G reit liquidating trust k 1

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In interpreting the language of a statute, “[a] basic rule of statutory construction is that a statute should not be read to create an internal inconsistency.” Although Code Sec. A similar conclusion can be drawn from the language of Treas. The treasury regulation states that the amount subject to withholding is the amount which the REIT has designated as a “capital gain dividend.” The treasury regulation makes no reference to withholding on any amounts from a liquidating distribution, nor do the preambles to the temporary or final regulations make any reference to distributions outside of those designated as “capital gain dividends.” Therefore, “the measure of withholding (and, by inference, the measure of the foreign shareholder’s substantive tax liability) adopted by Treas. 897(h)(1) is applied to liquidating distributions from DCRs to non-U. shareholders, such shareholders could avoid the tax by selling their shares to a domestic buyer prior to the liquidation free of FIRPTA tax under Code Sec. Conversely, if such a DCR were to sell its underlying property to the buyer and then distribute the sales proceeds to a non-U. shareholder in complete liquidation of the REIT, such distributions would be taxable under Code Sec.

897(h)(1) provides for the taxation of “any distribution” by a REIT to a non-U. shareholder to the extent attributable to gain from the sale of a USRPI by the REIT, Code Sec. 1445 provides rules for withholding on the disposition of USRPIs, with subsection (e) providing special rules for certain types of distributions. 1445(e)(3), dealing with distributions by domestic corporations which are current or former USRPHC, requires that on a distribution of property by such a corporation to a non-U. shareholder in, among other things, a liquidating distribution, the corporation must withhold 10% of the “amount realized” by the former shareholder. 1445(e)(3), if the position taken in the Notice is nonetheless applied, a conflict exists between Code Sec. 1445(e)(6) in that both provisions would apply simultaneously on a liquidating distribution if the REIT shares are treated as a USRPI in the hands of the non-U.

Looking at the term “distribution” in the context of Code Sec. However, if such a corporate shareholder were to sell its shares, any gain from such sale would be exempt from branch profits tax. 897(h)(1) in accordance with the Notice would also lead to differing tax treatment of domestic and non-U.

897(h) itself suggests that the term should not be extended to include liquidating distributions. 897(h)(1) was not intended to apply to liquidating distributions from a DCR as doing so would require that the distributing entity withhold twice on such distributions. 1.1445-8(c)(2) which outlines those instances in which a REIT is required to withhold on amounts distributed. 1.445-8 is the amount which the REIT designates, or could designate, as capital gain dividends” If Code Sec. 897(h)(1) were to be applied to liquidating distributions from DCRs to non-U.

As such, Notice 2007-55 creates an inherent conflict in interpretation of the two sections. 897(h)(1) should be read in a manner that would remove any inherent inconsistency in interpretation by treating the liquidation (, deemed sale) of a non-U. shareholders shares in a DCR as outside the scope of Code Sec. 897(h)(1), it would have presumably used a similar qualifier to specify their inclusion. 1445 and the applicable regulations under it also support the inference that liquidating distributions from a DCR should be exempt from U.

897(h)(1) through the specific language of Code Sec.

The firm has 108 developments currently underway around the world. Under Notice 2007-55, discussed below, the IRS stated in part that it would challenge any assertion by a taxpayer that Code Sec. However, for the reasons set forth below, many tax professionals believe that Notice 2007-55 incorrectly interprets Code Sec. person by a REIT (whether or not domestically controlled) attributable to a sale or exchange by the REIT of a USRPI will be treated as gain recognized by the non-U. person from the sale of a USRPI, which will be subject to FIRPTA tax.The Senate Report explained that the 5% Exception was meant to remove “from treatment as effectively connected income for a foreign investor a capital gain distribution from a REIT” and justified it as a means to “provide greater conformity in the tax consequences of REIT distributions and other corporate stock distributions.” The use of the language “capital gain distribution from a REIT” would suggest that the Senate Report was referring to capital gains dividends, rather than liquidating distributions and that the distributions to which the 5% Exception (and, thus, Code Sec. 857(b)(3)(F), enacted at the same time as the 5% Exception, which recasts distributions subject to the 5% Exception as ordinary dividends, applies only to the amount which would be considered capital gain dividends (and not liquidating distributions). 897(h)(1) is applied in accordance with the Notice, a non-U. shareholder to which the 5% Exception applied on a liquidating distribution would not be subject to FIRPTA tax nor would the distribution be subject to withholding as an ordinary dividend under Code Sec. This disparity in treatment would suggest again that Congress did not intend Code Sec. To not treat liquidating distributions as ordinary dividend income subject to Code Sec. Such inconsistencies would not exist if liquidating distributions from a DCR were treated consistently with the provisions of Subchapter C of the Code.897(h)(1)) applied were not liquidating distributions. 897(h)(1) also fosters the goal of greater conformity in the tax consequences of REIT distributions and other corporate stock dividends stated under the Senate Report. shareholder could be subject to branch profits tax on liquidating distributions. Although liquidating distributions to domestic shareholders are generally treated as a sale of stock and are exempt from FIRPTA taxation, as discussed above, the same distributions to non-U.

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