Company: LANDO
Filing Date: 2025-02-19
Form Type: 10-K
Source: 0001495240-25-000005
Chunk: 70

Company: GLADSTONE LAND Corp
Filing Date: 2025-02-19
Form: 10-K
Item: Item 1A
Chunk 70
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, thereby reducing distributions to the Operating Partnership.  Such a re-characterization of an underlying property owner could also threaten our ability to maintain REIT status.

Our ownership of, and relationship with, TRSs will be limited, and our failure to comply with the limits would jeopardize our REIT status and could result in the application of a 100% excise tax.

We have elected to treat Gladstone Land Advisers, Inc. (“Land Advisers”), a wholly-owned subsidiary of ours, as a TRS.  We may also form other TRSs as part of our overall business strategy.  A TRS may earn income that would not be qualifying income if earned directly by the parent REIT.  Both the subsidiary and the REIT must jointly elect to treat the subsidiary as a TRS.  A corporation of which a TRS directly or indirectly owns more than 35% of the voting power or value of the stock will automatically be treated as a TRS.  Overall, no more than 20% of the value of a REIT’s assets may consist of stock or securities of one or more TRSs.  A TRS will pay federal, state, and local income tax at regular corporate rates on any income that it earns.  In addition, the TRS rules limit the deductibility of interest paid or accrued by a TRS to its parent REIT to ensure that the TRS is subject to an appropriate level of corporate taxation.  The rules also impose a 100% excise tax on certain transactions between a TRS and its parent REIT that are not conducted on an arm’s-length basis.

Our TRSs will pay federal, state, and local income tax on their taxable income, and their after-tax net income will be available for distribution to us but is not required to be distributed to us.  We anticipate that the aggregate value of any TRS stock and securities owned by us will be less than 20% of the value of our total assets, including the TRS stock and securities.  We will evaluate all of our transactions with TRSs to ensure that they are entered into on arm’s-length terms to avoid incurring the 100% excise tax.  There can be no assurance, however, that we will be able to comply with the 20% limitation or to avoid application of the 100% excise tax.

Legislative or regulatory income tax changes related to REITs could materially and adversely affect us.

The U.S. federal