Exercise

Answer the following questions.

1. What does REIT stand for?

A. Real estate investment transfer

B. Real estate investment tax

C. Revenue enhancing investment trade

D. Real estate investment trust

2. What does “beneficial interest” mean?

A. The owner of the shares owns an actual share of the real estate the REIT owns.

B. The owner of the shares does not own any of the REIT’s real estate but is entitled to benefits from owning shares.

C. The shareholder does not really own the shares but benefits from the REIT’s business success.

D. The REIT takes a beneficial interest in any real estate the shareholder owns.

3. According to the IRS, a REIT must return what percentage of its taxable income to shareholders in the form of dividends?

A. 90%

B. 75%

C. The IRS does not specify a percentage

D. 100%

4. What percentage of a REIT’s gross income must come from real estate sources?

A. 90%

B. 75%

C. 95%

D. 50%

5. What percentage of a REIT’s assets must be invested in real estate sources?

A. 90%

B. 75%

C. 95%

D. 50%

Answers

1. D. Real estate investment trust.

2. B. A REIT shareholder owns shares and receives benefits but does not own an actual piece of the real estate the REIT owns.

3. A. REITs generally are exempt from corporate taxation as long as they distribute at least 90% of their income to their shareholders.

4. B. The IRS specifies that 75% of a REIT’s gross income must come from real estate sources.

5. B. To be classified as a REIT, 75% of a REIT’s assets must be invested in real estate.

3.8.1.2. Real Estate Limited Partnership (RELP)

A limited partnership (LP) is a business organization that must have a minimum of two members: at least one general partner and at least one limited partner. When the limited partnership manages real estate it is often referred to as a real estate limited partnership (RELP). It can