Products & Their RisksQuestion 75 of 398
To qualify for favorable tax treatment as a real estate investment trust (REIT), the entity must distribute to shareholders at least:
a.50% of its net investment income
b.75% of its capital gains
c.90% of its taxable income
d.100% of its gross rental revenue
Explanation
A REIT that distributes at least 90% of its taxable income to shareholders generally avoids federal income tax at the corporate level on the distributed amount, passing income through to investors. REITs let investors participate in income-producing real estate, and equity REITs own property while mortgage REITs finance it.
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