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What are Reit Asset tests?

Asset tests are completed on a quarterly basis; 75 percent of the value of a REIT’s total assets must be represented by real estate assets, cash, cash items and government securities. Real estate assets specifically include real property, interests in mortgages on real property or real estate mortgage investment conduits.

How do REITs make money?

One way a REIT can generate earnings is by buying a wide selection of big real estate assets and charging rent to tenants on properties. Investors can buy units in publicly traded REITs, and receive profits generated by a REIT's holdings through taxable distributions. (More on that later.)

How do I qualify for a REIT?

To qualify as a REIT, an entity must derive at least 95% of its gross income from sources listed in Sec. 856 (c) (2) and at least 75% of its gross income from sources listed in Sec. 856 (c) (3). Rent from real property is a source listed under both Code sections.

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