to the definition of NAREIT (the National association
of REITs), a REIT is a company that owns, and in
most cases, manages income-producing real estate
such as apartments, shopping centers, office buildings,
hotels and warehouses. Some of them also engage
in real estate finance. Most shares of REITs are
freely traded on major stock markets.
To qualify as a REIT, a company should pay dividends
worth of at least 90 percent of its taxable profits
to its shareholders annually. A REIT is allowed
to deduct the dividends from its taxable profits,
so that most REITs are exempted from corporate taxes
by paying dividends of all taxable profits to shareholders.
Shareholders pay taxes on capital gains or dividends.
However, unlike joint ventures, a REIT cannot pass
over any tax losses to its investors.