Instructions For Form 1120-Reit - Internal Revenue Service Of Department Of The Treasury - 2007 Page 8
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An employee whose total compensation
allocable to any period after 2007 can
And the vehicle’s
must be reported to shareholders under the
FMV on the first day of
deduct only the amount allocable to 2007).
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The lease term
the
Securities Exchange Act of 1934 because
Interest and carrying charges on
began:
lease exceeded:
the employee is among the four highest
straddles. Generally, these amounts must
compensated officers for that tax year (other
be capitalized. See section 263(g).
After 12/31/06 but
$15,500
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than the chief executive officer).
Interest paid or incurred on any portion of
before 1/1/08 . . . . . .
an underpayment of tax that is attributable
For this purpose, compensation does not
After 12/31/04 but
$15,200
to an understatement arising from an
include the following:
before 1/1/07 . . . . . .
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undisclosed listed transaction or an
Income from certain employee trusts,
undisclosed reportable avoidance
After 12/31/03 but
$17,500
annuity plans, or pensions and
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transaction (other than a listed transaction)
before 1/1/05 . . . . . . .
Any benefit paid to an employee that is
entered into in tax years beginning after
excluded from the employee’s income.
After 12/31/02 but
$18,000
October 22, 2004.
before 1/1/04 . . . . . . .
The deduction limit does not apply to:
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Special rules apply to:
If the lease term began before January 1, 2003, see Pub.
Commissions based on individual
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Interest on which no tax is imposed (see
463, Travel, Entertainment, Gift, and Car Expenses, to
performance,
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find out if the REIT has an inclusion amount. The inclusion
section 163(j));
Qualified performance-based
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amount for lease terms beginning in 2008 will be
Foregone interest on certain
compensation, and
published in the Internal Revenue Bulletin in early 2008.
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below-market-rate loans (see section 7872);
Income payable under a written, binding
and
contract in effect on February 17, 1993.
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See Pub. 463 for instructions on figuring
Original issue discount on certain
The $1-million limit is reduced by
the inclusion amount.
high-yield discount obligations. (See section
amounts disallowed as excess parachute
163(e) to figure the disqualified portion.)
Line 14. Taxes and licenses. Enter taxes
payments under section 280G. For details,
paid or incurred during the tax year, but do
Line 16. Depreciation. Besides
see section 162(m) and Regulations section
not include the following:
depreciation, include on line 16 the part of
1.162-27.
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Federal income taxes (except for the tax
the cost that the REIT elected to expense
Line 10. Salaries and wages. Enter the
imposed on net recognized built-in gain
under section 179 for certain property
total salaries and wages paid for the tax
allocable to ordinary income).
placed in service during tax year 2007 or
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year, reduced by the amount claimed on:
Foreign or U.S. possession income taxes
carried over from 2006. See Form 4562 and
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Form 5884, Work Opportunity Credit (line
if a tax credit is claimed (however, see the
its instructions.
2);
Instructions for Form 5735 for special rules
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Line 18. Other deductions.
Form 8844, Empowerment Zone and
for possession income taxes).
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Renewal Community Employment Credit
Taxes not imposed on the REIT.
Penalties or fines paid to any
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(line 2);
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Taxes, including state or local sales
government agency or
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Form 8845, Indian Employment Credit
taxes, that are paid or incurred in connection
instrumentality because of a violation
CAUTION
(line 4); and
with an acquisition or disposition of property
of a law are not deductible. See Publication
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Form 8861, Welfare-to-Work Credit (line
(these taxes must be treated as a part of the
535, Business Expenses, for additional
2).
cost of the acquired property or, in the case
information.
See the instructions for these forms for
of a disposition, as a reduction in the
Attach a schedule, listing by type and
more information. Do not include salaries
amount realized on the disposition).
amount, all allowable deductions that are
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and wages deductible elsewhere on the
Taxes assessed against local benefits
not deductible elsewhere on the return.
return, such as elective contributions to a
that increase the value of the property
Enter the total on line 18. Include
section 401(k) cash or deferred
assessed (such as for paving, etc.).
amortization and organization expenses.
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arrangement, or amounts contributed under
Taxes deducted elsewhere on the return.
Generally, a deduction may not be taken for
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a salary reduction SEP agreement or a
Excise taxes imposed under section 4981
any amount that is allocable to a class of
SIMPLE IRA plan.
on undistributed REIT income.
exempt income. See section 265(b) for
See section 164(d) for apportionment of
exceptions.
If the REIT provided taxable fringe
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taxes on real property between seller and
benefits to its employees, such as
Examples of other deductions include:
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purchaser.
personal use of a car, do not deduct
Amortization (see Form 4562).
CAUTION
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as wages the amounts allocated for
Line 15. Interest.
Certain business start-up and
depreciation and other expenses claimed on
organizational costs that the REIT elects to
Interest expense cannot be used to
lines 16 and 18.
deduct.
!
offset interest income.
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Depletion. Attach Form T (Timber), Forest
Line 11. Repairs and maintenance. Enter
CAUTION
Activities Schedule, if a deduction for
the cost of incidental repairs and
depletion of timber is taken.
maintenance, such as labor and supplies,
The deduction for interest is limited when
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Reforestation costs. The REIT can elect
that do not add to the value of the property
the REIT is a policyholder or beneficiary with
to deduct up to $10,000 of qualified
or appreciably prolong its life. New
respect to a life insurance, endowment, or
reforestation expenses paid or incurred after
buildings, machinery, or permanent
annuity contract issued after June 8, 1997.
October 22, 2004, for each qualifying timber
improvements that increase the value of the
For details, see section 264(f). Attach a
property. The REIT can elect to amortize
property are not deductible. They must be
statement showing the computation of the
over 84 months any amount not deducted.
depreciated or amortized.
deduction.
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Insurance premiums.
Line 12. Bad debts. Enter the total debts
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The REIT must make an interest
Legal and professional fees.
that became worthless in whole or in part
allocation if the proceeds of a loan were
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Supplies used and consumed in the
during the tax year. A cash basis taxpayer
used for more than one purpose (for
business.
may not claim a bad debt deduction unless
example, to purchase a portfolio investment
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Utilities.
the amount was previously included in
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and to acquire an interest in a passive
Ordinary losses from trade or business
income.
activity). See Temporary Regulations
activities of a partnership (from Schedule
section 1.163-8T for the interest allocation
Line 13. Rents. If the REIT rented or
K-1 (Form 1065 or 1065-B)). Do not offset
rules.
leased a vehicle, enter the total annual rent
ordinary income against ordinary losses.
or lease expense paid or incurred during the
The following interest is not deductible:
Instead, include the income on line 7. Show
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year. Also complete Part V of Form 4562,
Interest on indebtedness incurred or
the partnership’s name, address, and EIN
Depreciation and Amortization. If the REIT
continued to purchase or carry obligations if
on a separate statement attached to this
leased a vehicle for a term of 30 days or
the interest is wholly exempt from income
return. If the amount is from more than one
more, the deduction for the vehicle lease
tax. For exceptions, see section 265(b).
partnership, identify the amount from each
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expense may have to be reduced by an
For cash basis taxpayers, prepaid interest
partnership.
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amount called the inclusion amount.
allocable to years following the current tax
Deduction for certain energy efficient
The REIT may have an inclusion amount
year (for example, a cash basis calendar
commercial building property. See section
if:
year taxpayer who in 2007 prepaid interest
179D.
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