What To Make Of The IRS’ Guidance on Real Estate Spinoffs
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WASHINGTON, DC–Well that didn’t take long. There has been an uptick in companies spinning off real estate to monetize their (often struggling) operations. And while the standard by-the-book spinoffs — recent deals done by Vornado Realty Trust, for example, or Ventas — have not garnered a second glance by regulators, there have been some deals that apparently bothered the Internal Revenue Service.
This week the agency released new guidance cautioning companies that seek to spin off their real estate to tread carefully. It will stop pre-approving these deals, it added, as it studies the matter more closely. The concern by the agency appears to be that companies are forming REITs to avoid taxes and/or that these new companies do not have an adequate business purpose…
