Company: KBSR
Filing Date: 2025-03-14
Form Type: 10-K
Source: 0001482430-25-000021
Chunk: 184

Company: KBS Real Estate Investment Trust III, Inc.
Filing Date: 2025-03-14
Form: 10-K
Item: Item 1A
Chunk 184
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. federal income tax directly on such income.  In that event, our stockholders would be treated as if they earned that income and paid the tax on it directly.  However, stockholders that are tax-exempt, such as charities or qualified pension plans, would have no benefit from their deemed payment of such tax liability unless they file U.S. federal income tax returns and thereon seek a refund of such tax.  We also will be subject to corporate tax on any undistributed REIT taxable income.  We intend to make distributions to our stockholders to comply with the REIT requirements of the Internal Revenue Code.  

From time to time, we may generate taxable income greater than our income for financial reporting purposes, or our taxable income may be greater than our cash flow available for distribution to stockholders (for example, where a borrower defers the payment of interest in cash pursuant to a contractual right or otherwise).  If we do not have other funds available in these situations we could be required to borrow funds, sell investments at disadvantageous prices or find another alternative source of funds to pay distributions sufficient to enable us to pay out enough of our taxable income to satisfy the REIT distribution requirements and to avoid corporate income tax and the 4% excise tax in a particular year.  These alternatives could increase our costs or reduce our equity.  Thus, compliance with the REIT requirements may hinder our ability to operate solely on the basis of maximizing profits.  In addition, as we extend or refinance our debt, lenders may scrutinize our REIT distribution requirements.  Therefore, compliance with the REIT distribution requirements may hinder our ability to extend or refinance our debt.  

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To maintain our REIT status, we may be forced to forego otherwise attractive business opportunities, which may hinder our ability to operate solely on the basis of maximizing profits and reduce the value of our stockholders’ investment.  

To qualify as a REIT for U.S. federal income tax purposes, we must continually satisfy certain tests concerning, among other things, the sources of our income, the nature and diversification of our assets, the ownership of our common stock and the amounts we distribute to our stockholders.  We may be required to pay distributions to stockholders at times when it would be more advantageous to reinvest cash in our business or when we do not have cash readily available for distribution, and we may be forced to sell assets on terms and at times unfavorable to us, which could have a material adverse effect on us.