![]() 897 currently, a nonresident individual or foreign corporation invested in the REIT is taxed when a Qualified Investment Entity (QIE) makes a distribution from a gain on a sale or disposition of a U.S. How Does Section 897 Impact REIT Foreign Investors? This is a significant tax benefit to foreign investors. investor that sells its stock of the corporation is exempt from U.S. Therefore, under current law, any non-U.S. taxpayers, easily satisfying the domestically controlled testing. domestic C corporation qualifies as a domestically controlled REIT, regardless of the ownership of the corporation. Let’s look at an example under current law. ![]() While private letter rulings are not law or binding, this ruling has been widely used as the only guidance for how the IRS views domestic control in these situations. corporations was domestically controlled, as the corporations were the taxpayers, regardless of the ownership within those corporations. What Guidance is Currently Followed to Determine If a REIT Is Domestically Controlled?Ī 2009 Private Letter Ruling concluded that a REIT owned by two U.S. While still under review, the proposed regulations also suggest the IRS may begin using these new guidelines before they become final. tax on any gains realized upon sale of their stock. investors in these structures to pay potentially significant U.S. On December 28, 2022, the IRS issued proposed regulation REG-100442-22, which may change real estate investment trusts’ (REITs) domestically controlled status.
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