Real estate workouts: issues and opportunities under the proposed regulations. Caveat REIT-lessor: qualifying as a real estate investment trust by receiving "rents from real property."
Real estate workouts: issues and opportunities under the proposed regulations
Real estate loan workouts will be affected by new rules for debt modification that resolve problems raised in Cottage Savings Assn v. Commissioner. The IRS has proposed regulations under IRC section 1001 covering changes of debt instruments which will be considered as exchanges. This could hurt real estate loan workouts unless the loans are structured with the new rules in mind. Exchange status can be avoided by unilateral modifications of original loan terms.
Author: Short, Andrew M., Zachary, Seth M.
Mortgages, External debt relief, Debt relief
Caveat REIT-lessor: qualifying as a real estate investment trust by receiving "rents from real property."
It is a complicated process to seek tax status as a real estate investment trust (REIT) through the receipt of real property rents. Independent management contractors must be used, lessees must be found who are not involved with the REIT and lease payments must meet IRS rules. There are also three tests for the income sources of the REIT. The IRS will help evaluate a proposed REIT if given sufficient information for a ruling.
Author: Zachary, Seth M., Meyers, Eliot N.
The better alternative: the limited liability company
Limited liability companies (LLCs) offer real estate businesses excellent tax advantages. Investors in a project derive liability protection while federal income tax status is that of a partnership. Nonrecourse financing can be used to improve the tax basis and there is no one-class-of-stock rule as for S corporations. LLCs have advantages over S corporations and limited partnerships.
Author: Horwood, Richard M., Hechtman, Jeffrey A.
Subjects list: Taxation, Laws, regulations and rules, Real property tax, Real property taxes
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