REIT Taxation Example

Example of the week

Individual eREIT: eREIT Realty Income Corporation (O) paid out total common distributions of $3.1255 per share in 2024, of which $2.1760 (69.6%) and $0.9495 (30.4%) were classified as ordinary income dividend (taxable at ordinary income tax rates) and non-taxable distribution (return of capital (RoC) accounted for by lowering shareholders’ cost basis), respectively.

Real estate fund: The Vanguard Real Estate Index ETF (VNQ) made total cash distributions of $3.4335 per share in 2024, of which $2.6129 (76.1%) and $0.8206 (23.9%) were classified as ordinary income and RoC, respectively.

RoC: Distributions to shareholders in excess of taxable income are classified as RoC.