NEW REIT RULES TAXING

Holders of real estate investment trusts (REITs) feel the pain when they look at their investments this year. The IRS changed its rules, and REITs no longer need to follow a long-standing requirement to pay, in cash, 90 percent of its pretax income to shareholders. Instead, REITs can now pay as much as 90 percent of their dividends in stock and keep the money, applying it to declining balance sheets. While that may sound reasonable, though, it’s not the whole story. The IRS is also demanding tax payments on 100 percent of dividends collected, whether they’re paid in cash or stock.

Source: The Wall Street Journal, John Jannarone (02/06/2009)
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