Tax Planning and Reporting for Real Estate Investment Trusts

The original REIT legislation was enacted in 1960 to provide the equivalent of a mutual fund for investment in real estate. To achieve this intent, complex rules were enacted with the aim on ensuring that REITs remain primarily invested in passive real estate investments, those investments are professional managed, and returns from those investments are distributed largely to investors.  The “reward” for such compliance is that a REIT can entirely eliminate its liability for U.S. federal income tax.

Today, REITs make up a significant portion of all real estate investing, and the types of REITs and structures are even more complex than was envisioned in 1960. Sponsors, managers, and other REIT professionals have myriad issues to monitor and consider in complying with the REIT tax obligations, and investors should ensure that they understand the nature of REIT taxation, and its limitations and benefits. Any missteps in tax planning and reporting for REITs can significantly impact tax liability.

Tax counsel and advisers must have a thorough understanding of the REIT life cycle, including structuring a REIT, complying with the limitations around asset composition, gross income, and distributions, and taxation of the REIT and its shareholders.

In addition, the Treasury and the IRS are regularly reviewing the taxation of REITs, and new regulations and administrative guidance, including private letter rulings, frequent impact the practice. This panel will cover some of the most recent regulations and pronouncements.

Listen as our authoritative panel guides you through navigating the complex tax rules regarding the tax treatment of REITs.