Company: IIPR
Filing Date: 2025-02-26
Form Type: 424B5
Source: 0001104659-25-017454
Chunk: 135

Company: INNOVATIVE INDUSTRIAL PROPERTIES INC
Filing Date: 2025-02-26
Form: 424B5
Chunk 135
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 partner has received or
will receive any cash distributions from the partnership. Cash distributions, if any, from a partnership to a partner generally are not
taxable unless and to the extent they exceed the partner’s basis in its partnership interest immediately before the distribution.
Any amounts in excess of such tax basis will generally be treated as a sale or exchange of such partner’s interest in the partnership.

For purposes of the REIT income and asset tests,
we are treated as receiving or holding our proportionate share of our Operating Partnership’s income and assets, respectively.
We control, and intend to continue to control, our Operating Partnership and intend to operate it consistently with the requirements
for our qualification as a REIT.

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The Bipartisan Budget Act of 2015 changed the
rules applicable to U.S. federal income tax audits of partnerships. Under the new rules (which generally are effective for
taxable years beginning after December 31, 2017), among other changes and subject to certain exceptions, any audit adjustment to
items of income, gain, loss, deduction, or credit of a partnership (and any partner’s distributive share thereof) is determined,
and taxes, interest, or penalties attributable thereto are assessed and collected, at the partnership level. These rules could result
in the Operating Partnership being required to pay additional taxes, interest and penalties as a result of an audit adjustment, and we
could be required to bear the economic burden of those taxes, interest, and penalties even though we, as a REIT, may not otherwise have
been required to pay additional corporate-level taxes as a result of the related audit adjustment. Prospective stockholders are urged
to consult their tax advisors with respect to these changes and their potential impact on their investment in our securities.

The discussion above assumes that our Operating
Partnership is treated as a “partnership” for U.S. federal income tax purposes. Generally, a domestic unincorporated entity
with two or more owners is treated as a partnership for U.S. federal income tax purposes unless it affirmatively elects to be treated
as a corporation. However, certain “publicly traded partnerships” are treated as corporations for U.S. federal income tax
purposes. We intend to comply with one or more exceptions to treatment of our Operating Partnership as a corporation under the publicly
traded partnership rules. Failure to qualify for such an exception could prevent us from qualifying as a REIT.

Taxation of U.S. Hold