A G-REIT will likely earn predominantly rental income (as it will own predominantly assets that produce such income). The corporation would then risk being classified as a PFIC, because rental income is generally considered FPHCI under Sec. 954(c)(1)(A).
Are REITs PFIC?
are considered to be corporations for U.S. tax purposes. As these securities primarily hold investments that are passive in nature they are generally considered to be PFICs. … trusts (REITs) that do not primarily carry on an active business are PFICs.
Are foreign REITs PFIC?
PFICs often include foreign-based mutual funds, money market accounts, and pension funds. They can also include partnerships and other pooled investment vehicles, such as many foreign REITs.
What qualifies as a PFIC?
A passive foreign investment company (PFIC) is a corporation, located abroad, which exhibits either one of two conditions, based on either income or assets: At least 75% of the corporation’s gross income is “passive”—that is, derived investments or other sources not related to regular business operations.
What type of entity is a REIT?
A REIT, generally, is a company that owns – and typically operates – income-producing real estate or real estate-related assets. The income-producing real estate assets owned by a REIT may include office buildings, shopping malls, apartments, hotels, resorts, self-storage facilities, warehouses, and mortgages or loans.
Can a REIT be a CFC?
R.E.I.T.’s that invest in non- U.S. real estate often make such investments through foreign corporate entities that may be classified as controlled foreign corporations (“C.F.C.’s”)1 or passive foreign investment companies (”P.F.I.C.’s”).
Are REITs considered passive income?
Real estate investment trust (REITs) are publicly or privately traded companies that pool investors’ money to acquire and manage multiple commercial real estate properties. … It’s important to note that REIT dividends are a way to passively earn income but are not taxed as passive income by the IRS.
Is my investment account a PFIC?
An investment account is not a corporation – it is an account that a financial institution maintains on your behalf. Therefore an investment account cannot be a passive foreign investment company. Your account is not a PFIC.
Can a REIT own foreign assets?
Institutional investors are treated as multiple shareholders representing beneficiaries. Must be taxable as a domestic corporation but for REIT status; foreign corporations cannot be REITs. Shareholders taxed at ordinary rates on dividends and capital gains rates on distributions representing capital gains.
How can PFIC tax be prevented?
A superior solution for U.S. taxable persons is to avoid PFIC funds and focus on building a global investment portfolio through U.S.-based investment options. This is certainly the best way for Americans abroad to invest to avoid PFIC reporting complications and additional tax costs.
Can an ETF be a PFIC?
It might not be obvious at first glance but mutual funds, and ETFs in general, are corporations. … If you pay attention you will notice that foreign funds and ETFs generally meet both PFIC tests: most of their income are passive and most of their assets generate passive income. Therefore, they are PFICs for tax purposes.
Can a publicly traded company be a PFIC?
Generally, a publicly traded foreign corporation will be classified as a PFIC if 50% or more of the average gross value of its assets, determined at the end of each quarter, is attributable to assets such as cash or cash equivalents that produce passive income.
Are ETFs considered PFIC?
Canadian mutual fund trusts (including ETFs) and mutual fund corporations are considered PFICs and, therefore, are subject to the PFIC rules.
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. … Taking into account the 20% deduction, the highest effective tax rate on Qualified REIT Dividends is typically 29.6%.
Is a REIT a CIS?
REITs are subject to the Prospectus Directive and the UK Listing Rules when listed. US SEC See response to Question 1 – real estate funds are not regulated as CIS. Please provide information on the regulation of real estate funds relating to: … Other real estate funds are eligible up to 5% of the fund’s value.
Are REITs considered financial institutions?
Not be a financial institution or an insurance company. Be jointly owned by 100 persons or more. Have 95 percent of its income derived from dividends, interest, and property income. Pay dividends of at least 90% of the REIT’s taxable income.