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Which of the following statements is true about REIT dividends? A. REITs must pay tax on...

Which of the following statements is true about REIT dividends?

A. REITs must pay tax on capital gains.

B. REITs must pay out 100% of the taxable income in years they have capital gains.

C. REITs pay tax on the 10% of taxable income they choose not to distribute but retain their REIT status.

D. Only the cash portion of cash/stock dividends is tax deductible for a REIT.

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Answer #1

A. REITs must pay tax on capital gains. - False. REIT company will not pay capital gains tax instead they distribute the gains as dividends to shareholders and shareholders will pay the tax as per their individual slab rates.

B. REITs must pay out 100% of the taxable income in years they have capital gains. - False. REIT needs to pay atleast 90% of the taxable income as dividends so their is no rule of 100% dividend pay out

C. REITs pay tax on the 10% of taxable income they choose not to distribute but retain their REIT status. - True because the REIT has to pay corporate taxes on any retained income even after paying out 90% dividends.

D. Only the cash portion of cash/stock dividends is tax deductible for a REIT. - False it applicable for both cash and non cash in stock dividends as well

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