Gross income of a lessee does not include any amount received in cash (or treated as a rent reduction) by a lessee from a lessor-
under a short-term lease of retail space, and
for the purpose of such lessee™s constructing or improving qualified long-term real property for use in such lessee™s trade or business at such retail space,
but only to the extent that such amount does not exceed the amount expended by the lessee for such construction or improvement.
Consistent treatment by lessor
Qualified long-term real property constructed or improved in connection with any amount excluded from a lessee™s income by reason of subsection (a) shall be treated as nonresidential real property of the lessor (including for purposes of section 168 (i)(8)(B)).
For purposes of this section-
Qualified long-term real property
The term “qualified long-term real property” means nonresidential real property which is part of, or otherwise present at, the retail space referred to in subsection (a) and which reverts to the lessor at the termination of the lease.
The term “short-term lease” means a lease (or other agreement for occupancy or use) of retail space for 15 years or less (as determined under the rules of section 168 (i)(3)).
The term “retail space” means real property leased, occupied, or otherwise used by a lessee in its trade or business of selling tangible personal property or services to the general public.
Information required to be furnished to Secretary
Under regulations, the lessee and lessor described in subsection (a) shall, at such times and in such manner as may be provided in such regulations, furnish to the Secretary-
information concerning the amounts received (or treated as a rent reduction) and expended as described in subsection (a), and
any other information which the Secretary deems necessary to carry out the provisions of this section.