Instructions For Form 1120-Reit - 2006 (Page 2 of 13) in pdf

General Instructions

Where To File

Purpose of Form

File the REIT’s return at the applicable IRS address listed below.

Use Form 1120-REIT, U.S. Income Tax Return

for Real Estate Investment Trusts, to report the

If the REIT’s principal

And the total assets at the

Use the following Internal

income, gains, losses, deductions, credits, and

business, office, or agency

end of the tax year (Form

Revenue Service Center

to figure the income tax liability of a REIT.

is located in:

1120-REIT, page 1, item E)

address:

are:

Who Must File

Connecticut, Delaware, District

A corporation, trust, or association that meets

of Columbia, Illinois, Indiana,

certain conditions (discussed below) must file

Kentucky, Maine, Maryland,

Form 1120-REIT if it elects to be treated as a

Massachusetts, Michigan, New

Less than $10 million

Cincinnati, OH 45999-0012

REIT for the tax year (or has made that

Hampshire, New Jersey, New

election for a prior tax year and the election

has not been terminated or revoked). The

York, North Carolina, Ohio,

election is made by figuring taxable income as

Pennsylvania, Rhode Island,

a REIT on Form 1120-REIT.

South Carolina, Vermont,

Virginia, West Virginia,

$10 million or more

Ogden, UT 84201-0012

General Requirements To

Wisconsin

Qualify as a REIT

Alabama, Alaska, Arizona,

Arkansas, California, Colorado,

To qualify as a REIT, an organization:

•

Florida, Georgia, Hawaii,

Must be a corporation, trust, or association.

•

Idaho, Iowa, Kansas,

Must be managed by one or more trustees

Louisiana, Minnesota,

or directors.

•

Mississippi, Missouri, Montana,

Any amount

Must have beneficial ownership: (a)

Ogden, UT 84201-0012

Nebraska, Nevada, New

evidenced by transferable shares, or by

Mexico, North Dakota,

transferable certificates of beneficial interest;

and (b) held by 100 or more persons. (The

Oklahoma, Oregon, South

REIT does not have to meet this requirement

Dakota, Tennessee, Texas,

until its 2nd tax year.)

Utah, Washington, Wyoming

•

Would otherwise be taxed as a domestic

corporation.

A foreign country or U.S.

•

Any amount

P.O. Box 409101

Must be neither a financial institution

possession

(referred to in section 582(c)(2)), nor a

Ogden, UT 84409

subchapter L insurance company.

•

Cannot be closely held, as defined in section

A group of corporations with members located in more than one service center area will often

856(h). (The REIT does not have to meet this

keep all the books and records at the principal office of the managing corporation. In this case, the

requirement until its 2nd tax year).

tax returns of the corporations may be filed with the service center for the area in which the

If a REIT meets the requirement for

principal office of the managing corporation is located.

ascertaining actual ownership (see Regulations

section 1.857-8 for details), and did not know

REIT or a qualified REIT subsidiary) and may

Termination of Election

(after exercising reasonable diligence), or have

provide services to the REIT’s tenants without

reason to know, that it was closely held, it will

The election to be treated as a REIT remains in

disqualifying the rent received by the REIT.

be treated as meeting the requirement that it is

effect until terminated, revoked, or the REIT

See section 856(l) for details, including certain

not closely held.

has failed to meet the requirements of the

restrictions on the type of business activities a

statutory relief provisions. It terminates

TRS may perform. Also, not more than 20% of

automatically for any tax year in which the

Other Requirements

the fair market value (FMV) of a REIT’s total

corporation, trust, or association is not a

assets may be securities of one or more TRSs

•

The gross income and diversification of

qualified REIT.

(see section 856(c)(4) for details).

investment requirements of section 856(c)

The organization may revoke the election

Transactions between a TRS and its

must be met.

•

for any tax year after the 1st tax year the

The organization must:

associated REIT must be at arm’s length. A

election is effective by filing a statement with

REIT may be subject to a 100% tax to the

1. Have been treated as a REIT for all tax

the service center where it files its income tax

extent it improperly allocates income and

years beginning after February 28, 1986, or

return. The statement must be filed on or

deductions between the REIT and the TRS

2. Had, at the end of the tax year, no

before the 90th day after the 1st day of the tax

(see section 857(b)(7) for details). Additional

accumulated earnings and profits from any tax

year for which the revocation is to be effective.

limitations on transactions between a TRS and

year that it was not a REIT.

The statement must include the following:

its associated REIT include:

For this purpose, distributions are treated

•

The name, address, and employer

Limitations on income from a TRS that may

as made from the earliest earnings and profits

identification number of the organization;

be treated as rents from real property by the

accumulated in any non-REIT tax year. See

•

The tax year for which the election was

REIT (see section 856(d)(8)).

section 857(d)(3).

•

made;

•

Limitations on a TRS’s deduction for interest

The organization must adopt a calendar tax

•

A statement that the organization (according

paid to its associated REIT (see section

year unless it first qualified for REIT status

to section 856(g)(2)) revokes its election under

163(j)).

before October 5, 1976.

section 856(c)(1) to be a REIT; and

•

The deduction for dividends paid (excluding

•

To elect to have an eligible corporation

The signature of an official authorized to sign

net capital gain dividends, if any) must equal or

treated as a TRS, the corporation and the REIT

the income tax return of the organization.

exceed:

must jointly file Form 8875, Taxable REIT

The organization may not make a new

1. 90% of the REIT’s taxable income

Subsidiary Election.

election to be taxed as a REIT during the 4

(excluding the deduction for dividends paid and

years following the 1st year for which the

any net capital gain); plus

When To File

termination or revocation is effective. See

2. 90% of the excess of the REIT’s net

section 856(g)(4) for exceptions.

Generally, a REIT must file its income tax

income from foreclosure property over the tax

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

imposed on that income by section

Taxable REIT Subsidiaries

the end of its tax year. A new REIT filing a

857(b)(4)(A); less

short period return must generally file by the

3. Any excess noncash income as

(TRS)

15th day of the 3rd month after the short period

determined under section 857(e).

A REIT may own up to 100% of the stock in

ends. A REIT that has dissolved must

See sections 856 and 857, and the related

one or more taxable REIT subsidiaries (TRS).

generally file by the 15th day of the 3rd month

regulations for details and exceptions.

A TRS must be a corporation (other than a

after the date it dissolved.

-2-

Instructions For Form 1120-Reit - 2006 Page 2

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