Question

Which statements are TRUE about Equity REITs?

I. Equity REIT share prices and overall stock prices are positively correlated.
II. Equity REIT share prices and overall stock prices are negatively correlated.
III. Equity REIT dividends paid to shareholders are taxed at regular income tax rates.
IV. Equity REIT dividends paid to shareholders are taxed at a preferential 15% or 20% maximum rate.

A) I and III
B) I and IV
C) II and III
D) II and IV

Answer 1

Equity REIT share prices are generally positively correlated with overall stock prices, and dividends are usually taxed at regular income tax rates. Thus, the true statements about Equity REITs are I and III, making option A the correct answer.

Step-by-step explanation:

Equity REITs, or Real Estate Investment Trusts, are companies that own and often operate income-producing real estate. They are unique investment vehicles that allow individuals to invest in large-scale, income-generating real estate. Regarding the statements provided:

• Statement I: Equity REIT share prices are generally positively correlated with overall stock prices because they are a part of the stock market.
• Statement III: Equity REIT dividends paid to shareholders are typically taxed at regular income tax rates. However, under certain conditions (such as the shareholder meeting holding period requirements and the REIT qualifying as a real estate investment trust under the tax code), a portion of the dividends may qualify for capital gains treatment.

Therefore, the correct answer to which statements are true about Equity REITs is option A) I and III.