CFTC No-Action Letter That Real Estate Investment Trusts Are Not Pools

The CFTC issued guidance that REITS would not be deemed "pools" subject to their meeting the following conditions:

• The REIT primarily derives its income from the ownership and management of real estate and uses derivatives for the limited purpose of "mitigat[ing] their exposure to changes in interest rates or fluctuations in currency";

• The REIT is operated so as to comply with all of the requirements of a REIT election under the Internal Revenue Code, including 26 U.S.C. §856(c)(2) (the 75-percent test); and

• The REIT has identified itself as an equity REIT in Item G of its last U.S. income tax return on Form 1120-REIT and continues to qualify as such, or, if the REIT has not yet filed its first tax filing with the Internal Revenue Service, the REIT has stated its intention to do so to its participants and effectuates its stated intention.

See: CFTC Letter 12-13.