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Tax Considerations for REITs and RICs: Recent IRS Guidance, Distributions, Reporting Requirements, Tax Planning

Recording of a 90-minute premium CLE/CPE video webinar with Q&A

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Conducted on Thursday, February 24, 2022

Recorded event now available

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Course Materials

This CLE/CPE course will provide tax counsel and advisers with an in-depth analysis of key tax considerations and related issues for real estate investments trusts (REITs) and regulated investment companies (RICs). The panel will also discuss recent developments including Revenue Procedure 2021-53 permitting certain REIT and RIC stock distributions to count as dividends for purposes of minimum dividend requirements, proposed legislation, and developments in RICs investing in cryptocurrencies.

Description

Fund managers and investors must consider various issues when complying with their REIT and RIC tax obligations. Any missteps in tax planning and reporting for REITs and RICs can significantly impact tax liability and potential audit risk.

Tax counsel and advisers must have a thorough understanding of REIT formation and investment, including rules relating to REIT subsidiaries (QRSs and TRSs) and REITs that own partnership and LLC interests. REITs must satisfy complex IRS requirements regarding the organization of the entity, its income, assets, and distribution of income, as well as its ownership base.

The Internal Revenue Code provides special favorable rules for the taxation of RICs. Companies registered as an investment company under the provisions of the Investment Company Act of 1940 may elect to be a RIC if it satisfies specific requirements relating to the source of its income and the diversification of its assets. If additional distribution requirements are met, a RIC will be taxed as a pass-through entity that acts as a conduit of income to its shareholders, allowing the RIC to deduct dividends paid to its shareholders in computing its taxable income and gains.

In addition, on Nov. 30, 2021, the IRS issued Rev. Proc. 2021-53, which allows publicly offered RICs and publicly offered REITs to limit the cash component of their dividends to a maximum of 10 percent cash if specific procedures are followed.

Listen as our authoritative panel guides you through navigating the complex tax rules regarding the tax treatment of REIT and RIC transactions.

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Outline

  1. REITs
    1. Organizational requirements
    2. Income and asset tests
    3. Distribution requirements
    4. Qualified vs. taxable subsidiaries
    5. Investor taxation
  2. RICs
    1. Source of income requirements
    2. Diversification requirements
    3. Distribution requirements
    4. Tax treatment of qualifying RICs and shareholders
  3. Best practices for confronting and managing risk

Benefits

The panel will review these and other key issues:

  • What are the organizational and operational tax rules for REITs?
  • What are the limitations and benefits of REIT status?
  • What are the income, diversification, and distributions requirements for RICs?
  • How are qualifying RICs and shareholders treated for tax purposes?
  • What are best practices for confronting and mitigating risk?

Faculty

Gianou, Nickolas
Nickolas Gianou

Partner
Skadden Arps Slate Meagher & Flom

Mr. Gianou represents clients on a wide range of tax matters, including partnership transactions, public and private...  |  Read More

Nirenberg, David
David Z. Nirenberg

Partner
Chapman and Cutler

Mr. Nirenberg is a partner in Chapman's Tax Department. His practice focuses on securitizations, taxable and...  |  Read More

Weiss, Jennifer
Jennifer H. Weiss

Shareholder
Greenberg Traurig

Ms. Weiss focuses her practice on structuring, negotiating, and documenting complex tax oriented commercial...  |  Read More

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