Federal Tax

Real Estate Leases (Portfolio 593)

  • The Portfolio, Real Estate Leases, analyzes the tax issues encountered by both landlord and tenant in contemporary leasing of real property.


Tax Management Portfolio, Real Estate Leases, No. 593, analyzes the tax issues encountered by both lessor and lessee in contemporary leases of real property.

This Portfolio discusses issues to be considered in originating a lease, including §467 rental agreements. It also presents the lessor’s and lessee’s perspectives, with respect to tax principles, in determining who should pay for lessee improvements. Also discussed are the issues raised when a lease is modified, terminated, or transferred.

There are different reasons for using a sale of real property by its owner and the simultaneous leaseback of the property as a method of financing the property (as opposed to borrowing). This Portfolio analyzes the income tax consequences to the seller-lessee and the buyer-lessor, and outlines the various tax problems inherent in structuring such transactions. Special emphasis is placed on tax planning, from the standpoints of both the seller-lessee and the buyer-lessor, to maximize the tax benefits inherent in sale and leaseback and related transactions.

Table of Contents

I. Introduction
II. Originating a Lease
III. Who Should Pay for Tenant Improvements?
IV. Modifications/Terminations
V. Transferring Lease Interests
VI. Sale–Leaseback Transactions
VII. Passive Loss Rules
VIII. Leasing to Tax-Exempts
IX. Tax Planning

Phil Holthouse
Holthouse Carlin & Van Trigt LLP
Lisa Starczewski
Chair, Opportunity Zones and Tax
Buchanan Ingersoll & Rooney PC
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