REITs & Upcoming January Deadlines
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- Jan 13, 2025
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Coming off the holiday season into a new year can make anyone feel overwhelmed, especially by fast-approaching deadlines. With January being particularly busy for REITs, don’t waste valuable time deciphering key deadlines. Our trusted tax professionals have compiled a list of important upcoming REIT deadlines. Please note that this list is not all-inclusive, but rather a summary of common items to note for January.
What is a REIT?
Real Estate Investment Trusts (REITs) entities generally own and operate real estate assets or provide financing for real estate-related assets. REITs come with several advantages, as users can avoid paying corporate income taxes and provide its shareholders the ability to diversify their portfolio of real estate investments.
Key REIT Deadlines
January is a critical month for REITs, with several important deadlines. Key REIT deadlines include the following:
Capital Gain Dividend Designations
Within 30 days after the close of its tax year, a REIT must notify its shareholders via a written notice that all or part of its dividend will be treated as a capital gain dividend (IRC §857(b)(3)(B)). Issuing a 1099-Div by January 30 may be the best way to communicate this; however, other forms of communication would suffice, especially if you extend the 1099-Div recipient copy filing.
Demand Letters/Treasury Regulation Section 1.857-8
Within 30 days after close of its tax year, a REIT is required to demand a written statement (“demand letter”) from certain shareholders of record detailing their ownership interest in the REIT so that the REIT can determine the actual ownership of its stock.
An actual owner of stock is the person and/or entity who is required to include in gross income the dividend received from the REIT. This is typically the shareholder of record but not always the case. Therefore, the REIT must request the information from shareholders of record within 30 days after close of its year.
IRC §857(b)(9) Dividends
If a REIT declared dividends in the last quarter of 2024, the cash must be distributed in January 2025 to provide for the option of rolling it back to the previous year to satisfy the distribution requirements. Even if you are uncertain whether the rollback would be necessary, there may be a benefit in making the distribution in January regardless.
100+ Shareholder Requirement
If you elect REIT status for the 2024 initial year, you must satisfy the 100-person ownership requirement by January 30, 2025.
1099-Div Forms
Recipient copies are typically due to shareholders by the end of January. (Extensions may be available).
Failure to comply with these requirements may result in heavy penalties, unintended REIT consequences, and possible failure of REIT status. To learn more about REITs, you can explore further information here.
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Arthur Khaimov
Arthur Khaimov is a Partner and a member of the firm's Real Estate Group with over 15 years of experience providing tax consulting and compliance services to a broad range of real estate and corporate clients
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