Instructions For Form 1120-Ric - U.s. Income Tax Return For Regulated Investment Companies - Internal Revenue Service - 2010 Page 8

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$60,000. Any remaining costs must be
indirectly owned by or for not more than
See the instructions for these forms for
amortized. See section 195(b)(3).
five individuals and it is not a personal
more information.
service corporation.
Time for making an election. The
Do not include salaries and wages
RIC generally elects to deduct start-up or
deductible elsewhere on the return, such
Line 9. Compensation of Officers.
organizational costs by claiming the
as amounts included in officer’s
Complete Schedule E if total receipts are
deduction on its income tax return filed by
compensation, elective contributions to a
$500,000 or more. Total receipts are
the due date (including extensions) for the
section 401(k) cash or deferred
figured by adding:
tax year in which the active trade or
arrangement, or amounts contributed
1. Line 8, Part I,
business begins. However, for start-up or
under a salary reduction SEP agreement
2. Net capital gain from line 1, Part II,
organizational costs paid or incurred
or a SIMPLE IRA plan.
and
before September 9, 2008, the RIC may
3. Line 9a, Form 2438.
If the RIC provided taxable fringe
be required to attach a statement to its
!
benefits to its employees, such as
return to elect to deduct such costs. See
Do not include compensation
personal use of a car, do not
CAUTION
Temporary Regulations sections 1.195-1T
deductible elsewhere on the return, such
deduct as wages any amounts deducted
and 1.248-1T for details.
as elective contributions to a section
elsewhere.
If the RIC timely filed its return for the
401(k) cash or deferred arrangement, or
Line 11. Rents. If the RIC rented or
year without making an election, it can
amounts contributed under a salary
leased a vehicle, enter the total annual
still make an election by filing an
reduction SEP agreement or a SIMPLE
rent or lease expense paid or incurred
amended return within 6 months of the
IRA plan.
during the year. Also, complete Part V of
due date of the return (excluding
Include only the deductible part of
Form 4562, Depreciation and
extensions). Clearly indicate the election
officers’ compensation on Schedule E.
Amortization. If the RIC leased a vehicle
on the amended return and write ‘‘Filed
Complete Schedule E, columns (a)
for a term of 30 days or more, the
pursuant to section 301.9100-2’’ at the
through (e), for all officers. The RIC
deduction for the vehicle lease expense
top of the amended return. File the
determines who is an officer under the
may have to be reduced by an amount
amended return at the same address the
laws of the state where incorporated.
called the inclusion amount.
RIC filed its original return. The election
Disallowance of deduction for
The RIC may have an inclusion
applies when figuring taxable income for
employee compensation in excess of
amount if:
the current tax year and all subsequent
$1 million. Publicly held corporations
years.
cannot deduct compensation to a
The lease term began:
And the
Note. The RIC can choose to forgo the
vehicle’s
“covered employee” to the extent that the
elections above by clearly electing to
FMV on the
compensation exceeds $1 million.
capitalize its start-up or organizational
first day of
Generally, a covered employee is:
costs on an income tax return filed by the
the lease
The principal executive officer (or an
due date (including extensions) for the tax
exceeded:
individual acting in that capacity) as of the
year in which the active trade or business
After 12/31/07 but before 1/1/11
$18,500
end of the tax year; or
begins.
A principal employee whose total
After 12/31/06 but before 1/1/08
$15,500
Report the deductible amount of such
compensation must be reported to
After 12/31/04 but before 1/1/07
$15,200
costs and any amortization on line 22. For
shareholders under the Securities
amortization that begins during the 2010
Exchange Act of 1934 because the
After 12/31/03 but before 1/1/05
$17,500
tax year, complete and attach Form 4562.
employee is among the three highest
If the lease term began before January 1, 2004, see
compensated officers for that tax year
For more details on business start-up
Pub. 463, Travel, Entertainment, Gift, and Car
Expenses, to find out if the RIC has an inclusion
(other than the principal executive officer).
and organizational costs, see Pub. 535,
amount. The inclusion amount for lease terms
Business Expenses.
For this purpose, compensation does
beginning in 2011 will be published in the Internal
Section 265(a)(3) limitation. If the RIC
not include:
Revenue Bulletin in early 2011.
paid exempt-interest dividends during the
Income from certain employee trusts,
tax year (including those dividends
annuity plans, or pensions.
See Pub. 463 for instructions on
deemed paid under section 855), no
Any benefit paid to an employee that is
figuring the inclusion amount.
deduction is allowed for that portion of
excluded from the employee’s income.
Line 12. Taxes and Licenses. Enter
otherwise deductible expenses allocable
The deduction limit does not apply to:
taxes paid or accrued during the tax year,
to tax-exempt income. The excluded
Commissions based on individual
but do not include the following:
amount is determined by the amount
performance;
Federal income taxes (except for the
tax-exempt income bears to total gross
Qualified performance-based
tax imposed on net recognized built-in
income (including tax-exempt income but
compensation; and
gain allocable to ordinary income).
excluding capital gain net income).
Income payable under a written,
Foreign or U.S. possession income
Net operating loss deduction. The net
binding contract in effect on February 17,
taxes if a foreign tax credit is claimed, or if
operating loss deduction is not allowed.
1993.
the RIC made an election under section
Passive activity limitations. Limitations
853.
The $1 million limit is reduced by
on passive activity losses and credits
Excise taxes imposed under section
amounts disallowed as excess parachute
under section 469 apply to RICs that are
4982 on undistributed RIC income.
payments under section 280G.
closely held (as defined in section
Taxes not imposed on the RIC.
For details, see section 162(m) and
469(j)(1)). RICs subject to the passive
Taxes, including state or local sales
Regulations section 1.162-27. Also, see
activity limitations must complete Form
taxes, that are paid or incurred in
Notice 2007-49, 2007-25 I.R.B. 1429.
8810, Corporate Passive Activity Loss
connection with an acquisition or
and Credit Limitations, to compute their
Line 10. Salaries and Wages. Enter the
disposition of property (these taxes must
allowable passive activity loss and credit.
salaries and wages paid for the tax year,
be treated as a part of the cost of the
Before completing Form 8810, see
reduced by the amount claimed on:
acquired property or, in the case of a
Temporary Regulations section 1.163-8T,
Form 5884, Work Opportunity Credit,
disposition, as a reduction in the amount
for rules on allocating interest expense
Form 8844, Empowerment Zone and
realized on the disposition).
among activities.
Renewal Community Employment Credit,
Taxes assessed against local benefits
Closely held corporation. A RIC is
Form 8845, Indian Employment Credit,
that increase the value of the property
closely held if at any time during the last
and
assessed (such as for paving, etc.).
half of the tax year more than 50% in
Form 8932, Credit for Employer
Taxes deducted elsewhere on the
value of its outstanding stock is directly or
Differential Wage Payments.
return.
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