Understanding REIT Tax Treatment

Easy Real Estate Investment Reits

John is considering investing in a Real Estate Investment Trust (REIT) to diversify his investment portfolio. He is particularly interested in understanding the tax implications and how dividends are treated for investors in REITs. John has come across the following statement regarding REITs:

"REITs must distribute a minimum of 90% of their taxable income to shareholders in order to qualify for special tax treatments, which generally means they are not subject to corporate income tax."

Based on this information, which of the following statements about REITs is correct?

REITs are required to pay corporate income tax on all taxable income.

REITs must distribute at least 90% of their taxable income to shareholders to avoid taxation at the corporate level.

Investors in REITs are taxed on capital gains received at a lower rate than dividends.

Hint

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