What percentage of income must a REIT distribute to maintain its tax-exempt status?

To maintain its tax-exempt status, a Real Estate Investment Trust (REIT) must distribute at least 90% of its taxable income to its shareholders. This requirement is a fundamental aspect of the regulatory framework that governs REITs, established under the Internal Revenue Code. By distributing this high percentage of earnings, REITs can pass on their income directly to investors, who then pay taxes on those dividends rather than the REIT itself being taxed.

This distribution requirement encourages REITs to generate income through property holdings and provides investors with a steady stream of cash flow, which is one of the primary advantages of investing in REITs. Meeting the 90% distribution rule allows REITs to avoid corporate income tax, making them attractive investment vehicles in the real estate sector.

The incorrect options represent lower percentages, which do not align with the regulatory requirements for maintaining tax-exempt status. Therefore, 90% is indeed the correct percentage necessary for a REIT to qualify under the tax regulations.