Which of the following statements regarding REITs is true?

The statement that income is distributed without corporate level taxation is accurate in the context of Real Estate Investment Trusts (REITs). REITs are specifically designed to pass along their income to shareholders in the form of dividends. To qualify as a REIT under the Internal Revenue Code, a company must distribute at least 90% of its taxable income to its shareholders. As a result, the income that is distributed to shareholders is taxed at the individual level rather than being subject to corporate income tax. This structure allows investors to benefit from a flow-through of income while avoiding the double taxation typically associated with corporate entities.

This distinguishing feature of REITs is significant because it influences investment decisions. By understanding that income is distributed without corporate level taxation, investors are more likely to appreciate the tax efficiency of REITs compared to other types of investments, including direct real estate ownership, where the owner may face different tax obligations depending on the structure of the ownership and the income generated.

The other statements, while related to the characteristics of REITs, do not accurately describe the taxation and distribution structure that makes REITs unique. For instance, income being taxed at the corporate level contradicts the operational premise of REITs. Similarly, the idea that