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Form 4562, Depreciation and

institutions. Also see section 265(b)(7) for

Form 1120-RIC. Generally, a deduction

Amortization. If the RIC leased a vehicle

a temporary de minimis exception for

may not be taken for any amount that is

for a term of 30 days or more, the

financial institutions for certain tax exempt

allocable to tax-exempt income. See

deduction for the vehicle lease expense

bonds issued in 2009 and 2010.

section 265(b) for exceptions.

•

may have to be reduced by an amount

For cash basis taxpayers, prepaid

Examples of other deductions include:

called the inclusion amount.

interest allocable to years following the

•

Amortization. See Form 4562.

current tax year. For example, a cash

•

The RIC may have an inclusion

Certain business start-up and

basis calendar year taxpayer who in 2011

amount if:

organizational costs the RIC elects to

prepaid interest allocable to any period

amortize or deduct.

after 2011 can deduct only the amount

•

The lease term began:

And the

Supplies used and consumed in the

allocable to 2011.

vehicle’s

business.

•

Interest and carrying charges on

•

FMV on the

Utilities.

straddles. Generally, these amounts must

first day of

•

Ordinary losses from trade or business

the lease

be capitalized. See section 263(g).

activities of a partnership (from Schedule

exceeded:

Special rules apply to:

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

After 12/31/07 but before 1/1/12

$18,500

•

Disqualified interest on certain

ordinary income against ordinary losses.

indebtedness under section 163(j). See

Instead, include the income on line 7.

After 12/31/06 but before 1/1/08

$15,500

Form 8926, Disqualified Corporate

Show the partnership’s name, address,

After 12/31/04 but before 1/1/07

$15,200

Interest Expense Disallowed Under

and EIN on a separate statement

Section 163(j) and Related Information,

attached to this return. If the amount is

After 12/31/03 but before 1/1/05

$17,500

and the related instructions.

from more than one partnership, identify

If the lease term began before January 1, 2004, see

•

Pub. 463, Travel, Entertainment, Gift, and Car

Interest on which no tax is imposed

separately the amount from each

Expenses, to find out if the RIC has an inclusion

(see section 163(j)).

partnership.

amount. The inclusion amount for lease terms

•

OID on certain high-yield discount

Deduction for certain energy efficient

beginning in 2012 will be published in the Internal

obligations. See section 163(e)(5) to

commercial building property placed in

Revenue Bulletin in early 2012.

determine the amount of the deduction for

service during the tax year. See section

OID that is deferred and the amount that

179D, Notice 2008-40, 2008-14 I.R.B.

See Pub. 463 for instructions on

is disallowed on a high-yield discount

725, and Notice 2006-52, 2006-26 I.R.B.

figuring the inclusion amount.

obligation. The rules under section

1175.

Line 12. Taxes and Licenses. Enter

•

163(e)(5) do not apply to certain

Any extraterritorial income exclusion

taxes paid or accrued during the tax year,

high-yield discount obligations issued

(from Form 8873, line 52).

but do not include the following:

•

after August 31, 2008 and before January

Any net negative section 481(a)

•

Federal income taxes (except for the

1, 2011. See section 163(e)(5)(F). Also,

adjustment.

tax imposed on net recognized built-in

•

see Notice 2010-11, 2010-4 I.R.B. 326.

Any taxes imposed under section

gain allocable to ordinary income).

•

The deduction for interest when the

851(d)(2) relating to failures to meet the

•

Foreign or U.S. possession income

RIC is a policyholder or beneficiary with

requirements of the asset test. See

taxes if a foreign tax credit is claimed, or if

respect to a life insurance, endowment, or

section 851(d) for details.

the RIC made an election under section

•

annuity contract issued after June 8,

Any taxes imposed under section 851(i)

853.

1997. For details, see section 264(f).

relating to failures to meet certain

•

Excise taxes imposed under section

Attach a statement showing the

requirements of the gross income test.

4982 on undistributed RIC income.

computation of the deduction.

See section 851(i) for details.

•

Taxes not imposed on the RIC.

•

Section 108(i) OID deduction. If the

Charitable contributions. Enter

•

Taxes, including state or local sales

RIC issued a debt instrument with OID

contributions or gifts actually paid within

taxes, that are paid or incurred in

that is subject to section 108(i)(2)

the tax year to or for the use of charitable

connection with an acquisition or

because of an election to defer income

and governmental organizations

disposition of property (these taxes must

from the cancellation of debt (COD), the

described in section 170(c) and any

be treated as a part of the cost of the

deduction for this OID is deferred until the

unused contribution carryovers.

acquired property or, in the case of a

COD is includible in income. The accrued

RICs reporting taxable income on the

disposition, as a reduction in the amount

OID is allowed as a deduction ratably

accrual method may elect to treat as paid

realized on the disposition).

over the 5-year period the COD is

•

during the tax year any contributions paid

Taxes assessed against local benefits

includible in income. The deduction is

by the 15th day of the 3rd month after the

that increase the value of the property

limited to the amount of COD subject to

end of the tax year if the contributions

assessed (such as for paving, etc.).

the section 108(i) election. An annual

•

were authorized by the board of directors

Taxes deducted elsewhere on the

information statement (discussed earlier)

during the tax year. Attach a declaration

return.

is required if an election is made. See

to the return that includes the date the

See section 164(d) for information on

section 108(i)(5)(D) regarding any

resolution was adopted.

apportionment of taxes on real property

deferred COD deduction that is allowed

Limitation on deduction. The total

between seller and purchaser.

as a deduction in the current year

amount claimed cannot be more than

because of an accelerated event.

Line 13. Interest

10% of taxable income (the sum of Part I,

Line 14. Depreciation. Include on line

Interest expense cannot be used

line 26; Part ll, line 3; and Form 2438, line

14 depreciation and the cost of certain

to offset interest income.

11) computed without regard to the

property that the RIC elected to expense

following:

CAUTION

under section 179. See Form 4562 and

•

Any deduction for contributions.

Interest allocation. The RIC must

the related instructions to figure the

•

The domestic production activities

make an interest allocation if the

amount of depreciation to enter on this

deduction.

proceeds of a loan were used for more

line.

•

The deduction allowed under section

than one purpose (for example, to

Line 22. Other Deductions

249, related to any premium paid or

purchase a portfolio investment and to

incurred upon the repurchase of a

acquire an interest in a passive activity).

Penalties or fines paid to any

convertible bond.

government agency or

See Temporary Regulations section

Carryover. Charitable contributions

1.163-8T for the interest allocation rules.

instrumentality because of a

CAUTION

violation of a law are not deductible. See

over the 10% limitation cannot be

The following interest is not deductible:

•

Chapter 11, Other Expenses, in

deducted for the tax year but may be

Interest on indebtedness incurred or

Publication 535 for additional information.

carried over to the next 5 tax years

continued to purchase or carry obligations

subject to certain limitations.

if the interest is wholly exempt from

Attach a schedule listing by type and

income tax. See section 265(b) for special

amount all allowable deductions that are

For more information on charitable

rules and exceptions for financial

not specifically deductible elsewhere on

contributions, including substantiation and

-9-

Instructions For Form 1120-Ric - U.s. Income Tax Return For Regulated Investment Companies - Internal Revenue Service - 2011 Page 9

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