REIT changes in the 2008 Housing Act
Mike Habib, EA Included in the $15.1 billion of housing tax incentives in the recently enacted “Housing Assistance Tax Act of 2008” (the Housing Act) is a package of changes liberalizing the real estate investment trust (REIT) rules. Under these new provisions:
- Foreign exchange gains that a REIT generates from operating real estate outside of the U.S. generally will qualify under both REIT gross income tests.
- The limit on a REIT’s ownership of taxable REIT subsidiaries (TRSs) increases from 20% to 25% of the REIT’s gross assets.
- The safe harbor test for dealer sales is changed by reducing the holding period requirement from four years to two years and by allowing measurement of the 10% sales test by fair market value instead of tax basis.
- Health care facilities can be leased by a TRS to a REIT under the same rules that currently apply to lodging facilities.
- The new rules for REITs are generally effective for tax years beginning after the date of enactment. However, some of the effective dates are accelerated to apply to transactions entered into after the date of enactment, e.g,. dispositions tested under the dealer sales rules.
I hope this information is helpful.
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