United States

A real estate investment trust, or REIT, is a company that owns, and in most cases, operates income-producing real estate. Some REITs finance real estate. To be a REIT, a company must distribute at least 90 percent of its taxable income to shareholders annually in the form of dividends.

Qualification

In order to qualify for the advantages of being a pass-through entity for U.S. corporate income tax, a REIT must:

• Be structured as corporation, trust, or association^[9]
• Be managed by a board of directors or trustees^[10]
• Have transferable shares or transferable certificates of interest^[11]
• Otherwise be taxable as a domestic corporation^[12]
• Not be a financial institution or an insurance company^[13]
• Be jointly owned by 100 persons or more^[14]
• Have 95 percent of its income derived from dividends, interest, and property income^[15]
• Pay dividends of at least 90% of the REIT's taxable income
• No more than 50% of the shares can be held by five or fewer individuals during the last half of each taxable year (5/50 rule)
• At least 75% of total investment assets must be in real estate
• Derive at least 75% of gross income from rents or mortgage interest
• No more than 20% of its assets may consist of stocks in taxable REIT subsidiaries.