In December 2008, the Internal Revenue Service (the “IRS”) issued Revenue Procedure 2008-68,providing temporary guidance regarding certain stock distributions by publicly traded real estate investment trusts (“REITs”). The taxpayer-favorable guidance gave publicly traded REITs greater flexibility to satisfy their tax-related distribution requirements while conserving cash in an illiquid market. On January 7, 2009, the IRS issued Revenue Procedure 2009-15 (the “Procedure”), extending its prior guidance to publicly traded regulated investment companies (“RICs”). Effective January 1, 2008 and for taxable years ending on or before December 31, 2009, the IRS will treat a distribution of stock by a publicly traded REIT or RIC pursuant to certain elections to receive stock or cash as a taxable distribution of property. The Procedure only applies to a REIT or RIC publicly traded on an established U.S. securities market. The amount of the stock distribution will be treated as equal to the amount of cash that could have been received instead. Under the Procedure, REITs and RICs can limit the aggregate amount of cash available to shareholders pursuant to the election to 10 percent of the aggregate distribution of cash and stock taken together. Given the requirement that a REIT or RIC be publicly traded on an established securities market, the Procedure generally will not apply to open-end mutual funds, and will only apply to ETFs and closed-end funds that are traded on a U.S. exchange rather than in the over-the counter market.
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