Instructions For Form 1120-Reit - 2009 (Page 5 of 17) in pdf

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Any other method authorized by the

Note. A REIT must adopt a calendar

deficiency dividends. See section 860 and

Internal Revenue Code.

year unless it first qualified for REIT

the related regulations.

status before October 5, 1976.

Forms 1042,1042-S, and 1042-T,

Accrual method. Generally, a REIT

Annual Withholding Tax Return for U.S.

must use the accrual method of

Change of tax year. A REIT may not

Source Income of Foreign Persons, Form

accounting if its average annual gross

change its tax year to any tax year other

1042-S, Foreign Person’s U.S. Source

receipts exceed $5 million. See section

than the calendar year. Generally, a REIT

Income Subject to Withholding, and Form

448(c).

must receive consent from the IRS before

1042-T, Annual Summary and Transmittal

changing its tax year by filing Form 1128,

Under the accrual method, an amount

of Forms 1042-S. Use these forms to

Application To Adopt, Change, or Retain

is includible in income when:

report and send withheld tax on payments

a Tax Year.

1. All the events have occurred that fix

or distributions made to nonresident alien

However, upon electing to be taxed as

the right to receive the income, which is

individuals, foreign partnerships, or

a REIT, an entity that has not engaged in

the earliest of the date:

foreign corporations to the extent these

any active trade or business may change

a. the required performance takes

payments constitute gross income from

its tax year to a calendar year without

place,

sources within the United States (see

obtaining the consent.

b. payment is due, or

sections 861 through 865).

See the Instructions for Form 1128

c. payment is received, and

Also, see sections 1441 and 1442, and

and Pub. 538 for more information on

2. The amount can be determined

Pub. 515, Withholding of Tax on

accounting periods and tax years.

with reasonable accuracy.

Nonresident Aliens and Foreign Entities.

Rounding Off to

Form 1099-DIV, Dividends and

See Regulations section 1.451-1(a) for

Distributions. Use this form to report

details and Publication 538, Accounting

Whole Dollars

certain dividends and distributions.

Periods and Methods.

The REIT can round off cents to whole

Form 2438, Undistributed Capital Gains

Change in accounting method.

dollars on its returns and schedules. If the

Tax Return, must be filed by the REIT if it

Generally, the REIT must get IRS consent

REIT does round to whole dollars, it must

designates undistributed net long-term

to change the method of accounting used

round all amounts. To round, drop

capital gains under section 857(b)(3)(D).

to report taxable income (for income as a

amounts under 50 cents and increase

Form 2439, Notice to Shareholder of

whole or for the treatment of any material

amounts from 50 to 99 cents to the next

Undistributed Long-Term Capital Gains,

item). To do so, the REIT generally must

dollar (for example, $1.39 becomes $1

must be completed and a copy given to

file Form 3115, Application for Change in

and $2.50 becomes $3).

each shareholder for whom the REIT paid

Accounting Method. See Form 3115 and

If two or more amounts must be added

tax on undistributed net long-term capital

Pub. 538, Accounting Periods and

to figure the amount to enter on a line,

gains under section 857(b)(3)(D).

Methods, for more information.

include cents when adding the amounts

Form 3520, Annual Return To Report

There are some instances when the

and round off only the total.

Transactions With Foreign Trusts and

REIT can obtain automatic consent from

Receipt of Certain Foreign Gifts, is

the IRS to change to certain accounting

Recordkeeping

required either if the REIT received a

methods. See Rev. Proc. 2008-52,

distribution from a foreign trust or if the

Keep the REIT’s records for as long as

2008-36 I.R.B. 587, and Rev. Proc.

REIT was a grantor of, transferor of, or

they may be needed for the

2009-39, 2009-38 I.R.B. 371.

transferor to a foreign trust that existed

administration of any provision of the

Section 481(a) adjustment. The

during the tax year. See Question 5 of

Internal Revenue Code. Usually, records

REIT may have to make an adjustment

Schedule N (Form 1120).

that support an item of income, deduction,

under section 481(a) to prevent amounts

or credit on the return must be kept for 3

Form 5471, Information Return of U.S.

of income or expenses from being

years from the date the return is due or

Persons With Respect to Certain Foreign

duplicated or omitted. This is referred to

filed, whichever is later. Keep records that

Corporations, is required if the REIT

as a “section 481(a) adjustment.” The

verify the REIT’s basis in property for as

controls a foreign corporation; acquires,

section 481(a) adjustment period is

long as they are needed to figure the

disposes of, or owns 10% or more in

generally 1 year for a net negative

basis of the original or replacement

value or vote of the outstanding stock of a

adjustment and 4 years for a net positive

property.

foreign corporation; or had control of a

adjustment. However, a REIT can elect to

foreign corporation for an uninterrupted

The REIT should also keep copies of

use a 1-year adjustment period if the net

period of at least 30 days during the

all filed returns. They help in preparing

section 481(a) adjustment for the change

annual accounting period of the foreign

future and amended returns.

is less than $25,000. The REIT must

corporation. See Question 4 of Schedule

complete the appropriate lines of Form

Other Forms That May Be

N (Form 1120).

3115 to make the election. Also, under

Form 5472, Information Return of a 25%

Required

certain other conditions, the REIT can

Foreign-Owned U.S. Corporation or a

modify the period for taking into account a

In addition to Form 1120-REIT, the REIT

Foreign Corporation Engaged in a U.S.

net positive section 481 adjustment. See

may have to file some of the following

Trade or Business. This form is filed if the

Rev. Proc. 2007-67, 2007-48 I.R.B. 1072.

forms. Also see Pub. 542, Corporations,

REIT is 25% or more foreign owned. See

for an expanded list of forms the REIT

Note. Include any net positive section

the instructions for Question 5, Schedule

may be required to file.

481(a) adjustment on page 1, line 7.

K, on page 15.

Report any negative adjustment on page

Form 926, Return by a U.S. Transferor

Form 8275, Disclosure Statement, and

1, line 18.

of Property to a Foreign Corporation, is

Form 8275-R, Regulation Disclosure

filed to report certain transfers to foreign

Statement, are used to disclose items or

Accounting Period

corporations under section 6038B.

positions taken on a tax return that are

Form 966, Corporate Dissolution or

not otherwise adequately disclosed on a

A REIT must figure its taxable income on

Liquidation, is used to report the adoption

tax return or that are contrary to Treasury

the basis of a tax year. A tax year is the

of a resolution or plan to dissolve the

regulations (to avoid parts of the

annual accounting period a REIT uses to

corporation or liquidate any of its stock.

accuracy-related penalty or certain

keep its records and report its income and

preparer penalties).

expenses. A REIT adopts a tax year

Form 976, Claim for Deficiency

when it files its first income tax return. It

Dividends Deductions by a Personal

Form 8300, Report of Cash Payments

must adopt a tax year by the due date

Holding Company, Regulated Investment

Over $10,000 Received in a Trade or

(not including extensions) of its initial

Company, or a Real Estate Investment

Business. Use this form to report the

income tax return.

Trust, is used to claim a deduction for

receipt of more than $10,000 in cash or

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Instructions For Form 1120-Reit - 2009 Page 5

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