SIE practice questioneasyREITs — 90% Distribution Requirement
To qualify for special tax treatment, a REIT must distribute at least what percentage of its taxable income to shareholders?
- A75%
- B100%
- C90%✓ Correct answer
- D50%
Explanation
Why C — 90%
REITs must distribute at least 90% of their taxable income to shareholders annually to avoid being taxed at the corporate level. This requirement results in relatively high dividend yields for REIT investors. The distributions are generally taxed as ordinary income (not qualified dividend rates) for shareholders. REITs that distribute less than 90% lose their favorable tax status.
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