A U.S. stockholder will generally recognize gain or loss equal to the difference between the
amount realized and the U.S. stockholders adjusted basis in our stock that is sold or exchanged. This gain or loss will be capital gain or loss, and will be long-term capital gain or loss if the U.S. stockholders holding period in our
stock exceeds one year. In addition, any loss upon a sale or exchange of our stock held for six months or less will generally be treated as a long-term capital loss to the extent of any long-term capital gain dividends we paid on such stock during
the holding period.
If a U.S. stockholder recognizes a loss upon a disposition of our stock in an amount that exceeds certain
thresholds beginning as low as $2,000,000 (and currently described in more detail in the instructions to IRS Form 8886), it is possible that the provisions of Treasury regulations involving reportable transactions could apply, with a
resulting requirement to separately disclose the loss-generating transaction to the IRS. Failure to comply with these requirements could result in significant penalties.
Noncorporate U.S. stockholders who borrow funds to finance their acquisition of our stock could be limited in the amount of deductions allowed for the interest paid on the indebtedness incurred. Under
Section 163(d) of the Code, interest paid or accrued on indebtedness incurred or continued to purchase or carry property held for investment is generally deductible only to the extent of the investors net investment income. A U.S.
stockholders net investment income will include ordinary income dividend distributions received from us and, if an appropriate election is made by the U.S. stockholder, capital gain dividend distributions and qualified dividends received from
us; however, distributions treated as a nontaxable return of the stockholders basis will not enter into the computation of net investment income.
Taxation of Tax-Exempt U.S. Stockholders
The rules governing the U.S.
federal income taxation of tax-exempt entities are complex, and the following discussion is intended only as a summary of material consequences to such investors of an investment in our stock. If you are a tax-exempt stockholder, we urge you to
consult your own tax advisor to determine the impact of federal, state, local and foreign tax laws, including any tax return filing and other reporting requirements, with respect to your investment in our stock.
Subject to the pension-held REIT rules described below, our distributions made to stockholders that are tax-exempt pension plans,
individual retirement accounts or other qualifying tax-exempt entities will not constitute UBTI, provided that the stockholder has not financed its acquisition of our stock with acquisition indebtedness within the meaning of the Code,
that the stock is not otherwise used in an unrelated trade or business of the tax-exempt entity, and that, consistent with our present intent, we do not hold a residual interest in a real estate mortgage investment conduit.
Any trusts that are described in Section 401(a) of the Code and are tax-exempt under Section 501(a) of the Code
(tax-exempt pension trusts) that own more than 10% by value of a pension-held REIT at any time during a taxable year may be required to treat a percentage of all dividends received from the pension-held REIT during the year
as UBTI. This percentage is equal to the ratio of:
||the pension-held REITs gross income derived from the conduct of unrelated trades or businesses, determined as if the pension-held REIT were a tax-exempt pension
trust, less direct expenses related to that income, to |
||the pension-held REITs gross income from all sources, less direct expenses related to that income, |
except that this percentage shall be deemed to be zero unless it would otherwise equal or exceed 5%. A REIT is a pension-held REIT if:
the REIT is predominantly held by tax-exempt pension trusts; and
the REIT would fail to satisfy the closely held ownership requirement, described above in Material U.S. Federal Income Tax
Considerations Related to Our Qualification and Taxation as a REITREIT