# ASC 842-974-25: Leases — Real Estate—Real Estate Investment Trusts — 25 Recognition

Source: FASB Accounting Standards Codification, Basic View

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## ASC 842-974-25: 25 Recognition

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##### [842-974-25-1](https://asc.understandingaccounting.org/asc/842/974/#842-974-25-1)

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Regardless of the method of accounting used by a [real estate investment trust](https://asc.understandingaccounting.org/glossary/r/#real-estate-investment-trust "Real estate investment trusts generally are formed as trusts, associations, or corporations. They employ equity capital, coupled with substantial amounts of debt financing, in making real estate loans and investments. Real estate investment trusts must distribute substantially all of their taxable income to their shareholders annually in order to retain their favorable tax status (that is, dividends paid are treated as deductions in arriving at taxable income).") for its investment in a [service corporation](https://asc.understandingaccounting.org/glossary/s/#service-corporation "A real estate investment trust may establish a service corporation to perform services for the real estate investment trust or for third parties. Service corporations may provide property management and leasing services, as well as services to acquire, develop, construct, finance, or sell real estate projects."), the service corporation shall not be considered an independent third party and the amount of costs capitalized by the real estate investment trust for leasing services provided by the service corporation shall be no greater than the amount of [initial direct costs](https://asc.understandingaccounting.org/glossary/i/#initial-direct-costs "Incremental costs of a lease that would not have been incurred if the lease had not been obtained.") (see paragraphs

[842-10-30-9 through 30-10](https://asc.understandingaccounting.org/asc/842/10/#842-10-30-9)

) that would have been capitalized had the real estate investment trust incurred the costs directly.