REITs and DPPs: Rapid Fire
Chapters in this video
- 0:00 REIT vs. DPP: the one-way truck and the two-way pipe
- 0:58 Passive loss limitation: the salary trap
- 2:15 REIT 90% distribution and 75/95 tests
- 3:15 Mortgage REIT interest rate risk
- 3:35 Limited partner liability: the management boundary
- 4:16 Oil and gas risk and tax inverse relationship
- 4:45 IDC vs. tangible drilling costs, plus 15% percentage depletion
- 5:25 Residential 27.5-year vs. commercial 39-year depreciation
- 6:02 Land is never depreciable
- 6:19 DPP sponsor compensation caps and economic soundness test
- 6:56 Non-traded REIT illiquidity and accredited investor suitability
- 7:41 Rapid-fire exam recap
What this video covers
- How a Real Estate Investment Trust (REIT) avoids entity-level tax through the 90% distribution rule, and why shareholders still pay ordinary income tax on the dividends they receive
- Why REIT losses stay locked inside the entity while DPP passive losses flow through to partners on Schedule K-1, and the strict rule that passive losses only offset passive income
- The difference between the 75% asset and income tests, the 95% income test, and the 90% distribution requirement for REIT qualification
- Which REIT type carries the most interest rate risk, and how rising rates compress the spread for mortgage REITs
- How limited partners in a DPP can instantly lose limited liability by participating in management, binding the partnership, or acting as its agent
- Why oil and gas DPPs show an inverse relationship between risk and tax benefits, and which drilling costs are immediately deductible versus capitalized
- The phantom income crossover point in DPPs, where partners owe tax on allocated income even when no cash is distributed
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