December 23, 2009

NAREIT Applauds IRS Two-Year Extension and Clarification of Elective Stock Dividend Guidance

Today, the IRS issued Rev. Proc. 2010-12, extending for two years Rev. Proc. 2009-15, relating to elective stock dividends. Rev. Proc. 2010-12 extends the IRS guidance for REITs first issued in Rev. Proc. 2008-68 and expanded to mutual funds in Rev. Proc. 2009-15 so that, for dividends declared by publicly traded REITs (and mutual funds) on or after January 1, 2008 and on or before December 31, 2012, with respect to a taxable year ending on or before December 31, 2011, the IRS will treat the entire value of the declared amount (including the stock portion) as a dividend, and thereby eligible for the dividends paid deduction so long as the specific calculation formula in Rev. Proc. 2010-12 is met, including that the total amount of cash available for the distribution is not less than 10%.

NAREIT is pleased that the Treasury Department and IRS responded favorably not only to its request to extend Rev. Proc. 2009-15, but also that they clarified that the calculation of the number of shares and the value of the stock portion of the elective stock dividend may be made pursuant to a formula calculated over up to a two-week period. NAREIT is also pleased that Rev. Proc. 2010-12 clarifies that an elective stock dividend within its scope will not be treated as a preferential dividend in most circumstances.

The guidance did not respond to two other requests: 1) that it be extended to non-listed REITs; and, 2) that the IRS conclude that it would not apply the disguised sales of partnership interests rules to an elective stock dividend that involved the distribution of REIT stock to unitholders in a REIT's operating partnership.

To access Rev. Proc. 2010-12, click here. For more information, click here.

Contact

For further information, please contact Dara Bernstein at dbernstein@nareit.com.
NAREIT® does not intend this publication to be a solicitation related to any particular company, nor does it intend to provide investment, legal or tax advice. Investors should consult with their own investment, legal or tax advisers regarding the appropriateness of investing in any of the securities or investment strategies discussed in this publication. Nothing herein should be construed to be an endorsement by NAREIT of any specific company or products or as an offer to sell or a solicitation to buy any security or other financial instrument or to participate in any trading strategy. NAREIT expressly disclaims any liability for the accuracy, timeliness or completeness of data in this publication. Unless otherwise indicated, all data are derived from, and apply only to, publicly traded securities. All values are unaudited and subject to revision. Any investment returns or performance data (past, hypothetical, or otherwise) are not necessarily indicative of future returns or performance. © Copyright 2009 National Association of Real Estate Investment Trusts®. NAREIT® is the exclusive registered trademark of the National Association of Real Estate Investment Trusts. Riet.com

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