SIE practice questionhardREITs — Qualification Requirements
To qualify as a REIT, a company must meet all of the following requirements EXCEPT:
- ABe managed exclusively by its shareholders (no external management allowed)✓ Correct answer
- BInvest at least 75% of total assets in real estate
- CHave at least 100 shareholders
- DDerive at least 75% of gross income from real estate-related sources
Explanation
Why A — Be managed exclusively by its shareholders (no external management allowed)
REITs CAN be externally managed — there is no requirement that shareholders must manage the REIT. Actual requirements include: at least 100 shareholders (the '100 shareholder test'), at least 75% of income from real estate sources, at least 75% of assets in real estate, distribute 90%+ of taxable income, and no more than 50% of shares held by 5 or fewer individuals (the '5/50 test').
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