[§235-13]  Sales of residential land tolessees; involuntary conversion.  (a)  A sale by an organization exemptunder section 501(c)(3), or treated as an estate or trust under Subchapter J ofthe Internal Revenue Code to a lessee of the entire interest in the land of thelessor organization, estate, or trust shall be an involuntary conversion ofproperty used in trade or business or a capital asset of the lessororganization, estate, or trust and shall not be a sale of property held by thelessor organization, estate or trust in the ordinary course of a trade orbusiness, irrespective of the number of such sales in any taxable year, if:

(1)  The lessee has a right to terminate such leaseand to acquire the entire interest of the lessor in the land, which rightexists by virtue of chapter 516 and not because of any private agreement orprivately created condition;

(2)  The lessee exercises the lessee's right topurchase such entire interest;

(3)  The lessor organization, estate, or trust hasheld the land for a period determined under subsection (b) prior to the date ofpurchase by lessee; and

(4)  The land is developed single-family residentialland.

(b)  The period for which a lessororganization, estate, or trust has held land, within the meaning of subsection(a)(3), shall be determined under the rules of section 1223 of the InternalRevenue Code, except that if such land shall have been acquired by the lessororganization, estate, or trust from a decedent, within the meaning of section1014 of the Internal Revenue Code, or if such land shall have been acquired bythe lessor organization, estate, or trust from a donor, within the meaning ofsection 1015 (other than section 1015(c)) of the Internal Revenue Code, theholding period shall include the period during which such land shall have beenheld by such decedent or by such donor and also the period if any for whichsuch land shall have been held by an inter vivos or testamentary trust estatecreated by such decedent or by such donor.

(c)  This section shall not apply with respectto any transaction governed by section 1055 of the Internal Revenue Code.

(d)  As used in this section:

(1)  "Lessee" means the original lessee andany successor who has the right under chapter 516 to bring about an involuntaryconversion.

(2)  "Lessor" means any fee simple owner,any sublessor, and any person entitled to share in the rents or subrents of theland involved in an involuntary conversion described in subsection (a).

(e)  The gain derived from sales qualified asinvoluntary conversion of property under this section shall be treated asprovided in section 1033 of the Internal Revenue Code of 1954, as amended. [L1977, c 75, §1; gen ch 1985]