Wise Money by Daniel Wildermuth

Author:Daniel Wildermuth
Language: eng
Format: epub
Publisher: McGraw Hill LLC
Published: 2012-01-15T00:00:00+00:00

Investor Requirements

Regulations about who can and cannot purchase nontraded REITs can be an issue for some people. For example, states may impose investor requirements for minimum net worth and/or net worth and income. They may require investors to have, say, either a net worth of $250,000 or a net worth of $150,000 and an annual income of $75,000.

I have never been able to get a solid answer from a regulator or product sponsor on the exact reason that these requirements exist. The best guess I’ve heard was from a senior manager of a nontraded REIT firm. He believed that the requirements were a holdover from the mid-1980s when some investors held an overly large percentage of their portfolio in tax shelters structured as limited partnerships that imploded when the ridiculous tax benefits were eliminated as part of the 1986 tax reform. These “investments” only made sense as long as the tax law provided massive tax benefits to otherwise worthless investments. Although current-day REITs (traded and nontraded) offer a corporate tax benefit, the tax benefit to the investment is minor and the complete repeal of the benefit would have a limited effect on the investment. In addition, a major change to the tax benefits seems highly unlikely, as similar tax treatment by various governments is growing rapidly across the globe. The U.S. REIT tax structure has become the global standard.

Download

Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.