Summary
Real estate investment trusts
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Extract
Ups and downs: a REIT dilemma.
Investors, professional property managers, and real property owners can pool their resources in a REIT, each enjoying the benefit of the others' contributions.
A publicly traded real estate investment trust (REIT) offers investors the opportunity to indirectly own professionally managed equity or mortgage interests in real property by purchasing shares or certificates of beneficial interest in the REIT. A REIT can be thought of as a mutual fund for real estate because many investors are pooling their capital in a professionally managed endeavor. Under the Internal Revenue Code of 1986 as amended (the "Code" or "I.R.C."), a REIT is not generally subject to federal income taxes.[1] Public corporations and certain publicly traded partnerships, on the other hand, generally are subject to two tiers of U.S. taxation. A REIT also offers the owners of equity or mortgage interests in real property the means to achieve their goals of liquidity, growth, and development through the capital infusions received by the REIT from the public. For purposes of this discussion, we will assume that the owners are actually partners in existing real property partnerships. The formation of a REIT can bring together owner, professional property manager, and investor, all of whom enjoy the rewards of the property and services each contributes to the venture. This article focuses on certain of the more important issues which the investors, the property managers, and the existing real estate partnerships and its partners face when e...See the full content of this document
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