Instructions For Form 1120-Reit - 2010 (Page 12 of 17) in pdf

Backup withholding. If the REIT had

years. Although the current year NOL is

This election must be made by the

computed without regard to the dividends

income tax withheld from any payments it

due date for filing Form 1120-REIT

paid deduction, an NOL carryover from a

received because, for example, it failed to

(including extensions). To make the

prior year is applied to the current year

give the payer its correct EIN, include the

election, attach a statement that:

•

using taxable income after it is reduced

amount withheld in the total for line 24h.

Indicates that the election under

by the dividends paid deduction. The NOL

Enter the amount withheld and the words

section 856(e) is being made;

•

amounts carried forward by the REIT are

“Backup Withholding.” in the blank space

Identifies the property to which the

not reduced by subsequent year

above line 24h.

election applies;

•

dividends paid deductions. See Example

Includes the name, address, and EIN of

Line 25. Estimated tax penalty. A REIT

1 in Regulations section 1.172-5(a)(4).

the REIT, the date the property was

that does not make estimated tax

acquired, and a brief description of how

payments when due may be subject to an

Special NOL rules apply when:

the property was acquired (including the

underpayment penalty for the period of

•

An ownership change (described in

name of the person from whom the

underpayment. Generally, a REIT is

section 382(g)) occurs, the amount of the

property was acquired); and

subject to the penalty if its tax liability is

•

taxable income of a loss REIT that may

Gives a description of the lease or debt

$500 or more and it did not timely pay the

be offset by the pre-change NOL

with respect to which default occurred or

smaller of:

carryovers is limited (see section 382 and

•

was imminent.

Its alternative minimum tax minus the

the related regulations). A loss REIT must

credit for federal tax paid on fuels for

The REIT can revoke the election by

file an information statement with its

2010 as shown on the return or

filing a revocation on or before the due

income tax return for each tax year that

•

Its prior year’s tax (computed in the

date (including extensions) for filing Form

certain ownership shifts occur (see

same manner). See section 6655 for

1120-REIT. See section 856(e) for more

Temporary Regulations section

details and exceptions, including special

details.

1.382-2T(a)(2)(ii) for details). See

rules for large corporations.

Line 2. Gross income from foreclosure

Regulations section 1.382-6(b) for details

Use Form 2220, Underpayment of

property. Do not include income that

on how to make the closing-of-the-books

Estimated Tax by Corporations, to

qualifies under the REIT’s 75% gross

election.

determine whether the REIT owes a

•

income test under section 856(c)(3)(A),

A REIT acquires control of another

penalty and to figure the amount of the

(B), (C), (D), (E), or (G). These amounts

REIT (or acquires its assets in a

penalty. Generally, the REIT does not

must be reported in Part I.

reorganization), the amount of

have to file this form because the IRS can

pre-acquisition losses that may offset

Line 4. Deductions. Deduct only those

figure the amount of any penalty and bill

recognized built-in gains is limited (see

expenses that have a proximate and

the REIT for it. However, even if it does

section 384).

primary relationship to earning the income

not owe the penalty, the REIT must

shown on line 3. This includes:

Tax and Payments

complete and attach Form 2220 if the

•

Depreciation on foreclosure property;

annualized income or adjusted seasonal

•

Interest paid or accrued on debt of the

Line 24b. Estimated tax payments.

installment method is used, or the REIT is

Enter any estimated tax payments the

REIT that is attributable to the carrying of

a large corporation computing its first

the property;

REIT made for the tax year.

required installment based on the prior

•

Real estate taxes; and

Line 24f(1). Enter the credit (from Form

year’s tax. See the Instructions for Form

•

Fees charged by an independent

2439) for the REIT’s share of the tax paid

2220 for the definition of a “large

contractor to manage such property.

by a regulated investment company (RIC)

corporation.”

Do not deduct general overhead and

or another REIT on undistributed

If Form 2220 is attached, check the

administrative expenses in Part II.

long-term capital gains included in the

box on this line and enter the amount of

REIT’s income. Attach Form 2439 to

any penalty.

Form 1120-REIT.

Part III—Tax for Failure To

Line 24f(2). Enter the credit from Form

Part II—Tax on Net Income Meet Certain

4136, Credit for Federal Tax Paid on

Fuels, if the REIT qualifies to claim this

From Foreclosure Property Source-of-Income

credit. Attach Form 4136 to Form

Complete Part II only if the gross income,

1120-REIT.

Requirements

gains, losses, and deductions from

Line 24g. Refundable Credits From

Section 856(c)(6) provides REITs with a

foreclosure property (defined in section

Forms 3800 and 8827. If the REIT

relief provision if they have failed to

856(e)) result in net income. If an overall

elected to claim certain unused research

satisfy the source-of-income requirements

net loss results, report the gross income,

or minimum tax credits instead of claiming

of sections 856(c)(2) and 856(c)(3). If

gains, losses, and deductions from

any additional first-year special

section 856(c)(6) applies to a REIT for

foreclosure property on the appropriate

depreciation allowance for eligible

any taxable year, a tax is imposed on the

lines of Part I.

property, see the instructions for Forms

REIT under section 857(b)(5).

Property may be treated as foreclosure

3800 and 8827. Enter on line 24g the

All REITs must complete lines 1a

property only if it meets the requirements

amounts from line 19c of Form 3800 and

through 8 of Part III to determine whether

of section 856(e) and the REIT elects to

line 8c of Form 8827, if applicable. See

they are subject to the tax imposed under

treat the property as foreclosure property

the instructions for these forms for more

section 857(b)(5). If line 8 is zero, the tax

in the year it was acquired. The property

information.

does not apply, and the REIT does not

continues to be foreclosure property until

The REIT must use the refundable

have to complete the rest of Part III.

the close of the 3rd tax year following the

credits from Forms 3800 and 8827

However, if line 8 is greater than zero, the

tax year in which the REIT acquired it. For

to reduce any built-in gains tax

REIT is subject to this tax, and must

more information, see section 856(e).

CAUTION

derived from property that it owned when

complete the rest of Part III to determine

However, if the foreclosure property is

it was a C corporation, before the credits

the amount of tax.

qualified health care property, it will cease

can be used to reduce the REIT’s income

to be foreclosure property as of the close

A REIT that has failed the

tax. See the instructions for line h of the

of the 2nd year following the tax year the

source-of-income requirements of

Built-in Gains Tax Worksheet Instructions

REIT acquired it (although the REIT may

sections 856(c)(2) and 856(c)(3) may

beginning on page 15.

request one or more extensions to this

avoid loss of its REIT status as a result of

Line 24h. Add the amounts on lines 24d

2-year grace period not to extend beyond

the failure if, following identification of its

through 24g and enter the total on line

the 6th year). See section 856(e)(6) for

failure to meet the source-of-income

24h.

details.

requirements, the REIT sets forth a

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Instructions For Form 1120-Reit - 2010 Page 12

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