ASHFORD HOSPITALITY TRUST ANNOUNCES TAX REPORTING INFORMATION FOR 2023 PREFERRED SHARE DISTRIBUTIONS
- Detailed tax reporting information for 2023 distributions provided
- Clear breakdown of income tax treatment for each preferred share distribution
- Company's adherence to IRS Code Section 6045B for posting Form 8937
- Encouragement for stockholders to consult with their tax advisors
- None.
Insights
The announcement by Ashford Hospitality Trust regarding the tax reporting for their 2023 distributions on preferred shares is a critical piece of information for shareholders and tax professionals alike. It's essential to understand that the entirety of the distributions per share for each series of preferred stock has been classified as Ordinary Taxable Dividend. This classification has significant implications for shareholders, as it determines how these distributions will be taxed under federal income tax laws.
From a tax planning perspective, the absence of a Return of Capital or Capital Gain Distribution simplifies the tax reporting for shareholders. However, it also means that the entire distribution amount is likely to be taxed at the individual's ordinary income tax rate, rather than potentially lower capital gains tax rates. Shareholders should be aware that this could result in a higher tax liability, depending on their individual tax bracket.
Moreover, the lack of Section 199A Dividends indicates that shareholders will not be able to take advantage of the qualified business income deduction for these dividends. This could have been a potential tax benefit, particularly for those owning shares in pass-through entities. The straightforward nature of these distributions might be seen as a double-edged sword; while simplicity in tax reporting is often welcomed, the opportunity for tax optimization is somewhat limited in this case.
As a Real Estate Investment Trust (REIT), Ashford Hospitality Trust's distribution structure is pivotal to its appeal to investors. REITs are generally required to distribute at least 90% of their taxable income to shareholders, which can lead to high yield investment opportunities. In this case, the fact that all distributions are classified as Ordinary Taxable Dividend aligns with the typical REIT payout structure, but it also underscores the company's operational focus on generating income through its upper upscale, full-service hotel investments.
Investors typically weigh the yield against the tax treatment of distributions when evaluating REITs. While the high percentage of ordinary income distributions may be less tax-efficient for investors, it reflects the company's commitment to providing consistent income streams. This can be an attractive quality for income-focused investors, particularly in an economic climate where steady returns are valued.
It is also worth noting that the consistency in the distribution types across all series of preferred stock suggests a uniform approach to income generation and distribution by the Trust. This can be indicative of a stable operational strategy, which could reassure investors looking for predictability in their investments.
When analyzing the financial health and investor appeal of Ashford Hospitality Trust, it's important to consider the impact of distribution announcements on the stock's performance. The declaration that all distributions are classified as Ordinary Taxable Dividend means that shareholders can anticipate a predictable income stream, which can be factored into the stock's valuation.
However, investors must also consider the current interest rate environment and tax legislation, as these can influence the net after-tax return on these investments. In a rising interest rate environment, for example, the fixed income from preferred shares might become less attractive compared to other income-generating securities, potentially affecting the stock's market value.
The disclosure of the tax treatment of distributions is also a testament to the company's transparency, which can have a positive effect on investor confidence. By providing detailed tax information and encouraging shareholders to consult with tax advisors, the company is taking proactive steps to ensure that investors are well-informed about the potential tax implications of their investment.
The amounts below represent the income tax treatment applicable to each distribution that is reportable in 2023. The preferred distributions that the Company paid on January 17, 2023 to stockholders of record as of December 30, 2022 are reportable in 2023. The preferred distributions that the Company paid on January 16, 2024 to stockholders of record as of December 29, 2023 will be reportable in 2024.
The income tax treatment for the 2023 distributions for Ashford Hospitality Trust, Inc. Series D Cumulative Preferred Stock CUSIP #044103406 traded on the NYSE under ticker symbol "AHTPrD" is as follows:
Distribution Type | |||||
Distributions | Ordinary | Section 199A | Capital Gain | Return of | |
Total Cash Per Share | |||||
Percent | 100 % | 0 % | 0 % | 0 % | 100 % |
The income tax treatment for the 2023 distributions for Ashford Hospitality Trust, Inc. Series F Cumulative Preferred Stock CUSIP #044103604 traded on the NYSE under ticker symbol "AHTPrF" is as follows:
Distribution Type | |||||
Distributions | Ordinary | Section 199A | Capital Gain | Return of | |
Total Cash Per Share | |||||
Percent | 100 % | 0 % | 0 % | 0 % | 100 % |
The income tax treatment for the 2023 distributions for Ashford Hospitality Trust, Inc. Series G Cumulative Preferred Stock CUSIP #044103703 traded on the NYSE under ticker symbol "AHTPrG" is as follows:
Distribution Type | |||||
Distributions | Ordinary | Section 199A | Capital Gain | Return of | |
Total Cash Per Share | |||||
Percent | 100 % | 0 % | 0 % | 0 % | 100 % |
The income tax treatment for the 2023 distributions for Ashford Hospitality Trust, Inc. Series H Cumulative Preferred Stock CUSIP #044103802 traded on the NYSE under ticker symbol "AHTPrH" is as follows:
Distribution Type | |||||
Distributions | Ordinary | Section 199A | Capital Gain | Return of | |
Total Cash Per Share | |||||
Percent | 100 % | 0 % | 0 % | 0 % | 100 % |
The income tax treatment for the 2023 distributions for Ashford Hospitality Trust, Inc. Series I Cumulative Preferred Stock CUSIP #044103885 traded on the NYSE under ticker symbol "AHTPrI" is as follows:
Distribution Type | |||||
Distributions | Ordinary | Section 199A | Capital Gain | Return of | |
Total Cash Per Share | |||||
Percent | 100 % | 0 % | 0 % | 0 % | 100 % |
The income tax treatment for the 2023 distributions for Ashford Hospitality Trust, Inc. Series J Preferred Stock (CUSIPs #04410A863, 04410A798, 04410A723, 04410A657 and 04410A574) is as follows:
Distribution Type | |||||
Distributions | Ordinary | Section 199A | Capital Gain | Return of | |
Total Cash Per Share | |||||
Percent | 100 % | 0 % | 0 % | 0 % | 100 % |
Distributions Per Share reflects the annual rate per share for distributions reportable in 2023.
The income tax treatment for the 2023 distributions for Ashford Hospitality Trust, Inc. Series K Preferred Stock (CUSIP #04410D867) is as follows:
Distribution Type | |||||
Distributions | Ordinary | Section 199A | Capital Gain | Return of | |
Total Cash Per Share | |||||
Percent | 100 % | 0 % | 0 % | 0 % | 100 % |
The income tax treatment for the 2023 distributions for Ashford Hospitality Trust, Inc. Series K Preferred Stock (CUSIPs #04410D792, 04410D727, 04410D651, and 04410D578) is as follows:
Distribution Type | |||||
Distributions | Ordinary | Section 199A | Capital Gain | Return of | |
Total Cash Per Share | |||||
Percent | 100 % | 0 % | 0 % | 0 % | 100 % |
Distributions Per Share reflects the annual rate per share for distributions reportable in 2023.
In accordance with IRS Code Section 6045B, the Company will post Form 8937, Report of Organizational Actions Affecting Basis of Securities, which may be found in the Corporate Actions section of the Company's website. This form provides detailed information on the return of capital amount of the preferred share distributions.
The Company encourages stockholders to consult with their own tax advisors with respect to the federal, state and local, and foreign income tax effects of these dividends.
Ashford Hospitality Trust is a real estate investment trust (REIT) focused on investing predominantly in upper upscale, full-service hotels.
Forward-Looking Statements
Certain statements and assumptions in this press release contain or are based upon "forward-looking" information and are being made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements in this press release include, among others, statements about the Company's strategy and future plans. These forward-looking statements are subject to risks and uncertainties. When we use the words "will likely result," "may," "anticipate," "estimate," "should," "expect," "believe," "intend," or similar expressions, we intend to identify forward-looking statements. Such statements are subject to numerous assumptions and uncertainties, many of which are outside Ashford Trust's control.
These forward-looking statements are subject to known and unknown risks and uncertainties, which could cause actual results to differ materially from those anticipated, including, without limitation: our ability to repay, refinance, or restructure our debt and the debt of certain of our subsidiaries; anticipated or expected purchases or sales of assets; our projected operating results; completion of any pending transactions; our understanding of our competition; market trends; projected capital expenditures; the impact of technology on our operations and business; general volatility of the capital markets and the market price of our common stock and preferred stock; availability, terms and deployment of capital; availability of qualified personnel; changes in our industry and the markets in which we operate, interest rates or the general economy; and the degree and nature of our competition. These and other risk factors are more fully discussed in Ashford Trust's filings with the Securities and Exchange Commission.
The forward-looking statements included in this press release are only made as of the date of this press release. Such forward-looking statements are based on our beliefs, assumptions, and expectations of our future performance taking into account all information currently known to us. These beliefs, assumptions, and expectations can change as a result of many potential events or factors, not all of which are known to us. If a change occurs, our business, financial condition, liquidity, results of operations, plans, and other objectives may vary materially from those expressed in our forward-looking statements. You should carefully consider these risks when you make an investment decision concerning our securities. Investors should not place undue reliance on these forward-looking statements. The Company can give no assurance that these forward-looking statements will be attained or that any deviation will not occur. We are not obligated to publicly update or revise any forward-looking statements, whether as a result of new information, future events or circumstances, changes in expectations, or otherwise, except to the extent required by law.
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SOURCE Ashford Hospitality Trust, Inc.
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