Fixed UITs/ REITs/ BDCs

What is the main objective of investing in Equity REITs? a. income and growth b. capital appreciation and stability c. tax deductions and tax credits d. speculation and aggressive gains

a. income and growth.

Which statements are TRUE regarding Real Estate Investment Trusts? I. Mortgage REITs can only invest in long term mortgages, but not short term loans II. to be regulated under subchapter M, 90% of Net Investment Income must be distributed to shareholders III. equity REIT income is derived from the difference between net rental income and interest paid on loans IV. REIT losses can be passed through to shareholders under the "conduit" rules a. I and II b. II and III c. II, III, IV d. I, II, III, IV

b. II and III.

REITs can distribute all of the following to their shareholders EXCEPT: a. capital gains b. capital losses c. cash dividends d. stock dividends

b. capital losses.

Which sources of REIT income are counted towards the 75% test required by Subchapter M? I. Net rental income II. Interest income from mortgages III. Real estate tax refunds IV. Dividend income a. I only b. II and III only c. I, II, III d. I, II, III, IV

c. I, II, III.

Which of the following statements are TRUE about REITs? I. to qualify under Subchapter M, at least 75% of Net Investment Income must be distributed to shareholders II. to qualify under Subchapter M, at least 90% of Net Investment Income must be distributed to shareholders III. to qualify under Subchapter M, at least 75% of the assets must be in real estate IV. to qualify under Subchapter M, at least 90% of assets must be in real estate a. I and III b. I and IV c. II and III d. II and IV

c. II and III.

Which statements are TRUE about Equity REITs? I. equity REIT share prices and overall stock prices are positively correlated II. equity REIT share prices and overall stock prices are negatively correlated III. equity REIT dividends paid to shareholders are taxed at regular income tax rates IV. equity REIT dividends paid to shareholders are taxed at a preferential 15% or 20% maximum rate a. I and III b. I and IV c. II and III d. II and IV

c. II and III.

Which statements are TRUE when comparing VC funds to Business Development Companies? I. VC funds are available to the general public II. VC funds are only available to wealthy accredited investors III. BDCs are available to the general public IV. BDCs are only available to wealth accredited investors a. I and III b. I and IV c. II and III d. II and IV

c. II and III.

Real Estate Investment Trusts are not suitable as tax advantaged investments because they: a. have too many corporate characteristics b. do not qualify for conduit tax treatment under Subchapter M c. are not allowed to pass operating losses to shareholders d. are not allowed to pass capital gains to shareholders

c. are not allowed to pass operating losses to shareholders.

REITs can invest in all of the following EXCEPT: a. mortgages b. real estate c. limited partnerships d. other REITs

c. limited partnerships.

A client of yours has heard about private equity investing from some wealthy friends and asks you, the registered representative about it. This customer is age 51 and earns $160,000 per year. He is willing to assume a moderate level of risk in pursuit of higher returns. This customer has a liquid net worth of $450,000 and has a diversified equity and bond portfolio. You should tell the customer that the best way to make a private equity investment is to invest in a(n): a. Hedge fund b. VC fund c. REIT d. BDC

d. BDC.