Built-in Gain Regulations Expected to Adhere to Five-Year Recognition Period for REITs

A Treasury Department official said at a Nov. 9 IRS hearing that final regulations for built-in gains of companies electing REIT status or merging into  REITs and regulated investment companies (RICs) will implement a five-year recognition period, as opposed to 10 years.

Testifying at the hearing on temporary and proposed regulations related to property transfers under section 337(d), Tony Edwards, NAREIT executive vice president and general counsel, repeated NAREIT’s call for a permanent five-year built-in gain (BIG) recognition period.

In June, the IRS issued temporary regulations under which it announced that the BIG recognition period for REITs and RICs would be 10 years. Since then, NAREIT has worked with its Corporate Members to analyze and address the regulations, including comments sent to the IRS in July.

Last month, the chairmen and ranking members of the House Ways & Means and Senate Finance Committees sent a letter to the Treasury Department that stated their belief that Congress intended that REITs and RICs use the same five-year BIG recognition period as S corporations. Additionally, they asked the Treasury Department to amend the regulations to reflect such legislative intent.

(Contact: Tony Edwards at tedwards@nareit.com)


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