions of this part apply is due to reasonable cause and not due to willful neglect. (Added Pub. L. 86-779, § 10(a), Sept. 14, 1960, 74 Stat. 1004, and amended Pub. L. 88-272, title II, § 225(k)(4), Feb. 26, 1964, 78 Stat. 94; Pub. L. 88- 554, § 4(b)(4), Aug. 31, 1964, 78 Stat. 763; Pub. L. 93-625, § 6(a), (b), (d)(1), Jan. 3, 1975, 88 Stat. 2112 to 2114; Pub. L. 94-455, title XIV' § 1402(b)(1)(O), title XVI, §§ 1602(a), 1603(a), (c)(1)-(4), 1604(a)-(c)(1), (d)-(f)(3)(A), (g), (k)(1), (2)(A), title XIX, §§1901(a)(111), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1732, 1746, 1748-1753, 1783, 1834.) TAXABLE YEARS ArTLR 1977 Subsec. (c)(4)(A) of this section amended by Pub. L. 94-455, title XIV, § 1402(b)(2), Oct. 4, 1976, 90 Stat. 1732, effective for tax- able years beginning after Dec. 31, 1977, by substituting "1 year"for "9 months" REFERENCES IN TEXT The Investment Company Act of 1940, referred to in subsec. (c)(6)(D), is act Aug. 22, 1940, ch. 686, title I, 54 Stat. 789, as amended, which is classified generally to subchapter I (§ 80a-1 et seq.) of chapter 2D of Title 15, Commerce and Trade. For complete classification of this Act to the Code, see section 80a-51 of Title 15, and Tables volume. AMENDMENTS 1976-Subsec. (a). Pub. L. 94-455, §§ 1603(a), 1604(f)(1), (2), in introductory provisions substituted "this title" for "this subtitle" and "a corporation, trust, or association" fur "an unincorporated trust or an unicorporated association", in par. (1) added "or di- rectors" following "trustees", and in par. (4) substitut- ed reference to which is neither (A) a financial institu- tion to which section 585, 586, or 593 applies, nor (B) an insurance company to which subchapter L applies for reference to which does not hold any property pri- marily for sale to customers in the ordinary course of its trade or business. Subsec. (c). Pub. L. 94-455, § 1604(f)(3)(A), in intro- ductory material substituted "A corporation, trust, or association" for "A trust or association". Subsec. (c)(1). Pub, L. 94-455, §§ 1604(k)(2)(A), 1901(a)(111)(A), struck out reference to which began after Dec. 31, 1960 and added reference to such elec- tion has not been terminated or revoked under subsec- tion (g). Subsec. (c)(2). Pub. L. 94-455, §§ 1603(c)(2), 1604(a), (c)(1), in introductory provision substituted "95 per- cent (90 percent for taxable years beginning before January 1, 1980) of its gross income (excluding gross Income from prohibited transactions)" for "90 percent of its gross income", in subpar. (D) added reference to which is not property not described in section 1221(1), and added subpar. (G). Subsec. (c)(3). Pub. L. 94-455, §§ 1603(c)(1), (3). 1604(c)(1), in introductory provision inserted "(exclud. ing gross income from prohibited transactions) 75 per- cent of its gross income", in subpar. (C) added refer- ence to which is not property described in section 1221(1), and added subpar. (G). Subsec. (c)(4). Pub. L. 94-455, §§ 1402(b)(1)(O), 1604(d), in subpar. (A) provided that "6 months" would be changed to "9 months" for taxable years be- ginning in 1977, added subpar. (B), and redesignated former subpar. (B) as (C), and in subpar. (C) as so re- designated, substituted "(including interest in real property and interest in mortgages on real property" for "(including interest in real property)" and added reference to property which is foreclosure property within the definition of section 856(e). Subsec. (c)(6)(C). Pub. L. 94-455, § 1604(e), added ref- erence to options to acquire land or improvements thereon, and options to acquire leaseholds of land or improvements thereon. Subset. (c)(6)(D). Pub. L. 94-455, § 1901(a)(111)(B), inserted "(15 U.S.C. 80a-1 and following)" following as amended". Subsec. (c)(7'. Pub. L. 94-455, § 1602(a), added subsec. (c)(7). Subsec. (d). Pub. L. 94-455, § 1604(b), among other changes, added provisions including in definition of rents from real property charges for services custom- arily furnished or rendered in connection with rental of real property and rent attributable to personal property which is leased under, or in connection with, a lease of real property, provisions relating to the com- putation of the amount of rent attributable to person- al property, and provisions relating to the special rule for certain contingent rents. Subsec. (e)(1). Pub. L. 94-455, § 1603(c)(4), added pro- vision relating to the exclusion, from the definition of foreclosure property, of property acquired by the real estate investment trust or other disposition of proper- ty of the trust described in section 1221(1) of this title. Subsec. (e)(3), (5). Pub. L. 94-455, § 1906(b)(13)(A), struck out "or his delegate" following "Secretary" each time appearing. Subsec. (f). Pub. L. 94-455, § 1604(g), added subsec. (f). Subsec. (g). Pub. L. 94-455, § 1604(k)(1), added subscc. (g). 1975-Subsec. (a)(4). Pub. L. 93-625, § 6(b), inserted "(other than foreclosure prope,-rty, as defined in sub- section (e))" following "property". Subsec. (c)(2), (3). Pub. L. 93-625, §6(d)(1), added subpar. (F) to pars. (2) and (3). Subsec. (e). Pub. L. 93-625, § 6(a), added subsec. (e). 1964-Subsec. (a)(6). Pub L. 88-272 substituted "ad- justed ordinary gross income (as defined in section 543(b)(2))" for "gross income". Subsec. (d). Pub. L. 88-5544 inserted the reference to subparagraph (C) of section 318(a)(3) of this title. EFFECTIVE DATE OF 1976 AMENDMENT Section 1402(b)(1) of Pub. L. 94-455 provided in part that the substitution of "9 months" for "6 months" in sub~ec. (c)(4)(A) of this section by section 1402(b)(1)(O) of Pub. L. 94-455 is effective with re- spect to taxable years beginning in 1977. Section 1608(d) of Pub. L. 94-455 provided that: "(1) Except as provided in paragraphs (2) and (3), the amendments made by sections 1603, 1604, and 1605 shall apply to taxable years of real estate investment trusts beginning after the date of the enactment of this Act [Oct. 4, 1976]. "(2) If, as a result of a determination (as d-.fined in section 859(c) of the Internal Revenue Code of 1954 [section 859(c) of this title]), occurring after the date of enactment of this Act [Oct. 4, 1976], with respect to Page 547 § 856