REITS are popular ways to make money and produce high yields.
Of course, nothing’s better than shielding tax money from the Federal government, right? (If anyone from the gov is reading this, we're only kidding.) REITs generate returns from real estate assets and typically never owe taxes. Earnings are just passed onto investors in the form of dividends. Following the 2017 tax cuts, pass-through income got an even bigger tax break.
But that doesn’t stop people from wanting to shield even more money from Uncle Sam.
Enter the Captive REIT Trust.
What makes a Captive REIT Trust interesting is its structure. Basically, at the beginning of its formation, all of the properties in the REIT are taken from and then leased back to a corporation that doesn’t specialize in real estate management. This new Trust doesn’t even bother taking care of the properties. The corporation can then rent its own property, and deduct those costs on their income taxes.
In the first decade of the millennium, states took aim at companies that had been engaging in this practice. Regulators and politicians said that it was a way for companies to avoid income tax payments. They’re not wrong. But they probably all invest in real estates, so nothing will change.
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Finance: What is a 12b1 fee?91 Views
Finance a la shmoop.. what is a 12b1 fee what a clever name like why don't they give
normal names to these things like fund admin expense fee or just name it Bob [Document with Bob written at the top]
but they don't so you just have to memorize what they mean anyway
mutual funds had to bear enormous communications related expenses in the
pre computer-internet everyone has an email address era delivering gobs of [Mail man arrives at house]
paperwork snail mail to its customers it was enough expense to them that well
they frankly just hated doing it and did more or less anything they could to [Man licking envelopes]
avoid having to deliver you know dead trees so along came the investment
advisors act of 1940 which basically recognized that mutual funds did in fact
have expenses that were more than bonuses to the senior partners the 12b1
fee system allowed a fairly set and standard amount of fees to be charged to
customers so that a given mutual fund could recoup the money it had to spend [Fund statement document appears]
mailing annual reports and performance data and tax information and all kinds
of other things to its customers the 12b1 system was basically a
pass through set of charges such that the customer paid for her own paperwork
incentivizing mutual funds to actually do a good job communicating with their [Woman receiving a trophy on stage]
constituency and it let the little guy mutual funds compete against the big guy
mutual funds who already had all that infrastructure of course the biggest
winner out of this entire deal yeah it was the trees especially the ones who [Tree given a first prize award]
got in early on Google
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