RIC Shareholder Dividends Qualify as Section 199A
Posted on August 4th, 2020
Section 199A, enacted as part of the Tax Cuts and Jobs Act (TCJA), allows individual taxpayers and certain trusts and estates to deduct up to 20 percent of certain income (section 199A deduction). It is available to eligible taxpayers with qualified business income (QBI) from qualified trades or businesses operated as sole proprietorships or through partnerships, S corporations, trusts, or estates, as well as for qualified REIT dividends and income from publicly traded partnerships. The deduction is not available for C corporations.
Recently, regulations were issued clarifying that a RIC that receives qualified real estate investment trust (REIT) dividends is now able to report these dividends, which are paid to its shareholders, as section 199A dividends to take the deduction.
The regulations also provide additional guidance on the treatment of previously disallowed losses that are included in QBI in subsequent years and guide taxpayers who hold interests in split-interest trusts or charitable remainder trusts.
For more information about this and other provisions of the TCJA, please call.