Real Estate
Question: What is a REIT?
-- Ronaslov Justin Stazuk, Ukraine 01/08/98 12:50AM
Investment Life Expert Response:
A Real Estate Investment Trust (REIT) is essentially a corporation
or business trust that combines the capital of many investors to
acquire or provide financing for all forms of real estate. A REIT
serves much like a mutual fund for real estate in that retail investors
obtain the benefit of a diversified portfolio under professional
management. Its shares are freely traded, often on a major stock
exchange.
A corporation or trust that qualifies as a REIT generally does not
pay corporate income tax to the Internal Revenue Service (IRS).
This is a unique feature and one of the most attractive aspects
of a REIT. Most states honor this federal treatment and do not require
REITs to pay state income tax. This means that nearly all of a REIT's
income can be distributed to shareholders, and there is no double
taxation of the income to the shareholder. Unlike a partnership,
a REIT cannot pass its tax losses onto its investors.
John Devons, Managing Partner, Realinvest Capital Partners
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