FORM 20-F/A Brookfield Property Partners L.P. - Brookfield Asset ...

liabilities upon the deemed transfer. Thereafter, our company would be treated as a corporation for U.S. federalincome tax purposes.If our company were treated as a corporation in any taxable year, either as a result of a failure to meet theQualifying Income Exception or otherwise, our company’s items of income, gain, loss, deduction, or creditwould be reflected only on our company’s tax return rather than being passed through to our unitholders, and ourcompany would be subject to U.S. corporate income tax and potentially branch profits tax with respect to itsincome, if any, effectively connected with a U.S. trade or business. Moreover, under certain circumstances, ourcompany might be classified as a passive foreign investment company, or PFIC, for U.S. federal income taxpurposes, and a U.S. Holder would be subject to the rules applicable to PFICs discussed below. See “—Consequences to U.S. Holders — Passive Foreign Investment Companies”. Subject to the PFIC rules,distributions made to U.S. Holders would be treated as taxable dividend income to the extent of our company’scurrent or accumulated earnings and profits. Any distribution in excess of current and accumulated earnings andprofits would first be treated as a tax-free return of capital to the extent of a U.S. Holder’s adjusted tax basis in itsunits. Thereafter, to the extent such distribution were to exceed a U.S. Holder’s adjusted tax basis in its units, thedistribution would be treated as gain from the sale or exchange of such units. The amount of a distribution madebefore January 1, 2013 and treated as a dividend could be eligible for reduced rates of taxation, provided certainconditions are met. In addition, dividends, interest and certain other passive income received by our companywith respect to U.S. investments generally would be subject to U.S. withholding tax at a rate of 30% (althoughcertain Non-U.S. Holders nevertheless might be entitled to certain treaty benefits in respect of their allocableshare of such income) and U.S. Holders would not be allowed a tax credit with respect to any such tax withheld.In addition, the “portfolio interest” exemption would not apply to certain interest income of our company(although certain Non-U.S. Holders nevertheless might be entitled to certain treaty benefits in respect of theirallocable share of such income).Based on the foregoing consequences, treatment of our company as a corporation could materially reducea holder’s after-tax return and therefore could result in a substantial reduction of the value of our units. If theProperty Partnership were to be treated as a corporation for U.S. federal income tax purposes, consequencessimilar to those described above would apply.The remainder of this summary assumes that our company and the Property Partnership will be treated aspartnerships for U.S. federal tax purposes. We expect that a substantial portion of the items of income, gain,deduction, loss, or credit realized by our company will be realized in the first instance by the PropertyPartnership and allocated to our company for reallocation to our unitholders. Unless otherwise specified,references in this section to realization of our company’s items of income, gain, loss, deduction, or credit includea realization of such items by the Property Partnership (or other lower tier partnership) and the allocation of suchitems to our company.Proposed LegislationOver the past several years, a number of legislative and administrative proposals relating to partnershiptaxation have been introduced and, in certain cases, have been passed by the U.S. House of Representatives. OnMay 28, 2010, the U.S. House of Representatives passed legislation which, if it had been finally enacted into lawand applied to our company or to the Property Partnership, could have had adverse consequences, including(i) the recharacterization of capital gain income as “ordinary income”, (ii) the potential reclassification ofqualified dividend income as “ordinary income” subject to a higher rate of U.S. income tax, and (iii) potentiallimitations on the ability of our company to meet the “qualifying income” exception for taxation as a partnershipfor U.S. federal income tax purposes. This legislation was not passed by the U.S. Senate and therefore was notenacted into law. However, substantially similar legislation was reintroduced in the U.S. House ofRepresentatives in February 2012.The Obama administration has indicated it supports the adoption of legislation that similarly changes thetreatment of carried interest for U.S. federal income tax purposes. In its published revenue proposals for 2013,162