As long as we qualify for taxation as a REIT, a distribution to our U.S. stockholders that
we do not designate as a capital gain dividend generally will be treated as an ordinary income dividend to the extent of our available current or accumulated earnings and profits. Distributions made out of our current or accumulated earnings and
profits that we properly designate as capital gain dividends generally will be taxed as long-term capital gains, as described below, to the extent they do not exceed our actual net capital gain for the taxable year. However, corporate U.S.
stockholders may be required to treat up to 20% of any capital gain dividend as ordinary income under Section 291 of the Code.
In addition, we may elect to retain net capital gain income and treat it as constructively distributed. In that case:
||we will be taxed at regular corporate capital gains tax rates on retained amounts; |
||each U.S. stockholder will be taxed on its designated proportionate share of our retained net capital gains as though that amount were distributed and designated a
capital gain dividend; |
||each U.S. stockholder will receive a credit or refund for its designated proportionate share of the tax that we pay; |
||each U.S. stockholder will increase its adjusted basis in our stock by the excess of the amount of its proportionate share of these retained net capital gains over the
U.S. stockholders proportionate share of the tax that we pay; and |
||both we and our corporate stockholders will make commensurate adjustments in our respective earnings and profits for U.S. federal income tax purposes.
If we elect to retain our net capital gains in this fashion, we will notify our U.S. stockholders of the
relevant tax information within 60 days after the close of the affected taxable year.
If for any taxable year we
designate capital gain dividends for our U.S. stockholders, then a portion of the capital gain dividends we designate will be allocated to the holders of a particular class of stock on a percentage basis equal to the ratio of the amount of the total
dividends paid or made available for the year to the holders of that class of stock to the total dividends paid or made available for the year to holders of all outstanding classes of our stock. We will similarly designate the portion of any capital
gain dividend that is to be taxed to noncorporate U.S. stockholders at preferential maximum rates (including any capital gains attributable to real estate depreciation recapture that are subject to a maximum 25% U.S. federal income tax rate) so that
the designations will be proportionate among all outstanding classes of our stock.
Distributions in excess of current or
accumulated earnings and profits will not be taxable to a U.S. stockholder to the extent that they do not exceed the U.S. stockholders adjusted tax basis in our stock, but will reduce the U.S. stockholders basis in such stock. To the
extent that these excess distributions exceed a U.S. stockholders adjusted basis in such stock, they will be included in income as capital gain, with long-term gain generally taxed to noncorporate U.S. stockholders at preferential maximum
rates. No U.S. stockholder may include on its U.S. federal income tax return any of our NOLs or any of our capital losses. In addition, no portion of any of our dividends is generally eligible for the dividends received deduction for corporate
If a dividend is declared in October, November or December to stockholders of record during one of those
months, and is paid during the following January, then for U.S. federal income tax purposes the dividend will be treated as having been both paid and received on December 31 of the prior taxable year. Also, items that are treated differently
for regular and alternative minimum tax purposes are to be allocated between a REIT and its stockholders under Treasury regulations which are to be prescribed. It is possible that these Treasury regulations will permit or require tax preference
items to be allocated to our stockholders with respect to any accelerated depreciation or other tax preference items that we claim, including a portion of the NOLs that we may utilize. We have allocated and may in the future allocate preference
items to our stockholders in the absence of such regulations.