Providing services to tenants won't disqualify REIT.

AuthorKusch, Linda M.
PositionReal estate investment trust - Brief Article

In Letter Ruling 9233008, the IRS addressed whether a real estate investment trust's (REIT) management activities with respect to its properties would disqualify its rental receipts as rents for real property under Sec. 856(d). Sec. 856(d) defines rents from real property as including charges for services customarily furnished or rendered in connection with the rental of real property. Sec. 856(d), however, specifically excludes from the definition of rental income all amounts received by a REIT in connection with services rendered or furnished directly to tenants, or from the operation or management of the property.

The REIT in this ruling, which owned 43 retail buildings, 11 office and commercial properties, and three industrial properties, provided only limited property management services (such as lease administration) directly to the tenants. Most other management services were provided by an independent contractor or by the tenants themselves. However, the REIT intended to provide all the ordinary, necessary, usual and customary services connected with the operation, leasing and management of these properties (including lease...

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