beliavsky[at]aol.com wrote:

- quote -


The only REIT that I own in a non-IRA account is Plum Creek Timber (PCL)
and its distributions are taxed as long-term capital gains because all
the income is derived from the sale of timber or raw timblerland. I
think it ended up reported as qualifying dividends on my 1099 this year
and that's how I reported it.

Bob

beliavsky[at]aol.com wrote:
- quote -

B-
MIFP was onto this ages ago! Search the archive for "REITS in a variable
annuity" March 2004.

To me the WSJ, as they say, "buried the lead." REITs are pass-through
entities and I think the more interesting story is whether the "return
of capital" portion of REIT returns is larger than it used to be, and
how that relates to tax laws regarding depreciation, and acquisition
activities of the REITs. I don't know the numbers exactly but ROC seems
to have risen and it's not clear why.

-Tad

I thought that virtually all REIT returns come from non-qualified
dividends taxable as ordinary income, but an article in today's WSJ
indicates otherwise.

Study Pinpoints Potential Tax Benefits of REITs
Results Counter Perception That Payouts Don't Qualify For Lower
Dividend Rates
By JEFF D. OPDYKE
Staff Reporter of THE WALL STREET JOURNAL
April 19, 2005; Page D2

...

"Many investors assume that just because the income came from REITs, it
must be taxed at high rates. But a recent study says the conventional
wisdom that any one REIT will pay out high-tax dividends may be wrong.

New research from the National Association of Real Estate Investment
Trusts, or Nareit, found that of the distributions REITs paid to
investors in 2004, 37% represented income that is taxable at lower
rates. More than half of that was taxable as capital gains, which
qualifies for a 15% tax rate for most investors and as low as 10% for
others. The other portion largely came from nontaxable distributions --
typically return of capital, which, when the shares are sold, is taxed
as capital gains, currently a 15% rate for shares held for more than a
year."

...

"So how consistently do REITs provide dividends that are taxable at
lower rates? Nareit research going back to 1995 shows that the
percentage of annual REIT distributions taxed at
lower-than-ordinary-income rates has ranged from 17% to 37% last year."