The Company has used the beneficial advantages of forming as a Delaware Limited Liability Corporation (LLC), while electing to be taxed as a “C” corporation.
An LLC allows for greater flexibility structuring the entity in defining ownership and shareholder rights and keeps costs at a minimum.
In electing to be taxed as a C corporation, we are able to maximize the advantages of the new tax laws. This overall structure creates an attractive new type of Real Estate investment offering and differentiates us from all other Real Estate companies.
Currently, most public real estate offerings are in the form of a Real Estate Investment Trust (REIT), in order to avoid double taxation. A REIT is required to distribute 90% of it’s profits in the form of dividends which, for federal purposes, are generally taxed at the investor’s personal income tax rate, which can be as high as 37%.
New U.S. Tax Law Advantages
By electing to be taxed as a C corporation, REICG’s maximum federal tax exposure will be currently 21% at the corporate level.
Additionally, the new depreciation rules, when utilizing cost segregation studies*, have been enhanced four-fold, which reduces corporate tax exposure even further.
Overall, the Company will pay the lowest possible taxes allowing for more annual profits to be reinvested. More importantly, US investors will likely be taxed federally at the more favorable long-term capital gains tax rates when disposing of their interest.
* A cost segregation study identifies and reclassifies personal property assets (meaning all the component parts of a property HVAC, parking lot, ect) to shorten the depreciation time for taxation purposes, which reduces current income tax obligations.