Company: IIPR
Filing Date: 2025-02-21
Form Type: S-3ASR
Source: 0001104659-25-016184
Chunk: 70

Company: INNOVATIVE INDUSTRIAL PROPERTIES INC
Filing Date: 2025-02-21
Form: S-3ASR
Chunk 70
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 for “10%” and the “3-year average adjusted bases percentage” (as defined in the Code) for                                    
 the taxable year does not exceed 10%, or (b) the REIT satisfies the requirements of clause (3) applied by substituting             
 “20%” for “10%” and the “3-year average fair market value percentage” (as defined in the Code)                                     
 for the taxable year does not exceed 10%;                                                                                          |
| · | in the case of property not acquired through foreclosure                                                                           
 or lease termination, the REIT has held the property for at least two years for the production of rental income; and               |
| · | if the REIT has made more than seven property sales                                                                                
 (excluding sales of foreclosure property) during the taxable year, substantially all of the marketing and development expenditures 
 with respect to the property were made through an independent contractor from whom the REIT or a TRS derives no income.            |

We will attempt to comply with the terms of the
safe-harbor provisions in the federal income tax laws prescribing when an asset sale will not be characterized as a prohibited transaction.
We cannot assure you, however, that we will be able to comply with the safe-harbor provisions or that we will avoid owning property that
may be characterized as property held “primarily for sale to customers in the ordinary course of a trade or business.” We
may hold and dispose of certain properties through a taxable REIT subsidiary if we conclude that the sale or other disposition of such
property may not fall within the safe-harbor provisions. The 100% prohibited transactions tax will not apply to gains from the sale of
property that is held through a taxable REIT subsidiary although such income will be taxed to the taxable REIT subsidiary at U.S. federal
corporate income tax rates.

Foreclosure Property. We will be subject to tax at the maximum corporate rate on any income from foreclosure property,
other than income that otherwise would be qualifying income for purposes of the 75% gross income test, less expenses directly connected
with the production of that income. Gross income from foreclosure property will qualify, however, under the 75% and 95% gross income
tests. Foreclosure property is any real property, including interests in real property, and any personal property incident to such real
property:

| · | that is acquired by a REIT as the result of the REIT                                                                                
 having bid on such property at foreclosure, or having otherwise reduced such