Company: IIPR
Filing Date: 2025-02-21
Form Type: S-3ASR
Source: 0001104659-25-016184
Chunk: 85

Company: INNOVATIVE INDUSTRIAL PROPERTIES INC
Filing Date: 2025-02-21
Form: S-3ASR
Chunk 85
---
, return of capital and capital gain.

<div align='center'>46</div>

Taxation of Taxable U.S. Holders on the Disposition of Shares. In general, a U.S. holder who is not a dealer in securities
must treat any gain or loss realized upon a taxable disposition of our shares of capital stock as long-term capital gain or loss if the
U.S. holder has held such shares of capital stock for more than one year and otherwise as short-term capital gain or loss. In general,
a U.S. holder will realize gain or loss in an amount equal to the difference between the sum of the fair market value of any property
and the amount of cash received in such disposition and the U.S. holder’s adjusted tax basis. A holder’s adjusted tax basis
generally will equal the U.S. holder’s acquisition cost, increased by the excess of net capital gain deemed distributed to the
U.S. holder (discussed above) less tax deemed paid by such U.S. holder on such gains and reduced by any returns of capital. However,
a U.S. holder must treat any loss upon a sale or exchange of shares of capital stock held by such holder for six months or less as a
long-term capital loss to the extent of capital gain dividends and any other actual or deemed distributions from us that such U.S. holder
treats as long term capital gain. All or a portion of any loss that a U.S. holder realizes upon a taxable disposition of our shares of
capital stock may be disallowed if the U.S. holder purchases our shares of capital stock (or substantially similar shares of capital
stock) within 30 days before or after the disposition.

Capital Gains and Losses. A taxpayer generally must hold a capital asset for more than one year for gain or loss derived
from its sale or exchange to be treated as long-term capital gain or loss. The maximum tax rate on long-term capital gain applicable
to U.S. holders taxed at individual rates is 20% for sales and exchanges of assets held for more than one year. The maximum tax rate
on long-term capital gain from the sale or exchange of “Section 1250 property,” or depreciable real property, is 25%,
which applies to the lesser of the total amount of the gains or the accumulated depreciation on the Section 1250 property. Individuals,
trusts and estates whose income exceeds certain thresholds are also subject to a 3.8% Medicare tax on gain from