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Safe harbor under Temporary

RIC does round to whole dollars, it must

income under section 4982 or makes an

Regulations section 1.67-2T(j)(2).

round all amounts. To round, drop

election under section 4982(e)(4), it must

Generally, shareholders in a nonpublicly

amounts under 50 cents and increase

file this return for the calendar year.

offered fund that are individuals or

amounts from 50 cents to 99 cents to the

Form 8927, Determination Under

pass-through entities are treated as

next dollar (for example, $1.39 becomes

860(e)(4) by a Qualified Investment

having received a dividend in an amount

$1 and $2.50 becomes $3).

Entity. Use Form 8927 to establish a

equal to the shareholder’s allocable share

If two or more amounts must be added

determination date under Section

of affected RIC expenses for the calendar

to figure the amount to enter on a line,

860(e)(4) for purposes of making a

year. They are also treated as having

include cents when adding the amounts

deficiency dividend distribution.

paid or incurred an expense described in

and round off only the total.

section 212 (and subject to the 2%

Statements

limitation on miscellaneous itemized

Recordkeeping

deductions) in the same amount for the

Reportable transaction disclosure

Keep the RIC’s records for as long as

calendar year.

statement. Disclose information for each

they may be needed for administration of

reportable transaction in which the RIC

Election. A nonpublicly offered fund

any provision of the Internal Revenue

participated. Form 8886, Reportable

may elect to treat its affected RIC

Code. Usually, records that support an

Transaction Disclosure Statement, must

expenses for a calendar year as equal to

item of income, deduction, or credit on the

be filed for each tax year that the federal

40% of the amount determined under

return must be kept for 3 years from the

income tax liability of the RIC is affected

Temporary Regulations section

date the return is due or filed, whichever

by its participation in the transaction. The

1.67-2T(j)(1)(i) for that calendar year.

is later. Keep records that verify the RIC’s

following are reportable transactions.

To make this election, attach to Form

basis in property for as long as they are

1. Any listed transaction, which is a

1120-RIC for the tax year that includes

needed to figure the basis of the original

transaction that is the same as or

the last day of the calendar year for which

or replacement property.

substantially similar to one of the types of

the fund makes the election a statement

The RIC should keep copies of all filed

transactions that the IRS has determined

that it is making an election under

returns. They help in preparing future and

to be a tax avoidance transaction and

Temporary Regulations section

amended returns.

identified by notice, regulation, or other

1.67-2T(j)(2). Once made, the election

published guidance as a listed

remains in effect for all subsequent

Other Forms That May Be

transaction.

calendar years and may not be revoked

Required

2. Any transaction offered under

without IRS consent. See Temporary

conditions of confidentiality for which the

Regulations section 1.67-2T for

In addition to Form 1120-RIC, the RIC

RIC (or a related party) paid an advisor a

definitions and other details.

may have to file some of the following

fee of at least $250,000.

Transfers to a corporation controlled

forms. Also see Pub. 542, Corporations,

3. Certain transactions for which the

by the transferor. Every significant

for an expanded list of forms the RIC may

RIC (or a related party) has contractual

transferor (as defined in Regulations

be required to file.

protection against disallowance of the tax

section 1.351-3(d) that receives stock of a

Form 976, Claim for Deficiency

benefits.

corporation in exchange for property in a

Dividends Deductions by a Personal

4. Certain transactions resulting in a

nonrecognition event must include the

Holding Company, Regulated Investment

loss of at least $10 million in any single

statement required by Regulations

Company, or Real Estate Investment

year or $20 million in any combination of

section 1.351-3(a)) on or with the

Trust. Use this form to claim a deficiency

years.

transferor’s tax return for the tax year of

dividend under section 860.

5. Any transaction identified by the

the exchange. The transferee corporation

IRS by notice, regulation, or other

Form 1096, Annual Summary and

must include the statement required by

published guidance as a “transaction of

Transmittal of U.S. Information Returns.

Regulations section 1.351-3(b) on or with

interest.” See Notice 2009-55, 2009-1

Use Form 1096 to transmit Forms 1099

its return for the tax year of the exchange,

I.R.B. 170.

and 5498 to the Internal Revenue

unless all the required information is

Service.

included in any statement(s) provided by

For more information, see Regulations

a significant transferor that is attached to

Form 1099-DIV, Dividends and

section 1.6011-4. Also, see the

the same return for the same section 351

Distributions. Report certain dividends

Instructions for Form 8886.

exchange. If the transferor or transferee

and distributions.

Penalties. The RIC may have to pay

corporation is a controlled foreign

Form 1099-INT, Interest Income. Report

corporation, each U.S. shareholder

a penalty if it is required to disclose a

interest income.

(within the meaning of section 951(b))

reportable transaction under section 6011

Form 2438, Undistributed Capital Gains

must include the required statement on or

and fails to properly complete and file

Tax Return, must be filed by the RIC if it

with its return.

Form 8886. Penalties may also apply

designates undistributed net long-term

under section 6707A if the RIC fails to file

Distributions under section 355. Every

capital gains under section 852(b)(3)(D).

Form 8886 with its Form 1120-RIC, fails

corporation that makes a distribution of

Form 2439, Notice to Shareholder of

to provide a copy of Form 8886 to the

stock or securities of a controlled

Undistributed Long-Term Capital Gains,

Office of Tax Shelter Analysis (OTSA), or

corporation, as described in section 355

must be completed and a copy given to

files a form that fails to include all the

(or so much of section 356 as it relates to

each shareholder for whom the RIC paid

information required (or includes incorrect

section 355), must attach the statement

tax on undistributed net long-term capital

information). Other penalties, such as an

required by Regulations section 1.355-5

gains under section 852(b)(3)(D).

accuracy-related penalty under section

to its return for the year of the distribution.

6662A, may also apply. See the

Form 3520, Annual Return to Report

If the distributing corporation is a

Instructions for Form 8886 for details on

Transactions With Foreign Trusts and

controlled foreign corporation, each U.S.

these and other penalties.

Receipt of Certain Foreign Gifts, may be

shareholder (within the meaning of

required if the RIC received a distribution

section 951(b)), must include the

Reportable transactions by material

from, was a grantor of, or transferor to, a

statement on or with its return.

advisors. Material advisors to any

foreign trust during the tax year. See

reportable transaction must disclose

Dual consolidated losses. If a

Question 5 of Schedule N (Form 1120).

certain information about the reportable

domestic corporation incurs a dual

Form 8613, Return of Excise Tax on

transaction by filing Form 8918, Material

consolidated loss (as defined in

Undistributed Income of Regulated

Advisor Disclosure Statement, with the

Regulations section 1.1503-2(c)(5)), the

Investment Companies. If the RIC is liable

IRS. For details, see the Instructions for

corporation (or consolidated group) may

for the 4% excise tax on undistributed

Form 8918.

need to attach an elective relief

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Instructions For Form 1120-Ric - U.s. Income Tax Return For Regulated Investment Companies - Internal Revenue Service - 2010 Page 5

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