Qualified REIT Subsidiary (QRS) › QRSs are corporations that are wholly-owned by the REIT and for which a TRS. election is not made. › QRSs are transparent for income and asset testing purposes and thus are. consolidated with the REIT for income and asset testing, and also for activity.
What is a QRS in tax?
A QRS is a wholly-owned subsidiary that the IRS disregards for tax purposes. The REIT owns the QRS’ income, deductions, assets, and liabilities. Therefore, a REIT must include a QRS when applying the asset and income tests.
What is QRS in real estate?
A captive REIT/QRS is a real estate investment trust (REIT) or qualified real estate investment trust subsidiary (QRS) that has more that 50 percent of the voting power or value of the trust owned or controlled by a single corporation that is not a REIT or a QRS.
What is the purpose of a taxable REIT subsidiary?
What is a taxable REIT subsidiary? A taxable REIT subsidiary (TRS) is a corporation owned by a REIT that elects to be taxed at the regular corporate income tax rate. TRSs provide REITs the flexibility to hold, up to 20% of their total assets, entities that otherwise wouldn’t be permissible in the REIT structure.
What is a taxable REIT subsidiary and how would someone try to shelter income from taxes with such a subsidiary?
A taxable REIT subsidiary (“TRS”) is a corporation that is owned directly or indirectly by a REIT and has jointly elected with the REIT to be treated as a TRS for tax purposes. A TRS is subject to regular corporate income tax which, pursuant to the Tax Cuts and Jobs Act (TCJA), is now a flat tax rate of 21%.
Can a REIT own another REIT?
A REIT cannot own, directly or indirectly, more than 10% of the voting securities of any corporation other than another REIT, a taxable REIT subsidiary (TRS) or a qualified REIT subsidiary (QRS).
How are REITs taxed?
The majority of REIT dividends are taxed as ordinary income up to the maximum rate of 37% (returning to 39.6% in 2026), plus a separate 3.8% surtax on investment income. Taxpayers may also generally deduct 20% of the combined qualified business income amount which includes Qualified REIT Dividends through Dec.
Do REITs file consolidated returns?
Parent REIT is a publicly traded REIT that conducts its operations through Operating Partnership. … For purposes of the consolidated financial statements, the assets, income, loss and other activities of Taxpayer are included with those of Parent REIT and the other consolidated entities.
Can a REIT be a LLC?
The net effect of these rules is that an entity formed as a trust, partnership, limited liability company or corporation can be a ReIT.
Can a REIT own foreign assets?
REITs may also own stock in foreign corporations that are PFICs. As U.S. persons owning stock (or treated as owning stock) in a foreign corporation, REITs may be required (under Secs. 951 to 965 and Secs.
What is the purpose of a qualified REIT subsidiary?
A real estate investment trust (REIT) may own a “qualified REIT subsidiary” and treat all of the subsidiary’s assets, liabilities and items of income, deduction and credit as its own.
What is a qualified REIT subsidiary?
(2) Qualified REIT subsidiary For purposes of this subsection, the term “qualified REIT subsidiary” means any corporation if 100 percent of the stock of such corporation is held by the real estate investment trust. Such term shall not include a taxable REIT subsidiary.
What tax form do REITs file?
Use Form 1120-REIT, U.S. Income Tax Return for Real Estate Investment Trusts, to report the income, gains, losses, deductions, credits, certain penalties, and to figure the income tax liability of a REIT.
What is a REIT prohibited transaction?
In general, inventory or property held by a taxpayer primarily for sale to customers as part of its business is not considered a capital asset6. Accordingly, if a REIT were deemed to have sold dealer property, the sale would be considered a prohibited transaction.
Can a REIT be a disregarded entity?
Under the Internal Revenue Code and its regulations, three types of entities may be disregarded as entities separate from their owners: qualified REIT subsidiaries (within the meaning of section 856(i)(2)), qualified subchapter S subsidiaries (within the meaning of section 1361(b)(3)(B)), and single owner eligible …
What is a REIT election?
REIT Election means Parent’s election to be, and qualification to be taxed as, a real estate investment trust for U.S. … REIT Election means Holdings’ election to be, and qualification to be taxed as, a REIT for U.S. federal income tax purposes.