7891. What asset tests apply in determining whether a trust qualifies as a REIT?Alexis Longrcline202014-09-15T13:47:00Z2014-09-15T13:47:00Z12231274Summit Business Media1021495147891. What asset tests apply in determining whether a trust qualifies as a REIT?A REIT must satisfy several asset-based tests in order to qualify for pass-through tax treatment as a REIT. The following asset-based tests are applied at the close of each quarter of the taxable year of a REIT’s existence: 1.The 75 Percent Test: At least 75 percent of a REIT’s assets must consist of cash, cash items (including receivables), real estate assets and government securities.IRC Sec. 856(c)(4)(A), Treas. Reg. §1.856-2. 2.The 25 Percent Test: No more than 25 percent of a REIT’s assets may consist of securities (other than securities permitted under the 75 percent test).IRC Sec. 856(c)(4)(B)(i).3.The Taxable REIT Subsidiary Test: No more than 25 percent of the total value of a REIT’s assets may consist of securities of one or more taxable REIT subsidiaries.IRC Sec. 856(c)(4)(B)(ii).The purpose of these asset-based tests is to ensure that REITs continue to concentrate their investments in the real estate assets for which they were created. See Q 7892 to Q 7894 for a detailed discussion of the types of assets that qualify as permissible REIT assets for purposes of the 75 percent asset test. See Q 7901 for information on taxable REIT subsidiaries.