Often the ownership structure for real estate investments involves a corporation holding an investment in a partnership or a joint venture (“JV”). Until 2011, this structure could be used to defer taxes if the corporation had a different year-end from the partnership or JV.
In 2011, this tax deferral opportunity was eliminated, as the corporate partner must now accrue additional income based on the estimated income earned during the “stub period” between the end of the partnership/JV’s fiscal period and the end of the corporate tax year. Transitional relief was offered in the first year that the corporate partner was required to adopt this new rule, provided that an election was made.
If you are a shareholder in a company that has investments in a partnership or JV, please contact us for further information.