debt-financed property
(4) Treatment of certain indebtedness (A) In general The exclusion provided in paragraph (1) shall not apply to the extent that the land is debt-financed property. (B) Definitions For purposes of this paragraph— (i) Debt-financed property The term “debt-financed property” means any property with respect to which there is an acquisition indebtedness (as defined in clause (ii)) on the date of the decedent’s death. (ii) Acquisition indebtedness The term “acquisition indebtedness” means, with respect to debt-financed property, the unpaid amount of— (I) the indebtedness incurred by the donor in acquiring such property, (II) the indebtedness incurred before the acquisition of such property if such indebtedness would not have been incurred but for such acquisition, (III) the indebtedness incurred after the acquisition of such property if such indebtedness would not have been incurred but for such acquisition and the incurrence of such indebtedness was reasonably foreseeable at the time of such acquisition, and (IV) the extension, renewal, or refinancing of an acquisition indebtedness.