Chasing Value: Change in Tax Law for REIT Spin-off Deals Sparks Creative Solutions

May 17, 2016Commercial Investment Real Estate

Richard Morris and Sung Hwang co-authored an article for Commercial Investment Real Estate about the implications of the IRS eliminating the tax-free benefits of companies spinning off real estate assets into real estate investment trusts (REITs).

In it, they conclude that the change in the Internal Revenue code will “reduce the supply of commercial real property available for REITs, limiting the opportunity for operating companies to monetize these assets,” and that operating companies might “continue to hold valuable real estate property rather than subject themselves and their stockholders to a tax liability - taxable income - without any cash realization.” They also proposed other tax-advantaged transactions for commercial property executives to realize strategic benefits of spinning off real estate assets.