ASSESSING THE IMPACT OF REAL ESTATE TAX REFORM 34 pay no less than 10% tax on its income before taking into account any deductions for payments made to related foreign persons (generally requiring a 25% affiliation). In calculating gross receipts for this purpose, the gross receipts of all related entities are aggregated using the same challenging aggregation rules as apply to the small business exception to the interest deductibility limitation discussed above. • Anti-hybrid rules: The TCJA denies a deduction for any interest paid to a related party (generally requiring a 50% affiliation) if the interest is not taxed under the law of the related party’s country and either (i) the payment is not treated as interest under the tax law of the foreign country where the related party recipient resides, or (ii) either the payor or the related party recipient is treated as a pass-through entity in the US while it is not so treated in the foreign country, or vice versa. EDWARD L. GLAZER Partner +1 617 570 1170 MARK D. KIRSHENBAUM Partner +1 617 570 1305 KELSEY LEMASTER Partner +1 415 733 6086 DAVID M. PATTON Partner +1 617 570 1939 H. NEAL SANDFORD Partner +1 617 570 1632 KAREN F. TURK Partner +1 617 570 1097 JASON VOLLBRACHT Partner +1 415 733 6026 ERIC C. WILLENBACHER Partner +1 212 813 8942 CONTACT THE AUTHORS IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this informational piece (including any attachments) is not intended or written to be used, and may not be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. • Ownership of non-US assets. While the foregoing discussion focuses on investments in US real estate, many of the TCJA changes discussed above also can apply to non-US real estate investments. The TCJA also made fundamental changes to the US cross- border tax regime, which could materially alter the tax treatment of investments in non-US real estate for US investors.