Tuesday, June 21, 2016

IRS Stops One Channel for REIT Spinoffs

 According to an article in the Wall Street Journal, the IRS has closed what was apparently a loophole in the tax law that permitted companies to spin off real estate holdings into REITs.  

http://www.wsj.com/articles/irs-shuts-down-remaining-channels-for-reit-spinoffs-1465325526

https://newyork.nacdonline.org/Resources/RSSDetail.cfm?RSSID=199612

According to the experts, the law was written in reaction to deals proposed by some companies seeking to have the tax benefits of a REIT and others trying to create some additional kind of investment product out of real estate assets that they own. 

Macy's was considering a REIT last year, but decided against it. http://www.marketwatch.com/story/macys-hires-real-estate-executive-amid-activist-pressure-for-reit-spin-off-2016-04-04

Sears has formed a REIT. http://seekingalpha.com/news/2404286-sears-finally-forms-reit

The previous law allowed a loophole which still allowed spun-off companies to merge into an existing REIT.  The new regulation supposedly closes that loophole. 

 -- Kathy Bissell

 

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