The Internal Revenue Service shut down an apparent gap in a tax law that otherwise could have allowed companies across industries to continue spinning off their property holdings into tax-advantaged real-estate investment trusts (REITs), The Wall Street Journal reported yesterday. The law was written in response to a wave of deals by retailers, hotels and others that sought the tax-beneficial status of being REIT. The law banned companies created in tax-free spinoffs from electing REIT status for 10 years after the transaction, but the law didn’t prevent spun-off companies from merging into an existing REIT, among other possible workarounds. The regulations from the IRS and Treasury Department take effect immediately and “are necessary to prevent abuse,” the government said.
