C-Corporations pay income taxes on earnings; REITS do not so long as they return 90% of their profits in dividends.

Question

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REITs (Real Estate Investment Trusts) are not required to pay federal income taxes on their earnings as long as they distribute at least 90% of their taxable income to shareholders in the form of dividends. C-Corporations, on the other hand, are subject to corporate income tax on their earnings before they can distribute dividends to shareholders, which are then potentially taxed again at the individual level.

C-Corporations Pay Income Taxes on Earnings; REITS Do Not So