Captive Real Estate Investment Trust

REITS are popular ways to make money and produce high yields.

Of course, nothing’s better than shielding tax money from the Federal government, right? (If anyone from the gov is reading this, we're only kidding.) REITs generate returns from real estate assets and typically never owe taxes. Earnings are just passed onto investors in the form of dividends. Following the 2017 tax cuts, pass-through income got an even bigger tax break.

But that doesn’t stop people from wanting to shield even more money from Uncle Sam.

Enter the Captive REIT Trust.

What makes a Captive REIT Trust interesting is its structure. Basically, at the beginning of its formation, all of the properties in the REIT are taken from and then leased back to a corporation that doesn’t specialize in real estate management. This new Trust doesn’t even bother taking care of the properties. The corporation can then rent its own property, and deduct those costs on their income taxes.

In the first decade of the millennium, states took aim at companies that had been engaging in this practice. Regulators and politicians said that it was a way for companies to avoid income tax payments. They’re not wrong. But they probably all invest in real estates, so nothing will change.