The Uncertain Fate of Domestically Controlled Real Estate Investment Trusts

Real estate investment trusts (REITs) are companies formed to own and lease real property or hold debt secured by real property. They are attractive to foreign investors as they provide a vehicle for using foreign-owned domestic corporations to create domestically controlled REITs, potentially avoiding U.S. federal income tax. However, the IRS has proposed regulations that would put an end to this common practice. Read this article to learn more about the determination of domestically controlled REIT status under the current guidance and the possible changes under the proposed regulations.

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Related Content

• Real Estate Investment Trusts
  Learn how REITs function like mutual funds for real estate, providing investors with the opportunity to invest in a diversified portfolio of real estate, much in the same way that a mutual fund allows investors to invest in a diversified portfolio of securities.

• REITs: Use in Commercial Real Estate Transactions
  Read this practice note discussing how to use REITs for commercial real estate purposes, including formation of REITs, types of REITs, IRS requirements, and sale-leaseback transactions, as well as practical and strategic considerations for investors, sponsors, tenants, and landlords.

• REIT Organization
  Study this practice note for additional information regarding formation and organization of REITs.

• Real Estate Investment Trusts State Law Survey
  Refer to this survey for state laws governing REITs, which provides links to state provisions addressing the creation, operation, and taxation of REITs, including how deductions are treated, capital requirements, and tax reporting.

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