Real estate investment trusts (REITs) are creatures of the tax code, having been added to the Internal Revenue Code in 1960 (See IRC Sections 856 to 860, set out in Appendix 27A). Under the tax code, a REIT is given special conduit tax treatment (i.e., the income is passed through to the investors without the imposition of corporate tax), in much the same manner as a mutual fund. Its purpose is to permit individual investors freer access to real estate invest- ments which had previously been limited to those with greater financial resources. Additionally, REITs were created to provide fresh sources of capital to finance economically viable real estate projects which yield a steady income stream.
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