Real Estate Investment Trusts: An Analysis of the Investment Vehicle and Income Tax Implications

JASON MERETSKY

ABSTRACT

As the market trend in real estate finance is shifting away from private transactions and towards public markets, real estate investment trusts (REITs) offer an ideal vehicle through which real estate can be securitized and equitized. REITs represent a highly regarded financial instrument for future ownership of commercial real estate in Canada. With the recent decline in real estate values and the lack of liquidity in the marketplace, investors have been frustrated by their inability to exit syndicated real estate investments. The REIT vehicle affords the investor liquidity and as well enables large and small investors to access the real estate market. The topic of REITs raises interesting legal issues in the area of tax law. This paper examines the nature and characteristics of the REIT investment; the benefits and risks associated with this type of investment; provides a detailed analysis of the current Canadian tax rules applicable to REITs and considers proposed legal reform.

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Citation: (1995) 53(1) U.T. Fac. L. Rev. 95.
Copyright © 1995. University of Toronto Faculty of Law Review.
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