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
Failing the 90% payout causes the REIT to lose pass-through treatment, subjecting it to corporate tax. B, C, and D are incorrect consequences.
Turn it into reps
Reading one answer is not the same as being ready
Lucky the Banker is a free practice app with 1,867+ SIE questions, weak-area tracking, and timed mock exams. No credit card, no paywall.
Related Investment Companies & Packaged Products questions
- Compared to mutual funds, hedge funds are less likely to:
- A closed-end fund may trade at a premium if:
- An RR recommends that a client divide investments among several mutual fund families to 'avoid breakpoints.' This…
- An investor exchanges shares from one mutual fund to another within the same fund family. For tax purposes, this is…