How are REITs Different from Limited Partnerships?
REITs are not partnerships, although, as is the case with other corporations, REITs use partnerships to engage in joint ventures. There are important organizational and operational differences between REITs and limited partnerships.One of the major differences between REITs and limited partnerships is how annual tax information is reported to investors. Each year, an investor in a REIT receives a traditional IRS Form 1099 from the REIT, indicating the amount and type of income received during the prior tax year. However, an investor in a partnership receives a more complicated IRS Schedule K-1 which must be furnished to taxpayers later in the year than a 1099. Also, a REIT investor must file fewer state tax returns than required by a partnership investment.The corporate governance features of a REIT are believed to be far superior to those of a partnership.Other important differences between REITs and limited partnerships are shown in the chart below.
REITs are not partnerships, although REITs use partnerships to engage in joint ventures. There are important organizational and operational differences between REITs and limited partnerships, especially in tax reporting. An investor in a REIT receives a traditional IRS Form 1099 from the REIT, indicating the amount and type of income received during the year. An investor in a partnership receives a more complicated IRS Schedule K-1.
