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The Origins of REITs and How They Benefit Investors

The Origins of REITs and How They Benefit Investors

More investors have been using  the Real Estate Investment Trust (REIT) structure to facilitate investment in real estate. With origins dating back to the 1960s, REITS were created to allow average investors to invest in a managed portfolio of real estate assets. REITs have become more prominent since the early 1990s and have gained credibility as an investment vehicle due to the fact that they provide significant tax advantages. Under IRC Sec. 857(b), a REIT is allowed to take a deduction from its taxable income on any dividends paid to shareholders, creating essentially only one level of tax on the earnings. 

Due to the special tax treatment afforded them, REITs have specific and complicated compliance requirements. While compliance is the key to operating under a REIT structure, the recent popularity of the REITs has spread beyond the real estate industry and into other sectors such as cell towers, data centers, document storage, billboards, electrical transmission infrastructure, gas pipelines, telecommunications networks and gaming.


Why REITs was an article written about how REITs work and why investors are turning to them, including many of the key issues anyone considering a REIT structure needs to consider.

Kristen Lewis is the Director of Marketing for EisnerAmper LLP in Philadelphia Pennsylvania. She has written articles for CPA Practice Management Forum and the Pennsylvania Institute of Certified Public Accountants.

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