Operating Rules. In determining whether the uneven rent test has been met, the following rules apply: (A) Any contingent rent attributable to a provision set forth in § 1.467– 1(c)(2)(iii)(B)(3) through (9) is dis- regarded. (B) If the lease term includes one or more partial calendar years (a period less than a complete calendar year), the average rent allocated to each cal- endar year is the total rent allocated under the rental agreement, divided by the actual length (in years) of the lease term. The rent allocated to a partial calendar year is annualized by multi- plying the allocated rent by the num- ber of periods of the partial calendar year’s length in a full calendar year and the annualized rent is treated as the amount of rent allocated to that year in determining whether the un- even rent test is met. (C) In the case of a rental agreement not described in paragraph (c)(4)(ii) of this section, an initial rent holiday pe- riod and any rent allocated to such pe- riod are disregarded for purposes of this paragraph (c)(4) if taking such pe- riod and rent into account would cause the agreement to fail to meet the un- even rent test. For purposes of this paragraph (c)(4), an initial rent holiday period is any period of three months or less at the beginning of the lease term during which annualized fixed rent (de- termined by treating such period as a rental period for purposes of § 1.467– 1(j)(3)) is less than the average rent al- located to all calendar years (deter- mined before the application of this paragraph (c)(4)(iii)(C)). (D) In the case of a rental agreement described in paragraph (c)(4)(ii) of this section, one qualified rent holiday pe- riod and any rent allocated to such pe- riod are disregarded for purposes of this paragraph (c)(4) if taking such pe- riod and rent into account would cause the agreement to fail the uneven rent test. For this purpose, a qualified rent holiday period is a consecutive period that is an initial rent holiday period or that meets the following conditions: (1) The period does not exceed the lesser of 24 months or 10 percent of the lease term (determined before the ap- plication of this paragraph (c)(4)(iii)(D)). (2) Annualized fixed rent during the period (determined by treating the pe- riod as a rental period for purposes of § 1.467–1(j)(3)) is less than the average rent allocated to all calendar years (de- termined before the application of this paragraph (c)(4)(iii)(D)). (3) Providing less than average rent for the period is reasonable, deter- mined by reference to commercial practice (as of the agreement date) in the locality where the use of the prop- erty occurs. (E) If the rental agreement contains a variable interest rate provision, the uneven rent test is applied by treating the rent as having been fixed under the terms of the rental agreement for the entire lease term using fixed rate sub- stitutes (determined in the same man- ner as § 1.1275–5(e), treating the agree- ment date as the issue date) for the variable rates of interest provided under the terms of the lessor’s indebt- edness.
Appears in 7 contracts
Samples: Rental Agreement, Rental Agreement, Rental Agreement
Operating Rules. In determining whether the uneven rent test has been met, the following rules apply:
(A) Any contingent rent attributable to a provision set forth in § 1.467– 1(c)(2)(iii)(B)(3) through (9) is dis- regarded.
(B) If the lease term includes one or more partial calendar years (a period less than a complete calendar year), the average rent allocated to each cal- endar year is the total rent allocated under the rental agreement, divided by the actual length (in years) of the lease term. The rent allocated to a partial calendar year is annualized by multi- plying the allocated rent by the num- ber of periods of the partial calendar year’s length in a full calendar year and the annualized rent is treated as the amount of rent allocated to that year in determining whether the un- even rent test is met.
(C) In the case of a rental agreement not described in paragraph (c)(4)(ii) of this section, an initial rent holiday pe- riod and any rent allocated to such pe- riod are disregarded for purposes of this paragraph (c)(4) if taking such pe- riod and rent into account would cause the agreement to fail to meet the un- even rent test. For purposes of this paragraph (c)(4), an initial rent holiday period is any period of three months or less at the beginning of the lease term during which annualized fixed rent (de- termined by treating such period as a rental period for purposes of § 1.467– 1(j)(3)) is less than the average rent al- located to all calendar years (deter- mined before the application of this paragraph (c)(4)(iii)(C)).
(D) In the case of a rental agreement described in paragraph (c)(4)(ii) of this section, one qualified rent holiday pe- riod and any rent allocated to such pe- riod are disregarded for purposes of this paragraph (c)(4) if taking such pe- riod and rent into account would cause the agreement to fail the uneven rent test. For this purpose, a qualified rent holiday period is a consecutive period that is an initial rent holiday period or that meets the following conditions:
(1) The period does not exceed the lesser of 24 months or 10 percent of the lease term (determined before the ap- plication of this paragraph (c)(4)(iii)(D)).
(2) Annualized fixed rent during the period (determined by treating the pe- riod as a rental period for purposes of § 1.467–1(j)(3)) is less than the average rent allocated to all calendar years (de- termined before the application of this paragraph (c)(4)(iii)(D)).
(3) Providing less than average rent for the period is reasonable, deter- mined by reference to commercial practice (as of the agreement date) in the locality where the use of the prop- erty occurs.
(E) If the rental agreement contains a variable interest rate provision, the uneven rent test is applied by treating the rent as having been fixed under the terms of the rental agreement for the entire lease term using fixed rate sub- stitutes (determined in the same man- ner as § 1.1275–5(e), treating the agree- ment date as the issue date) for the variable rates of interest provided under the terms of the lessor’s indebt- edness.
(d) Calculating constant rental amount—
(1) In general. Except as pro- vided in paragraph (d)(2) of this sec- tion, the constant rental amount is the amount that, if paid at the end of each rental period, would result in a present value equal to the present value of all amounts payable under the disqualified leaseback or long-term agreement as rent and interest. In computing the constant rental amount, the rules for determining present value are the same as those provided in § 1.467–2(d) for com- puting the proportional rental amount. If constant rental accrual is required, all rental periods (other than an initial or final short period of not more than one month) must be equal in length and satisfy the requirements of § 1.467– 1(j)(5).
Appears in 1 contract
Samples: Rental Agreement
Operating Rules. In determining whether the uneven rent test has been met, the following rules apply:
(A) Any contingent rent attributable to a provision set forth in § 1.467– 1(c)(2)(iii)(B)(3) through (9) is dis- regarded.
(B) If the lease term includes one or more partial calendar years (a period less than a complete calendar year), the average rent allocated to each cal- endar year is the total rent allocated under the rental agreement, divided by the actual length (in years) of the lease term. The rent allocated to a partial calendar year is annualized by multi- plying the allocated rent by the num- ber of periods of the partial calendar year’s length in a full calendar year and the annualized rent is treated as the amount of rent allocated to that year in determining whether the un- even rent test is met.
(C) In the case of a rental agreement not described in paragraph (c)(4)(ii) of this section, an initial rent holiday pe- riod and any rent allocated to such pe- riod are disregarded for purposes of this paragraph (c)(4) if taking such pe- riod and rent into account would cause the agreement to fail to meet the un- even rent test. For purposes of this paragraph (c)(4), an initial rent holiday period is any period of three months or less at the beginning of the lease term during which annualized fixed rent (de- termined by treating such period as a rental period for purposes of or
§ 1.467– 1(j)(3)) is less than the average rent al- located to all calendar years (deter- mined before the application of this paragraph (c)(4)(iii)(C)).1. 467–3
(D) In the case of a rental agreement described in paragraph (c)(4)(ii) of this section, one qualified rent holiday pe- riod and any rent allocated to such pe- riod are disregarded for purposes of this paragraph (c)(4) if taking such pe- riod and rent into account would cause the agreement to fail the uneven rent test. For this purpose, a qualified rent holiday period is a consecutive period that is an initial rent holiday period or that meets the following conditions:
(1) The period does not exceed the lesser of 24 months or 10 percent of the lease term (determined before the ap- plication of this paragraph (c)(4)(iii)(D)).
(2) Annualized fixed rent during the period (determined by treating the pe- riod as a rental period for purposes of § 1.467–1(j)(3)) is less than the average rent allocated to all calendar years (de- termined before the application of this paragraph (c)(4)(iii)(D)).
(3) Providing less than average rent for the period is reasonable, deter- mined by reference to commercial practice (as of the agreement date) in the locality where the use of the prop- erty occurs.
(E) If the rental agreement contains a variable interest rate provision, the uneven rent test is applied by treating the rent as having been fixed under the terms of the rental agreement for the entire lease term using fixed rate sub- stitutes (determined in the same man- ner as § 1.1275–5(e), treating the agree- ment date as the issue date) for the variable rates of interest provided under the terms of the lessor’s indebt- edness.
(d) Calculating constant rental amount—
(1) In general. Except as pro- vided in paragraph (d)(2) of this sec- tion, the constant rental amount is the amount that, if paid at the end of each rental period, would result in a present value equal to the present value of all amounts payable under the disqualified leaseback or long-term agreement as
Appears in 1 contract
Samples: Rental Agreement
