Final answer:
To qualify as a REIT, a company must have at least 75% of its holdings in real estate assets and cash. REITs allow individual investors to earn income from commercial real estate and must comply with certain regulatory requirements, including asset composition and income distribution.
Step-by-step explanation:
To qualify as a REIT, or Real Estate Investment Trust, a company must have at least 75% of its holdings in the form of real estate assets and cash. REITs are designed to provide a way for individual investors to earn a share of the income produced through commercial real estate ownership without actually having to go out and buy, manage, or finance any properties themselves.
By focusing a significant portion of their investments in real estate, REITs benefit from certain tax considerations, but they must also adhere to certain regulatory requirements such as the minimum percentage of real estate assets and cash, along with the requirement to distribute at least 90% of taxable income to shareholders in the form of dividends.