CRA finds that a company with no non-portfolio property can satisfy the 4 REIT tests

A REIT wished to know whether shares of a U.S. subsidiary, which did not hold any non-portfolio property, qualified as “real or immovable property” for REIT-test purposes. This required that the subsidiary itself satisfy the four numerical REIT tests in paras. (a) to (d) of the REIT definition.

Would the subsidiary satisfy the para. (a) non-portfolio property test? CRA responded:

The condition set out in paragraph (a) of the definition of REIT requires that at each time in the taxation year the total fair market value at that time of all non-portfolio properties that are qualified REIT properties held by the trust is at least 90% of the total fair market value at that time of all non-portfolio properties held by the trust.

In our view, the fact that a particular entity does not hold any non-portfolio property does not preclude the entity from satisfying the condition set out in paragraph (a) of the REIT definition.

Also of interest is 2014-0547491R3, finding that the 75% and 90% revenue tests in para. (b) and (c) of the REIT definition can be satisfied with nil revenue.

Neal Armstrong. Summary of 13 January 2022 External T.I. 2020-0845011E5 under s. 122.1(1) – real estate investment trust – (a).