Company: IIPR
Filing Date: 2025-02-26
Form Type: 424B5
Source: 0001104659-25-017454
Chunk: 141

Company: INNOVATIVE INDUSTRIAL PROPERTIES INC
Filing Date: 2025-02-26
Form: 424B5
Chunk 141
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 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 the sale of our shares
of capital stock.

With respect to distributions that we designate
as capital gain dividends and any retained capital gain that we are deemed to distribute, we will designate whether such a distribution
is taxable to U.S. holders taxed at individual rates at a 20% or 25% rate. The highest marginal individual income tax rate currently
is 37%. Thus, the tax rate differential between capital gain and ordinary income for those taxpayers may be significant. In addition,
the characterization of income as capital gain or ordinary income may affect the deductibility of capital losses, including capital losses
recognized upon the disposition of our shares. A non-corporate taxpayer may deduct capital losses not offset by capital gains against
its ordinary income only up to a maximum annual amount of $3,000. A non-corporate taxpayer may carry forward unused capital losses indefinitely.
A corporate taxpayer must pay tax on its net capital gain at ordinary corporate rates (currently up to 21%). A corporate taxpayer may
deduct capital losses only to the extent of capital gains, with unused losses being carried back three years and forward five years.
The Service and the U.S. Treasury Department have issued final regulations effective for tax years commencing on or after January 19,
2021 that impose special rules in respect of capital gain dividends received through partnership interests constituting “applicable
partnership interests” under Section 1061 of the Code. If we fail to provide the additional reporting set forth in these rules,
capital gain dividends may