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.
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Finance: What is an Omnibus Account?111 Views
Finance a la shmoop. What is an omnibus account?
Herbi just eats leaves, Carni just eats meat, Omni well it's pretty much [Different buses eating stuff]
everything. So yeah an omnibus as in bus-i-ness or business account services is
a bunch of investors who've all pitched in or wired in their capital to become a
percentage owner of that omnibus account. Why would people do this? Scale, volume,
discounts size, heft. When you have a lot of money in an account basic things like [Lots of money in a suitcase]
audit and legal fees and brokerage services and the fees with them and
other one-off costs get amortized across a lot of people in dollars invested [Definition of Amortization]
rather than being laid entirely or solely on one investor where they can
then be a meaningful percentage of the total and with an omnibus account you [Bus labelled Omni eating leaves]
also get anonymity since it's a broker dealing in street name with the account [Anonymity stamp]
interfacing with the street well investors can live if they want in the
lovely dark shadows of Erewhon. Omnibus accounts are sort of like your own [Full moon in a dark sky]
custom mutual fund without the whole nav, net asset value stamp requirements at
the end of each trading day and all the other regulations and filings and legal
crap needed for publicly offered securities it's like having a fully [Book labelled my very own omnibus account]
gassed up bus with a working GPS and Waze system you can drive anywhere you [Guy sat on a bus]
want on the investing landscape you don't have to tell anyone outside of
your own partners about it, and it works great as long as you all want to eat the
same kind of financial cooking.. [Omni asking Carni if he is going to finish his food]
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