The loss of corporate tax revenue is probably true if you look at it only in the context of the corporation (REIT). But a holistic view of the REIT status and ALL taxes collected would have to look at the shareholder and the tax they pay on REIT distributions. Distributed REIT income is ordinary income, which means it will be taxed at the shareholder's marginal tax rate (qualifying dividends from Taxable REIT subsidiaries notwithstanding), which can go as high as 35% for Federal income (2012), whereas qualifying corporate dividends would be taxed at a maximum of 15%. (this could change in 2013).But as to what defines a REIT over other business forms, per Sec. 856(c)(3) (3)at least 75 percent of its gross income (excluding gross income from prohibited transactions) is derived from— (A)rents from real property; (B)interest on obligations secured by mortgages on real property or on interests in real property; (C)gain from the sale or other disposition of real property (including interests in real property and interests in mortgages on real property) which is not property described in section 1221(a)(1); (D)dividends or other distributions on, and gain (other than gain from prohibited transactions) from the sale or other disposition of, transferable shares (or transferable certificates of beneficial interest) in other real estate investment trusts which meet the requirements of this part; (E)abatements and refunds of taxes on real property; (F)income and gain derived from foreclosure property (as defined in subsection (e)); (G)amounts (other than amounts the determination of which depends in whole or in part on the income or profits of any person) received or accrued as consideration for entering into agreements (i) to make loans secured by mortgages on real property or on interests in real property or (ii) to purchase or lease real property (including interests in real property and interests in mortgages on real property); (H)gain from the sale or other disposition of a real estate asset which is not a prohibited transaction solely by reason of section 857(b)(6); and (I)qualified temporary investment income; and (4)at the close of each quarter of the taxable year— (A)at least 75 percent of the value of its total assets is represented by real estate assets, cash and cash items (including receivables), and Government securities; and (B)(i)not more than 25 percent of the value of its total assets is represented by securities (other than those includible under subparagraph (A)), (ii)not more than 25 percent of the value of its total assets is represented by securities of one or more taxable REIT subsidiaries,(iii)except with respect to a taxable REIT subsidiary and securities includible under subparagraph (A)— (I)not more than 5 percent of the value of its total assets is represented by securities of any one issuer, (II)the trust does not hold securities possessing more than 10 percent of the total voting power of the outstanding securities of any one issuer, and (III)the trust does not hold securities having a value of more than 10 percent of the total value of the outstanding securities of any one issuer. A real estate investment trust which meets the requirements of this paragraph at the close of any quarter shall not lose its status as a real estate investment trust because of a discrepancy during a subsequent quarter between the value of its various investments and such requirements (including a discrepancy caused solely by the change in the foreign currency exchange rate used to value a foreign asset) unless such discrepancy exists immediately after the acquisition of any security or other property and is wholly or partly the result of such acquisition. A real estate investment trust which does not meet such requirements at the close of any quarter by reason of a discrepancy existing immediately after the acquisition of any security or other property which is wholly or partly the result of such acquisition during such quarter shall not lose its status for such quarter as a real estate investment trust if such discrepancy is eliminated within 30 days after the close of such quarter and in such cases it shall be considered to have met such requirements at the close of such quarter for purposes of applying the preceding sentence. Of course, there are other rules governing ownership, distributions, etc. But I suspect the core question of sourcing of income to sustain REIT status as defined above, is what will come under review and possible Congressional ammendment.And keep in mind....both Obama and Romney have advocated dropping the corporate max tax rate to 25%, which might make this all moot anyway.BruceM
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