What is a 721 Upreit?
Section 721 of the Internal Revenue Code allows a property owner to contribute their property to a real estate investment trust (REIT) in exchange for an interest in the REIT. The process is sometimes referred to as a 721 UPREIT or UPREIT transaction.
What is a section 721 exchange?
A 721 exchange allows investors to avoid taxes and keep their wealth working for them in a tax- deferred exchange of their investment property for shares in a REIT. REITs are required to distribute 90% of their taxable income in the form of dividends paid to shareholders.
What is an Upreit transaction?
“UPREIT“ is an acronym that stands for “Umbrella Partnership Real Estate Investment Trust”. It is a type of property acquisition transaction, where a property owner contributes his/her property to a Real Estate Investment Trust (a “REIT”) in exchange for ownership in the REIT.
What is 721 C property?
The IRC 721(c) regulations generally provide that a U.S. Transferor must recognize gain upon the transfer of appreciated property (tangible or intangible property) to certain partnerships (domestic or foreign) whose partners include foreign persons related to the U.S. Transferor unless certain requirements are met.
Is Cash section 721 property?
721(c) property generally includes any property that has built-in gain at the time it is contributed to the partnership, other than (1) a cash equivalent; (2) a “security” within the meaning of Sec.
What are REIT OP units?
An UPREIT is an arrangement that a property investor makes with a REIT to transfer the ownership of appreciated real estate. Instead of selling the property for cash, which would trigger capital gains taxes, the owner receives OP units in the REIT, which are equal in value to its common stock.
Can you 1031 a rental property into a REIT?
An investor is not able to do a direct 1031 exchange into a REIT since REIT shares are not considered “like kind” property by the IRS for the purposes of a 1031 exchange.
How is income from a REIT 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.
Can you avoid capital gains by investing in a REIT?
Tax benefits of REITs Individual REIT shareholders can deduct 20% of the taxable REIT dividend income they receive (but not for dividends that qualify for the capital gains rates). There is no cap on the deduction, no wage restriction and itemized deductions are not required to receive this benefit.