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Calvin on Fund Tax: FATCA multilateral joint statement

An energy products trading group in Europe and The Depository Trust & Clearing Corporation said they have started accepting An energy products trading group in Europe and The Depository Trust & Clearing Corporation said they have started accepting
An energy products trading group in Europe and The Depository Trust & Clearing Corporation said they have started accepting

Late TRS Elections

IRS Private Letter Ruling 201214002

                                           
Internal Revenue Service Department of the Treasury
Washington, DC 20224
Number: 201214002
Release Date: 4/6/2012
Index Number:  9100.00-00, 856.07-00

Refer Reply To:
CC:FIP:2
PLR-127099-11

Dear ————-:

This is in reply to a letter dated June 10, 2011, requesting on behalf of Company and Sub an extension of time under section 301.9100-1 of the Procedure and Administration Regulations to file an election for Sub to be treated as a taxable real estate investment trust subsidiary (“TRS”) of Company under section 856(l) of the Internal Revenue Code.

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REIT Mergers and Reorganizations

IRS Private Letter Ruling 201214020

Facts
In a letter ruling dated April 14, 2009 (PLR-143744-08) (the “Prior Letter Ruling”), we ruled on the federal income tax consequences of a proposed distribution of the stock of Controlled by Distributing (the “Distribution”) and a proposed merger of Controlled into MergeCo with MergeCo surviving (the “Merger”).  Prior to Year 1, MergeCo elected to be taxed as a real estate investment trust (“REIT”) for federal income tax purposes. 


Following the Merger, MergeCo changed its name to Corporation X and continued to operate as a REIT.  Corporation X operated as a REIT until Year 2.  During Year 2, Corporation X failed to qualify as a REIT.  Corporation X’s REIT status was effectively revoked retroactively for all of Corporation X’s Year 2 taxable year. 


Rulings
Based solely on the information submitted and the representations made, we rule as follows:
Following the Distribution, Controlled will not be considered a successor to Distributing for purposes of section 1504(a)(3).  As a result, beginning in Year 2, Corporation X and its subsidiaries that are “includible corporations” under section 1504(b) and satisfy the ownership requirements of section 1504(a)(2), may elect to file a consolidated federal income tax return with Corporation X as the common parent.

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treatment of a REIT and its taxable REIT subsidiary (TRS) under section 856

IRS Private Letter Ruling 201214009

Internal Revenue Service Department of the Treasury
Washington, DC 20224
Number: 201214009
Release Date: 4/6/2012
Index Number:  856.00-00
———————————
Third Party Communication: None
Date of Communication: Not Applicable
Person To Contact:
—————-, ID No. ————
Telephone Number:
———————
Refer Reply To:
CC:FIP:B02
PLR-128509-11


This is in reply to a letter dated July 6, 2011, and a subsequent submission, requesting rulings on behalf of Taxpayer.  The requested rulings concern the treatment of a REIT and its taxable REIT subsidiary (TRS) under section 856 of the Internal Revenue Code in the circumstances described below.


Facts:
Taxpayer is a publicly held State A corporation that elected to be taxed as a real estate investment trust (REIT) for its tax year beginning Year 1.  Taxpayer invests in Properties through the acquisition and development of primarily single tenant properties.  In general, Taxpayer’s Properties are leased under absolute-net lease terms to third party lessee/operators, and Taxpayer is not involved in the management of the properties.


On Date 1, Taxpayer acquired all of the stock of Company A as part of a merger transaction (the Merger).  Prior to the Merger, Taxpayer had an approximately b% interest in Company A.  As part of the Merger, Company A was merged with a transitory subsidiary of Taxpayer with Company A surviving as a wholly-owned subsidiary of Taxpayer.  After the Merger, Company A is a qualified REIT subsidiary (QRS) of
Taxpayer.  The Merger included the acquisition by Taxpayer of Company A’s Facilities. Facilities were leased to TRS in a RIDEA  structured transaction by Taxpayer and Company B, which was formed by nine senior executives of Company A (Management REIT Investment Diversification and Empowerment Act of 2007 which permits a REIT to lease qualified health care facilities to a TRS.)  Prior to the merger, Company A had spun off its Services Businesses into a new company, Company C.


Taxpayer and Management Team established a limited liability company, Lessor, to own Facilities and, through TRS, established a separate limited liability company, Lessee, to own the operations portion of the business.  Company A owns approximately d percent of Lessor and TRS owns approximately d percent of Lessee.  Management Team owns approximately a percent of each entity.  Lessor leases Facilities to Lessee
under three separate master leases. A wholly-owned subsidiary of Company C manages the Facilities as an eligible independent contractor (EIK).

Discharge of Real Estate Indebtedness

IRS Private Letter Ruling 201212003
IRS Private Letter Ruling 201212004
IRS Private Letter Ruling 201212005
IRS Private Letter Ruling 201212006
IRS Private Letter Ruling 201212007

This letter responds to your letter requesting an extension of time under § 301.9100-3 of the Procedure and Administration Regulations to make an election under § 108(c)(3)(C) of the Internal Revenue Code.  Specifically, you have requested an extension of time to make an election under § 108(c)(3)(C) and § 1.108-5(b) of the Income Tax Regulations, to exclude income resulting from the discharge of qualified real property business indebtedness and to reduce the basis of depreciable real property, effective for Taxpayer’s Year 1 tax return.

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Compliance Key for Real Estate Tax Issues

Compliance Key for Real Estate Tax Issues:

“Michele Randall, director in the tax department with Deloitte, sat down with REIT.com following her session on state and local tax issues at REITWise 2012: NAREIT’s Law, Accounting and Finance Conference in Hollywood, FL. last month.

Randall began the interview by discussing transfer taxes, which she said can be a significant part of any transaction. She added that 39 states currently have a transfer tax”

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Extension of Time for Election to Exclude Income Resulting from Discharge of Qualified Real Property Business Indebtedness

IRS Private Letter Ruling 201212002

This letter responds to your letter requesting an extension of time under § 301.9100-3 of the Procedure and Administration Regulations to make an election under § 108(c)(3)(C) of the Internal Revenue Code.

Specifically, you have requested an extension of time to make an election under § 108(c)(3)(C) and §1.108-5(b) of the Income Tax Regulations, to exclude income resulting from the discharge of qualified real property business indebtedness and to reduce the basis of depreciable real property, effective for Taxpayer’s Year 1 tax return.

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Late Election to be Treated as a REIT under IRC 856(c)

IRS Private Letter Ruling 201208012

This responds to a letter dated June 22, 2011, that was submitted on behalf of Company A, Company B, Company C, and Company D (collectively, the Companies), requesting an extension of time under § 301.9100-1 and § 301.9100-3 of the Procedure and Administration Regulations to make an election under § 856(c) of the Internal Revenue Code to treat each of the Companies as a real estate investment trust (REIT).

FACTS
The Companies are each State X corporations.  Trust owns all of the common stock of each of the Companies.  Trust is a State X corporation that made an election to be treated as a real estate investment trust (“REIT”) on its federal income tax return filed for the tax year that ended on Date 1.

In late Year 1, Trust formed Company A and Company B, each of which was a qualified REIT subsidiary (“QRS”) during Year 1.  During Date 2, Company A and  Company B each issued preferred stock to third parties.  During Year 2, Trust formed Company C and Company D, each of which was a QRS during Year 2.  During Date 3, Company C and Company D each issued preferred stock to third parties.  Trust and the Companies represent that it has always been the intention of Trust and the Companies that each of the Companies would make an election under § 856(c) of the Code to become a REIT for federal income tax purposes.

Accounting Firm was retained to provide tax advice and tax compliance services for Trust and Companies.  Various personnel of Accounting Firm were provided information indicating the existence of the preferred shareholders of Companies, although some information provided to Accounting Firm regarding the share ownership structure was inconsistent and erroneous.  The personnel of Accounting Firm that were advised of the presence of the preferred shareholders were not familiar with the nuances of a multi-tier REIT structure or the significance of the existence of these preferred shareholders.  As a result, the existence of the preferred shareholders was not communicated by these persons to the Accounting Firm Senior Director who signed Trust’s tax returns on behalf of Accounting Firm.

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Request for Extension to File Election to be Treated as a Taxable REIT Subsidiary

IRS Private Letter Ruling 201210021

This is in reply to a letter dated September 26, 2011, requesting on behalf of Company and Sub an extension of time under section 301.9100-1 of the Procedure and Administration Regulations to file an election for Sub to be treated as a taxable real estate investment trust subsidiary (“TRS”) of Company under section 856(l) of the Internal Revenue Code.

FACTS
Company is a State 1 corporation.   It is a commercial real estate specialty finance company that invests in a combination of commercial real estate assets and other commercial finance assets.  Company timely elected under section 856 of the Code to be treated as a REIT for its taxable year ending Date 1.

Company’s wholly owned subsidiary Sub is a State 2 corporation.  It was incorporated on Date 2.  It was formed to hold and manage collateralized loan obligation contracts that are not real estate assets.  From the time of Sub’s formation Company and Sub intended to file Form 8875, Taxable REIT Subsidiary Election, to make a TRS election that would be effective beginning with Date 2, when Sub was formed.

Manager’s internal tax department was responsible for filing Form 8875.

Because of that department’s limited size and the extent of its reporting responsibilities, which include Securities Exchange Commission filings, tax return filings, and extensions for filings that were due on Date 3 (one month after Date 2), Form 8875 was inadvertently not filed.

On Date 4, while Manager was handling other tax matters for Company, the tax department discovered that Form 8875 had not been filed.  Less than a month later, on Date 5, Form 8875 was filed for Company and Sub.  Because the instructions for Form 8875 provide that the effective date of a TRS election cannot be more than 75 days prior to the date of filing Form 8875, the effective date on the form is Date 6.  Date 6 is
more than two months after Date 2, which is the effective date that Company and Sub intended.

After filing Form 8875, Manager’s tax department learned of the relief available under section 301.9100-1 of the regulations.  On Date 7 such relief was requested.  Company has submitted the affidavit of the person initially responsible for preparing the Form 8875 in support of the requested extension.

The following representations are made in connection with the request for the relief of an extension of time:

  1. The request for relief was made before the failure to make the regulatory election was discovered by the Internal Revenue Service.
  2. Granting the relief requested will not result in Company or Sub having a lower tax liability in the aggregate for all years to which the election applies than the taxpayers would have had if the election had been timely made (taking into account the time value of money).  
  3. Company and Sub do not seek to alter a return position for which an accuracy-related penalty has been or could have been imposed under section 6662 of the Code at the time the taxpayers requested relief and the new position requires or permits a regulatory election for which relief is requested.  
  4. Being fully informed of the required regulatory election and related tax consequences, Company and Sub did not choose to not file the election.

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Qualification as a Taxable REIT Subsidiary under IRC 856(l)

IRS Private Letter Ruling 201208014

This responds to a letter dated June 29, 2011, and supplemental correspondence dated October 28, 2011, requesting a ruling on behalf of Taxpayer.

Taxpayer is requesting a ruling that under the circumstances described below, TRS 2 will not be considered to be directly or indirectly operating or managing a lodging facility in violation of section 856(l)(3)(A) of the Internal Revenue Code (the Code) and that TRS 2 will not fail to qualify as a taxable REIT subsidiary (TRS) under section 856(l) of the Code.

Facts:
Taxpayer is a domestic corporation which has elected to be treated as a real estate investment trust (REIT) for Federal income tax purposes under section 856(c) of the Code.  Taxpayer is the managing general partner of OP and owns approximately a percent of the outstanding common units of OP.  OP, through various separate limited liability companies, partnerships, and REITs, owns and operates numerous real properties throughout the United States.

TRS 1 is a TRS of Taxpayer and is wholly owned by OP.  TRS 2 is a limited liability company that has elected to be treated as a corporation for Federal income tax purposes.  TRS 2 is wholly owned by TRS 1 and is also a TRS of Taxpayer.  TRS 2 currently owns a b percent interest in LLC, a limited liability company which is classified as a partnership for Federal tax purposes.  LLC currently owns and operates Property in City.

LLC plans to construct a hotel and ———(the Facility) in City assuming it can obtain a license to operate such a facility.  In anticipation of receiving the license, LLC has entered into a management agreement (Management Agreement) with an affiliate of Corporation to manage and operate the Facility.

Under the Management Agreement, LLC will continue to own the Facility and Corporation will make a contribution of capital to LLC obtaining a c percent membership interest in LLC.  TRS 2 will then have a d percent minority membership interest in LLC.

Two members unrelated to Taxpayer and TRS 2 will hold the largest interests in LLC, a collective e percent and other members will own the remaining f percent.  LLC will be managed by a board consisting of g members.  TRS 2 will appoint h of those g members of the board.  Taxpayer represents that TRS 2 will not have the ability to control the operation or management of the Facility.  Pursuant to the Management Agreement, Corporation will manage and operate the Facility for LLC in exchange for a fee.

Taxpayer represents that Corporation is unrelated to Taxpayer and TRS 2 for purposes of section 52(a) and (b) of the Code.  Taxpayer also represents that Corporation is an “independent contractor” with respect to Taxpayer, within the meaning of section 856(d)(3).  Corporation is actively engaged in the trade or business of operating “lodging facilities” (within the meaning of section 856(d)(9)(D)(ii)) for persons unrelated to the Taxpayer.  Corporation operates numerous facilities, each of which has
———— activities conducted at or in connection with the facility.

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