- Recognizing taxes and fees
When someone buys or sells a REIT, they should be aware of a few taxes and fees. First, there’s the federal income tax. While buying a publicly traded REIT on an exchange, the buyer will also have to pay state and local taxes. Finally, other fees may be associated with buying or selling a REIT, such as broker commissions.
- Special Tax Considerations
REITs are subject to special tax considerations. To qualify for REIT status, a company must meet certain requirements regarding asset diversification, income distribution, and corporate structure. As a result, REITs are generally not subject to corporate income taxes. Instead, they are taxed as pass-through entities, meaning that the company’s shareholders are responsible for paying taxes on their dividends.
- Preventing Fraud
It is best to steer clear of anyone who is trying to sell REITs without being registered with the SEC. The buyer can verify whether publicly listed and non-traded REITs are registered using the SEC’s EDGAR system. EDGAR allows users to view a REIT’s quarterly, annual, and any offering prospectus. To learn more about using EDGAR, go to Research Public Companies.