SIE: Exercise

Exercise

Answer the following questions.

1. 1. What does REIT stand for?
2. A. Real estate investment transfer
3. B. Real estate investment tax
4. C. Revenue enhancing investment trade
5. D. Real estate investment trust
6. 2. Does a REIT pass through losses to its investors?
7. A. Yes, just like a DPP in the real estate business
8. B. No, unlike a DPP or a RELP
9. C. Yes, like a DPP but unlike a RELP
10. D. No, unlike a DPP but like a RELP
11. 3. What does “beneficial interest” mean?
12. A. The owner of the shares owns an actual share of the real estate the REIT owns.
13. B. The owner of the shares does not own any of the REIT’s real estate but is entitled to benefits from owning shares.
14. C. The shareholder does not really own the shares but benefits from the REIT’s business success.
15. D. The REIT takes a beneficial interest in any real estate the shareholder owns.
16. 4. According to the IRS, a REIT must return what percentage of its taxable income to shareholders in the form of dividends?
17. A. 90%
18. B. 75%
19. C. The IRS does not specify a percentage
20. D. 100%
21. 5. What percentage of a REIT’s gross income must come from real estate sources?
22. A. 90%
23. B. 75%
24. C. 95%
25. D. 50%
26. 6. What percentage of a REIT’s assets must be invested in real estate sources?
27. A. 90%
28. B. 75%
29. C. 95%
30. D. 50%

Answer true or false.

1. 7. _____ The REIT corporate income tax exemption means that it’s generally best for investors to hold REIT shares in a taxable account rather than a tax-advantaged account such as an IRA.

Answers

1. 1. D. Real estate investment trust.
2. 2. B. A REIT does not pass through losses to its investors, unlike real estate limited partnerships (RELPs) and direct participation programs (DPPs), which do pass through losses to investors.
3. 3. B.