AIR Communities Announces 2023 Dividend Income Tax Allocations

Rhea-AI Summary

Apartment Income REIT Corp. (AIRC) reported the tax status of its 2023 distributions, revealing favorable tax characterization compared to peer REITs, benefiting taxable investors due to the Separation from Aimco. The distributions include details on tax classifications and percentages of dividends, capital gain distributions, and nondividend distributions. Shareholders will receive an IRS Form 1099-DIV from Computershare, AIR’s distribution paying agent. The company encourages shareholders to consult with their tax advisors for reporting the distributions on their tax returns.

Insights

Tax Advisor

The disclosure by Apartment Income REIT Corp. (AIR) regarding the tax status of its 2023 distributions is a vital piece of information for shareholders, particularly for tax planning purposes. A significant portion of the distributions, over 83%, is classified as nondividend distributions, which typically represent a return of capital rather than taxable income. This reduces the shareholder's cost basis in the stock, potentially deferring taxes until the stock is sold. It's noteworthy that AIR's distributions have a favorable tax characterization when compared to peer REITs, suggesting a strategic advantage in terms of tax efficiency for investors.

Moreover, the absence of qualified dividends indicates that investors will not benefit from the lower tax rates generally applicable to qualified dividend income. The allocation to Section 199A dividends, however, allows for a potential 20% deduction on these dividends for eligible taxpayers, which is an aspect of the Tax Cuts and Jobs Act designed to provide tax relief to non-corporate taxpayers receiving income from pass-through entities.

It is also important for shareholders to understand the implications of Section 1061 disclosures, which relate to the taxation of carried interest and may affect investors holding applicable partnership interests. These nuances underscore the complexity of tax planning for REIT investors and highlight the importance of consulting with tax advisors to understand individual tax obligations and opportunities.

Financial Analyst

From a financial perspective, AIR's announcement regarding the tax status of its distributions can influence investor sentiment and the stock's attractiveness. The high percentage of nondividend distributions could signal that the company is prioritizing return of capital over current income, which may be indicative of its asset management strategy and long-term growth plans. This approach can be appealing to investors seeking tax-efficient investment options, potentially increasing demand for AIR's shares.

Additionally, the consistency in the tax treatment of the dividends throughout the year provides predictability for income-focused investors. However, the lack of qualified dividends may be less attractive to those in higher tax brackets looking for favorable tax treatment on their investment income. Ultimately, the impact on the stock price will depend on the market's perception of the company's financial health, the real estate sector's performance and broader economic factors.

Real Estate Market Analyst

Understanding the tax implications of REIT distributions is essential for real estate market analysts, as it affects the overall return on investment for shareholders. The structure of AIR's distributions suggests a focus on maintaining property value and capital appreciation over immediate income generation. This can be a strategic move in a real estate market that anticipates appreciation, as it implies that the company is reinvesting in its assets or paying down debt to strengthen its balance sheet.

The real estate market often cycles through periods of growth and contraction and a REIT's distribution policy can be a reflection of its management's outlook on the market. Given that AIR has a comparatively favorable tax characterization, it could indicate a competitive edge in attracting and retaining investors, especially in a market where investors are increasingly tax-conscious. Analysts would also consider how this tax treatment compares to the sector's norms and whether it reflects broader trends in the REIT industry.

DENVER--(BUSINESS WIRE)-- Apartment Income REIT Corp. (“AIR”) (NYSE: AIRC) reported today the tax status of its 2023 distributions paid to shareholders. Details on the tax classifications of the distributions are included in the table below. As a result of the Separation from Aimco, taxable investors have benefited from AIR’s refreshed tax basis through the favorable tax characterization of AIR’s distributions as compared to peer REITs.

Class A Common Stock	CUSIP: 03750L109
Record Date	Payable Date	Dividend per Share	Total Ordinary Dividends	Qualified Dividends(1)	Total Capital Gain Distribution	Unrecaptured Sec. 1250 Gain(2)	Section 199A Dividends(3)	Section 897 Ordinary Dividends(4)	Section 897 Capital Gain(5)	Nondividend Distributions
2/17/2023	2/28/2023	$0.45	13.091822%	0.000000%	3.525736%	0.000000%	13.091822%	6.962967%	3.525736%	83.382442%
5/19/2023	5/30/2023	$0.45	13.091822%	0.000000%	3.525736%	0.000000%	13.091822%	6.962967%	3.525736%	83.382442%
8/18/2023	8/29/2023	$0.45	13.091822%	0.000000%	3.525736%	0.000000%	13.091822%	6.962967%	3.525736%	83.382442%
11/17/2023	11/30/2023	$0.45	13.091822%	0.000000%	3.525736%	0.000000%	13.091822%	6.962967%	3.525736%	83.382442%
Annual		$1.8000	13.091822%	0.000000%	3.525736%	0.000000%	13.091822%	6.962967%	3.525736%	83.382442%

(1)	- The percentage of Qualified Dividends for each of the quarters shown above is a subset of, and included in, Dividend per Share.
(2)	- The percentage of Unrecaptured Sec. 1250 Gain for each of the quarters shown above is a subset of, and included in, Dividend per Share.
(3)	- The percentage of Section 199A Dividends for each of the quarters shown above is a subset of, and included in, Dividend per Share.
(4)	- The percentage of Section 897 Ordinary Dividends for each of the quarters shown above is a subset of, and included in, Dividend per Share.
(5)	- The percentage of Section 897 Capital Gain for each of the quarters shown above is a subset of, and included in, Dividend per Share.

Pursuant to Treas. Reg. § 1.1061-6(c), Apartment Income REIT Corp. is disclosing below two additional amounts for purposes of Section 1061 of the Internal Revenue Code. Section 1061 is generally applicable to direct and indirect holders of “applicable partnership interests.”

Record Date	Payable Date	Form 1099-DIV Box 2a, Total Capital Gain Distr. Per Share	One Year Amounts Disclosure Per Share	Three Year Amounts Disclosure Per Share
2/17/2023	2/28/2023	$0.015866	$0.015866	$0.015866
5/19/2023	5/30/2023	$0.015866	$0.015866	$0.015866
8/18/2023	8/29/2023	$0.015866	$0.015866	$0.015866
11/17/2023	11/30/2023	$0.015866	$0.015866	$0.015866
Annual		$0.063463	$0.063463	$0.063463

Shareholders of record of the Company's common stock will receive an Internal Revenue Service Form 1099-DIV from Computershare, AIR’s 2023 distribution paying agent. If shares were held in "street name" during 2023, the IRS form will be provided by a bank, brokerage firm, or nominee. Because AIR’s tax return has not yet been filed for the year ended December 31, 2023, the distribution allocations presented herein have been calculated using the best available information to date.

The tax treatment of these distributions by state and local authorities varies and may not be the same as the IRS's treatment. Because federal and state tax laws affect individuals differently, AIR cannot advise shareholders on how distributions should be reported on their tax returns. AIR encourages shareholders to consult with their own tax advisors with respect to the federal, state and local income tax consequences of these distributions.

About AIR Communities

Apartment Income REIT Corp (NYSE: AIRC) is a publicly traded, self-administered real estate investment trust (“REIT”). AIR’s portfolio comprises 75 communities totaling 26,623 apartment homes located in 10 states and the District of Columbia. AIR offers a simple, predictable business model with focus on what we call the AIR Edge, the cumulative result of our focus on resident selection, satisfaction, and retention, as well as relentless innovation in delivering best-in-class property management. The AIR Edge is a durable operating advantage in driving organic growth, as well as making possible the opportunity for excess returns for properties new to AIR’s platform. For additional information, please visit aircommunities.com.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240125704333/en/

Matthew O’Grady

Senior Vice President, Capital Markets

(303) 691-4566

Mary Jensen

Head of Investor Relations

(303) 691-4349

investors@aircommunities.com

Source: Apartment Income REIT Corp

FAQ

What did Apartment Income REIT Corp. (AIRC) report?

AIRC reported the tax status of its 2023 distributions to shareholders.

Why are the distributions beneficial to taxable investors?

Due to the Separation from Aimco, taxable investors have benefited from AIR’s refreshed tax basis through the favorable tax characterization of AIR’s distributions as compared to peer REITs.

What form will shareholders receive for the 2023 distributions?

Shareholders of record of the company's common stock will receive an Internal Revenue Service Form 1099-DIV from Computershare, AIR’s distribution paying agent.

How should shareholders report the distributions on their tax returns?

AIR encourages shareholders to consult with their own tax advisors with respect to the federal, state, and local income tax consequences of these distributions.