Rental Income Essay -- Business, Taxes

In order to qualify as a REIT for some(prenominal) taxable year, at least 95% of a REITs flagrant income must be derived from sources such as dividends, interest, and 75% of income from items related to certain genuine property. The items of income related to real estate assets are listed under IRC 856(c)(3) which includes, among other sources, rents from real property, interest on obligations secured by real property or on interests in real property, gain from the sale or other inclination of an orbit of real property that is non inventory or dealer property, and dividends and gains from the sale or orther disposition of divides in other qualifying REITs. For the purpose of the income tests described above, IRC 856(d)(1) provides that the term rents from real property includes rents from interests in real property, charges for services customarily furnished or rendered in participation with the rental of real property, whether or not such charges are separately stated, and rent attributable to personal property which is leased under, or in connection with, a lease of real property, but only if the rent attributable to such personal property for the taxable year does not outdo 15 percent of the total rent for the taxable year attributable to both the real and personal property leased under, or in connection with, such lease.To provide guidance with regard to tiered partnerships, the Treasury prescribed Reg. 1.856-3(g) which states that a REIT is permitted to look through a partnership in which it is a partner for the purposes of applying the income tests of IRC 856(c)(2) and IRC 856(c)(3). This regulation section provides that a REIT is deemed to own a proportionate share of each of the assets of the partnership and that it is deemed to be ent... ...hall be issued to provide that certain items of gross income will not be taken into account in determining income or loss from any activity. The court could not justify treating IRC 469(l)(1) as self- executing and IRC 469(l)(2) as not being self-executing. The court stated that there was intent to promulgate regulations to carry out a statutory purpose and the fact that regulations are not forthcoming cannot be an acceptable basis to preclude taxpayer from congressionally intended and appropriate relief. In addition, the court emphasized that Hillmans approach in netting his share of self-charged management fee expense with gross income from the activities fulfills the economic significance concern. The taxpayer did not experience accretion in wealth. The court did not see an economic contrast between this situation and one involving self-charged lending.