A boost for REITs.The House Ways and Means WAYS AND MEANS. In legislative assemblies there is usually appointed a committee whose duties are to inquire into, and propose to the house, the ways and means to be adopted to raise funds for the use of the government. This body is called the committee of ways and means. Committee's tax bill contains an interesting proposal relative to real estate investment trusts (REITs). Currently, a REIT REIT See: Real Estate Investment Trust REIT See real estate investment trust (REIT). is disqualified dis·qual·i·fy tr.v. dis·qual·i·fied, dis·qual·i·fy·ing, dis·qual·i·fies 1. a. To render unqualified or unfit. b. To declare unqualified or ineligible. 2. from favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. tax treatment if, at any time during the last six months of the year, more than 50% of its stock (by value) is owned by five or fewer individuals (the so-called 5/ 50 rule). For this purpose, a domestic pension trust is treated as a single individual. The bill provides an exception for cases where one or more pension trusts own more than 10% of a REIT's stock and the 5/50 rule otherwise would be violated. In that situation the REIT will not be disqualified if treating the trust's REIT stock as if it were held by the trust's beneficiaries consequently would result in the 5/50 rule not being violated. Moreover, if no single trust owns more than 25% of the stock of a public REIT and the aggregate interest of trusts owning more than 10% of a REIT's stock does not exceed 50%, the REIT will not be subject to the restrictions imposed on earning debt-financed income. This means the dividends remitted by the REIT to the pension trusts will not constitute unrelated business taxable income Under the federal tax law, gross income reduced by adjustments and allowable deductions. It is the income against which tax rates are applied to compute an individual or entity's tax liability. The essence of taxable income is the accrual of some gain, profit, or benefit to a taxpayer. . Observation: Passage of this provision of the bill would undoubtedly bolster demand for stock in REITs. |
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