[Code of Federal Regulations]
[Title 26, Volume 9]
[Revised as of April 1, 2006]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.856-9]

[Page 75-76]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec.  1.856-9  Treatment of certain qualified REIT subsidiaries.

    (a) In general. A qualified REIT subsidiary, even though it is 
otherwise not treated as a corporation separate from the REIT, is 
treated as a separate corporation for purposes of:
    (1) Federal tax liabilities of the qualified REIT subsidiary with 
respect to any taxable period for which the qualified REIT subsidiary 
was treated as a separate corporation.
    (2) Federal tax liabilities of any other entity for which the 
qualified REIT subsidiary is liable.
    (3) Refunds or credits of Federal tax.
    (b) Examples. The following examples illustrate the application of 
paragraph (a) of this section:

    Example 1. X, a calendar year taxpayer, is a domestic corporation 
100 percent of the stock of which is acquired by Y, a real estate

[[Page 76]]

investment trust, in 2002. X was not a member of a consolidated group at 
any time during its taxable year ending in December 2001. Consequently, 
X is treated as a qualified REIT subsidiary under the provisions of 
section 856(i) for 2002 and later periods. In 2004, the Internal Revenue 
Service (IRS) seeks to extend the period of limitations on assessment 
for X's 2001 taxable year. Because X was treated as a separate 
corporation for its 2001 taxable year, X is the proper party to sign the 
consent to extend the period of limitations.
    Example 2. The facts are the same as in Example 1, except that upon 
Y's acquisition of X, Y and X jointly elect under section 856(l) to 
treat X as a taxable REIT subsidiary of Y. In 2003, Y and X jointly 
revoke that election. Consequently, X is treated as a qualified REIT 
subsidiary under the provisions of section 856(i) for 2003 and later 
periods. In 2004, the IRS determines that X miscalculated and 
underreported its income tax liability for 2001. Because X was treated 
as a separate corporation for its 2001 taxable year, the deficiency may 
be assessed against X and, in the event that X fails to pay the 
liability after notice and demand, a general tax lien will arise against 
all of X's property and rights to property.
    Example 3. X is a qualified REIT subsidiary of Y under the 
provisions of section 856(i). In 2001, Z, a domestic corporation that 
reports its taxes on a calendar year basis, merges into X in a state law 
merger. Z was not a member of a consolidated group at any time during 
its taxable year ending in December 2000. Under the applicable state 
law, X is the successor to Z and is liable for all of Z's debts. In 
2004, the IRS seeks to extend the period of limitations on assessment 
for Z's 2000 taxable year. Because X is the successor to Z and is liable 
for Z's 2000 taxes that remain unpaid, X is the proper party to sign the 
consent to extend the period of limitations.

    (c) Effective date. This section applies on or after April 1, 2004.

[T.D. 9183, 70 FR 9221, Feb. 25, 2005]