Is the IRS Reining in REITs?

The Internal Revenue Service has formed a working group to study and possibly recommend changes to current legal standards defining "real estate" for purposes of the real estate investment trust (REIT) provisions of the tax code. This point, revealed in the 8-K form filed Thursday by data-management company Iron Mountain (IRM), caught investors and most of Washington off guard. IRM shares lost more than 15% on Friday, while recently converted prison REITs Corrections Corp. of America (CXW) and GEO Group (GEO) lost 0.22% and 1.33%, respectively.

In its disclosure, Iron Mountain acknowledged having been informed that the IRS was "tentatively adverse" to providing a private letter ruling that the company's "racking structures constitute 'real estate' for REIT purposes." According to the filing, this initial judgment could have been based on either the agency's preliminary indecision on the matter or need for additional information. In the past, the company stated, it has been "not unusual" for other entities receiving similar notifications to ultimately prove successful....519 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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