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real estate investment trust) is amended by adding at the 
end the following new subsection: 
‘‘(n) RULES REGARDING FOREIGN CURRENCY TRANS-
ACTIONS.— 
‘‘(1) IN GENERAL.—For purposes of this part— 
‘‘(A) passive foreign exchange gain for any 
taxable year shall not constitute gross income for 
purposes of subsection (c)(2), and 
‘‘(B) real estate foreign exchange gain for 
any taxable year shall not constitute gross in-
come for purposes of subsection (c)(3). 
‘‘(2) REAL ESTATE FOREIGN EXCHANGE GAIN.— 
For purposes of this subsection, the term ‘real estate 
foreign exchange gain’ means— 
‘‘(A) foreign currency gain (as defined in 
section 988(b)(1)) which is attributable to— 
‘‘(i) any item of income or gain de-
scribed in subsection (c)(3), 
‘‘(ii) the acquisition or ownership of 
obligations secured by mortgages on real 
property or on interests in real property 
(other than foreign currency gain attrib-
utable to any item of income or gain de-
scribed in clause (i)), or
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‘‘(iii) becoming or being the obligor 
under obligations secured by mortgages on 
real property or on interests in real prop-
erty (other than foreign currency gain at-
tributable to any item of income or gain de-
scribed in clause (i)), 
‘‘(B) section 987 gain attributable to a 
qualified business unit (as defined by section 
989) of the real estate investment trust, but only 
if such qualified business unit meets the require-
ments under— 
‘‘(i) subsection (c)(3) for the taxable 
year, and 
‘‘(ii) subsection (c)(4)(A) at the close of 
each quarter that the real estate investment 
trust has directly or indirectly held the 
qualified business unit, and 
‘‘(C) any other foreign currency gain as de-
termined by the Secretary. 
‘‘(3) PASSIVE
FOREIGN
EXCHANGE
GAIN.—For 
purposes of this subsection, the term ‘passive foreign 
exchange gain’ means— 
‘‘(A) real estate foreign exchange gain,
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‘‘(B) foreign currency gain (as defined in 
section 988(b)(1)) which is not described in sub-
paragraph (A) and which is attributable to— 
‘‘(i) any item of income or gain de-
scribed in subsection (c)(2), 
‘‘(ii) the acquisition or ownership of 
obligations (other than foreign currency 
gain attributable to any item of income or 
gain described in clause (i)), or 
‘‘(iii) becoming or being the obligor 
under obligations (other than foreign cur-
rency gain attributable to any item of in-
come or gain described in clause (i)), and 
‘‘(C) any other foreign currency gain as de-
termined by the Secretary. 
‘‘(4) EXCEPTION FOR INCOME FROM SUBSTAN-
TIAL AND REGULAR TRADING.—Notwithstanding this 
subsection or any other provision of this part, any 
section 988 gain derived by a corporation, trust, or 
association from dealing, or engaging in substantial 
and regular trading, in securities (as defined in sec-
tion 475(c)(2)) shall constitute gross income which 
does not qualify under paragraph (2) or (3) of sub-
section (c). This paragraph shall not apply to income
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which does not constitute gross income by reason of 
subsection (c)(5)(G).’’. 
(b) ADDITION TO REIT HEDGING RULE.—Subpara-
graph (G) of section 856(c)(5) is amended to read as fol-
lows: 
‘‘(G) TREATMENT OF CERTAIN HEDGING IN-
STRUMENTS.—Except to the extent as determined 
by the Secretary— 
‘‘(i) any income of a real estate invest-
ment trust from a hedging transaction (as 
defined in clause (ii) or (iii) of section 
1221(b)(2)(A)) which is clearly identified 
pursuant to section 1221(a)(7), including 
gain from the sale or disposition of such a 
transaction, shall not constitute gross in-
come under paragraphs (2) and (3) to the 
extent that the transaction hedges any in-
debtedness incurred or to be incurred by the 
trust to acquire or carry real estate assets, 
and 
‘‘(ii) any income of a real estate in-
vestment trust from a transaction entered 
into by the trust primarily to manage risk 
of currency fluctuations with respect to any 
item of income or gain described in para-
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graph (2) or (3) (or any property which 
generates such income or gain), including 
gain from the termination of such a trans-
action, shall not constitute gross income 
under paragraphs (2) and (3), but only if 
such transaction is clearly identified as 
such before the close of the day on which it 
was acquired, originated, or entered into (or 
such other time as the Secretary may pre-
scribe).’’. 
(c) AUTHORITY TO EXCLUDE ITEMS OF INCOME FROM 
REIT INCOME TESTS.—Section 856(c)(5) is amended by 
adding at the end the following new subparagraph: 
‘‘(J) SECRETARIAL AUTHORITY TO EXCLUDE 
OTHER ITEMS OF INCOME.—To the extent nec-
essary to carry out the purposes of this part, the 
Secretary is authorized to determine, solely for 
purposes of this part, whether any item of in-
come or gain which— 
‘‘(i) does not otherwise qualify under 
paragraph (2) or (3) may be considered as 
not constituting gross income for purposes 
of paragraphs (2) or (3), or 
‘‘(ii) otherwise constitutes gross income 
not qualifying under paragraph (2) or (3)
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the gain (including any foreign currency 
gain, as defined in section 988(b)(1)) from 
prohibited transactions over the deductions 
(including any foreign currency loss, as de-
fined in section 988(b)(2)) allowed by this 
chapter which are directly connected with 
prohibited transactions;’’. 
Subtitle B—Taxable REIT 
Subsidiaries 
SEC. 3041. CONFORMING TAXABLE REIT SUBSIDIARY ASSET 
TEST. 
Section 856(c)(4)(B)(ii) is amended— 
(1) by striking ‘‘20 percent’’ and inserting ‘‘25 
percent’’, and 
(2) by striking ‘‘REIT subsidiaries’’ and all that 
follows, and inserting ‘‘REIT subsidiaries,’’. 
Subtitle C—Dealer Sales 
SEC. 3051. HOLDING PERIOD UNDER SAFE HARBOR. 
(a) IN GENERAL.—Section 857(b)(6) (relating to in-
come from prohibited transactions) is amended— 
(1) by striking ‘‘4 years’’ in subparagraphs 
(C)(i), (C)(iv), and (D)(i) and inserting ‘‘2 years’’, 
(2) by striking ‘‘4-year period’’ in subpara-
graphs (C)(ii), (D)(ii), and (D)(iii) and inserting ‘‘2- 
year period’’, and
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(3) by striking ‘‘real estate asset’’and all that fol-
lows through ‘‘if’’ in the matter preceding clause (i) 
of subparagraphs (C) and (D), respectively, and in-
serting ‘‘real estate asset (as defined in section 
856(c)(5)(B)) and which is described in section 
1221(a)(1) if’’. 
(b) RETENTION OF EXISTING LAW.—Section 857(b)(6) 
is amended— 
(1) by striking subparagraph (G) and redesig-
nating subparagraphs (H) and (I) as subparagraphs 
(G) and (H), respectively, and 
(2) in subparagraph (G), as so redesignated, by 
adding at the end the following: ‘‘For purposes of the 
preceding sentence, the reference to subparagraph (D) 
shall be a reference to such subparagraph as in effect 
on the day before the enactment of the Housing As-
sistance Tax Act of 2008, as modified by subpara-
graph (G) as so in effect.’’. 
SEC. 3052. DETERMINING VALUE OF SALES UNDER SAFE 
HARBOR. 
Section 857(b)(6) is amended— 
(1) by striking the semicolon at the end of sub-
paragraph (C)(iii) and inserting ‘‘, or (III) the fair 
market value of property (other than sales of fore-
closure property or sales to which section 1033 ap-
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plies) sold during the taxable year does not exceed 10 
percent of the fair market value of all of the assets of 
the trust as of the beginning of the taxable year;’’, and 
(2) by adding ‘‘or’’ at the end of subclause (II) 
of subparagraph (D)(iv) and by adding at the end of 
such subparagraph the following new subclause: 
‘‘(III) the fair market value of prop-
erty (other than sales of foreclosure property 
or sales to which section 1033 applies) sold 
during the taxable year does not exceed 10 
percent of the fair market value of all of the 
assets of the trust as of the beginning of the 
taxable year,’’. 
Subtitle D—Health Care REITs 
SEC. 3061. CONFORMITY FOR HEALTH CARE FACILITIES. 
(a) RELATED PARTY RENTALS.—Subparagraph (B) of 
section 856(d)(8) (relating to special rule for taxable REIT 
subsidiaries) is amended to read as follows: 
‘‘(B) EXCEPTION FOR CERTAIN LODGING FA-
CILITIES
AND
HEALTH
CARE
PROPERTY.—The 
requirements of this subparagraph are met with 
respect to an interest in real property which is 
a qualified lodging facility (as defined in para-
graph (9)(D)) or a qualified health care property 
(as defined in subsection (e)(6)(D)(i)) leased by
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the trust to a taxable REIT subsidiary of the 
trust if the property is operated on behalf of such 
subsidiary by a person who is an eligible inde-
pendent contractor. For purposes of this section, 
a taxable REIT subsidiary is not considered to 
be operating or managing a qualified health care 
property or qualified lodging facility solely be-
cause it— 
‘‘(i) directly or indirectly possesses a 
license, permit, or similar instrument ena-
bling it to do so, or 
‘‘(ii) employs individuals working at 
such facility or property located outside the 
United States, but only if an eligible inde-
pendent contractor is responsible for the 
daily supervision and direction of such in-
dividuals on behalf of the taxable REIT 
subsidiary pursuant to a management 
agreement or similar service contract.’’. 
(b) ELIGIBLE INDEPENDENT CONTRACTOR.—Subpara-
graphs (A) and (B) of section 856(d)(9) (relating to eligible 
independent contractor) are amended to read as follows: 
‘‘(A) IN GENERAL.—The term ‘eligible inde-
pendent contractor’ means, with respect to any 
qualified lodging facility or qualified health care
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property (as defined in subsection (e)(6)(D)(i)), 
any independent contractor if, at the time such 
contractor enters into a management agreement 
or other similar service contract with the taxable 
REIT subsidiary to operate such qualified lodg-
ing facility or qualified health care property, 
such contractor (or any related person) is ac-
tively engaged in the trade or business of oper-
ating qualified lodging facilities or qualified 
health care properties, respectively, for any per-
son who is not a related person with respect to 
the real estate investment trust or the taxable 
REIT subsidiary. 
‘‘(B) SPECIAL RULES.—Solely for purposes 
of this paragraph and paragraph (8)(B), a per-
son shall not fail to be treated as an independent 
contractor with respect to any qualified lodging 
facility or qualified health care property (as so 
defined) by reason of the following: 
‘‘(i) The taxable REIT subsidiary 
bears the expenses for the operation of such 
qualified lodging facility or qualified health 
care property pursuant to the management 
agreement or other similar service contract.