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TITLE 26-INTERNAL REVENUE CODE For purposes of clause (it), if the lessee transfers the lease in a transfer described in paragraph (7), the lessee shall be considered as having the right to use of the property so long as the transferee has such use. (B) For purposes of subparagraph (A)- (I) a person who holds property (or rights in property) which is pre-termina- tion property by reason of the application of paragraph (4) shall, with respect to such property, be treated as a party to a binding contract described in paragraph (1), and (it) a corporation which is a member of the same affiliated group (as defined in paragraph (8)) as the transferor described in subparagraph (A) and which simulta- neously with the transfer of property to another person acquires a right to use such property under a lease with such other person shall be treated as the trans- feror and as a party to the contract, (6) Certain lease and contract obligations (A) Where, pursuant to a binding lease or contract to lease in effect on April 18, 1969, a lessor or lessee is obligated to construct, reconstruct, erect, or acquire property speci- fied in such lease or contract or in a related document filed before April 19, 1969, with a Federal regulatory agency or property the specifications of which are readily ascer- tainable from the terms of such lease or contract or from such related document, any property so constructed, reconstructed, erected, or acquired by the lessor or lessee shall be pre-termination property. In the case of any project which includes property other than the property to be leased to such lessee, the preceding sentence shall be applied, in the case of the lessor, to such other property only if the binding leases and contracts with all lessees in effect on April 18, 1969, cover real property constitut- ing 25 percent or more of the project (deter- mined on the basis of rental value). For pur- poses of the preceding sentences of this paragraph, in the case of any project where one or more vendor-vendee relationships exist, such vendors and vendees shall be treated as lessors and lessees, (B) Where in order to perform a binding contract or contracts in effect on April 18, 1969, (i) the taxpayer is required to con- struct, reconstruct, erect, or acquire proper- ty specified in any order of a Federal regu- latory agency for which application was filed before April 19, 1969, (ii) the property is to be used to transport one or more prod- ucts under such contract or contracts, and (iII) one or more parties to the contract or contracts are required to take or to provide more than 50 percent of the products to be transported over a substantial portion of the expected useful life of the property, then such property shall be pre-termination property. (C) Where, in order to perform a binding contract in effect on April 18, 1969, the tax- payer is required to construct, reconstruct, erect, or acquire property specified in the contract to be used to produce one or more products and (unless the other party to the contract is a State or a political subdivision of a State which is required by the contract to make substantial expenditures which benefit the taxpayer) the other party to the contract is required to take substantially all of the products to be produced over a sub- stantial portion of the expected useful life of the property, then such property shall be pre-termination property. For purposes of applying the preceding sentence in the case of a contract for the extraction of minerals, property shall be treated as specified in the contract if (i) the specifications for such property are readily ascertainable from the location and characteristics of the mineral properties specified in such contract from which the minerals are to be extracted; (ii) such property is necessary for and is to be used solely in the extraction of minerals under such contract; (iii) the physical con- struction, reconstruction, or erection of such property is begun by the taxpayer before April 19, 1970, such property is ac- quired by the taxpayer before April 19, 1970, or such property is constructed, recon- structed, erected, or acquired pursuant to a contract which was, on April 18, 1970, and at all times thereafter, binding on the tax- payer; (iv) such property is placed in service on or before December 31, 1972; (v) such contract is a fixed price contract (except for provisions for price changes under which the loss of the credit allowed by section 38 would not result in a price change); and (vi) such property is not placed in service to re- place other property used in extracting minerals under such contract. (7) Certain transfers to be disregarded (A) If property or rights under a contract are transferred in- (I) a transfer by reason of death, (ii) a transaction as a result of which the basis of the property in the hands of the transferee is determined by reference to its basis in the hands of the transferor by reason of the application of section 332, 351, 361, 371(a), 374(a), 721, or 731, or (iii) a sale of substantially all of the assets of the transferor pursuant to the terms of a contract, which was on April 18, 1969, and at all times thereafter, bind- ing on the transferee, and such property (or the property ac- quired under such contract) would be treat- ed as pre-termination property in the hands of the decedent or the transferor, such property shall be treated as pre-termination property in the hands of the transferee. (B) If- (i) property or rights under a contract are acquired in a transaction to which sec- tion 334(b)(2) applies, (i) the stock of the distributing corpo- ration was acquired before April 19, 1969, or pursuant to a binding contract in effect April 18, 1969, and (iii) such property (or the property ac- quired under such contract) would be treated as pre-termination property in the hands of the distributing corporation, Page 81