The IRS just shut down yet another loophole in tax law that, if exploited, would allow companies to keep spinning off their property holdings into REITs.

REITs enjoy special tax benefits—they pay no corporate tax on the majority of profits—and in December a law was written to prevent retailers and hotels, among others, from creating REITs to avoid taxes. The law banned companies created in spinoffs from becoming REITs for at least 10 years following the transaction, but it forgot to ban spun-off companies from merging into an existing REIT, the Wall Street Journal reports.

“I have every confidence that this loophole would have been exploited,” says Robert Willens, a NY tax adviser. But the new IRS and Treasury Department regulations solve the problem—the new rules require spun-off companies that get REIT status to pay corporate taxes as if they had sold their appreciated real estate, which undermines the whole purpose of creating a REIT to avoid taxes. [WSJ]