I 

108TH CONGRESS 

2D SESSION H. R. 3829 

To amend the Internal Revenue Code of 1986 to provide that interests 

in certain domestically controlled investment partnerships are not treated 

as United States real property interests. 

IN THE HOUSE OF REPRESENTATIVES 

FEBRUARY 25, 2004 

Mr. CANTOR introduced the following bill; which was referred to the 

Committee on Ways and Means 

A BILL 

To amend the Internal Revenue Code of 1986 to provide 

that interests in certain domestically controlled investment partnerships are not treated as United States real 

property interests. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 
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1 SECTION 1. CERTAIN DOMESTICALLY CONTROLLED IN2 VESTMENT PARTNERSHIP INTERESTS NOT 

3 TREATED AS UNITED STATES REAL PROP4 ERTY INTERESTS. 

5 (a) IN GENERAL.—Paragraph (1) of section 897(c) 

6 of the Internal Revenue Code of 1986 is amended by add7 ing at the end the following new subparagraph: 

8 ‘‘(C) EXCLUSION OF DOMESTICALLY CON9 TROLLED INVESTMENT PARTNERSHIPS.— 

10 ‘‘(i) IN GENERAL.—The term ‘United 

11 States real property interest’ does not in12 clude any interest in or owned by an in13 vestment partnership (as defined by sec14 tion 731(c)(3)(C)(i)) if at all times during 

15 the testing period— 

16 ‘‘(I) less than 50 percent in value 

17 of the capital or profits interests in 

18 such partnership is held directly or in19 directly by foreign persons, 

20 ‘‘(II) no single foreign person 

21 owns directly or indirectly more than 

22 10 percent of the capital or profits in23 terests in such partnership, and 

24 ‘‘(III) the adjusted basis of its 

25 United States real property interests 
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1 does not exceed 10 percent of the ad2 justed basis of its assets. 

3 ‘‘(ii) SPECIAL RULE FOR PENSION

4 TRUSTS.—In determining the ownership of 

5 the capital or profits in a partnership, any 

6 interest held by a pension trust shall be 

7 treated as held directly by its beneficiaries 

8 in proportion to their actuarial interests in 

9 such trust and shall not be treated as held 

10 by such trust. 

11 ‘‘(iii) TESTING PERIOD.—For pur12 poses of this subparagraph, the term ‘test13 ing period’ means the shorter of— 

14 ‘‘(I) the 5-year period ending on 

15 the date of the disposition or of the 

16 distribution, as the case by be, or 

17 ‘‘(II) the period during which the 

18 partnership was in existence. 

19 For purposes of clause (i)(III), except as 

20 provided in regulations, the testing period 

21 shall not commence until the date which is 

22 36 months after the partnership came into 

23 existence.’’. 

24 (b) WITHHOLDING TAX.—Section 1445(b) of such 

25 Code is amended— 
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1 (1) in paragraph (1), by striking ‘‘or (6)’’ and 

2 inserting ‘‘(6), or (8)’’, and 

3 (2) by adding at the end the following new 

4 paragraph: 

5 ‘‘(8) DOMESTICALLY CONTROLLED INVEST6 MENT PARTNERSHIPS.—This paragraph applies if 

7 the disposition is of an interest in or owned by a do8 mestically controlled investment partnership that is 

9 not a United States real property interest by reason 

10 of section 897(c)(1)(C).’’. 

11 (c) EFFECTIVE DATE.—The amendments made by 

12 this section shall apply to dispositions on or after the date 

13 of the enactment of this Act. 

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