IRS, Treasury Issue Package of Debt Equity Regulations

On Oct. 13, the IRS and Treasury Department issued a package of, among other things, final regulations that revise proposed section 385 regulations released by the IRS and Treasury earlier this year.

Like the proposed regulations, the final regulations propose to recharacterize debt between related parties as equity in a number of situations – including those in the ordinary course of business – absent contemporaneous and specific documentation. 

While NAREIT continues to review the extensive regulation package, we are pleased to see that the IRS and Treasury excluded almost all transactions between SEC-registered REITs and its affilaites from the scope of the final regulations and made a number of other helpful changes as well.

NAREIT submitted comments in July on the previously proposed suite of regulations.

(Contact: Dara Bernstein at


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