Instructions For Form 1120-Reit - 2010 (Page 8 of 17) in pdf

Time for making an election. The

856(d)(8) and 856(d)(9). Also, see Rev.

To make the election, attach a

Proc. 2003-66, 2003-33 I.R.B. 364 for the

statement to the REIT’s return for the tax

REIT generally elects to deduct start-up

special rules on rents paid to a REIT by

year in which the applicable reacquisition

or organizational costs by claiming the

certain joint ventures that include a TRS.

occurs. The statement must clearly

deduction on its income tax return filed by

identify the applicable instrument and

the due date (including extensions) for the

See section 856(d)(2) for amounts

include the amount of income to which

tax year in which the active trade or

excluded from “rents from real property.”

the election applies. Once made, the

business begins. However, for start-up or

Line 4. Other gross rents. Enter the

election is irrevocable. For more

organizational costs paid or incurred

gross amount received for renting

information, see section 108(i) and Rev.

before September 9, 2008, the REIT may

property not included on line 3.

Proc. 2009-37, 2009-36 I.R.B. 309.

be required to attach a statement to its

Line 5. Capital gain net income. Every

return to elect to deduct such costs. See

Deductions

sale or exchange of a capital asset must

Temporary Regulations sections

be reported in detail on Schedule D (Form

1.195 – 1T and 1.248 – 1T for details.

Limitations on Deductions

1120), Capital Gains and Losses, even if

If the REIT timely filed its return for the

there is no gain or loss.

Section 263A uniform capitalization

year without making an election, it can

Line 7. Other income. Enter any other

rules. The uniform capitalization rules of

still make an election by filing an

taxable income not reported on lines 1

section 263A generally require REITs to

amended return within 6 months of the

through 6, except amounts that must be

capitalize certain costs directly or

due date of the return (excluding

reported in Part II or IV. List the type and

indirectly (including taxes) allocable to

extensions). Clearly indicate the election

amount of income on an attached

real or tangible personal property

on the amended return and write “Filed

schedule. If the REIT has only one item of

constructed or improved by the REIT.

pursuant to section 301.9100-2” at the top

other income, describe it in parentheses

of the amended return. File the amended

For more details on the uniform

on line 7. Examples of other income to

return at the same address the REIT filed

capitalization rules, see Regulations

report on line 7 are:

its original return. The election applies

•

sections 1.263A-1 through 1.263A-3. See

Amounts received or accrued as

when figuring taxable income for the

Regulations section 1.263A-4 for rules for

consideration for entering into

current tax year and all subsequent years.

property produced in a farming business.

agreements to make real property loans

or to purchase or lease real property.

Note. The REIT can choose to forgo the

Transactions between related

•

Recoveries of bad debts deducted in

elections above by clearly electing to

taxpayers. Generally, an accrual basis

prior years under the specific charge-off

capitalize its start-up or organizational

taxpayer may only deduct business

method.

costs on an income tax return filed by the

expenses and interest owed to a related

•

Refunds of taxes deducted in prior

due date (Including extensions) for the tax

party in the year the payment is included

years if they reduced income subject to

year in which the active trade or business

in the income of the related party. See

tax in the year deducted (see section

begins.

sections 163(e)(3), 163(j), and 267 for

111). Do not offset current year taxes

limitations on deductions for unpaid

Report the deductible amount of such

against tax refunds.

interest and expenses.

costs and any amortization on line 18. For

•

Any deduction previously taken under

amortization that begins during the 2010

Also see the Instructions for Form

section 179A that is subject to recapture.

tax year, complete and attach Form 4562.

8926, Disqualified Corporate Interest

The REIT must recapture the benefit of

Expense Disallowed Under Section 163(j)

any allowable deduction for clean-fuel

For more details on business start-up

and Related Information, with respect to

vehicle property (or clean-fuel vehicle

and organizational costs, see Pub. 535,

section 163(j).

refueling property), if the property later

Business Expenses.

ceases to qualify. See Regulations

Golden parachute payments. A portion

Passive activity limitations. Limitations

section 1.179A-1 for details.

of the payments made by a REIT to key

•

on passive activity losses and credits (for

Ordinary income from trade or business

personnel that exceeds their usual

the first tax year as a REIT) under section

activities of a partnership (from Schedule

compensation may not be deductible.

469 apply to REITs that are closely held

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

This occurs when the REIT has an

(as defined in section 856(h)). REITs

ordinary losses against ordinary income.

agreement (golden parachute) with these

subject to the passive activity limitations

Instead, include the losses on line 18,

key employees to pay them these

must complete Form 8810 to compute

Form 1120-REIT). Show the partnership’s

excessive amounts if control of the REIT

their allowable passive activity loss and

name, address, and EIN on a separate

changes. See section 280G and

credit. Before completing Form 8810, see

statement attached to this return. If the

Regulations section 1.280G-1. Also see

Temporary Regulations section 1.163-8T,

amount entered is from more than one

the instructions for line 9.

for rules on allocating interest expense

partnership, identify the amount from

Business start-up and organizational

among activities.

each partnership.

•

costs. A REIT can elect to deduct up to

Income from discharge of indebtedness

Reducing certain expenses for which

$5,000 of business start-up and up to

for the repurchase of a debt instrument

credits are allowable. For each credit

$5,000 of organizational costs paid or

for less than its adjusted issue price.

listed below, the REIT must reduce the

incurred after October 22, 2004. Any

However, for a reacquisition of an

otherwise allowable deductions for

remaining cost must be amortized. The

applicable debt instrument after

expenses used to figure the credit by the

$5,000 deduction is reduced (but not

December 31, 2008, and before January

amount of the current year credit. Do not

below zero) by the amount the total costs

1, 2011, a REIT can elect, under section

reduce the amount of the allowable

exceed $50,000. If the total costs are

108(i), to defer the income from discharge

deduction for any portion of the credit that

$55,000 or more, the deduction is

of indebtedness in connection with the

was passed through to the REIT from a

reduced to zero. See sections 195(b) and

election. If the REIT makes the election,

pass-through entity on Schedule K-1.

248(a),

the income is deferred and ratably

•

Employment credits. See the

included in income over the 5-year period

Special rule for 2010 start-up costs.

instructions for line 10.

beginning with:

•

For a tax year beginning in 2010, a REIT

Disabled access credit.

•

1. For a reacquisition occurring in

can elect to deduct up to $10,000 of

Employer credit for social security and

2009, the fifth tax year following the tax

business start-up costs paid or incurred

Medicare taxes paid on certain employee

year in which the reacquisition occurs,

after December 31, 2009. The $10,000

tips.

•

and

deduction is reduced (but not below zero)

Credit for small employer pension plan

2. For a reacquisition occurring in

by the amount such start-up costs exceed

start-up costs.

•

2010, the fourth tax year following the tax

$60,000. Any remaining costs must be

Credit for employer-provided childcare

year in which the reacquisition occurs.

amortized. See section 195(b)(3).

facilities and services.

-8-

Instructions For Form 1120-Reit - 2010 Page 8

Related Articles

Related forms

Related Categories