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What are the general requirements regarding income, investments, and dividends with which a REIT must comply...

What are the general requirements regarding income, investments, and dividends with which a REIT must comply to maintain its tax-exempt status?

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Answer #1

Requirements:

  1. At least 95 percent of the REIT's income (consider gross income here), should be from  dividends, interest income, rental income, income from sale of assets
  2. At least 75 percent of the REIT's income (again consider gross income here) must be from the following: rental income, interest on mortgage obligations, income from sale of assets, income from its investments in other REITs.
  3. At least 75 percent of the value of a REIT’s assets must consist of the following: cash, real estate and government securities.
  4. In addition the REIT should distribute 95 percent of its income (consider taxable income here) to shareholders in the form of dividends.
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