Discussion
           • What is a REIT?
           • REIT compliance
         #8576969                                                                                2
      What is a REIT?
          • A Real Estate Investment Trust is a private or public 
            corporation or trust that has special status for federal 
            income tax purposes. 
          • It pays no federal income tax because it can take a 
            deduction for dividends paid out to shareholders which 
            reduces taxable income to zero. 
          • Passive entity that owns, develops, leases, and manages 
            real estate
          • There are organizational, income, asset, and distribution 
            tests that must be met to remain qualified as a REIT. 
       #8576969                                                                    3
      REIT Compliance / Qualifications
           • Organizational requirements
                   • Transferable shares
                   • Directors or Trustees
                   • 100 Shareholder
                   • 5/50 Test
           • Asset tests
           • Distribution tests
           • Income tests
        #8576969                                                                             4
      REIT Compliance: Asset Tests
          • 75% Test
          • 5% Test
          • 10% Test
          • 25% Test
          • Failure of Asset Test
       #8576969                                                                     5
      REIT Compliance: Income Test
           • 75% Test
           • Rents from real property
               • Interest income derived from real property
               • Gain on sale of real property (excluding prohibited 
                 transactions)
               • Abatements/refunds of taxes on real property
           • Failure of the income test: 100% tax on deficiency
        #8576969                                                                              6