SIE Exam Question 349: Answer and Explanation

Question: 349

To avoid double taxation on dividends paid to shareholders, REITs must invest what portion of their total assets in real estate?

• A. At least 51%
• B. At least 75%
• C. At least 90%
• D. Substantially all

Correct Answer: B

Explanation:

B - REITs can avoid double taxation on profits passed through as dividends to shareholders by concentrating their investments in real estate. At least 75% of total assets must be in real estate, and at least 75% of gross income must be derived from real estate. Also, they must pass through at least 90% of their gains to shareholders.