How to Model a REIT and MLPs

I have a lot of income securities. Many of these should be taxed as ordinary income (REITs), some are return on capital (MLPs), and others are regular qualified income. How best to model this?

You would want to create custom asset classes for these. Let's look at modeling a REIT as an example. Say that you project 80% of the future returns will be from the dividend, which is taxable at ordinary income tax rates. First, select your username at the top right and go to 'Account'. Then go to the 'Asset Class Assumptions' section. Look at the screenshot below. In this example I assigned an 8% projected annual return to REITs. I also set the '% Of Return Due To Interest' to 80% since 80% of the return will be due to dividends that are taxed at income tax rates. We don't want to use '% Of Return Due To Dividends' for REITs because the program assumes dividends are taxed at qualified dividend tax rates.


You must then assign this asset class to the investment holding that is a REIT. You can see how to change an assigned asset class here.




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