What are REITs and Why Do Companies Need to Know about Them?
(PRWEB) August 01, 2013 -- Yellow flags for three firms have been raised by the IRS who intend on converting to real estate investment trusts (REITs) or real estate stock.
The firms, namely Iron Mountain Inc. and Equinix Inc have made approvals on their plans for the conversion of their business structure in order to qualify as REITS under the IRS code. Lamar Advertising Co. is still waiting for the decision of its Board of Directors.
For certain firms, the basics of REITs need to be understood. First, they need to know what REIT is: It is a form of security which is similar to a stock that invests in real estate directly. REITs are bundled together as unit investment trusts.
In terms of taxation, REITs are singled out. Investors are offered returns which are rather high. Others may purchase REITs directly by grabbing shares and/or investing in mutual funds.
When one invests in REITs, he or she should know that a REIT is liquid and is a dividend paying entity. They most likely posses a market cap of $423 billion in the NYSE.
To qualify as a REIT, firms must invest about 90% of its taxable income to shareholders. There are also some other requirements for a company to qualify as a REIT:
- Be structured as a corporation
- Have at least 100 shareholders
- Hold at least 75% asset investment in real estate
- Derive at least 75 percent of gross income from rents or mortgage interest
Read more on the requirements here.
To summarize, REITs are simply stocks treated as real estate investments. Companies have to qualify in order to become REITs and such qualifications would have to be met by them. Also, the IRS has special considerations on REITs under its code.
Perfect Tax offers strategies in order to help taxpayers deal with concerns on REITs and the IRS.
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Sam Thakkar, Perfect Tax, http://www.perfecttax.com, 1-888-671-0829, [email protected]
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