The IRS Finishes What Congress Started Last Year With Its Updated REIT Spinoff Rule

The US Treasury Department

WASHINGTON, DC–The Internal Revenue Service published regulations Tuesday morning updating REIT spinoff rule changes that were made by Congress in December of 2015 as part of the larger Consolidated Appropriations Act passed by Congress. PATH requires companies who elected a REIT status for assets that have been spin off within 10 years of that event to recognize the gain as though the assets had been sold at their fair market value on the sale date.

The regulation, however, said nothing about a company engaging in a REIT conversion after a spin off, such as by merging with an existing REIT. This is where the IRS stepped in, updating the rules to include conversions and making it effective immediately.