Real Estate Investment Trusts (REITs)
Chapters in this video
- 0:00 Meet the REIT: IRC regulation, not the 1940 Act
- 0:52 Equity, mortgage, and hybrid REIT income sources
- 1:57 The REIT number salad: 75/75/90 and the 5/50 rule
- 3:47 Tax time trap: ordinary income, not qualified dividends
- 4:38 Traded versus non-traded REIT liquidity and fees
- 6:02 Rapid-fire exam recap
What this video covers
- Why REITs are regulated under the Internal Revenue Code (IRC), not the Investment Company Act of 1940, and what that exemption means for pass-through taxation
- The three REIT types (equity, mortgage, hybrid) and whether each generates rental income, interest income, or both
- The two 75% tests: one for total assets in real estate/cash/government securities, and one for gross income from real estate-related sources
- The 5/50 rule and the 100-shareholder minimum as ownership requirements for IRC qualification
- Why REIT dividends are taxed as ordinary income, not qualified dividends, and how the pass-through taxation creates this shareholder consequence
- The liquidity, pricing transparency, fee structure, and redemption differences between exchange-traded REITs and non-traded REITs
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