ADISA Submits Letter to Congress Over IRS Treatment of REIT Distributions
The Alternative & Direct Investment Securities Association (ADISA), a trade group for the retail alternative investment space, has submitted a letter to several members of Congress urging them to withdraw Section 2 of IRS Notice 2007-55, which pertains to the treatment of liquidating distributions of a real estate investment trust.
The Alternative & Direct Investment Securities Association (ADISA), a trade group for the retail alternative investment space, has submitted a letter to several members of Congress urging them to withdraw Section 2 of IRS Notice 2007-55, which pertains to the treatment of liquidating distributions of a real estate investment trust.
Under the 2007 IRS Notice, liquidating distributions are treated as capital gain distributions subject to the Foreign Investment in Real Property Tax Act (FIRPTA), which results in a tax on these foreign investments in U.S. real estate businesses. Prior to the issuance of the 2007 IRS Notice, ADISA noted that foreign shareholders relied on tax law that treated REIT liquidating distributions as sales of stock.
“The 2007 IRS Notice created tax disparity between REIT shareholders in economically parallel positions,” state ADISA in its letter. “Specifically, REIT liquidating distributions to domestic shareholders are treated as sales of stock, while such distributions to foreign shareholders are treated as capital gain distributions. This tax imposed solely on foreign investment in U.S. real estate can have a discouraging impact on such investment.”
ADISA added, “Since liquidating distributions are the economic equivalent of a shareholder selling all of its stock in a REIT, there is little reason why the tax treatment should be different.”
To read the letter in its entirety, click here.
The Alternative & Direct Investment Securities Association bills itself as the nation’s largest trade association representing the non‐traded alternative investment space. ADISA’s members are typically involved in non-traded real estate investment trusts, business development companies, master limited partnerships and private and public funds (LPs/LLCs), 1031 exchange programs (DSTs/TICs), energy and oil and gas interests, equipment leasing programs, or other alternative and direct investment offerings. The association was founded in 2003 and has approximately 5,000 members.
