Accounting Period

A REIT must figure its taxable income on the basis of a tax year. A tax year is the annual accounting period a REIT uses to keep its records and report its income and expenses. A REIT adopts a tax year when it files its first income tax return. It must adopt a tax year by the due date (not including extensions) of its initial income tax return.

Note: A REIT must adopt a calendar year unless it first qualified for REIT status before October 5, 1976.

Instructions for Form 1120-REIT (2025) 5

Change of tax year. A REIT may not change its tax year to any tax year other than the calendar year. Generally, a REIT must receive consent from the IRS before changing its tax year by filing Form 1128, Application To Adopt, Change, or Retain a Tax Year.

However, upon electing to be taxed as a REIT, an entity that has not engaged in any active trade or business may change its tax year to a calendar year without obtaining the consent.

See the Instructions for Form 1128 and Pub. 538 for more information on accounting periods and tax years.