Series 7 practice questioneasyAlternative Investments — REITs
A Real Estate Investment Trust (REIT) must distribute what minimum percentage of its taxable income to shareholders to maintain its tax-advantaged status?
- A50%
- B75%
- C90%✓ Correct answer
- D100%
Explanation
Why C — 90%
To qualify for the favorable tax treatment (pass-through of income without corporate-level taxation), a REIT must distribute at least 90% of its taxable income to shareholders as dividends. REITs must also derive at least 75% of gross income from real estate-related sources and have at least 75% of total assets invested in real estate.
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