Company: IIPR
Filing Date: 2025-02-21
Form Type: S-3ASR
Source: 0001104659-25-016184
Chunk: 64

Company: INNOVATIVE INDUSTRIAL PROPERTIES INC
Filing Date: 2025-02-21
Form: S-3ASR
Chunk 64
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” to the extent not secured
by real property or an interest in real property) or any combination of these.

Certain income items do not qualify for either
gross income test. Other types of income are excluded from both the numerator and the denominator in one or both of the gross income
tests. For example, gross income from the sale of property that we hold primarily for sale to customers in the ordinary course of business,
income and gain from “hedging transactions,” as defined in “— Hedging Transactions,” and gross income attributable
to cancellation of indebtedness, or “COD,” income will be excluded from both the numerator and the denominator for purposes
of both the 75% and 95% gross income tests. For purposes of the 75% and 95% gross income tests, we are treated as receiving our proportionate
share of our Operating Partnership’s gross income. We will monitor the amount of our non-qualifying income and will seek to manage
our investment portfolio to comply at all time with the gross income tests. Under the Tax Cuts and Jobs Act, we would have to accrue
certain items of income before they would otherwise be taken into income under the Code if they are taken into account in our applicable
financial statements. The following paragraphs discuss the specific application of the gross income tests to us.

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Dividends. Our
share of any dividends received from any corporation (including dividends from any TRS that we may form, but excluding any REIT) in which
we own an equity interest will qualify for purposes of the 95% gross income test but not for purposes of the 75% gross income test. Our
share of any dividends received from any other REIT in which we own an equity interest, if any, will be qualifying income for purposes
of both gross income tests.

Interest. The
term “interest,” as defined for purposes of both gross income tests, generally excludes any amount that is based in whole
or in part on the income or profits of any person. However, interest generally includes the following:

| · | an amount that is based on a fixed percentage or percentages                                                                                
 of receipts or sales; and                                                                                                                   |
| · | an amount that is based on the income or profits of                                                                                         
 a debtor, as long as the debtor derives substantially all of its income from the real property securing the debt from leasing substantially 
 all of its interest in the property, and only to the extent that the amounts received