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Other. Additional tax and interest

or losses of the RIC. The RIC’s tax on net

line a as if the full amount had been

amounts can be included in the total

recognized built-in gain is treated as a

entered on line a in the current tax year.

entered on line 6. Check the box for

loss sustained by the RIC after October

Line a. Enter the amount that would be

“Other” if the RIC includes any of the

31 of the same tax year (see the

the taxable income of the RIC for the tax

taxes and interest discussed below. See

instructions for line i of the Built-in Gains

year if only recognized built-in gain,

How to report, below, for details on

Tax Worksheet below). See Regulations

recognized built-in loss, and recognized

reporting these amounts on an attached

section 1.337(d)-7 for details.

built-in gain carryover were taken into

schedule.

account.

Different rules apply to elections to be

•

Recapture of qualified electric vehicle

Line b. Add the amounts shown on:

a RIC and to transfers of property in a

(QEV) credit. The RIC must recapture

•

Form 1120-RIC, page 1, line 24,

carryover basis transaction that occurred

part of the QEV credit it claimed in a prior

•

Form 1120-RIC, Part II, line 1, and

prior to January 2, 2002. For RIC

year if, within 3 full years of the date the

•

Form 2438, line 11.

elections and property transfers before

vehicle was placed in service, it ceases to

For this purpose, refigure line 24 on page

this date, the C corporation is subject to

qualify for the credit. See Regulations

1 without regard to any election under

deemed sale treatment on the transferred

section 1.30-1 for details on how to figure

section 852(b)(2)(F). Enter the result on

property unless the RIC elects section

the recapture.

line b of the Built-in Gains Tax Worksheet

1374 treatment. See Regulations section

•

Recapture of Indian employment credit.

below.

1.337(d)-6 for information on how to make

Generally, if an employer terminates the

the election and figure the tax for RIC

Line c. The RIC’s net unrealized built-in

employment of a qualified employee less

elections and property transfers before

gain is the amount, if any, by which the

than 1 year after the date of initial

this date. The RIC may also rely on

FMV of the assets of the RIC at the

employment, any Indian employment

Regulations section 1.337(d)-5 for RIC

beginning of its first RIC year (or as of the

credit allowed for a prior tax year because

elections and property transfers that

date the assets were acquired, for any

of wages paid or incurred to that

occurred before January 2, 2002.

asset with a basis determined by

employee must be recaptured. For

reference to its basis (or the basis of any

details, see Form 8845 and section 45A.

Built-in Gains Tax Worksheet

•

other property) in the hands of a C

Recapture of new markets credit (see

Instructions

corporation) exceeds the aggregate

Form 8874 and Regulations section

adjusted basis of such assets at that time.

Complete the worksheet below to figure

1.45D-1(e) for details).

•

the built-in gains tax under Regulations

Recapture of employer-provided

Enter on line c the RIC’s net

section 1.337(d)-6 or 1.337(d)-7.

childcare facilities and services credit

unrealized built-in gain reduced by the net

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

recognized built-in gain for prior years.

For tax years beginning in 2011,

details).

See sections 1374(c)(2) and (d)(1).

•

no tax is imposed on the net

Interest due on deferred gain

Line d. If the amount on line b exceeds

recognized built-in gain of a RIC if

recognition (section 1260(b)).

CAUTION

the amount on line a, the excess is

•

the 5th year of the applicable recognition

Taxes imposed for de minimis asset

treated as a recognized built-in gain in the

period ended before the tax year. In

test failures or failure to meet the gross

succeeding tax year.

figuring the amount to enter on line a,

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

Line e. Enter the section 1374(b)(2)

exclude any recognized built-in gains and

Built-in Gains Tax

deduction. Generally, this is any net

recognized built-in losses arising in the

operating loss or capital loss carryforward

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

tax year if the 5th year of the applicable

(to the extent of net capital gain included

a C corporation becomes property of a

recognition period ended before the

in recognized built-in gain for the tax year)

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

beginning of the tax year. This exclusion

arising in tax years for which the RIC was

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

does not apply, however, for the following

a C corporation. A capital loss

such property to a RIC, then the RIC will

purposes.

carryforward must be used to reduce

be subject to the built-in gains tax under

•

Figuring the carryover of net

recognized built-in gain for the tax year to

section 1374 unless the C corporation

recognized built-in gain in excess of the

the greatest extent possible before it can

elects deemed sale treatment on the

taxable income limitation;

be used to reduce the RIC’s taxable

transferred property. If the C corporation

•

Allocating your taxable income

income.

does not make this election, the RIC must

limitation (line b) between separate

pay tax on the net recognized built-in gain

Line h. Credit carryforwards arising in

groups of assets as required by

during the 10-year period beginning on its

tax years for which the RIC was a C

Regulations section 1.1374-8(d);

first day as a RIC or the day it acquired

corporation must be used to reduce the

•

Figuring your net unrealized built-in

the property (for tax years beginning in

tax on net built-in gain for the tax year to

gain limitation in any subsequent year

2011, see the Built-in Gains Tax

the greatest extent possible before the

(line c); or

Worksheet Instructions for an exception).

credit carryforwards can be used to

•

Figuring your section 1374(b)(2)

reduce the tax on the RIC’s taxable

Recognized built-in gains and losses

deduction (line e) in any subsequent year.

income.

generally retain their character (for

example, ordinary income or capital gain)

For these purposes, treat net

Note. If the RIC makes the election,

and are treated the same as other gains

recognized built-in gain excluded from

the unused research and minimum tax

Built-in Gains Tax Worksheet (keep for your records)

Excess of recognized built-in gains over recognized built-in losses . . . . . . . . . . . . . . . . . . . . . . . a.

b. Taxable income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b.

Enter the net unrealized built-in gain reduced by any net recognized built-in gain for all prior years c.

d. Net recognized built-in gain (enter the smallest of lines a, b, or c) . . . . . . . . . . . . . . . . . . . . . . . d.

Section 1374(b)(2) deduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e.

Subtract line e from line d. If zero, enter -0- here and on line i . . . . . . . . . . . . . . . . . . . . . . . . . . . f.

g. Enter 35% of line f . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . g.

h. Business credit and minimum tax credit carryforwards under section 1374(b)(3) from C corporation

(see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . h.

Tax. Subtract line h from line g (if zero or less, enter -0-). Enter here and include on line 6 of

Schedule J (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i.

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Instructions For Form 1120-Ric - U.s. Income Tax Return For Regulated Investment Companies - Internal Revenue Service - 2011 Page 12

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