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Item E. Final Return, Name

Line 4. Payments with respect to

1, 2011, a RIC can elect, under section

securities loans. Enter the amount

108(i), to defer the income from discharge

Change, Address Change,

received or accrued from a broker as

of indebtedness in connection with the

compensation for securities loaned by the

or Amended Return

election. If the RIC makes the election,

RIC to the broker for use in completing

the income is deferred and ratably

•

If this is the RIC’s final return and it will

market transactions. The payments must

included in income over the 5-year period

no longer exist, check the “Final return”

meet the requirements of section

beginning with:

box.

512(a)(5).

1. For a reacquisition occurring in

•

If the RIC has changed its name since

2009, the fifth tax year following the tax

Line 5. Excess of Net Short-Term

it last filed a return, check the “Name

year in which the reacquisition occurs,

Capital Gain Over Net Long-Term

change” box. Generally, a RIC must also

and

Capital Loss. Enter the amount from

have amended its articles of incorporation

2. For a reacquisition occurring in

Schedule D (Form 1120), line 12. Every

and filed the amendment with the state in

2010, the fourth tax year following the tax

sale or exchange of a capital asset must

which it was incorporated.

year in which the reacquisition occurs.

•

be reported in detail on Schedule D (Form

If the RIC has changed its address

1120), even if no gain or loss is indicated.

To make the election, attach a

since it last filed a return (including a

statement to the RIC’s return for the tax

change to an “in care of” address), check

Line 7. Other Income. Enter any other

year in which the applicable reacquisition

the “Address change” box.

taxable income (loss) not reported on

occurs. The statement must clearly

Note. If a change in address occurs after

lines 1 through 6, except net capital gain

identify the applicable instrument and

the return is filed, use Form 8822,

reported in Part II. List the type and

include the amount of income to which

Change of Address, to notify the IRS of

amount of income on an attached

the election applies. Once made, the

the new address.

schedule. If the RIC has only one item of

election is irrevocable. For more

other income, describe it in parentheses

Amended return. If the RIC is amending

information, see section 108(i) and Rev.

on line 7. Examples of other income to

its return, check the box for “Amended

Proc. 2009-37, 2009-36 I.R.B. 309.

report on line 7 include:

return,” complete the entire return, correct

•

Deductions

Gross rents.

the appropriate lines with the new

•

Recoveries of fees or expenses in

information, and refigure the RIC’s tax

Limitations on Deductions

settlement or litigation.

liability. Attach a statement that explains

•

Amounts received or accrued as

the reason for the amendments and

Transactions between related

consideration for entering into

identifies the lines being changed on the

taxpayers. Generally, an accrual basis

agreements to make real property loans

amended return.

taxpayer may only deduct business

or to purchase or lease real property.

expenses and interest owed to a related

•

Recoveries of bad debts deducted in

party in the year the payment is includible

Part I—Investment

prior years under the specific charge-off

in the income of the related party. See

method.

Company Taxable Income

section 267 for limitations on deductions

•

Refunds of taxes deducted in prior

for interest and expenses paid to a

years to the extent they reduced income

related party.

Income

subject to tax in the year deducted (see

section 111). Do not offset current year

Also see the instructions for Form

Line 1. Dividends. A RIC that is the

taxes against prior year tax refunds.

8926, Disqualified Corporate Interest

holder of record of any share of stock on

•

The recapture amount under section

Expense Disallowed Under Section 163(j)

the record date for a dividend payable on

280F if the business use of listed property

and Related Information, with respect to

that stock must include the dividend in

drops to 50% or less. To figure the

section 163(j).

gross income by the later of: the date the

recapture amount, complete Part IV of

Golden parachute payments. A portion

share became ex-dividend, or the date

Form 4797.

of the payments made by a RIC to key

the RIC acquired the share.

•

Ordinary income from trade or business

personnel that exceeds their usual

Line 2. Interest. Enter taxable interest

activities of a partnership (from Schedule

compensation may not be deductible.

on U.S. obligations and on loans, notes,

K-1 (Form 1065 or 1065-B)). Do not offset

This occurs when the RIC has an

mortgages, bonds, bank deposits,

ordinary losses against ordinary income.

agreement (golden parachute) with key

corporate bonds, tax refunds, etc.

Instead, include the losses on line 22.

employees to pay them an amount

Do not offset interest expense against

Show the partnership’s name, address,

substantially in excess of their base

interest income. Special rules apply to

and EIN on a separate statement

amount if control of the RIC changes. See

interest income from certain

attached to this return. If the amount

section 280G and Regulations section

below-market-rate loans. See section

entered is from more than one

1.280G-1 for more information. Also, see

7872 for more information on the tax

partnership, identify the amount from

the instructions for line 9.

treatment of loans on which inadequate or

each partnership.

Business start-up and organizational

•

no interest is charged.

Any net positive section 481 income

costs. A RIC can elect to deduct up to

adjustment due to a change in method of

Note. Report tax-exempt interest income

$5,000 of business start-up and up to

accounting. See Form 3115 and its

on Schedule K, item 8. Do not include

$5,000 of organizational costs paid or

instructions for more information.

tax-exempt interest on line 2. Also, if

incurred after October 22, 2004. Any

•

Part or all of the proceeds received

required, include the same amount on

remaining cost must be amortized. The

from certain corporate-owned life

Schedule M-1, line 7.

$5,000 deductions is reduced (but not

insurance contracts issued after August

Include interest income from qualified

below zero) by the amount the total costs

17, 2006. Corporations that own one or

tax credit bonds on line 2. If the RIC

exceed $50,000. If the total costs are

more employer-owned life insurance

elects to pass through the credits to

$55,000 or more, the deduction is

contracts issued after this date must file

shareholders, see the instructions for

reduced to zero. See sections 195(b) and

Form 8925, Report of Employer-Owned

Part II, Schedule A, line 6.

248(a).

Life Insurance Contracts. See section

Line 3. Net Foreign Currency Gain or

101(j) for details.

Special rule for 2010 start-up costs.

•

(Loss) from Section 988 Transactions.

Income from discharge of indebtedness

For a tax year beginning in 2010, a RIC

Enter the net foreign currency gain (loss)

for the purchase of a debt instrument for

can elect to deduct up to $10,000 of

from section 988 transactions treated as

less than its adjusted issue price.

business start-up costs paid or incurred

ordinary income or loss under section

However, for a reacquisition of an

after December 31, 2009. The $10,000

988(a)(1)(A). Attach a schedule detailing

applicable debt instrument after

deduction is reduced (but not below zero)

each separate transaction.

December 31, 2008, and before January

by the amount such start-up costs exceed

-7-

Instructions For Form 1120-Ric - U.s. Income Tax Return For Regulated Investment Companies - Internal Revenue Service - 2010 Page 7

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