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

generally would constitute debt-financed property, and any income or gain realized on such debt-financedproperty and allocated to a tax-exempt organization generally would constitute UBTI to such tax-exemptorganization. In addition, even if such indebtedness were not used either by our company or by the PropertyPartnership to acquire property but were instead used to fund distributions to our unitholders, if a tax-exemptorganization subject to taxation in the United States used such proceeds to make an investment outside ourcompany, the IRS might assert that such investment constitutes debt-financed property to such unitholder withthe consequences noted above. Our company and the Property Partnership do not intend to directly incur debt toacquire property, and the BPY General Partner and the Property General Partner do not believe that our companyor the Property Partnership will generate UBTI attributable to debt-financed property in the future. Moreover, theBPY General Partner and the Property General Partner intend to use commercially reasonable efforts to structurethe activities of our company and the Property Partnership, respectively, to avoid generating UBTI. However,neither our company nor the Property Partnership is prohibited from incurring indebtedness, and no assurancecan be provided that neither our company nor the Property Partnership will generate UBTI attributable to debtfinancedproperty in the future. Tax-exempt U.S. Holders should consult an independent tax adviser regardingthe tax consequences of an investment in our units.Investments by U.S. Mutual FundsU.S. mutual funds that are treated as regulated investment companies, or RICs, for U.S. federal incometax purposes are required, among other things, to meet an annual 90% gross income and a quarterly 50% assetvalue test under Section 851(b) of the U.S. Internal Revenue Code to maintain their favorable U.S. federalincome tax status. The treatment of an investment by a RIC in our units for purposes of these tests will depend onwhether our company is treated as a “qualified publicly-traded partnership”. If our company is so treated, thenour units themselves are the relevant assets for purposes of the 50% asset value test, and the net income from ourunits is the relevant gross income for purposes of the 90% gross income test. If, however, our company is not sotreated, then the relevant assets are the RIC’s allocable share of the underlying assets held by our company, andthe relevant gross income is the RIC’s allocable share of the underlying gross income earned by our company.Whether our company will qualify as a qualified publicly-traded partnership depends on the exact nature of itsfuture investments, but the BPY General Partner believes it is likely that our company will not be treated as aqualified publicly-traded partnership. RICs should consult an independent tax adviser regarding the U.S. taxconsequences of an investment in our units.Consequences to Non-U.S. HoldersSpin-OffA Non-U.S. Holder generally should not recognize gain or loss for U.S. federal income tax purposes uponthe receipt of our units pursuant to the spin-off.Holding of Units and Other ConsiderationsBased on our organizational structure following the spin-off, as well as our company’s expected incomeand assets, the BPY General Partner and the Property General Partner currently believe that our company isunlikely to earn income treated as effectively connected with a U.S. trade or business, including effectivelyconnected income attributable to the sale of a “U.S. real property interest”, as defined in the U.S. InternalRevenue Code. If, as anticipated, our company is not treated as engaged in a U.S. trade or business or as derivingincome which is treated as effectively connected with a U.S. trade or business, and provided that a Non-U.S.Holder is not itself engaged in a U.S. trade or business, then such Non-U.S. Holder generally will not be subjectto U.S. tax return filing requirements solely as a result of owning our units and generally will not be subject toU.S. federal income tax on its allocable share of our company’s interest and dividends from non-U.S.-sources orgain from the sale or other disposition of securities or real property located outside of the United States.171