Company: IIPR
Filing Date: 2025-02-26
Form Type: 424B5
Source: 0001104659-25-017454
Chunk: 139

Company: INNOVATIVE INDUSTRIAL PROPERTIES INC
Filing Date: 2025-02-26
Form: 424B5
Chunk 139
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 we paid. The U.S. holder would increase the basis
in its shares of capital stock by the amount of its proportionate share of our undistributed long-term capital gain, minus its share
of the tax we paid.

A U.S. holder will not incur tax on a distribution
in excess of our current and accumulated earnings and profits if the distribution does not exceed the adjusted basis of the U.S. holder’s
shares of capital stock. Instead, the distribution will reduce the adjusted basis of such shares of capital stock. A U.S. holder will
recognize a distribution in excess of both our current and accumulated earnings and profits and the U.S. holder’s adjusted basis
in his or her shares of capital stock as long-term capital gain, or short-term capital gain if the shares of capital stock have been
held for one year or less, assuming the shares of capital stock are a capital asset in the hands of the U.S. holder. In addition, if
we declare a distribution in October, November or December of any year that is payable to a U.S. holder of record on a specified
date in any such month, such distribution shall be treated as both paid by us and received by the U.S. holder on December 31 of
such year, provided that we actually pay the distribution during January of the following calendar year, as described in “— Distribution
Requirements.”

To the extent that we have available net operating
losses and capital losses carried forward from prior tax years, such losses may reduce the amount of distributions that must be made
in order to comply with the REIT distribution requirements. Any net operating losses generated in years beginning after December 31,
2017 will generally only be able to offset 80% of our net taxable income (determined without regard to the dividends paid deduction).
Such losses are not passed through to U.S. stockholders and do not offset income of U.S. stockholders from other sources, nor do they
affect the character of any distributions that are actually made by us, which are generally subject to tax in the hands of U.S. stockholders
to the extent that we have current or accumulated earnings and profits.

Taxable distributions from us and gain from the
disposition of our shares of capital stock will not be treated as passive activity income and, therefore, a U.S. holder generally will
not be able to apply any “passive activity losses,” such as losses from certain types of limited partnerships in which such
U.S. holder