Final regulations establish analytical framework for determining whether assets qualify as real property for purposes of the REIT rules.

On August 31, 2016, the Treasury Department and the Internal Revenue Service (IRS) published final regulations (Regulations) clarifying the definition of “real property” for purposes of the real estate investment trust (REIT) rules of the Internal Revenue Code (Code). The Regulations generally adopted the proposed regulations (Proposed Regulations) released on May 14, 2014, with some revisions in response to comments received from the public. Consistent with prior final REIT regulations, IRS-published guidance and the Proposed Regulations, the Regulations define real property to include land, inherently permanent structures and structural components. The Regulations provide safe harbors for determining whether certain assets are real property, as well as facts and circumstances tests for determining whether assets not listed under the safe harbors are real property. In addition, the Regulations identify certain types of intangible assets that are real property or interests in real property for REIT purposes.