Question

Provided it adheres to the rules that govern REITS, a REIT does not pay taxes at the corporate level. This means that an equity investor in a REIT avoids double taxation?

True

False

When a REIT stock is trading for less than its liquidation value, the stock is said to be trading at a premium to Net Asset Value?

True

False

As a public company, REITs are required to report quarterly earnings on a GAAP basis. A big difference between net income on a GAAP basis and net income on an Adjusted Funds from Operations basis is the treatment of depreciation. Depreciation is treated as a non cash charge using GAAP. REIT investors are keen on cash flow and AFFO is a measure of net income less capital expenditures but excludes depreciation.  

True

False

Answer 1

1. The given statement is TRUE as real estate investment trust are exempted from the taxes at the corporate level so they are designed as a pass through entity and equity investors in real estate investment trust are avoiding double taxation.

2. when the real estate investment trust is trading for lower than its liquidation value, the stock is said to be trading at a discount to the net asset value and the given statement is FALSE.

3. The given statement about reporting of income of real estate investment trust is TRUE.