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

allowed for the current tax year from Form

Schedule B—Income From

rate of 35% on its investment company

8834, Qualified Plug-In Electric and

taxable income.

Electric Vehicle Credit, line 30 and attach

Tax-Exempt Obligations

Form 8834 to this return.

Line 2b–Capital Gains Tax

If, at the close of each quarter of the tax

Line 3c–General Business

Enter the capital gains tax from line 4,

year, at least 50% of the value of the

Credit

Part II.

fund’s assets consisted of tax-exempt

obligations under section 103(a), the RIC

The RIC is required to file Form 3800,

Line 2c–Alternative Minimum

qualifies under section 852(b)(5) to pay

General Business Credit, to claim most

Tax (AMT)

exempt-interest dividends for the tax year.

business credits. For a list of allowable

Unless the RIC is treated as a small

credits, see Form 3800. Enter the

If this applies, check the “Yes” box on

corporation exempt from the AMT, it may

allowable credit from Part II, line 38, of

line 1 and complete lines 2 through 5.

owe the AMT if it has any of the

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

See section 852(b)(5)(A) for the definition

adjustments and tax preference items

applicable credit form and its instructions.

of exempt-interest dividends and other

listed on Form 4626, Alternative Minimum

details.

Line 3d–Other Credits

Tax — Corporations. The RIC must file

Form 4626 if its investment company

Note. In the case of a qualified “fund of

Minimum tax credit. To figure the

taxable income (or loss), and retained

funds” structure, a RIC may pay

minimum tax credit and any carryforward

capital gains not designated under

exempt-interest dividends without regard

of that credit, use Form 8827, Credit for

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

to the requirement that at least 50% of the

Prior Year Minimum Tax — Corporations.

and tax preference items, is more than

value of the funds assets consist of

Bond credits from Form 8912. Enter

the smaller of:

tax-exempt obligations. See section

•

the allowable credits from Form 8912,

$40,000 or

852(g) for more information.

•

Credit to Holders of Tax Credit Bonds,

The RIC’s allowable exemption amount

line 12. However, if the RIC elects to pass

(from Form 4626).

through credits from tax credit bonds to its

Schedule J—Tax

See Form 4626 for definitions and

shareholders, it cannot take the credit.

details on how to figure the tax.

Computation

See Item 11 under question 5 later for

Apportioning tax preference items.

more information.

Line 1

Items of tax preference may be

Line 5– Personal Holding

apportioned by the RIC between the

If the RIC is a member of a controlled

Company Tax

entity and its shareholders in accordance

group, check the box on line 1 and

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

A RIC is taxed as a personal holding

complete and attach Schedule O (Form

Line 2d—Income Tax

company under section 542 if:

1120), Consent Plan and Apportionment

•

At least 60% of its adjusted ordinary

Schedule for a Controlled Group. See

Deferred tax under section 1291. If the

gross income for the tax year is personal

Schedule O (Form 1120) and its

RIC was a shareholder in a passive

holding company income, and

instructions for more information.

foreign investment company (PFIC), and

•

At any time during the last half of the

Line 2a–Tax on Investment

received an excess distribution or

tax year more than 50% in value of its

disposed of its investment in the PFIC

Company Taxable Income

outstanding stock is owned, directly or

during the year, it must include the

indirectly, by five or fewer individuals.

Members of a controlled group must use

increase in taxes due under section

Schedule O (Form 1120) to figure the tax

See the Instructions for Schedule PH

1291(c)(2) (from Form 8621, Part IV, line

for the group. Most corporations that are

(Form 1120), U.S. Personal Holding

11e) in the total for line 2d. On the dotted

not members of a controlled group, and

Company (PHC) Tax, for definitions and

line to the left of line 2d write “Section

do not file a consolidated return, figure

details on how to figure the tax.

1291” and the amount.

their tax by using the Tax Rate Schedule

Line 6–Other Taxes

Do not include on line 2d any interest

below.

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

Include any of the following taxes and

For a RIC that is not a personal

this applies, show the amount of interest

interest in the total on line 6. Check the

holding company (PHC). A RIC in

owed in the bottom margin of page 1 and

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

compliance with Regulations section

write “Section 1291 interest.”

used to compute the total.

1.852-6 regarding disclosure of the RIC’s

See the Instructions for Form 8621,

Tax(es) imposed for relief from failure

actual stock ownership (members of a

Part IV, lines 11e and 11f.

to meet the asset test and/or the gross

controlled group should see the

Additional tax under section 197(f). A

income test. Attach supporting

instructions for Schedule O (Form 1120))

RIC that elects to pay tax on the gain

schedule(s). Also, attach a statement

is not a PHC and should compute its tax

from the sale of an intangible under the

showing the computation of the amount of

using the Tax Rate Schedule below:

related person exception to the

the tax(es), an explanation of why the RIC

Tax Rate Schedule

anti-churning rules should include any

failed to meet the requirements of the

additional tax due under section

asset test and/or gross income test, and a

If the investment company taxable income

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

description of why the failure is due to

(line 26, page 1) is:

dotted line to the left of line 2d, write

reasonable cause and not willful neglect.

“Section 197” and the amount.

See sections 851(d)(2) and 851(i).

Of the

Line 3a– Foreign Tax Credit

Recapture of investment credit. If the

But not

amount

RIC disposed of investment credit

To find out when a RIC can claim the

Over —

over —

Tax is:

over —

property or changed the property’s use

credit for payment of income tax to a

before the end of its useful life or recovery

foreign country or U.S. possession, see

$50,000

15%

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

Form 1118, Foreign Tax

50,000

75,000

$ 7,500 + 25%

50,000

Recapture of Investment Credit, for

Credit — Corporations. The RIC may not

75,000

100,000

13,750 + 34%

75,000

details.

claim this credit if an election under

100,000

335,000

22,250 + 39% 100,000

Recapture of low-income housing

335,000

10,000,000

113,900 + 34% 335,000

section 853 was made for the tax year.

10,000,000

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

credit. If the RIC disposed of property

See Election under section 853(a), under

15,000,000

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

(or there was a reduction in the qualified

Schedule K, Item 10.

18,333,333

—

35%

basis of the property) for which it took the

Line 3b–Credit from Form 8834,

low-income housing credit, it may owe a

line 30

For a RIC that is a personal holding

tax. See Form 8611, Recapture of

company. A RIC that is not in

Enter any qualified electric vehicle

Low-Income Housing Credit, and IRC

compliance with Regulations section

passive activity credits from prior years

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

-11-

Instructions For Form 1120-Ric - U.s. Income Tax Return For Regulated Investment Companies - Internal Revenue Service - 2011 Page 11

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