Par. 4. Sections 1.141-0 through 1.141-16 are added to read as follows:
(a) Allocation of proceeds to expenditures generally. For purposes of Secs. 1.141-1 through 1.141-16, the provisions of Sec. 1.148-6(d) apply for purposes of allocating proceeds to expenditures, except that Sec. 1.148-6(d)(6) does not apply. Thus, allocations generally may be made using any reasonable, consistently applied accounting method, and allocations under section 141 and section 148 must be consistent with each other.
(b) Special rules for mixed use facilities--(1) Allocation of expenditures to mixed use facilities. Proceeds may be specifically allocated to the expenditures comprising a discrete portion of a mixed use facility. To approximate the actual expenditures, a percentage of actual costs based on rental values or usable space may be used if reasonable based on all the facts and circumstances.
(2) Mixed use facility defined--(i) Discrete portions. A mixed use facility is a facility containing two or more discrete portions. A discrete portion of a mixed use facility is a portion of a facility that consists of--
(A) Any separate and discrete portion of a facility (for example, a floor of a building, a portion of a building separated by walls, partitions, or other physical barriers) to which use is limited (other than common area use); or
(B) An undivided ownership interest in an output facility, sewage facility, water collection, storage, or distribution facilities, or any similar utility system (for example, railroads or fiber optic networks, but not airports or stadiums) or a portion of such a facility that, if owned by a person other than the actual owner, would constitute an undivided ownership interest.
(ii) Special rule for certain facilities. To the extent that a mixed use facility consists of discrete portions that are used for a government use in the same manner as for a private business use, proceeds allocated to expenditures comprising one discrete portion may be subsequently reallocated to expenditures comprising another discrete portion in that facility.
(iii) Examples. The following examples illustrate the application of this paragraph (b)(2).
Example 1. State S and Corporation C enter into an agreement under which C will lease for 20 years the third and fourth floors of an 11-story office building to be constructed on land that S will acquire. S will occupy the grade floor and the remaining eight floors of the building. S will issue $10 million of bonds the proceeds of which will be used to finance 10/11ths of the cost of the purchase of the land and construction of the building. S will use other funds for the remaining costs of the land and building. From the facts and circumstances presented, it is determined that an allocation of the costs of the acquisition of land and the construction of the building to the leased space based on the ratio of area leased to the entire building is reasonable. Thus, no proceeds are allocated to 1 of the 2 floors used by C.
Example 2. The facts are the same as in Example 1 except that some years after the building is placed in service, C and S agree that, in order to consolidate certain uses, S will begin to occupy the third and fourth floors and C will begin to occupy the seventh and eighth floors, each of which has an equal rental value. The result is the same as in Example 1.
(c) Allocation of disposition proceeds. Except as otherwise provided in this paragraph (c) and Sec. 1.141-1(c), disposition proceeds are allocated under the rules of this section. If a transfer that produces disposition proceeds is made pursuant to an installment sale or the property otherwise continues to have a nexus to the bonds, however, the disposition proceeds are allocated to the transferred property.
(d) Allocation of common areas. The allocation of proceeds to common areas may be made according to any reasonable method that properly reflects the proportionate benefit to be derived directly or indirectly by the users of the facility.
(e) Allocation of proceeds to bonds. Proceeds are allocated to bonds in a manner consistent with the allocation rules of Sec. 1.148- 9(h).