A Variety of Rental Streams Can Qualify as Rents for REITs

A Variety of Rental Streams Can Qualify as Rents for REITs
drusignola@reit.com
Mar. 26 2021

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PwC’s Julanne Allen says the IRS has taken a view that income for the use or occupancy of space can often qualify as rent.

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Julanne Allen, principal, National Tax Services at PwC, participated in a video interview in conjunction with REITwise 2021: Nareit’s Law, Accounting & Finance Conference.

Allen discussed a REITwise session on REIT tax conundrums that she was a panelist on. She said that because there are so many nuances and permutations of the rules that govern REITs, it’s easy to have a misstep that can put a REIT’s status in jeopardy.

“Sometimes these foot faults are discovered in the ordinary course of the REIT’s business, but frequently [they] aren’t discovered until there’s an M&A deal,” Allen said. “An experienced tax advisor is invaluable, not only to identify any potential failures, but also to provide options to remediate these failures.”

Allen said that as REITs acquire more and more asset classes, questions are arising about whether or not an income stream qualifies as rent or not. She said the IRS has taken a view that income for the use or occupancy of space in or on real property can qualify as rent, noting that it has to be structured in the appropriate manner and generally long-term.

“A variety of new assets that we’re seeing can have a variety of rental streams that qualify as rents,” Allen said.

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