United States Real estate investment trust

1 united states

1.1 history
1.2 legislation
1.3 structure

united states
history

from 2008 2011, reits faced challenges both slowing united states economy , late-2000s financial crisis, depressed share values 40 70 percent in cases.

legislation

under u.s. federal income tax law, reit corporation, trust or association acts investment agent specializing in real estate , real estate mortgages under internal revenue code section 856. rules federal income taxation of reits found in part ii (sections 856 through 859) of subchapter m of chapter 1 of internal revenue code. because reit entitled deduct dividends paid owners (commonly referred shareholders), reit may avoid incurring or part of liabilities u.s. federal income tax. qualify reit, organization makes election filing form 1120-reit internal revenue service, , meeting other requirements. purpose of designation reduce or eliminate corporate tax, avoiding double taxation of owner income. in return, reits required distribute @ least 90% of taxable income hands of investors. reit company owns, , in cases, operates income-producing real estate. reits own many types of commercial real estate, ranging office , apartment buildings warehouses, hospitals, shopping centers, hotels , timberlands. reits engage in financing real estate. reit structure designed provide real estate investment structure similar structure mutual funds provide investment in stocks.

structure

in united states, reit company owns, , in cases operates, income-producing real estate. reits finance real estate. reit, company must distribute @ least 90 percent of taxable income shareholders annually in form of dividends.

to qualify reit under u.s. tax rules, company must:

be structured corporation, trust, or association
be managed board of directors or trustees
have transferable shares or transferable certificates of interest
otherwise taxable domestic corporation
not financial institution or insurance company
be jointly owned 100 persons or more
have 95 percent of income derived dividends, interest, , property income
pay dividends of @ least 90% of reit s taxable income
have no more 50% of shares held 5 or fewer individuals during last half of each taxable year (5/50 rule)
have @ least 75% of total assets invested in real estate
derive @ least 75% of gross income rents or mortgage interest
have no more 25% of assets invested in taxable reit subsidiaries.

because of access corporate-level debt , equity typical real estate owners cannot access, reits have favorable capital structure. able use capital finance tenant improvement costs , leasing commissions less capitalized owners cannot afford.