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Tax Reform and Organizational Forms for Holding Investment Real Estate: Corporation vs. Partnership
Author(s) -
Lentz George H.,
Fisher Jeffrey D.
Publication year - 1989
Publication title -
real estate economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.064
H-Index - 61
eISSN - 1540-6229
pISSN - 1080-8620
DOI - 10.1111/1540-6229.00494
Subject(s) - perpetuity , economics , cash flow , finance , capitalization rate , business , tax reform , real estate , monetary economics , real estate investment trust , public economics
Following the ERTA of 1981, partnership ownership of real estate dominated corporate ownership. This study concludes that the Tax Reform Act of 1986 provides incentive for holding real estate investments that produce sizable tax losses and/or that are eligible for large tax credits in corporate rather than partnership form. Perpetuity cash flow models are employed initially to identify key tax and cash flow variables favorable to each organizational form. The perpetuity assumption is then relaxed to consider a more representative real estate investment. A sensitivity analysis examines the extent to which the base case results are dependent on the assumed values of selected model parameters.