A real estate investment trust is a corporation that owns, operates, or finances income-producing real estate and elects, under IRC §856, “Definition of real estate investment trust”, to be taxed as a pass-through entity rather than as a regular C-corp. The election comes with strict qualifying conditions: roughly 75% of assets in real estate, cash, or Treasuries; 75% of income from rents, mortgage interest, or property sales; and most importantly, mandatory distribution of at least 90% of taxable income to shareholders each year. Meet those, and the REIT pays no corporate-level tax; the investor receives the dividends and pays at ordinary rates (with a partial offset from the IRC §199A qualified business income deduction).
REITs come in two structural flavors — equity REITs that own physical properties, and mortgage REITs that hold real-estate debt — and trade either publicly on exchanges or privately. The 90% distribution requirement makes them high-yield, low-capital-growth instruments: most of the total return comes out as ordinary-income dividends rather than appreciation. That has direct asset-location consequences (REITs belong in tax-deferred accounts, not taxable accounts), which along with REIT analysis, sectors, and the detailed tax treatment is covered in section “REITs”.