NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3. INCOME TAXES A schedule of per share distributions we paid and reported to our shareholders is set forth in the following tables:  The following table reconciles net income to REIT taxable income for the years ended December 31, 2004, 2003 and 2002: We have maintained and intend to maintain our election as a REIT under the Internal Revenue Code of 1986, as amended.  To qualify as a REIT, we must meet a number of organizational and operational requirements, including a requirement  that we currently distribute at least 90% of our taxable income to our shareholders. As a REIT, we generally will not be  subject to federal income tax on distributed taxable income. No provision for federal income taxes from REIT operations  has been included in the accompanying consolidated financial statements as we made distributions in excess of our  taxable income in each of the three years ended December 31, 2004. If we fail to qualify as a REIT in any taxable year,  then we will be subject to federal income taxes at regular corporate rates, including any applicable alternative minimum  tax. Taxable income from non-REIT activities managed through taxable REIT subsidiaries is subject to applicable federal,  state and local income taxes. The tax attributes of our taxable REIT subsidiaries are immaterial to the accompanying  consolidated financial statements. (1) The dividend declared for the fourth quarter of 2004, with a record date of January 3, 2005, will be taxable in 2005. year ended december 31,  in thousands 2004 2003  2002  Net income  $ 41,341  $ 29,430  $ 74,612 Net (income) loss of taxable REIT subsidiaries included above  2,504 (496) 4,034 Net income from REIT operations  43,845 28,934 78,646 Book depreciation and amortization, including discontinued operations  108,880 108,027 105,043 Tax depreciation and amortization  (100,803) (94,660) (89,734) Book/tax difference on gains/losses from capital transactions  29,627 999 (1,642) Other book/tax differences, net  (3,697) (3,454) (3,919) REIT taxable income  77,852 39,846 88,394 Dividends paid deduction  (79,038) (100,104)  (103,441) Dividends paid (in excess) of taxable income  $  (1,186)  $ (60,258)  $ (15,047) year ended december 31, 2004  $^{(1)}$  2003 2002 COMMON SHARE DISTRIBUTIONS Ordinary income  $ 0.97 $  2.15 $  1.85 Return of capital  - 0.34 - 20% long-term capital gain - - 0.46 Pre May 6, 2003 long-term capital gain - 0.01 - Post May 5, 2003 long-term capital gain 0.72 0.03 - 25% Sec. 1250 capital gain 0.22 0.01 0.23 Total $ 1.91 $  2.54 $  2.54 Percentage of distributions representing tax preference items 9.081% 8.304% 9.491%  78 camden transforming