Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 65-66

1965-1 C.B. 268

Sec. 856

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Rev. Rul. 65-66

Section 856(a) of the Internal Revenue Code of 1954, which describes the general conditions which must be met in order to qualify as a real estate investment trust for Federal income tax purposes, provides, in part, that the term `real estate investment trust' means an unincorporated trust which is managed by one or more trustees.

Section 1.856-1(d)(1) of the Income Tax Regulations, which defines the term `trustee' for purposes of section 856(a) of the Code, provides, in part, that a trustee of a real estate investment trust may not be an officer or employee of, or have any direct or indirect proprietary interest in, any independent contractor (as defined in section 856(d)(3) of the Code and section 1.856-4 of the regulations) which furnishes or renders services pertaining to the trust property, or manages or operates such property.

The foregoing restrictive language of section 1.856-1(d)(1) of the regulations is concerned with insuring the maintenance of an arm's-length relationship between the trust and an independent contractor which furnishes or renders services to the trust's tenants pertaining to trust property, or which manages or operates the property.

Held , a trust which would otherwise qualify as a real estate investment trust within the provisions of section 856 of the Code will not be disqualified solely because one of its trustees is, concurrently, a stockholder, officer, or employee of an organization which renders only legal or investment advisory services to the trustees pertaining to the trust property.