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In addition, if section 856(c)(7)(A) applies

For more details, see the Instructions for

Line 3d–Other credits

to a REIT for any tax year, the REIT must

Form 4626.

Include any allowable credits not reported

pay a tax which is the greater of:

above, such as the Credit for Prior Year

•

Line 2h–Income Tax

$50,000 or

•

Minimum Tax – Corporations (Form 8827).

the amount determined (as prescribed by

Deferred tax under section 1291. If the

Attach a statement that identifies the type

regulations to be promulgated by the

REIT was a shareholder in a passive foreign

and amount for each credit. Attach the

Secretary) by multiplying the net income

investment company (PFIC) and received

applicable credit form to the return.

generated by the assets described in the

an excess distribution or disposed of its

specified schedule for the quarter in which

investment in the PFIC during the year, it

Line 5–Personal Holding

the failure occurred by 35% (the highest

must include the increase in taxes due

Company Tax

corporate tax rate).

under section 1291(c)(2) in the total for line

A REIT is taxed as a personal holding

2h. On the dotted line to the left of line 2h,

Note. There is no tax imposed and you are

company under section 542 if:

enter “Section 1291” and the amount.

not required to attach a schedule of assets

•

At least 60% of its adjusted ordinary gross

to Form 1120-REIT for the de minimus relief

Do not include on line 2h any interest

income for the tax year is personal holding

provision under section 856(c)(7)(B).

due under section 1291(c)(3). Instead, show

company income, and

the amount of interest owed in the bottom

•

Under section 856(c)(7)(B), a REIT may

At any time during the last half of the tax

margin of page 1, Form 1120-REIT, and

avoid loss of its REIT status as a result of

year more than 50% in value of its

enter “Section 1291 interest.” For details,

certain failures to meet the asset test

outstanding stock is owned, directly or

see Form 8621.

requirements of section 856(c)(4)(B)(iii) if:

indirectly, by five or fewer individuals.

•

Additional tax under section 197(f). A

Following its identification of the failure,

See Schedule PH (Form 1120), U.S.

corporation that elects to pay tax on the gain

the REIT disposes of assets within 6 months

Personal Holding Company (PHC) Tax, for

from the sale of an intangible under the

after the last day of the quarter in which the

definitions and details on how to figure the

related person exception to the

REIT’s identification of the failure occurred

tax.

anti-churning rules should include any

(or such time period prescribed by the

additional tax due under section 197(f)(9)(B)

Secretary and in the manner prescribed by

Line 6–Other Taxes

in the total for line 2h. On the dotted line

the Secretary, or

•

Include any of the following taxes and

next to line 2h, enter “Section 197” and the

The requirements of the asset test of

interest in the total on line 7. Check the

amount. For more information, see Pub.

section 856(c)(4) are otherwise met within

appropriate box(es) for the form, if any, used

535.

the specified time period.

to compute the total.

Line 3a–Foreign Tax Credit

Certain REIT qualification failures of

Recapture of investment credit. If the

sections 856 – 859 (other than sections

To find out when a REIT can claim the

REIT disposed of investment credit property

856(c)(2, 856(c)(3) and 856(c)(4)). Under

foreign tax credit for payment of income tax

or changed its use before the end of its

section 856(g)(5), a REIT that fails to meet

to a foreign country or U.S. possession, see

useful life or recovery period, it may owe a

the REIT qualification requirements under

Form 1118, Foreign Tax

tax. See Form 4255, Recapture of

sections 856 – 859, except for section

Credit – Corporations.

Investment Credit, for details.

856(c)(2), 856(c)(3),and 856(c)4), may avoid

Recapture of low-income housing credit.

Line 3b–Qualifed Electric

loss of its REIT status if the failure is due to

If the REIT disposed of property (or there

reasonable cause and not due to willful

Vehicle Credit

was a reduction in the qualified basis of the

neglect. In addition, the REIT must pay (as

property) for which it took the low-income

Use Form 8834, Qualified Electric Vehicle

prescribed by regulations and in the same

housing credit, it may owe a tax. See Form

Credit, to claim a credit for the purchase of a

manner as tax) a penalty of $50,000 for

8611, Recapture of Low-Income Housing

new qualified electric vehicle.

each failure to satisfy a provision of sections

Credit.

856 – 859. See section 856(g)(5).

Line 3c–General Business

Interest due under the look-back

Credit

Line 2g–Alternative Minimum

methods. If the REIT used the look-back

method for certain long-term contracts, see

Enter the REIT’s total general business

Tax (AMT)

Form 8697, Interest Computation Under the

credit.

Unless the REIT is treated as a small

Look-Back Method for Completed

If the REIT is filing Form 8844,

corporation exempt from the AMT, it may

Long-Term Contracts, for information on

Empowerment Zone and Renewal

owe the AMT if it has any of the adjustments

figuring the interest the REIT may have to

Community Employment Credit, check the

and tax preference items listed on Form

include.

“Form(s)” box, enter the form number in the

4626, Alternative Minimum

space provided, and include the allowable

The REIT may also have to include

Tax – Corporations. The REIT must file Form

interest due under the look-back method for

credit on line 3c.

4626 if its taxable income (loss) combined

property depreciated under the income

If the REIT is required to file Form 3800,

with these adjustments and tax preference

forecast method. See Form 8866, Interest

General Business Credit, check the “Form

items is more than the smaller of:

•

Computation Under the Look-Back Method

3800” box and include the allowable credit

$40,000 or

•

for Property Depreciated Under the Income

on line 3c. If the REIT is not required to file

The REIT’s allowable exemption amount

Forecast Method.

Form 3800, check the “Form(s)” box, enter

(from Form 4626).

the form number in the space provided, and

Other. Additional taxes and interest

For this purpose, taxable income does

include on line 3c the allowable credit from

amounts can be included in the total entered

not include the NOL deduction. See Form

the applicable form listed below.

on line 7. Check the box for “Other” if the

4626 for details.

•

Investment Credit (Form 3468).

REIT includes any of the taxes and interest

•

Exemption for small corporations. A

Work Opportunity Credit (Form 5884).

discussed below. See How to report , for the

•

Welfare-to-Work Credit (Form 8861).

REIT is treated as a small corporation

Line 7 instructions for details on reporting

•

exempt from the AMT for its tax year

Low-Income Housing Credit (Form 8586).

these amounts on an attached schedule.

•

Disabled Access Credit (Form 8826).

beginning in 2007 if that year is the REIT’s

1. Recapture of qualified electric vehicle

•

first tax year in existence (regardless of its

Indian Employment Credit (Form 8845).

(QEV) credit. The REIT must recapture part

•

Credit for Small Employer Pension Plan

gross receipts) or:

of the QEV credit it claimed in a prior year if,

Startup Costs (Form 8881).

1. It was treated as a small corporation

within 3 years of the date the vehicle was

•

Credit for Employer-Provided Child Care

exempt from the AMT for all prior tax years

placed in service, it ceases to qualify for the

Facilities and Services (Form 8882).

beginning after 1997 and

credit. See Regulations section 1.30-1 for

•

General credits from an electing large

2. Its average annual gross receipts for

details on how to figure the recapture.

partnership (Schedule K-1 (Form 1065-B))

the 3-year tax period (or portion thereof

2. Recapture of Indian employment

•

Alternative Motor Vehicle Credit (Form

during which the REIT was in existence)

credit. Generally, if an employer terminates

8910).

ending before its tax year beginning in 2007

the employment of a qualified employee less

did not exceed $7.5 million ($5 million if the

Also, see Form 3800 for a complete

than 1 year after the date of initial

REIT had only 1 prior tax year).

listing of general business credits.

employment, any Indian employment credit

-12-

Instructions For Form 1120-Reit - Internal Revenue Service Of Department Of The Treasury - 2007 Page 12

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