IRS closes off remaining REIT spinoff loophole

Los Angeles /
Jun.June 08, 2016 01:00 PM

From the New York Website: The Internal Revenue Service officially closed the last remaining legal avenue that allowed non-real estate corporations to spin off their property holdings into real estate investment trusts and reap tax benefits in the process.

Last year, Congress passed a law banning companies from spinning off their real estate assets into REITs after a wave of such deals by retailers, hotels and other non-real estate corporate entities – moves designed to benefit from the tax-exempt status carried by REITs.

While the measure banned such tax-free spinoffs from claiming REIT status for 10 years after their formation, it did not prohibit those spinoffs from merging with existing REITs or finding other ways around the law, according to the Wall Street Journal.

That avenue has now been closed off, however, after the IRS and Treasury Department announced new regulations deemed “necessary to prevent abuse.” Spinoffs that eventually gain REIT status would still be required to pay corporate taxes, undermining many of the benefits of becoming a REIT.

Neither Congress’ law banning spinoffs nor the new IRS and Treasury regulations prevent existing REITs from spinning off other REITs, nor do they affect REIT spinoffs that received permission from the IRS by last December – exempting the likes of hotel giant Hilton Worldwide Holdings. [WSJ]Rey Mashayekhi


Related Articles

arrow_forward_ios
Ric Clark, Sandeep Mathrani and the Staten Island Mall (Credit: Brookfield, Getty Images and GGP)

Brookfield’s deal for GGP is a cloud hanging over the mall sector: analysts

Brookfield’s deal for GGP is a cloud hanging over the mall sector: analysts
Ladies first: REITs with female board members do better than their all-male counterparts

Ladies first: REITs with female board members do better than their all-male counterparts

Ladies first: REITs with female board members do better than their all-male counterparts
Blackstone Mortgage Trust grows portfolio to record $11B

Blackstone Mortgage Trust grows portfolio to record $11B

Blackstone Mortgage Trust grows portfolio to record $11B
REITs had a bad week amid market volatility

REITs had a bad week amid market volatility

REITs had a bad week amid market volatility
The stock market is booming. So why are REIT shares falling?

The stock market is booming. So why are REIT shares falling?

The stock market is booming. So why are REIT shares falling?
Could Unibail’s Westfield deal pressure Simon Property Group to make a big buy?

Could Unibail’s Westfield deal pressure Simon Property Group to make a big buy?

Could Unibail’s Westfield deal pressure Simon Property Group to make a big buy?
Warren Buffett is making big bets on retail

Warren Buffett is making big bets on retail

Warren Buffett is making big bets on retail
You can now short private real estate markets

You can now short private real estate markets

You can now short private real estate markets
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...