2016 Form 1120-REIT - irs-2025

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Real Estate Investment Trusts (REITs) A REIT generally must distribute (via dividends) at least 90% of its taxable income each year[2] and, unlike most C corporations, receives an income tax deduction for the dividends it pays,[3] thereby achieving modified pass-through status and avoiding double taxation.
REITs, which are structured as a corporation, are not typically taxed at the entity level, which allows investors to avoid double taxation on dividends. REITs must invest in real assets and derive the majority of their income from real estate activities, including rents from properties and interest from mortgages.
Taxation of REITs An entity that qualifies as a real estate investment trust (REIT) ( 2326) is subject to the regular corporate income tax rate on its taxable income (21 percent) ( Code Sec. 857(b)).
Qualified REIT dividends from a fund are reported in Box 5, Section 199A dividends, of your Form 1099‑DIV.
If you own shares in a REIT, you should receive a copy of IRS Form 1099-DIV each year. This tells you how much you received in dividends and what kind of dividends they were: ordinary income dividends are reported in Box 1. qualified dividends in Box 1b.
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REITs have many built-in tax efficiencies for investors. For example, they do not pay corporate income taxes, return of capital distributions are tax-deferred and REIT investors can deduct 20% of their dividends earned for the qualified business income deduction.
Overview. A REIT is taxable as a regular corporation, but is entitled to the dividends paid deduction. Therefore, a REIT does not pay federal income tax on net taxable income distributed as deductible dividends to shareholders. Net income from foreclosure property is taxed at 35 percent.
Use Form 1120-REIT, U.S. Income Tax Return for Real Estate Investment Trusts, to report the income, gains, losses, deductions, credits, certain penalties; and to figure the income tax liability of a REIT.

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