OK! I believe this is the first time anybody has stated absolutely that "I have a Roth and in it I have REITs ... and ... I have never paid a penny in taxes on any of the distributions that I have received into that Roth."
I was tripping over a basic tenet of a ROTH, that it is funded with "after tax dollars." And we know that distributions from REITS are pre-tax dollars.
I have experienced the wrath of the IRS and know they can, sometimes, invoke their interpretations of how things should be done.
Sorry, but the tax information passed around on message boards is atrocious! You wrote, "...putting those aside, the Roth account must have been opened for minimum of 5 years and age of 59.5 years attained to withdraw tax free and without penalties."
I don't mean to be argumentative about it, but "putting those aside" clouds your post. Putting those aside or not you can always withdraw your original contribution without penalty without the account being open five years or reaching 59.5.
You answered your own question sonny. When you make the money, the government taxes it and after it is taxed, you can put it in a Roth if you are qualified to do so. That is precisely when the taxman gets his dough rae me. Now, once in the ROTH, all of your money grows tax free, including dividends, interest and return of capital. That's why you open a Roth whenever you can. The govt. gets it on the front end and you can make it back on the back end, if you are smart. CIM of course can go bankrupt and you get nothing, not even a tax write off. And in that case the govt. makes out again as you can't write off the loss if one occurs. So, it works both ways.
My confusion arose from the fact that, in a traditional IRA, dividends and interest are paid directly into the account. The sticking point, for me, is the fact that a reit typically does not pay interest or dividends - it distributes income.