I recently learned about a recent IRS Revenue Procedure from one of our custodians. The document is Revenue Procedure 2008-68 and addresses the concern REITs (Real Estate Investment Trusts) have regarding their ability to satisfy the taxable income distribution requirements.
A REIT is required to distribute 90% of its taxable income, including any net capital gains, to its shareholders each year. If it fails to do so, the REIT may lose its ability to reduce or eliminate its corporate income taxes. Due to the credit crisis affecting the economy, REITs are struggling to raise enough capital in order to distribute the mandatory 90% of taxable income in cash.
As a result of the procedure, the IRS will now allow REITs to distribute stock, in addition to cash, as a dividend and the entire amount will be treated as satisfying the REIT distribution requirements.
What does this mean for you and your clients?
