“721 Exchanges: A Tax Deferral Strategy for Real Estate”

Real estate investment trusts (REITs) typically own their real estate in an operating partnership known as an OP. The OP is structured as a partnership to obtain favorable tax treatment under the Internal Revenue Code. Section 721 of the Code provides favorable treatment for owners who exchange their real estate for OP units. This is commonly referred to as a 721 exchange, OP transaction or UPREIT.