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NEW YORK CITY-The tax benefits that historically have made real estate investment trusts so attractive to investors could suffer if the Republican party manages to emerge from today’s election with control of both the Senate and the House of Representatives, a statement released yesterday by Lehman Brothers says.

While it calls a Republican rout “a long shot” the statement refers to a proposal known as the “Dividend Tax Reduction Act.” According to Lehman, the proposal would offer taxpayers a 50% exclusion for all ordinary dividends received up to a cap of about $2,000. Thus, a taxpayer who receives that amount of dividends would report only $1,000, thereby cutting the income tax in half for that portion of their dividends.

“On a marginal basis, assuming the same yield, it makes other non REIT income streams more potentially more valuable,” Lehman Brothers research analyst Stuart Axelrod tells GlobeSt.com. “So the advantage that REITs have–there’s no corporate tax, just investor tax–part of that advantage could go away under new proposal.” Axelrod stress that while there probably would be an impact, it’s doubtful that the legislation, if passed, would cause significant damage to REITS.

Gordon DuGan, co-CEO and president of W.P Carey & Co LLC, agrees with Axelrod that the proposal has little potential impact on real estate trusts. “I don’t think it’s going to make much difference at all for any investor,” DuGan tells GlobeSt.com. “In REIT stocks, taxable income has never been reflected in share price to begin with.”

Lehman says the proposal resembles a smaller exclusion that was in effect prior to 1986.

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