What is QRS real estate?
A captive REIT/QRS is a real estate investment trust (REIT) or qualified real estate investment trust subsidiary (QRS) that has more that 50 percent of the voting power or value of the trust owned or controlled by a single corporation that is not a REIT or a QRS.
What does a taxable REIT subsidiary do?
What is a taxable REIT subsidiary? A taxable REIT subsidiary (TRS) is a corporation owned by a REIT that elects to be taxed at the regular corporate income tax rate. TRSs provide REITs the flexibility to hold, up to 20% of their total assets, entities that otherwise wouldn’t be permissible in the REIT structure.
What is a qualified REIT subsidiary?
(2) Qualified REIT subsidiary For purposes of this subsection, the term “qualified REIT subsidiary” means any corporation if 100 percent of the stock of such corporation is held by the real estate investment trust. Such term shall not include a taxable REIT subsidiary.
What tax return does a taxable REIT subsidiary file?
A taxable REIT subsidiary (“TRS”) is a corporation that is owned directly or indirectly by a REIT and has jointly elected with the REIT to be treated as a TRS for tax purposes. A TRS is subject to regular corporate income tax which, pursuant to the Tax Cuts and Jobs Act (TCJA), is now a flat tax rate of 21%.
What are the requirements for a REIT?
To qualify as a REIT, a company must have the bulk of its assets and income connected to real estate investment and must distribute at least 90 percent of its taxable income to shareholders annually in the form of dividends.
Can a REIT own foreign assets?
Restrictions on foreign assets There are no restrictions on foreign assets. Distribution requirements Undistributed income or gains may be taxed at the highest marginal tax rate (currently 49%). However, to mitigate this it is standard practice to distribute 100% of the taxable income of the REIT.
How do you start a REIT election?
In order to qualify as a REIT, a company must make a REIT election by filing an income tax return on Form 1120-REIT. Since this form is not due until March, the REIT does not make its election until after the end of its first year (or part-year) as a REIT.
How are REIT dividends taxed?
The majority of REIT dividends are taxed as ordinary income up to the maximum rate of 37% (returning to 39.6% in 2026), plus a separate 3.8% surtax on investment income. … Taking into account the 20% deduction, the highest effective tax rate on Qualified REIT Dividends is typically 29.6%.
What is a REIT prohibited transaction?
If it were determined that a REIT sold dealer property, that would be considered a prohibited transaction. Essentially, property or inventory held primarily for sale as part of its business model is not considered a capital asset. Income from a Foreclosure Property.
What is REIT testing?
Income testing is a vital aspect of compliance for real estate investment trusts (REITs). These income tests are based on the gross income, as computed for tax purposes, from the various properties that a REIT owns, including the REIT’s share of income from underlying partnerships (based on its capital ownership).
Can a REIT own more than 10% of a corporation’s stock that is not a TRS?
The 10% Test: REITs can hold no more than 10% of the total value or outstanding vote of any one issuer’s securities. TRS are exempt from this test.
Can a REIT be a disregarded entity?
A REIT may invest in foreign real estate through a foreign limited liability entity that checks the box to be a disregarded entity (DE) in order to achieve immediate flow- through of foreign income to the REIT so it can maximize distributions to shareholders and comply with the REIT income and asset tests.