In 2015, Congress correctly recognized that the preferential dividend rule should no longer apply to publicly offered REITs. Private REITs, however, continue to be subject to the preferential dividend rule, which remains a significant obstacle in the REIT industry and in many cases discourages the use of REITs in real estate funds.
In this report, Aresh Homayoun, Tax Partner, contends that in light of securities laws and other safeguards to protect the rights of shareholders, there is no justifiable policy reason to subject private real estate investment trusts to the preferential dividend rule.
Read more here, in this recent edition of Tax Notes. Membership required.