REIT Spinoffs: Passive REITs, Active Businesses, Part 2

III. SECTION 355 ISSUES

In addition to the many real estate investment trust issues discussed in the previous sections, REIT spinoffs implicate the provisions of section 355. Just as important as SpinCo's REIT qualification is the tax-free qualification of the distribution of SpinCo stock.222 Parent's contribution of assets to SpinCo and the distribution of SpinCo's stock must qualify as a section 368(a)(1)(D) reorganization (D reorganization). A D reorganization includes a corporation's transfer of all or part of its assets to another corporation if, immediately after the transfer, the transferor corporation or one or more of its shareholders, or any combination thereof, has control of the transferee corporation and the stock of the transferee corporation is distributed in a transaction qualifying under section 354, 355, or 356.²²³