While the REIT may be able to avoid losing its REIT status by having the shareholders agree to pick up the income as a "consent dividend
" even though there is no cash distribution, this is usually not viewed favorably by most shareholders TBS and may not be easy to get all the shareholders to agree on this solution.
If the corporation cannot deduct the post-year dividends, it may choose to have the shareholders file for a consent dividend
provided the consents are filed any time before the due date of the corporation's income tax return.
shareholders agree to a consent dividend
election with respect to such earnings.
The IRS allowed a deemed consent dividend
at the end of the third year and thereby eliminated the corporation's AE&P.
* Permit consent dividend
for AAA by-pass election.
The proposed regulations provide three ways to facilitate the distribution of E&P: (1) an AAA bypass election, (2) a PTI bypass election and (3) a deemed dividend election (25) This last election works like a consent dividend
The first one involves certain real estate investment trusts that use consent dividends
; the second involves certain closely held regulated investment companies.
* Form 973 - Corporation Claim for Deduction for Consent Dividends
Chapter 6 of the book addresses basis issues, and covers deemed dividends, the new investment adjustment regime, excess loss accounts, and consent dividends
. The chapter also discusses the implications of section 338 elections.
Form 973, Corporation Claim for Deduction for Consent Dividends
This seems a harsh and unfair result, because E&P is not frozen as to distributions, redemptions, consent dividends
SCRA Section 223 would statutorily allow consent dividends
, which are currently permitted only by Regs.