#### § 1.467-0 Table of contents.

This section lists the captions that appear in §§ 1.467-1 through 1.467-9.

## § 1.467-1 Treatment of lessors and lessees generally.

(a) Overview.

(1) In general.

(2) Cases in which rules are inapplicable.

(3) Summary of rules.

(i) Basic rules.

(ii) Special rules.

(4) Scope of rules.

(5) Application of other authorities.

(b) Method of accounting for section 467 rental agreements.

(c) Section 467 rental agreements.

(1) In general.

(2) Increasing or decreasing rent.

(i) Fixed rent.

(A) In general.

(B) Certain rent holidays disregarded.

(ii) Fixed rent allocated to a rental period.

(A) Specific allocation.

(*1*) In general.

(*2*) Rental agreements specifically allocating fixed rent.

(B) No specific allocation.

(iii) Contingent rent.

(A) In general.

(B) Certain contingent rent disregarded.

(3) Deferred or prepaid rent.

(i) Deferred rent.

(ii) Prepaid rent.

(iii) Rent allocated to a calendar year.

(iv) Examples.

(4) Rental agreements involving total payments of $250,000 or less.

(i) In general.

(ii) Special rules in computing amount described in paragraph (c)(4)(i) of this section.

(d) Section 467 rent.

(1) In general.

(2) Fixed rent for a rental period.

(i) Constant rental accrual.

(ii) Proportional rental accrual.

(iii) Section 467 rental agreement accrual.

(e) Section 467 interest.

(1) In general.

(2) Interest on fixed rent for a rental period.

(i) In general.

(ii) Section 467 rental agreements with adequate interest.

(3) Treatment of interest.

(f) Substantial modification of a rental agreement.

(1) Treatment as new agreement.

(i) In general.

(ii) Limitation.

(2) Post-modification agreement; in general.

(3) Other effects of a modification.

(4) Special rules.

(i) Carryover of character; leasebacks.

(ii) Carryover of character; long-term agreements.

(iii) Carryover of character; disqualified agreements.

(iv) Allocation of rent.

(v) Difference between aggregate rent and interest and aggregate payments.

(A) In general.

(B) Constant rental accrual prior to the modification.

(C) Agreements described in this paragraph (f)(4)(v)(C).

(vi) Principal purpose of tax avoidance.

(5) Definitions.

(6) Safe harbors.

(7) Special rules for certain transfers.

(i) In general.

(ii) Exception.

(g) Treatment of amounts payable by lessor to lessee.

(1) Interest.

(2) Other amounts. [Reserved]

(h) Meaning of terms.

(i) [Reserved]

(j) Computational rules.

(1) Counting conventions.

(2) Conventions regarding timing of rent and payments.

(i) In general.

(ii) Time amount is payable.

(3) Annualized fixed rent.

(4) Allocation of fixed rent within a period.

(5) Rental period length.

## § 1.467-2 Rent accrual for section 467 rental agreements without adequate interest.

(a) Section 467 rental agreements for which proportional rental accrual is required.

(b) Adequate interest on fixed rent.

(1) In general.

(2) Section 467 rental agreements that provide for a variable rate of interest.

(3) Agreements with both deferred and prepaid rent.

(c) Computation of proportional rental amount.

(1) In general.

(2) Section 467 rental agreements that provide for a variable rate of interest.

(d) Present value.

(e) Applicable Federal rate.

(1) In general.

(2) Source of applicable Federal rates.

(3) 110 percent of applicable Federal rate.

(4) Term of the section 467 rental agreement.

(i) In general.

(ii) Section 467 rental agreements with variable interest.

(f) Examples.

## § 1.467-3 Disqualified leasebacks and long-term agreements.

(a) General rule.

(b) Disqualified leaseback or long-term agreement.

(1) In general.

(2) Leaseback.

(3) Long-term agreement.

(i) In general.

(ii) Statutory recovery period.

(A) In general.

(B) Special rule for rental agreements relating to properties having different statutory recovery periods.

(c) Tax avoidance as principal purpose for increasing or decreasing rent.

(1) In general.

(2) Tax avoidance.

(i) In general.

(ii) Significant difference in tax rates.

(iii) Special circumstances.

(3) Safe harbors.

(4) Uneven rent test.

(i) In general.

(ii) Special rule for real estate.

(iii) Operating rules.

(d) Calculating constant rental amount.

(1) In general.

(2) Initial or final short periods.

(3) Method to determine constant rental amount; no short periods.

(i) Step 1.

(ii) Step 2.

(iii) Step 3.

(e) Examples.

## § 1.467-4 Section 467 loan.

(a) In general.

(1) Overview.

(2) No section 467 loan in the case of certain section 467 rental agreements.

(3) Rental agreements subject to constant rental accrual.

(4) Special rule in applying the provisions of § 1.467-7 (e), (f), or (g).

(b) Principal balance.

(1) In general.

(2) Section 467 rental agreements that provide for prepaid fixed rent and adequate interest.

(3) Timing of payments.

(c) Yield.

(1) In general.

(i) Method of determining yield.

(ii) Method of stating yield.

(iii) Rounding adjustments.

(2) Yield of section 467 rental agreements for which constant rental amount or proportional rental amount is computed.

(3) Yield for purposes of applying paragraph (a)(4) of this section.

(4) Determination of present values.

(d) Contingent payments.

(e) Section 467 rental agreements that call for payments before or after the lease term.

(f) Examples.

## § 1.467-5 Section 467 rental agreements with variable interest.

(a) Variable interest on deferred or prepaid rent.

(1) In general.

(2) Exceptions.

(b) Variable rate treated as fixed.

(1) In general.

(2) Variable interest adjustment amount.

(i) In general.

(ii) Positive or negative adjustment.

(3) Section 467 loan balance.

(c) Examples.

## § 1.467-6 Section 467 rental agreements with contingent payments. [Reserved]

## § 1.467-7 Section 467 recapture and other rules relating to dispositions and modifications.

(a) Section 467 recapture.

(b) Recapture amount.

(1) In general.

(2) Prior understated inclusion.

(3) Section 467 gain.

(i) In general.

(ii) Certain dispositions.

(c) Special rules.

(1) Gifts.

(2) Dispositions at death.

(3) Certain tax-free exchanges.

(i) In general.

(ii) Dispositions covered.

(A) In general.

(B) Transfers to certain tax-exempt organizations.

(4) Dispositions by transferee.

(5) Like-kind exchanges and involuntary conversions.

(6) Installment sales.

(7) Dispositions covered by section 170(e), 341(e)(12), or 751(c).

(d) Examples.

(e) Other rules relating to dispositions.

(1) In general.

(2) Treatment of section 467 loan.

(3) [Reserved]

(4) Examples.

(f) Treatment of assignments by lessee and lessee-financed renewals.

(1) Substitute lessee use.

(2) Treatment of section 467 loan.

(3) Lessor use.

(4) Examples.

(g) Application of section 467 following a rental agreement modification.

(1) Substantial modifications.

(i) Treatment of pre-modification items.

(ii) Computations with respect to post-modification items.

(iii) Adjustments.

(A) Adjustment relating to certain prepayments.

(B) Adjustment relating to retroactive beginning of lease term.

(iv) Coordination with rules relating to dispositions and assignments.

(A) Dispositions.

(B) Assignments.

(2) Other modifications.

(i) Computation of section 467 loan for modified agreement.

(ii) Change in balance of section 467 loan.

(iii) Section 467 rent and interest after the modification.

(iv) Applicable Federal rate.

(v) Modification effective within a rental period.

(vi) Other adjustments.

(vii) Coordination with rules relating to dispositions and assignments.

(viii) Exception for agreements entered into prior to effective date of section 467.

(3) Adjustment by Commissioner.

(4) Effective date of modification.

(5) Examples.

(h) Omissions or duplications.

(1) In general.

(2) Example.

## § 1.467-8 Automatic consent to change to constant rental accrual for certain rental agreements.

(a) General rule.

(b) Agreements to which automatic consent applies.

## § 1.467-9 Effective dates and automatic method changes for certain agreements.

(a) In general.

(b) Automatic consent for certain rental agreements.

(c) Application of regulation project IA-292-84 to certain leasebacks and long-term agreements.

(d) Entered into.

(e) Change in method of accounting.

(1) In general.

(2) Application of regulation project IA-292-84.

(3) Automatic change procedures.

[T.D. 8820, 64 FR 26851, May 18, 1999, as amended by T.D. 8917, 66 FR 1039, Jan. 5, 2001]