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Title 26, Internal Revenue CodeRelease 119-110

§859 Adoption of Annual Accounting Period

Title 26 › Subtitle A — Income Taxes › CHAPTER 1 — NORMAL TAXES AND SURTAXES › Subchapter M — Regulated Investment Companies and Real Estate Investment Trusts › PART II — REAL ESTATE INVESTMENT TRUSTS › § 859

Last updated Sep 22, 2026|Official source

Summary

Real estate investment trusts (REITs) must use the calendar year as their tax year. A corporation, trust, or association cannot choose to become a REIT for any tax year starting after October 4, 1976, unless it already uses the calendar year. That rule does not apply to an entity that was treated as a REIT for a tax year that began on or before October 4, 1976. Even if other rules would require permission, an entity that has not carried on any active trade or business can change its tax year to the calendar year without needing approval from the Secretary when the change is made to make the REIT election.

Full Legal Text

Title 26, §859

Internal Revenue Code, Source: USLM XML via OLRC

(a)General rule
For purposes of this subtitle—
(1)a real estate investment trust shall not change to any accounting period other than the calendar year, and
(2)a corporation, trust, or association may not elect to be a real estate investment trust for any taxable year beginning after October 4, 1976, unless its accounting period is the calendar year.
Paragraph (2) shall not apply to a corporation, trust, or association which was considered to be a real estate investment trust for any taxable year beginning on or before October 4, 1976.
(b)Change of accounting period without approval
Notwithstanding section 442, an entity which has not engaged in any active trade or business may change its accounting period to a calendar year without the approval of the Secretary if such change is in connection with an election under section 856(c).

Legislative History

Notes & Related Subsidiaries

Editorial Notes

Prior Provisions

A prior section 859, added Pub. L. 94–455, title XVI, § 1601(a)(1), Oct. 4, 1976, 90 Stat. 1742; amended Pub. L. 95–600, title VII, § 701(t)(4), Nov. 6, 1978, 92 Stat. 2912, related to a deduction for deficiency dividends, prior to repeal by Pub. L. 95–600, title III, § 362(d)(6), Nov. 6, 1978, 92 Stat. 2852. See section 860 of this title.

Amendments

1986—Pub. L. 99–514 designated existing provisions as subsec. (a) and added subsec. (b). 1978—Pub. L. 95–600, § 701(t)(1), designated existing provisions as par. (1), substituted “change to any accounting period” for “change to or adopt any annual accounting period”, and added par. (2) and provision for nonapplicability of par. (2) to a real estate investment trust for any taxable year beginning on or before Oct. 4, 1976.

Statutory Notes and Related Subsidiaries

Effective Date

of 1986 AmendmentAmendment by Pub. L. 99–514 applicable to taxable years beginning after Dec. 31, 1986, see section 669 of Pub. L. 99–514, set out as a note under section 856 of this title.

Effective Date

of 1978 AmendmentRepeal of prior section 859 of this title and redesignation of section 860 of this title as this section by section 362(d)(6) of Pub. L. 95–600 applicable with respect to determinations (as defined in section 860(e) of this title) after Nov. 6, 1978, see section 362(e) of Pub. L. 95–600, set out as an

Effective Date

note under section 860 of this title. Pub. L. 95–600, title VII, § 701(t)(5), Nov. 6, 1978, 92 Stat. 2912, provided that: “The

Amendments

made by this subsection [amending this section and section 275, 856, 6212, and 6501 of this title] shall take effect on October 4, 1976.”

Reference

Citations & Metadata

Citation

26 U.S.C. § 859

Title 26, Internal Revenue Code

Last Updated

Sep 22, 2026

Release point: 119-110