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subsidiary member of one group and the

file Form 5472. Generally, a 25%

The part of business gifts over $25.

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parent corporation of another.

foreign-owned corporation that had a

Expenses of an individual over $2,000,

reportable transaction with a foreign or

which are allocable to conventions on cruise

Note. If the REIT is an “excluded member”

domestic related party during the tax year

ships.

of a controlled group (see section

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must file Form 5472.

Employee achievement awards over

1563(b)(2)), it is still considered a member

$400.

of a controlled group for this purpose.

See Form 5472 for filing instructions and

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The cost of entertainment tickets over

penalties for failure to file.

Parent-subsidiary controlled group. The

face value (also subject to 50% limit under

term “parent-subsidiary controlled group”

Item 8

section 274(n)).

means one or more chains of corporations

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The cost of skyboxes over the face value

connected through stock ownership (section

Tax-exempt interest. Show any

of nonluxury box seat tickets.

1563(a)(1)). Both of the following

tax-exempt interest received or accrued.

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The part of luxury water travel not

requirements must be met:

Include any exempt-interest dividends

deductible under section 274(m).

received as a shareholder in a mutual fund

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1. At least 80% of the total combined

Expenses for travel as a form of

or other RIC.

voting power of all classes of voting stock

education.

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entitled to vote or at least 80% of the total

Other nondeductible travel and

Item 9

value of all classes of stock of each

entertainment expenses.

Enter the amount of the net operating loss

corporation in the group (except the parent)

For more information, see Pub. 542,

(NOL) carryover to the tax year from prior

must be owned by one or more of the other

Corporations.

years, even if some of the loss is used to

corporations in the group and

Line 7. Tax-exempt interest. Include as

offset income on this return. The amount to

2. The common parent must own at

interest any exempt-interest dividends

enter is the total of all NOLs generated in

least 80% of the total combined voting

received by the REIT as a shareholder in a

prior years but not used to offset income in a

power of all classes of stock entitled to vote

mutual fund or other RIC.

tax year prior to 2007. Do not reduce the

or at least 80% of the total value of all

amount by any NOL deduction reported on

classes of stock of one or more of the other

Privacy Act and Paperwork Reduction

line 21a.

corporations in the group. Stock owned

Act Notice. We ask for the information on

directly by other members of the group is

this form to carry out the Internal Revenue

not counted when computing the voting

laws of the United States. You are required

Schedule L–Balance

power or value.

to give us the information. We need it to

Sheets per Books

ensure that you are complying with these

See section 1563(d)(1) for the definition

laws and to allow us to figure and collect the

of “stock” for purposes of determining stock

The balance sheets should agree with the

right amount of tax. Section 6109 requires

ownership above.

REIT’s books and records.

return preparers to provide their identifying

Line 1. Cash. Include certificates of

Question 5

numbers on the return.

deposits as cash on line 1.

You are not required to provide the

Check the “Yes” box if one foreign person

Line 4. Tax-exempt securities. Include on

information requested on a form that is

owned at least 25% of (a) the total voting

this line:

subject to the Paperwork Reduction Act

power of all classes of stock of the REIT

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State and local government obligations,

unless the form displays a valid OMB control

entitled to vote, or (b) the total value of all

the interest on which is excludable from

number. Books or records relating to a form

classes of stock of the REIT.

gross income under section 103(a), and

or its instructions must be retained as long

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The constructive ownership rules of

Stock in a mutual fund or other RIC that

as their contents may become material in

section 318 apply in determining if a REIT is

distributed exempt-interest dividends during

the administration of any Internal Revenue

foreign owned. See section 6038A(c)(5) and

the tax year of the REIT.

law. Generally, tax returns and return

the related regulations.

Line 24. Adjustments to shareholders’

information are confidential, as required by

Enter on line 5a the percentage owned

equity. Examples of adjustments to report

section 6103.

by the foreign person specified in line 5. On

on this line include:

The time needed to complete and file this

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line 5b, enter the name of the owner’s

Unrealized gains and losses on securities

form will vary depending on individual

country.

held “available for sale.”

circumstances. The estimated average time

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Note. If there is more than one

Foreign currency translation adjustments.

is:

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25%-or-more foreign owner, complete lines

The excess of additional pension liability

5a and 5b for the foreign person with the

over unrecognized prior service cost.

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Recordkeeping . . . . . . . 59 hr., 33 min.

highest percentage of ownership.

Guarantees of employee stock (ESOP)

debt.

Foreign person. The term “foreign person”

Learning about the law

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Compensation related to employee stock

means:

or the form . . . . . . . . . . 24 hr., 18 min.

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award plans.

A foreign citizen or nonresident alien.

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Preparing the form . . . . 43 hr., 5 min.

An individual who is a citizen of a U.S.

If the total adjustment to be entered on

possession (but who is not a U.S. citizen or

line 24 is a negative number, enter the

Copying, assembling,

resident).

amount in parentheses.

and sending the form to

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A foreign partnership.

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the IRS . . . . . . . . . . . . .

4 hr., 49 min.

A foreign corporation.

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Schedule M-1

Any foreign estate or trust within the

If you have comments concerning the

meaning of section 7701(a)(31).

accuracy of these time estimates or

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A foreign government (or one of its

Reconciliation of Income (Loss)

suggestions for making this form simpler, we

agencies or instrumentalities) if it is engaged

per Books With Income per

would be happy to hear from you. You can

in the conduct of a commercial activity as

write to the Internal Revenue Service; Tax

Return

described in section 892.

Products Coordinating Committee;

Owner’s country. For individuals, the term

SE:W:CAR:MP:T:T:SP; 1111 Constitution

Line 5c. Travel and entertainment.

“owner’s country” means the country of

Ave., NW; IR-6526; Washington, DC 20224.

Include any of the following:

residence. For all others, it is the country

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Meals and entertainment not deductible

Do not send the tax form to this office.

where incorporated, organized, created, or

under section 274(n).

Instead, see the Where To File instructions.

administered.

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Expenses for the use of an entertainment

Requirement to file Form 5472. If the

facility.

REIT checked “Yes” to line 5, it may have to

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Instructions For Form 1120-Reit - Internal Revenue Service Of Department Of The Treasury - 2007 Page 14

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