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Senior housing qualifies for a critical exception

The Treasury Department is completing several multi-year tax regulatory projects that primarily relate to the Tax Cuts and Jobs Act of 2017 before the new Biden Administration.

Chief among them are procedures for carried interest and the deductibility of business interest, which the IRS just finalized.


This was a palatable compromise for the commercial real estate industry. “The industry strongly opposed extending the holding period to three years as part of TCJA but the law does not lengthen the one-year holding period applicable to Section 1231 gains,” it said.

In its analysis of the final measure, the Real Estate Roundtable notes the rules also clarify that the three-year holding period does not override other tax code provisions that treat certain transactions as nontaxable events.

Greater Finance Flexibility

The roundtable also points out that the financial regulations provide greater flexibility for a general partner to finance an equity interest in a partnership with a loan from other partners in the partnership.

But the final regulations allow these contributions to count toward an individual service provider’s capital account balance as long as the individual service provider is personally liable for the loan, it said.

Senior Housing Qualifies for Exception

The IRS also created a safe harbor for senior housing to qualify for an exception available to a “real property trade or business,” the Real Estate Roundtable explained.

Uncertainty about whether an assisted living facility would qualify as a real property trade or business has hung over the senior housing industry since the legislation’s enactment, the roundtable said. This new revenue procedure now clarifies that senior housing qualifies for the exception, as long as specific requirements are met.

Les Shaver | January 12, 2021 at 07:07 AM on Globest.com