WASHINGTON, DC–The Tax Cut and Jobs Act is the biggest change to the US tax code in 30 years. There is still much about it that needs clarification. Even the provisions that are perfectly clear, such as the tax rates, lead to further questions, at least in the commercial real estate community.
For instance, many real estate firms are be grappling with the question of whether to structure as a C corp. to take advantage of the new 21% corporate tax rate or to continue on as a pass-through entity.
The lower rate notwithstanding, this can be a surprisingly complex decision to make, says Montgomery McCracken Senior Tax law partner Gary M. Edelson. Here's one reason why: there is still the accumulated earnings tax and the personal holding company tax and therefore, a C corp. can't be used to to hold a large portfolio of stock and bonds. “Business entities where they need every nickel they can get their hands on and have no intention of distributing anything to the equity owners for as long as they can, would do well to opt to be a C corp.,” Edelson says.
And there are other considerations as well.
Recommended For You
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
