A financial intermediary that invests its equity capital and debt in income-producing real estate and mortgages. Under legislation passed in 1961, reits were granted conduit tax treatment (the same as that permitted mutual funds) under which the part of earnings which flows through to shareholders in the form of dividends is exempt from federal income taxes at the trust (or corporate) level, provided several conditions are met. Among the conditions for qualification as a reit under the internal revenue code: at least 90% of otherwise taxable income must be distributed to shareholders in the calendar year earned, and specified percentages of both investments and gross income must be related to real estate.