Every REIT must pass these four tests annually in order to retain its special tax status:
- “The REIT must distribute at least 90 percent of its annual taxable income, excluding capital gains, as dividends to its shareholders.
- The REIT must have at least 75 percent of its assets invested in real estate, mortgage loans, shares in other REITs, cash, or government securities.
- The REIT must derive at least 75 percent of its gross income from rents, mortgage interest, or gains from the sale of real property. At least 95 percent must come from these sources, together with dividends, interest and gains from securities sales.
- The REIT must have at least 100 shareholders and must have less than 50 percent of the outstanding shares concentrated in the hands of five or fewer shareholders.”