Tax memo: Proposed Changes to Real Estate Investment Trust (REIT) Tax Rules

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On December 16, 2010, the Department of Finance released proposed changes to the tax provisions that deal with real estate investment trusts (REITs). In general, the changes are helpful and address concerns that had been raised.

TThe timing of the announcement — mere weeks before the SIFT legislation is to apply fully — could be fortunate or unfortunate, depending on the circumstances, because many trusts have already undertaken or are about to complete transactions to qualify as REITs under the existing rules. In any event, the revisions should make qualifying as a REIT easier.

The changes apply to the 2011 and subsequent taxation years, and to earlier taxation years in certain circumstances. A consultation period allows interested parties to provide comments by January 31, 2011.