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Additional tax under section 197(f). A

Recapture of Investment Credit. If the

Tax Rate Schedule

RIC that elects to pay tax on the gain

RIC disposed of investment credit

If the investment company taxable income

from the sale of an intangible under the

property or changed the property’s use

(line 26, page 1) is:

related person exception to the

before the end of its useful life or recovery

anti-churning rules should include any

period, it may owe a tax. See Form 4255,

additional tax due under section

Recapture of Investment Credit, for

Of the

197(f)(9)(B) in the total for line 2d. On the

details.

But not

amount

dotted line to the left of line 2d, write

Over —

over —

Tax is:

over —

Recapture of Low-Income Housing

“Section 197” and the amount.

Credit. If the RIC disposed of property

$50,000

15%

(or there was a reduction in the qualified

Line 3a– Foreign Tax Credit

50,000

75,000

$ 7,500 + 25%

50,000

basis of the property) for which it took the

To find out when a RIC can claim the

75,000

100,000

13,750 + 34%

75,000

low-income housing credit, it may owe a

credit for payment of income tax to a

100,000

335,000

22,250 + 39% 100,000

tax. See Form 8611, Recapture of

foreign country or U.S. possession, see

335,000

10,000,000

113,900 + 34% 335,000

Low-Income Housing Credit, and IRC

10,000,000

15,000,000 3,400,000 + 35% 10,000,000

Form 1118, Foreign Tax

section 42(j)(1) for more information.

15,000,000

18,333,333 5,150,000 + 38% 15,000,000

Credit — Corporations. The RIC may not

18,333,333

—

35%

Other. Additional tax and interest

claim this credit if an election under

amounts can be included in the total

section 853 was made for the tax year.

entered on line 6. Check the box for

See Election under section 853(a), under

For a RIC that is a personal holding

“Other” if the RIC includes any of the

Schedule K, Item 10.

company. A RIC that is not in

taxes and interest discussed below. See

compliance with Regulations section

Line 3b–Credit from Form 8834,

How to report, below, for details on

1.852-6 is a PHC and is taxed at a flat

line 29

reporting these amounts on an attached

rate of 35% on its investment company

schedule.

Enter any qualified electric vehicle

taxable income.

•

Recapture of qualified electric vehicle

passive activity credits from prior years

Line 2b–Capital Gains Tax

(QEV) credit. The RIC must recapture

allowed for the current tax year from Form

part of the QEV credit it claimed in a prior

8834, Qualified Plug-In Electric and

Enter the capital gains tax from line 4,

year if, within 3 full years of the date the

Electric Vehicle Credit, line 29.

Part II.

vehicle was placed in service, it ceases to

Line 3c–General Business

Line 2c–Alternative Minimum

qualify for the credit. See Regulations

Credit

section 1.30-1 for details on how to figure

Tax (AMT)

the recapture.

The RIC is required to file Form 3800,

Unless the RIC is treated as a small

•

Recapture of Indian employment credit.

General Business Credit, to claim most

corporation exempt from the AMT, it may

Generally, if an employer terminates the

business credits. For a list of allowable

owe the AMT if it has any of the

employment of a qualified employee less

credits, see Form 3800. Enter the

adjustments and tax preference items

than 1 year after the date of initial

allowable credit from Part II, line 32, of

listed on Form 4626, Alternative Minimum

employment, any Indian employment

Form 3800, on line 3c. Also, see the

Tax — Corporations. The RIC must file

credit allowed for a prior tax year because

applicable credit form and its instructions.

Form 4626 if its investment company

of wages paid or incurred to that

taxable income (or loss), and retained

Line 3d–Other Credits

employee must be recaptured. For

capital gains not designated under

details, see Form 8845 and section 45A.

Minimum tax credit. To figure the

section 852(b)(3)(D), plus adjustments

•

Recapture of new markets credit (see

and tax preference items, is more than

minimum tax credit and any carryforward

Form 8874 and Regulations section

the smaller of:

of that credit, use Form 8827, Credit for

1.45D-1(e) for details).

•

$40,000 or

Prior Year Minimum Tax — Corporations.

•

Recapture of employer-provided

•

The RIC’s allowable exemption amount

Bond credits from Form 8912. Enter

childcare facilities and services credit

(from Form 4626).

the allowable credits from Form 8912,

(see Form 8882 and section 45F(d) for

Credit to Holders of Tax Credit Bonds,

details).

See Form 4626 for definitions and

•

line 18. However, if the RIC elects to pass

Interest due on deferred gain

details on how to figure the tax.

through credits from tax credit bonds to its

recognition (section 1260(b)).

Apportioning tax preference items.

•

shareholders, it cannot take the credit.

Taxes imposed for deminimis asset test

Items of tax preference may be

See Item 11 on page 13 for more

failures or failure to meet the gross

apportioned by the RIC between the

information.

income test (section 851(d)(2)).

entity and its shareholders in accordance

Line 5– Personal Holding

with section 59(d)(1)(A).

Built-in Gains Tax

Company Tax

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

Line 2d—Income Tax

a C corporation becomes property of a

A RIC is taxed as a personal holding

Deferred tax under section 1291. If the

RIC by either: (a) the qualification of the C

company under section 542 if:

•

RIC was a shareholder in a passive

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

At least 60% of its adjusted ordinary

foreign investment company (PFIC), and

such property to a RIC, then the RIC will

gross income for the tax year is personal

received an excess distribution or

be subject to the built-in gains tax under

holding company income, and

•

disposed of its investment in the PFIC

section 1374 unless the C corporation

At any time during the last half of the

during the year, it must include the

elects deemed sale treatment on the

tax year more than 50% in value of its

increase in taxes due under section

transferred property. If the C corporation

outstanding stock is owned, directly or

1291(c)(2) in the total for line 2d. On the

does not make this election, the RIC must

indirectly, by five or fewer individuals.

dotted line to the left of line 2d write

pay tax on the net recognized built-in gain

See the Instructions for Schedule PH

“Section 1291” and the amount.

during the 10-year period beginning on its

(Form 1120), U.S. Personal Holding

first day as a RIC or the day it acquired

Do not include on line 2d any interest

Company (PHC) Tax, for definitions and

the property (for tax years beginning in

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

details on how to figure the tax.

2009 or 2010, see the Built-in Gains Tax

this applies, show the amount of interest

Line 6–Other Taxes

Worksheet Instructions on page 12 for an

owed in the bottom margin of page 1 and

exception).

write “Section 1291 interest.” For details,

Include any of the following taxes and

see Form 8621, Return by a Shareholder

interest in the total on line 6. Check the

Recognized built-in gains and losses

of a Passive Foreign Investment

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

generally retain their character (for

Company or Qualified Electing Fund.

used to compute the total.

example, ordinary income or capital gain)

-11-

Instructions For Form 1120-Ric - U.s. Income Tax Return For Regulated Investment Companies - Internal Revenue Service - 2010 Page 11

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