Acquisitions by Real Estate Investment Trusts as a Strategy for Minimisation of Investor Tax Liability

Massey University Working Paper Series No. 99.15

20 Pages Posted: 13 Jun 2001

See all articles by Jennifer Li

Jennifer Li

Brock University

Fayez A. Elayan

Brock University-Goodman School of Business

Thomas O. Meyer

Southeastern Louisiana University - Department of Marketing and Finance

Multiple version iconThere are 2 versions of this paper

Date Written: January 1999

Abstract

A key requirement for Real Estate Investment Trusts (REITs) to maintain their corporate tax-exempt status is that ninety-five percent of income must be distributed as dividends. Receipt of this income imposes a personal tax burden on shareholders. A central tenet of this research is that REIT management is motivated to reduce investors' personal taxes. This may involve reduction of before-tax income through acquisitions. Market reaction to REIT merger announcements is found to be positive and significant. The evidence developed is more consistent with abnormal returns being related to a tax advantage from acquisitions rather than gaining economies of scale.

Keywords: REITs, Acquisitions, Tax Minimisation

JEL Classification: G34, G35

Suggested Citation

Li, Jingyu and Elayan, Fayez A. and Meyer, Thomas Otto, Acquisitions by Real Estate Investment Trusts as a Strategy for Minimisation of Investor Tax Liability (January 1999). Massey University Working Paper Series No. 99.15, Available at SSRN: https://ssrn.com/abstract=271628 or http://dx.doi.org/10.2139/ssrn.271628

Jingyu Li (Contact Author)

Brock University ( email )

500 Glenridge Avenue
St. Catherines, Ontario L2S 3A1
Canada

Fayez A. Elayan

Brock University-Goodman School of Business ( email )

1812 Sir Issac Brock Way
St. Catharines, Ontario L2S 3A1
Canada
905-688-5550 (Phone)
905-688-9779 (Fax)

HOME PAGE: http://www.brocku.ca

Thomas Otto Meyer

Southeastern Louisiana University - Department of Marketing and Finance ( email )

SLU 10844
Hammond, LA 70402
United States
985-549-3103 (Phone)
985-549-5010 (Fax)

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