Unit 11- Other Packaged Prodicts Flashcards
What type of organization is a REIT?
Trust
Are REITS redeemable with the trust?
Not…they are traded OTC, or on an exchange.
Is a REIT a direct participation program?
Not, it is not a DPP
What is the tax treatment of a REIT?
A REIT is taxed like a corporation, but it can avoid corporate tax if 1) 75% of its refine comes from real estate, and 2) it distributes 90% or more of its taxable income to shareholders.
Capital gains are taxed per usual.
Cash distributions are taxed at long-term gains rate.
Dividends are usually not qualified, and taxed an ordinary income levels.
Are REITS an investment company?
No
How at are limited partnerships issued?
Privately
-Only to accredited investors
- private placement memorandum
Publically
- All investors allowed
- Prospectus
Who sells a limited partnership, and what is the maximum fee they can change?
The syndicator. Can charge up to 10% of gross dollars of securities sold.
The three key documents for limited partnership?
Certificate of limited partnership.
Partnership agreement.
Subscription agreement.
When a limited partnership is dissolved, in what order are parties paid?
-Secured lenders
- Other creditors
-LPs: first for their claims to profits, then for their claim to return of capital.
- GP: first for fees and other claims not related to profits, then for their share of profits, and then for return of capital.
Tax treatment of the five types of real estate DPPs?
Raw Land
- No special tax treatment
New Construction
- Depreciation and expenses deduction, ONLY after the building is built.
Existing Property
- Deductions for mortgage interest and depreciation
Government Assisted Housing
- Tax credits and losses
Historic Rehabilitation
- Tax credits, deductions for expenses, and depreciation
What tax form do investors receive in a DPP?
Form 1065, with a Schedule K-1
Max commission a member firm can charge for a DPP?
10%
