Sarah Wellings, associate at Sullivan & Worcester LLP, sat down for a video interview at Nareit’s REITwise: 2026 Academic Convention in Hollywood, Florida, March 24-26.
Wellings reviewed widespread operational dangers REITs face when managing taxable REIT subsidiaries (TRSs), notably round service classification and asset transfers. She defined that counting on impartial contractors for non-customary companies might be dangerous resulting from advanced compliance necessities—usually tough to satisfy in apply. Misclassification and logistical challenges can expose REITs to violations, making TRSs an easier and extra versatile various, she stated.
On asset transfers, Wellings famous that fears of triggering the 100% prohibited transaction tax might be mitigated by routing gross sales via a TRS, framing the choice as a tradeoff between a 21% company tax and potential increased publicity.
She additionally burdened the rising significance of switch pricing documentation. Whereas inside pricing could also be correct, exterior research assist face up to IRS scrutiny and investor due diligence. “A REIT that is saving cash on the entrance finish… in the end spend(s) extra money on the again finish defending what they did,” she stated.
Wellings additionally noticed that whereas know-how adoption is enhancing compliance—via information aggregation, automation, and alerts—implementation challenges and person adoption stay key gaps.
