IRS rules that REIT may make liquidating consent dividend

29 September 2025

The IRS ruled that a real estate investment trust (REIT) with debt in excess of its inside asset basis may make a consent dividend under IRC Section 565 in the year of its liquidation, and should include the consent dividend in calculating its dividends-paid deduction for purposes of calculating its REIT taxable income.
The IRS also concluded that the REIT’s shareholder should treat the consent dividend as liquidating proceeds received under IRC Section 331 and a deemed contribution by the shareholder of those proceeds to the REIT under IRC Section 565(c), thus increasing the shareholder’s adjusted basis in the REIT’s stock.
This is the third ruling to permit a REIT…