Liquidating distribution return of capital dzoic dating software review

Talk with a financial planner, tax advisor, and/or do your own research before making such a decision. This is tricky, at times, because the after-tax yields depend on the breakdown of the REIT distributions.

Even so, it's important to keep in mind that taxes reduce the yield on REITs.

While REITs, on average, tend to make distributions that predominantly receive ordinary income treatment, certain years may witness distributions with return of capital or capital gains making up an uncharacteristically large portion of the distributions. Because REIT distributions (1) tend to be taxed predominantly at ordinary income levels and because (2) REITs must distribute the vast majority of their taxable income to maintain their REIT status, REITs are quite inefficient from a tax standpoint.

REITs can become even tax inefficient at the state level.

This distribution reduces your cost basis in the stock to .50.

Investors can minimize this risk by holding other investments that have less interest rate exposure.

There are many ways to diversify the interest rate risk posed by REITs; cash, SHY, individual dividend-paying stocks, or an index fund such as VTI are merely a few options.

In certain states, REIT unit holders must pay additional state taxes such as a sales and use tax, depending on the REIT's activities.

For middle to high-bracket taxpayers who are not near retirement, holding REITs in a taxable account isn't a wise tax move. For many investors, investing in REITs in a Roth IRA is akin to tax nirvana. This lets the investor avoid the ordinary income tax treatment of distributions (and it lets him avoid the capital gains tax on capital gains distributions and on the sale of the REIT).

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