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To: Paul Senior who wrote (9392)	12/22/1999 4:18:00 PM
From: Freedom Fighter	Read Replies (1) \| Respond to of 78495

Paul, Thanks for the input. I'm going to buy a book on the subject. My intuition on the subject was you got the dividend and it was taxable. The fact that a portion of the dividend is usually cash from operations other than earnings (depreciation or other) combined with my vague recollection of special tax circumstances for REITs (plus input from others) made me think that perhaps the non earnings portion is not taxable and the earnings portion is. I need to clarify all this. Wayne

To: Paul Senior who wrote (9392)	12/23/1999 9:05:00 AM
From: James Clarke	Read Replies (1) \| Respond to of 78495

<<What I am trying to say is that if someone invests in REITs and thinks they are going to get more cash back than what is stated by the dividend, that is not correct-- at least in my experience. There's no "extra". But some of that cash you get is usually (depending on the specific REIT) not taxable.>> I'll second that. To make it perfectly clear, further understand that the entire dividend is taxable, but a portion of it is taxable as capital gains (not current income) when you sell the stock. i.e. you would reduce your basis by that amount. Example. You Buy REIT ABC for $20 and they pay a $2 dividend, 50 cents of which is a return of capital. You would be taxed on $1.50 of current income. Then you would reduce your basis by 50 cents to $19.50 and pay tax on that 50 cents when you sell the stock at the capital gains rate.