Regulations Confirming Built-in Gain Recognition Period of 5 Years for REITs May Be Caught in New Administration’s Freeze

The Treasury Department issued final regulations on Jan. 18 confirming that the built-in gain (BIG) recognition period for REITs and regulated investment companies (RICs) is the same as that applicable to S corporations, five years.

At an IRS hearing in November, NAREIT Executive Vice President and General Counsel Tony Edwards reiterated NAREIT’s request for a permanent five-year BIG recognition period for REITs.

Although the final regulations will apply to conversion transactions after Feb. 17, 2017, taxpayers may choose to apply the five-year recognition period for conversion transactions occurring on or after Aug. 8, 2016, and on or before Feb. 17, 2017. However, the White House released a memorandum on Jan. 20 ordering a freeze on regulatory actions. Among other actions, the memorandum orders agencies to temporarily postpone for 60 days the effective date of regulations that have been published in the Federal Register but are not yet effective.

(Contact: Dara Bernstein at dbernstein@nareit.com)

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