SIE practice questionhardREITs - Dividend Distribution
If a REIT fails to distribute 90% of its taxable income as dividends, it will:
- AAutomatically convert to a mutual fund
- BBe prohibited from investing in real estate
- COwe taxes only on undistributed income
- DLose its tax-advantaged status and be taxed at the corporate level✓ Correct answer
Explanation
Why D — Lose its tax-advantaged status and be taxed at the corporate level
If a REIT fails the 90% taxable-income distribution requirement, it may lose its tax-advantaged REIT status and be taxed at the corporate level. It does not automatically become a mutual fund or stop investing in real estate.
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