Ace the Arizona Real Estate Exam 2025 – Unlock Your Property Dreams!

A Real Estate Investment Trust (REIT) must earn at least 75% of its income from real estate-related sources in order to maintain its status and avoid paying income tax at the corporate level. This requirement is part of the Internal Revenue Code, which outlines specific regulations governing REITs to encourage investment in real estate. By meeting this threshold, a REIT qualifies for tax benefits that allow it to pass on the majority of its earnings to shareholders as dividends, which are then taxed at the individual level rather than at the corporate level.

This structure incentivizes investment in real estate markets, offering a way for individuals to invest in real estate portfolios without directly owning physical properties. The 75% rule is significant as it helps maintain the REIT's primary focus on real estate as opposed to other types of investments, thus ensuring that its income is primarily generated from rental income, mortgage financing, or property sales.