Real Estate Investment Trusts: Tax Simplification

October 14, 1998

Although the Taxpayer Relief Act of 1997 (the "Act") should simplify taxpayers' compliance with regulatory strictures, competent professionals must accept the role of trusted business adviser to creatively assimilate and apply the myriad changes.  The ability of REITs to operate with agility in this new regulatory environment requires proactive, creative, and preventive problem solving.  Application of the recently revised and polished provisions to REITs should correct some technical missteps of the past, aid the practitioner in the present, and no doubt act as a catalyst for change in the future.

The tax provisions passed as part of the Act simplify the day-to-day operations of REITs, modernize complex parts of the regulatory structure under the previous tax regime, and indirectly assist the continued growth of the REIT industry.  The REIT tax provisions fall into three groups: (a) guidance to lessen the impact of "technical" violations, or so called "traps for the unwary"; (b) conformity to mutual fund provisions; and (c) miscellaneous simplification measures.

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