8000 / What is a qualified REIT subsidiary?
A qualified REIT subsidiary is a corporation in which the REIT owns 100 percent of the interests—e.g., it is a wholly owned subsidiary of a REIT. A qualified REIT subsidiary is not treated as an entity separate from the parent-REIT, so that all of the income and assets of the subsidiary are considered along with the REIT’s for purposes of the REIT income and asset tests.1
A subsidiary that has elected to be treated as a taxable REIT subsidiary (see Q 7999) cannot qualify as a qualified REIT subsidiary.2
If a qualified REIT subsidiary ceases to be 100 percent wholly-owned by the parent-REIT, its status as a qualified REIT subsidiary is terminated and it is treated as a new corporation that acquired all of its assets from the parent-REIT in exchange for its stock.3