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RICs, REITs and other Special Entities

PATH Act Brings FIRPTA Changes

February 2, 2016 By Heather Ripley

The Protecting Americans from Tax Hikes Act of 2015 (the “PATH Act”), signed December 18, 2015, introduces significant changes to the Foreign Investment in Real Property Tax Act (FIRPTA), particularly concerning REITs. The reforms are generally intended to make foreign investment in U.S. real estate more attractive, though some revenue-raising measures are thrown in the mix. Among the PATH Act's taxpayer-friendly FIRPTA updates: The ownership threshold for foreign “portfolio investors” in publicly traded REITs increases from 5% to 10%. These investors are exempt from FIRPTA tax [...]Read more

Filed Under: International - Corporate Tax Planning, International - Inbound, International Tax Advisory, RICs, REITs and other Special Entities Tagged With: FIRPTA, PATH Act, pension funds, portfolio investors, REIT, RIC, US real property, withholding tax

IRS Private Letter Ruling Holds that Pass-Through Interests in Mortgages Can Qualify as Registered Form Obligations

February 25, 2015 By Daniel Reach

In late January, the IRS issued a private letter ruling (P.L.R. 201504004) dealing with whether interests in a non-grantor trust and a partnership are considered to be in registered form, a precursor to qualification for payments thereon to the portfolio interest exemption. Although the ruling answers in the affirmative, it does not ultimately state whether the particular payments addressed in the ruling would be eligible for the portfolio interest exemption. To qualify for the portfolio interest exemption, and avoid U.S. withholding tax on payments of U.S.-source interest to a foreign person, [...]Read more

Filed Under: Financial Products and Securities, International - Corporate Tax Planning, International - Inbound, International Tax Alert, Partnerships, RICs, REITs and other Special Entities Tagged With: engaged in a US trade or business, grantor trust, PLR, portfolio interest exemption

Letter Ruling Addresses C Corporation’s Conversion to a REIT

February 3, 2015 By Jasper L. (Jack) Cummings, Jr.

The IRS recently released the letter ruling (PLR 201503010) that was likely issued to Iron Mountain, a US multinational document storage company, on its conversion to a REIT. The taxpayer in the ruling proposed retaining its leases and ownership interests in warehouse-like buildings and racking structures therein in the corporation that would elect REIT status and moving its document storage activities into taxable REIT subsidiaries. The letter ruling contained more than a dozen separate rulings, evincing the complexity of transitioning from a C corporation to a REIT, particularly when [...]Read more

Filed Under: Corporate - Federal, Federal Tax Advisory, RICs, REITs and other Special Entities Tagged With: change of accounting method, conversion to REIT, E&P, IRS letter ruling, proposed regulations, real property, REIT, REIT subsidiary, section 481, section 856

REIT Real Property Regulation Proposed

May 20, 2014 By Jasper L. (Jack) Cummings, Jr.

Prop. Reg. section 1.856-10 will define real property that will satisfy the income and asset requirements for REITs. It will replace Reg. section 1.856-3(d). It claims to be a clarification of existing law and not a modification that would cause significant reclassifications for existing REITs, and that seems to be true. It embodies the positions stated in the much briefer current regulation, plus several revenue rulings and letter rulings issued over the years. The regulation aims to rationalize the process of identifying real property so that REITs can decide for themselves whether they own [...]Read more

Filed Under: Mergers and Acquisitions, RICs, REITs and other Special Entities Tagged With: Domestic

REIT Conversions

June 7, 2013 By Jasper L. (Jack) Cummings, Jr. and Edward Tanenbaum

LTR 201314002 has caused quite a buzz in the investment community. Stock pickers want to know how far the envelope can be pushed on the definition of a real estate investment trust. The ruling seemed to allow it to be pushed fairly far, to include racks in buildings where computer servers are stored, called data centers. However, two companies in somewhat similar businesses recently filed information with the SEC indicating that the IRS was closely examining whether their real estate should receive REIT treatment. Facts A domestic consolidated group headed by a parent is now in the business of [...]Read more

Filed Under: Corporate - Federal, Federal - Corporate Tax Planning, Mergers and Acquisitions - Domestic, Reorganizations, RICs, REITs and other Special Entities

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