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Author: BruceCM Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 77332  
Subject: Re: MPG-pA Gamblers Special Date: 3/12/2013 4:55 PM
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Ron or Yoda, please correct me if I misspeak, but this is how I understand how net proceeds from asset sale would be handled in this case.

Realized capital gain distribution is optional to the REIT. They can elect to retain it, pay a flat 35% tax (or perhaps the retained CG is taxed at the REIT's corporate rate up to 35% and flat thereafter) or they may distribute as part of their 'normal' dividend or as a special dividend. But if not distributed, the REIT will issue a form 2439 to shareholders who must declare the 'phantom' distribution as income (in taxable accounts) but then can take a credit for the amount of the distribution paid as tax by the REIT.

However, a minimum of 90% of REIT taxable income (RTI) must be distributed for the REIT's tax year in order to maintain REIT status. It is my understanding that this will be distributed first to the suspended dividend preferred shareholders. However, with net operating expenses exceeding revenues since 2009, even before D/A is applied, suggest RTI is not in the cards for MPG.

What I don't know is if the realized CG, real or phantom, must be distributed first to preferred shareholders to the extent of suspended dividends?

I would think so, and from the price movement of the A preferred, it would seem investors think so....but not sure.

BruceM
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