Jun 07, 2016
Richard Nugent comments in the Wall Street Journal on new Treasury regulations that further limit the ability of corporations to form REITs by requiring companies to recognize built-in gain in certain assets transferred to a REIT within 10 years of a spinoff. The new regulations broaden the December 2015 PATH Act, which imposed significant restrictions on many REIT spinoffs.
The regulations don’t prevent entire companies from converting from corporations into REITs as long as they qualify under the existing definitions, said Richard M. Nugent, a partner at Cadwalader, Wickersham & Taft LLP in New York. That means data centers, billboard owners and other companies that aren’t necessarily thought of as traditional real-estate firms can still become REITs if they qualify and the whole company makes the move. “More things qualify as real property than one would normally think of,” Mr. Nugent said. “It doesn’t change the definition of real property. It doesn’t narrow it.”
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