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A REIT wants its subsidiary to handle activities the REIT itself cannot touch without risking qualification. Form 8875 is how that gets formalized: a joint Taxable REIT Subsidiary election that a REIT and a corporation file together under IRC section 856(l)(1). It is simple on paper and easy to mistime in practice.
The window is narrow and unforgiving. Your Line 11 effective date can run no earlier than 2 months and 15 days before filing and no later than 12 months after, and if you do not specify one, the election takes effect on the filing date. The signed form mails to the IRS at Ogden, UT 84201, and it is not attached to either entity's return. For tax years beginning after December 31, 2025, the TRS asset cap rises to 25 percent.
Key Takeaways
- Form 8875 is a joint REIT and corporation election that creates a Taxable REIT Subsidiary under IRC 856(l)(1). The election is irrevocable unless both parties consent to revoke.
- Timing is tight. Your 8875 effective date can be no earlier than 2 months and 15 days before filing, and no later than 12 months after filing. If you do not specify a date, the election is effective on the filing date.
- Where to file matters. Mail Form 8875 to the IRS in Ogden, Utah. Do not attach it to the corporation’s or the REIT’s income tax return.
- If your TRS is an LLC, file Form 8832 to elect corporate classification, then coordinate that effective date with the 8875 window, 75 days back and 12 months forward.
- Update for 2026. The TRS asset cap rises to 25 percent for tax years beginning after December 31, 2025. Many REITs will still apply the 20 percent cap for fiscal years that begin in 2025.
- Intercompany pricing is not “covered” by the 8875. Section 857(b)(7) imposes a 100 percent tax on redetermined rents, deductions, excess interest, and TRS service income when pricing is not at arm’s length. Maintain documentation.
What Form 8875 Is And When You Use It
Form 8875 is the joint election that your REIT and a corporation file to designate the corporation as a Taxable REIT Subsidiary, as defined in IRC 856(l)(1).
In plain English, a TRS lets you house nonqualifying activities and services in a corporate subsidiary, while your REIT stays within the income and asset tests. Any corporation qualifies, including an LLC that has elected to be taxed as a corporation, with one important exclusion: a corporation that directly or indirectly operates or manages a lodging or health care facility, or licenses brand rights for such a facility, is ineligible to be a TRS unless the narrow franchisee-with-eligible-independent-contractor exception under section 856(d)(9) applies. The election is easy to understand, and the Code lets you make or revoke it without IRS consent, as long as both parties sign.
Why a TRS exists
A TRS gives you flexibility. It allows activities that might otherwise taint REIT income, and it lets your team price and operate services that belong outside the REIT. The return tradeoff is corporate taxation at the TRS, which is usually a fair price for the flexibility when structured and priced correctly. The IRS reminds filers of arm’s length requirements and the 100 percent tax if you miss them.
Who signs and how the link is formed
Both the TRS and the REIT sign Form 8875. That signature is what creates the link under the statute. You also disclose if the TRS owns 35 percent or more of another corporation, since that lower tier corporation can automatically become a TRS and may require a follow up filing.
2026 Update, The TRS Asset Cap
Beginning with tax years that start on or after January 1, 2026, the TRS asset cap moves from 20 percent to 25 percent. If your fiscal year began in 2025, you likely still apply the 20 percent cap through the end of that year. Check your year start date and adjust testing accordingly. Multiple respected sources confirm this change and its effective date.
Quick rule, if your tax year begins after December 31, 2025, your TRS securities cap is 25 percent. If it begins on or before that date, apply 20 percent for that year.
Who Must File And Core Eligibility
If your REIT owns any stock, even a single share, in a corporation that you want to treat as a TRS, you file Form 8875 together. The statute is simple, the REIT owns stock, both parties elect, and the election is in place until both parties revoke.
REIT Ownership Requirement
- Your REIT must own stock in the corporation, directly or indirectly.
- Both the REIT and the corporation must jointly elect using Form 8875.
- The election is irrevocable unless both parties consent to revoke it, which you do on a newly filed Form 8875 marked “Revocation.”
The 35 Percent Rule For Lower Tier Corporations
If your TRS owns 35 percent or more of another corporation, that corporation is also treated as a TRS of the REIT under IRC 856(l)(2). When that ownership threshold is crossed by acquisition, you must file a copy of your prior 8875 marked “Automatic Taxable REIT Subsidiary,” include the lower tier company’s name and EIN, and send it within 30 days after the end of the quarter in which the threshold was crossed. If the 35 percent interest arises from causes other than an acquisition (for example, a redemption by the lower-tier corporation that raises your relative ownership), no Form 8875 filing is required.
This is one of those small tasks that is easy to miss. Put a quarterly control in your close checklist to check for new 35 percent holdings.
Using LLCs As TRSs, Why Form 8832 Comes First
Only corporations qualify as TRSs. If your subsidiary is an LLC, elect to be taxed as a corporation using Form 8832. The 8832 effective date can be at most 75 days before filing or up to 12 months after filing. Your 8875 effective date must fall on or after the day the LLC is classified as a corporation. Align the two dates before you sign anything.
- Confirm the LLC’s current classification.
- Pick the Form 8832 effective date first.
- Choose the 8875 effective date that fits within both windows.
What You Will Need Before You File
- Legal names and EINs for both entities.
- A chosen effective date that is compliant for both 8832 and 8875 windows.
- Officers who are authorized to sign.
- A quick ownership chart that shows any 35 percent lower tier corporations.
What The TRS Election Does Not Cover
Form 8875 is not a safe harbor for pricing. Section 857(b)(7) imposes a 100 percent tax on redetermined rents, redetermined deductions, excess interest, and redetermined TRS service income. That tax replaces section 482 adjustments between the REIT and TRS. Keep intercompany agreements at arm’s length and keep files current.
Think of your pricing file like a seatbelt. You hope you never need it, but you will be glad it is there if you do.
A Quick Story You Can Use
A team wanted a TRS effective on the first day of the quarter. They waited to finalize the 8832, then discovered the 8875 window did not reach far enough back. They had to either reset the effective date or seek late relief. A 30 minute timeline check would have saved them days. You can avoid the same detour with the timeline in the next section.
Effective Dates, Timing Windows, And Where To File
A good TRS election starts with the calendar. Lock the dates, then gather signatures.
Form 8875 Timing Window
- Earliest effective date, 2 months and 15 days before you file.
- Latest effective date, 12 months after you file.
- No date listed, the election is effective on the filing date.
Example, you file on March 31, 2026. Your earliest effective date is January 16, 2026. Your latest effective date is March 31, 2027. Put those bookends on your planning timeline and you will not miss. A date entered outside that range does not void the election; the IRS automatically rolls a too-early date to the 2-month-15-day retroactive boundary and a too-late date to the 12-month-forward boundary.
Where To File Form 8875
Mail Form 8875 to the IRS in Ogden, Utah. Do not attach it to the REIT’s or the corporation’s income tax return. Treat the mailing as a critical control, keep tracking, and retain proof of delivery with your workpapers.
Form 8832 Timing Window For LLCs Electing Corporate Status
- Earliest effective date, 75 days before filing.
- Latest effective date, 12 months after filing.
- If you leave the date blank, the effective date is the filing date.
Pro tip, set 8832 first, then set 8875 inside it. That order prevents surprises.
One Look Timelines
| Item | Earliest effective date | Latest effective date | Who signs | Where to file |
| Form 8832, LLC elects corporate status | 75 days before filing | 12 months after filing | Authorized owners or officer | File per 8832 instructions to the designated service center |
| Form 8875, TRS election | 2 months 15 days before filing | 12 months after filing | Officer of TRS and officer of REIT | Mail to IRS, Ogden, UT 84201, do not attach to returns |
Revocations And Corrections
If you need to revoke, file a new Form 8875, write “Revocation” at the top, include both signatures, and mail it to Ogden. The revocation is effective when filed. If a 35 percent lower tier threshold is crossed by acquisition, file the “Automatic Taxable REIT Subsidiary” copy within 30 days after quarter end as the instructions require.
Compliance Signals To Build Into Your File
- Signed Form 8875 and proof of mailing.
- Form 8832 copy and acceptance if applicable.
- Ownership chart, including any 35 percent lower tier companies.
- Transfer pricing file that covers rents, services, and intercompany interest.
Keep these together so your reviewer can get to “yes” in minutes, not hours.
Asset And Ownership Limits You Must Watch
The TRS Asset Cap, Now 25 Percent For Most 2026 Years
Historically, the TRS securities cap was 20 percent of total assets. For tax years beginning after December 31, 2025, Congress restored the cap to 25 percent. That gives you more room for operating subsidiaries and nonqualifying assets held in a TRS. If your year began in 2025, keep using 20 percent until your next year begins.
- Calendar-year 2026 REIT, use 25 percent.
- Fiscal-year REIT that began July 1, 2025, use 20 percent through June 30, 2026. Then use 25 percent for the next year.
The 35 Percent “Controlled TRS” And The Automatic Filing
Once a TRS owns at least 35 percent of another corporation by vote or value, that lower-tier entity is a TRS too. When you cross the threshold by acquisition, mail the “Automatic Taxable REIT Subsidiary” copy of your earlier 8875 within 30 days after the end of the quarter. Put this reminder in your quarter-end checklist so you do not miss it.
Pricing Between The REIT And TRS
Section 857(b)(7) imposes a 100 percent tax on redetermined rents, redetermined deductions, excess interest, and redetermined TRS service income if pricing is not arm’s length. That tax replaces section 482 adjustments. Keep intercompany service agreements, rent adjustments, and interest terms supportable, and refresh your documentation annually. The IRS 1120‑REIT instructions reinforce this point.
Keep one clean binder for pricing support, contracts, and comparables. Your reviewer will thank you, and future audits will be simpler.
States Do Not Always Mirror Federal TRS Treatment
Expect differences. Some states conform, some require separate registrations or classifications. Keep a short state checklist as part of your closing process so state reporting does not lag federal timing.
Security And Signatures When You File
The Form 8875 instructions tell you to mail a signed paper form to Ogden. The IRS does allow electronic signatures for certain forms and electronic business returns, but Form 8875 itself is not listed among the paper forms that accept e‑signatures. If you mail the 8875, use original signatures. If you are e‑filing corporate returns with attachments, follow the IRS business e‑file signature methods in the IRM and your software’s attachment process.
Common Timing Traps We See
- Picking the 8875 date before you set the 8832 date for an LLC, which can force a later TRS start.
- Missing the “Automatic TRS” copy after a 35 percent acquisition.
- Assuming the 20 percent cap still applies in 2026 when your year actually began on January 1, 2026.
- Attaching Form 8875 to a tax return. The IRS says to mail it to Ogden, do not attach.
Accountably note, our teams build these dates and checks into a simple tracker so staff, seniors, and reviewers see the same timeline. That keeps filings on time and avoids rework.
How To Prepare, File, And Document Form 8875
Step 1, Confirm Eligibility And Ownership
- Confirm your REIT owns stock in the subsidiary.
- Confirm the subsidiary is a corporation for federal tax, or plan the 8832.
Step 2, Set Dates
- If the subsidiary is an LLC, select the Form 8832 effective date first, within the 75‑day back and 12‑month forward window.
- Pick the Form 8875 effective date inside its 2 months 15 days back or 12 months forward window.
Step 3, Complete The Form
- Fill in legal names, EINs, dates of organization, and addresses.
- Answer whether the TRS has previously filed a return or is in a consolidated group.
- Disclose any 35 percent lower tier holdings and prepare the “Automatic TRS” copy if needed.
Step 4, Sign And Mail
- Secure signatures from an officer of the TRS and an officer of the REIT (each must be a person authorized to sign that entity's tax return; tax preparer signatures are not sufficient).
- Mail the original to, Internal Revenue Service, Ogden, UT 84201. Keep proof of delivery. Do not attach Form 8875 to a tax return.
Step 5, Build The File
- Signed 8875, mailing proof, and any revocation copies.
- 8832 filing and acceptance if used.
- Ownership chart and the quarter when any 35 percent thresholds were crossed.
- Pricing file that covers services, rent adjustments, and intercompany interest with current comparables.
Revocations, Late Elections, And Relief
How To Revoke Correctly
File a new Form 8875, write “Revocation” across the top, include both signatures, and mail to Ogden. The revocation is effective on the day you file. Keep proof of mailing with your close file and update internal trackers.
Late Election Relief
If you miss the timing window, relief may be available. The IRS has granted 301.9100 relief to deem TRS elections or related entity classification elections timely in appropriate cases. That process often requires a private letter ruling, affidavits, and user fees, so plan for cost and lead time.
If your intended effective date is already behind you, do not wait. Get counsel involved quickly and map out a 9100 path.
Consolidated Return Considerations
Once elected, a TRS can be included in a consolidated group if the group meets the ownership and timing rules. Expect standard consolidated return mechanics like intercompany eliminations, SRLY, and attribute sharing. The TRS election itself is separate, you still follow consolidated rules when you file.
Quick Checklist You Can Reuse
- Choose the “why TRS” and model the activity.
- Set 8832 date if needed, then set 8875 date.
- Gather EINs, signatures, and mailing supplies.
- Check the 25 percent cap for years beginning after December 31, 2025.
- Prepare “Automatic TRS” copy if you cross 35 percent in a lower tier.
- Mail to Ogden and file the proof.
Common Mistakes We See Every Season
The Form 8875 election looks deceptively simple on paper, and that is exactly where most filers slip. We see the same patterns repeat year over year, and each one traces back to a misread of the September 2014 instructions or a missed cross-reference to a sibling form.
Reusable Checklists
These checklists are written to be pasted into a TRS-election SOP without rewriting. Each step references the actual line, statute, or sibling form the IRS Form 8875 instructions point to, so a reviewer can trace the work back to its source in seconds.
Pre-file packet for a TRS election
- Confirm the corporation is not a REIT and not an ineligible corporation under the lodging or health-care brand rules in IRC section 856(l).
- Verify the REIT directly or indirectly owns stock in the corporation as of the intended effective date.
- Pull EINs for both entities; if the TRS does not yet have one, apply via Form SS-4 or at irs.gov/businesses, or enter Applied for on the EIN line.
- Draft Part I (lines 1 through 4) for the TRS and Part II (lines 5 through 10) for the electing REIT.
- Calculate the line 11 effective date inside the 2 months and 15 days lookback and 12 months lookforward window.
- Obtain officer signatures from both entities under penalties of perjury; preparer signatures do not substitute.
- Mail to Department of the Treasury, Internal Revenue Service, Ogden, UT 84201 with certified-mail proof of delivery.
- File a stamped copy in the TRS and REIT permanent workpaper folder; the election is irrevocable absent joint revocation.
Line 11 effective date worksheet
- Identify the planned filing date (the date Form 8875 will be postmarked).
- Compute the earliest allowable effective date: filing date minus 2 months and 15 days.
- Compute the latest allowable effective date: filing date plus 12 months.
- If the deal or operational need requires an earlier effective date than the lookback allows, flag for a 301.9100 relief evaluation before mailing the form.
- If the parties have no preference, leave line 11 blank; per the IRS Form 8875 instructions, the election then defaults to the filing date.
- Document the rationale for the chosen date in a one-page workpaper memo and attach it to the filed copy.
35 percent lower-tier and Automatic TRS monitor
- Inventory every corporation in which the TRS holds stock, by voting power and by value, refreshed quarterly.
- Flag any holdings at or above 35 percent of voting power or value, excluding REIT subsidiaries.
- For pre-election holdings already at 35 percent, attach a statement to the original Form 8875 with the lower-tier corporation's name and EIN.
- For post-election acquisitions that push ownership to 35 percent, file an Automatic Taxable REIT Subsidiary copy of Form 8875 within 30 days after the end of the REIT's tax-year quarter in which the acquisition closed.
- If the 35 percent crossing results from a redemption by the lower-tier corporation rather than an acquisition, document the cause; per IRC section 856(l)(2), no Form 8875 filing is required.
- Update the TRS workpaper file every quarter so the monitor never lags an event.
Keep 8875 Season From Stalling
Form 8875 does not have a March-April rush, but its windows are unforgiving in a different way. The election is event-driven: a REIT standing up a new subsidiary, an acquisition pushing a lower-tier interest past 35 percent, or a status change that swaps a TRS EIN can each open a tight filing window no one penciled into the compliance calendar. The IRS estimates 6 hours and 56 minutes of recordkeeping plus 25 minutes of preparation per form (per the Paperwork Reduction Act notice in the IRS Form 8875 instructions), and that estimate only covers the form itself, not the upstream legal and structuring work.
The fix is not more hours; it is a structured intake the moment a triggering event surfaces. When the line 11 window, the 30-day Automatic TRS clock, and the Ogden-only filing rule are baked into the TRS workpaper SOP, the form follows the deal instead of chasing it.
- Build a TRS event log keyed off the REIT's tax-year quarters, so any Automatic TRS clock starts at quarter-end and not at the deal-close date.
- Reserve a separate filing path for Form 8875: certified mail to Ogden, never bundled with the 1120-REIT or the subsidiary's 1120.
- Pair every Form 8875 with a Form 8822-B reminder so address or responsible-party changes route to the right form rather than triggering a needless refile.
- Pre-calculate line 11 windows from the planned mailing date and store the worksheet in the workpaper; reviewers and auditors will ask for it.
- Add a 35 percent ownership monitor to the quarterly TRS review so lower-tier crossings surface inside the 30-day Automatic TRS window, not after.
Our team runs this intake structure inside the same review path that handles the rest of REIT compliance, so the election lands on time and the workpaper closes the loop. See our tax outsourcing services for how the TRS workflow integrates into a documented delivery SOP.
FAQs
What is Form 8875 and who files it?
Form 8875 is the joint election your REIT files with a corporation to designate the corporation as a Taxable REIT Subsidiary under IRC 856(l)(1). Both entities sign, and the election remains in effect until both consent to revoke.
When should I file Form 8875?
File when your dates are set. The earliest effective date is 2 months and 15 days before you file, and the latest is 12 months after you file. If you leave the date blank, the election is effective on the filing date.
Where do I send Form 8875?
Mail it to the IRS in Ogden, Utah, and do not attach it to the REIT’s or the corporation’s return. Keep proof of delivery.
Can an LLC be a TRS?
Yes, but only if it is taxed as a corporation. Use Form 8832 to elect corporate classification and align that effective date with your Form 8875 window.
What changed for 2026?
For tax years beginning after December 31, 2025, the TRS asset cap increases from 20 percent to 25 percent of total assets. Many filers will still apply the 20 percent cap for fiscal years that began in 2025.
Are electronic signatures accepted on Form 8875?
Form 8875 is mailed to the IRS and is not on the current list of paper forms that accept e‑signatures, so use original signatures. If you submit attachments inside an e‑filed business return, follow the IRS business e‑file signature methods and your software’s rules.
What if we missed the filing window?
You may request late election relief under the 301.9100 procedures, often through a private letter ruling. The IRS has granted relief in TRS and entity classification cases, but expect documentation, user fees, and time.
What happens if our pricing between the REIT and TRS is off?
Section 857(b)(7) imposes a 100 percent tax on redetermined rents, deductions, excess interest, and TRS service income when pricing is not arm’s length. Keep strong documentation for rents, services, and intercompany interest.