75% of a REIT’s assets must be real estate. When a REIT owns a debt secured by both real estate and non-real estate, the regulations create an apportionment formula that, although typically favorable, creates an inappropriate bias against real estate classification for distressed debt. The IRS previously published Rev. Proc. 2011-16 to provide taxpayers with an “Asset Test Safe Harbor” to avoid inappropriately classifying distressed debt as a non-real estate asset. However, the IRS has become aware of “anomalous results” with this safe harbor if the underlying asset begins to regain its value after the REIT originates or acquires the loan. Therefore in new Rev. Proc. 2014-51 the IRS modified the safe harbor test and related examples to avoid this anomaly. In a particularly helpful fashion, the new guidance is effective for all calendar quarters and all taxable years.