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  • Alex Pettee, CFA

The Taxman Cometh: REIT Tax Myths

  • With tax season (unfortunately) upon us, we address some of the most common questions and respond to some of the outright myths that we hear related to REITs and taxes.

  • Functionally, from a tax reporting perspective, an investor’s experience with REITs shouldn’t be any different than a typical dividend-paying stock. REITs report using the standard 1099-DIV, not a K-1.

  • REIT investors were big winners from recent tax reform. Due to the new 20% QBI deduction, REITs are now essentially on par with typical qualified-dividend-paying companies when held in taxable accounts.

  • REIT investors got another win last year. The IRS amended an initially ambiguous regulation to allow ETFs and other REIT-owning funds to pass-through the QBI deduction to their shareholders.

  • At the company level, REITs are able to retain significantly more capital than is commonly believed, which has been a primary source of their under-appreciated historical record of strong growth.

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