IRS Worried Companies Might Use Real Estate Spinoffs to Avoid Paying Taxes

Posted by Staff Reporter ( on Sep 16, 2015 09:21 AM EDT
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WASHINGTON, DC - AUGUST 18: The Internal Revenue building is seen on August 18, 2015 in Washington, DC. This week officials at the IRS said that hackers had gained access to the tax returns of more than 300,000 people, many more than the agency had previously reported. (Photo : Mark Wilson/Getty Images)

Investors want to know just how much the properties of giant companies are truly worth especially their headquarters, stores, and the lands they call their own. One good way of unlocking this mystery is by spinning off real estate, which the Internal Revenue Service says is not in the best interest of the government.

According to The Wall Street Journal, the IRS has issued a new guideline that outlines what it thinks are possible negative repercussions of corporate spinoffs. They want to zero in on deals that will allow companies to separate real estate and other physical assets from their overall operations. The agency is concerned that such deals could lead business establishments to violate the rules that require them to reveal all taxable transactions.

In the same report by The Wall Street Journal, a possible deal that could be affected by this move from the IRS is the Darden Restaurant Inc. spinoff plan. Activist investor Starboard Value LP, the company's controller, is pushing for the transaction to go through. Shareholders of Macy's and McDonald's are also pressuring their management to do the same.

In an explanation reported by JD Supra Business Advisor, there has been an uptick in number of companies planning to spin off their real estate especially from retailers and restaurants. A real estate spin off has a lot of perks for a company. It can help raise cash for additional capital, add more market value to the brand, increase returns in assets plus a slew of other economic benefits. It is the main reason why the IRS wants to make sure that companies comply with what is required by the law and not hide behind a go-around loophole like the real estate spin off.

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