Looking for a Sec Form Pf Templates? Download it for free!

allowed for a prior tax year because of

Built-in Gains Tax Worksheet

be used to reduce the REIT’s taxable

income.

wages paid or incurred to that employee

instructions

must be recaptured. For details, see Form

Line h. Credit carryforwards arising in tax

Complete the worksheet on this page to

8845 and section 45A.

years for which the REIT was a C

figure the built-in gains tax under

corporation must be used to reduce the tax

3. Recapture of new markets credit (see

Regulations section 1.337(d)-7 or

on net built-in gain for the tax year to the

Form 8874).

1.337(d)-6.

greatest extent possible before the credit

4. Recapture of employer-provided

Line a. Enter the amount that would be the

carryforwards can be used to reduce the tax

childcare facilities and services credit (see

taxable income of the REIT for the tax year

on the REIT’s taxable income.

Form 8882).

if only recognized built-in gain, recognized

Line i. The REIT’s tax on net recognized

5. Interest due on deferred tax

built-in loss, and recognized built-in gain

built-in gain is treated as a loss sustained by

attributable to (a) installment sales of certain

carryover were taken into account, reduced

the REIT during the same tax year. Deduct

timeshares and residential lots (section

by any portion of the REIT’s recognized

the tax attributable to:

453(l)(3)) and (b) certain nondealer

built-in gain from:

•

Ordinary gain as a deduction for taxes on

•

installment obligations (section 453A(c))

Net income from foreclosure property,

Form 1120-REIT, line 14.

•

Amounts subject to tax for failure to meet

6. Interest due on deferred gain (section

•

Short-term capital gain as a short-term

certain source-of-income requirements

1260(b)).

capital loss on Schedule D (Form 1120), line

under section 857(b)(5) computed in

accordance with Regulations section

•

Long-term capital gain as a long-term

Built-in Gains Tax

1.337(d)-6(c)(2),

capital loss on Schedule D (Form 1120), line

•

Net income from prohibited transactions

If, on or after January 2, 2002, property of a

under section 857(b)(6), and

C corporation becomes property of a REIT

•

How to Report

Amounts subject to tax under section

by either: (a) the qualification of the C

857(b)(7).

corporation as a REIT; or (b) the transfer of

If the REIT checked the “Other” box, attach

such property to a REIT, then the REIT will

a schedule showing the computation of each

Line b. Add the amounts shown on:

•

item included in the total for line 6, Schedule

be subject to the built-in gain tax under

Form 1120-REIT, page 1, line 20;

•

J. In addition, identify: (a) the applicable

section 1374 unless the C corporation elects

Form 1120-REIT, Part II, line 5; and

•

Code section; (b) the type of taxes or

deemed sale treatment on the transferred

Form 2438, line 11.

interest; and (c) enter the amount of tax or

property. If the C corporation does not make

Subtract from the total the amount on Form

interest.

this election, the REIT must pay tax on the

1120-REIT, line 21c. Enter the result on line

net recognized built-in gain during the

b of the Built-in Gains Tax Worksheet below.

Line 7–Total Tax

10-year period beginning on its first day as a

Line c. The REIT’s net unrealized built-in

Include any deferred tax on the termination

REIT or the day it acquired the property.

gain is the amount, if any, by which the fair

of a section 1294 election applicable to

Recognized built-in gains and losses

market value of the assets of the REIT at

shareholders in a qualified electing fund in

generally retain their character (for example,

the beginning of its first REIT year (or as of

the amount entered on line 7. See Form

ordinary income or capital gain) and are

the date the assets were acquired, for any

8621, Part V, and How to report, below.

treated the same as other gains or losses of

asset with a basis determined by reference

Subtract from the total for line 7 the

the REIT. The REIT’s tax on net recognized

to its basis (or the basis of any other

deferred tax on the REIT’s share of the

built-in gain is treated as a loss incurred by

property) in the hands of a C corporation)

undistributed earnings of a qualified electing

the REIT during the same tax year (see the

exceeds the aggregate adjusted basis of

fund (see Form 8621, Part II).

instructions for line i of the Built-in Gains

such assets at that time.

Tax Worksheet on page 12. See

How to report

Enter on line c the REIT’s net unrealized

Regulations section 1.337(d)-7 for details.

Attach a schedule showing the computation

built-in gain reduced by the net recognized

of each item included in, or subtracted from,

built-in gain for prior years. See sections

Different rules apply to elections to be a

the total for line 7. On the dotted line next to

1374(c)(2) and (d)(1).

REIT and transfers of property in a

line 7, enter the amount of tax or interest,

carryover basis transaction that occurred

Line d. If the amount on line b exceeds the

identify it as tax or interest, and specify the

prior to January 2, 2002. For REIT elections

amount on line a, the excess is treated as a

Code section that applies.

recognized built-in gain in the succeeding

and property transfers before this date, the

tax year.

C corporation is subject to deemed sale

treatment on the transferred property unless

Schedule K—Other

Line e. Enter the section 1374(b)(2)

the REIT elects section 1374 treatment. See

deduction. Generally, this is any net

Information

Regulations section 1.337(d)-6 for

operating loss carryforward or capital loss

information on how to make the election and

Be sure to answer all the lines that apply to

carryforward (to the extent of the net capital

figure the tax for REIT elections and

the REIT.

gain included in recognized built-in gain for

property transfers before this date. The

the tax year) arising in tax years for which

Question 3

REIT may also rely on Regulations section

the REIT was a C corporation. These loss

1.337(d)-5 for REIT elections and property

carryforwards must be used to reduce

Check the “Yes” box if the REIT is a

transfers that occurred before January 2,

recognized built-in gain for the tax year to

subsidiary in a parent-subsidiary controlled

2002.

the greatest extent possible before they can

group (defined below), even if the REIT is a

Built-in Gains Tax Worksheet (keep for your records)

Excess of recognized built-in gains over recognized built-in losses . . . . . . . . . . . . . . . . . . . . . . . a.

b. Taxable income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b.

Enter the net unrealized built-in gain reduced by any net recognized built-in gain for all prior years c.

d. Net recognized built-in gain (enter the smallest of lines a, b, or c) . . . . . . . . . . . . . . . . . . . . . . . . d.

Section 1374(b)(2) deduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e.

Subtract line e from line d. If zero, enter -0- here and on line i . . . . . . . . . . . . . . . . . . . . . . . . . . . f.

g. Enter 35% of line f . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . g.

h. Business credit and minimum tax credit carryforwards under section 1374(b)(3) from C corporation

years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . h.

Tax. Subtract line h from line g ( if zero or less, enter -0-). Enter here and include on line 6 of

Schedule J (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i.

-13-

Instructions For Form 1120-Reit - Internal Revenue Service Of Department Of The Treasury - 2007 Page 13

Related Articles

Related forms

Related Categories