Instructions For Form 1120-Ric - U.s. Income Tax Return For Regulated Investment Companies - 2006 Page 11

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qualified electric vehicle placed in
entered on line 6. Check the box for
RIC elections and property transfers
service in 2006.
“Other” if the RIC includes any of the
before this date, the C corporation is
taxes and interest discussed below.
subject to deemed sale treatment on
Line 3c–General Business
See How to report, below, for details on
the transferred property unless the RIC
Credit
reporting these amounts on an
elects section 1374 treatment. See
attached schedule.
Regulations section 1.337(d)-6 for
Enter on line 3c the RIC’s total general
information on how to make the
1. Recapture of qualified electric
business credit.
election and figure the tax for RIC
vehicle credit. The RIC must recapture
If the RIC is filing Form 8844,
elections and property transfers before
part of the QEV credit it claimed in a
Empowerment Zone and Renewal
this date. The RIC may also rely on
prior year if, within 3 full years of the
Community Employment Credit, check
Regulations section 1.337(d)-5 for RIC
date the vehicle was placed in service,
the “Form(s)” box, enter 8844 in the
elections and property transfers that
it ceases to qualify for the credit. See
space provided, and include the
occurred before January 2, 2002.
Regulations section 1.30-1 for details
allowable credit on line 3c.
on how to figure the recapture.
Worksheet instructions. Complete
If the RIC is required to file Form
2. Recapture of Indian employment
the worksheet on page 12 to figure the
3800, General Business Credit, check
credit. Generally, if an employer
built-in gains tax under Regulations
the “Form 3800” box and include the
terminates the employment of a
section 1.337(d)-7 or 1.337(d)-6.
allowable credit on line 3c. If the RIC is
qualified employee less than 1 year
not required to file Form 3800, check
Line a. Enter the amount that would
after the date of initial employment, any
the “Form(s)” box, write the form
be the taxable income of the RIC for
Indian employment credit allowed for a
number in the space provided, and
the tax year if only recognized built-in
prior tax year because of wages paid or
include on line 3c the allowable credit
gain, recognized built-in loss, and
incurred to that employee must be
from the applicable form.
recognized built-in gain carryover were
recaptured. For details, see Form 8845
taken into account.
and section 45A.
Line 3d–Other Credits
3. Recapture of new markets credit
Line b. Add the amounts shown on
Minimum tax credit. To figure the
(see Form 8874 and Regulations
page 1, line 24; Part II, line 1; and Form
minimum tax credit and any
section 1.45D-1(e) for details).
2438, line 11. For this purpose, refigure
carryforward of that credit, use Form
4. Recapture of employer-provided
line 24 on page 1 without regard to any
8827, Credit for Prior Year Minimum
childcare facilities and services credit
election under section 852(b)(2)(F).
Tax — Corporations.
(see Form 8882 and section 45F(d) for
Enter the result on line b of the
details).
worksheet.
Line 5– Personal Holding
5. Interest due on deferred gain
Line c. The RIC’s net unrealized
Company Tax
recognition (section 1260(b)).
built-in gain is the amount, if any, by
A RIC is taxed as a personal holding
which the FMV of the assets of the RIC
How to report. If the RIC checked the
company under section 542 if:
at the beginning of its first RIC year (or
“Other” box, attach a schedule showing
At least 60% of its adjusted ordinary
as of the date the assets were
the computation of each item included
gross income for the tax year is
acquired, for any asset with a basis
in the total for line 6, Schedule J;
personal holding company income, and
determined by reference to its basis (or
identify the applicable code section and
At any time during the last half of the
the basis of any other property) in the
the type of tax or interest.
tax year more than 50% in value of its
hands of a C corporation) exceeds the
Built-in gains tax. (See worksheet).
outstanding stock is owned, directly or
aggregate adjusted basis of such
If, on or after January 2, 2002, property
indirectly, by five or fewer individuals.
assets at that time.
of a C corporation becomes property of
See the Instructions for Schedule PH
a RIC by either (a) the qualification of
Enter on line c the net unrealized
(Form 1120), U.S. Personal Holding
the C corporation as a RIC or (b) the
built-in gain reduced by the net
Company (PHC) Tax, for definitions
transfer of such property to a RIC, then
recognized built-in gain for prior years.
and details on how to figure the tax.
the RIC will be subject to the built-in
See sections 1374(c)(2) and (d)(1).
gains tax under section 1374 unless the
Line 6–Other Taxes
Line d. If the amount on line b
C corporation elects deemed sale
exceeds the amount on line a, the
Include any of the following taxes and
treatment on the transferred property. If
excess is treated as a recognized
interest in the total on line 6. Check the
the C corporation does not make this
built-in gain in the succeeding tax year.
appropriate box(es) for the form, if any,
election, the RIC must pay tax on the
used to compute the total.
Line e. Enter the section 1374(b)(2)
net recognized built-in gain during the
Recapture of Investment Credit. If
deduction. Generally, this is any net
10-year period beginning on its first day
the RIC disposed of investment credit
operating loss or capital loss
as a RIC or the day it acquired the
property or changed the property’s use
carryforward (to the extent of net capital
property. Recognized built-in gains and
before the end of its useful life or
gain included in recognized built-in gain
losses generally retain their character
recovery period, it may owe a tax. See
for the tax year) arising in tax years for
(for example, ordinary income or capital
Form 4255, Recapture of Investment
which the RIC was a C corporation. A
gain) and are treated the same as other
Credit, for details.
capital loss carryforward must be used
gains or losses of the RIC. The RIC’s
to reduce recognized built-in gain for
tax on net recognized built-in gain is
Recapture of Low-Income Housing
the tax year to the greatest extent
treated as a loss sustained by the RIC
Credit. If the RIC disposed of property
possible before it can be used to
(or there was a reduction in the
after October 31 of the same tax year
reduce the investment company taxable
qualified basis of the property) for which
(see the instructions for line i of the
income.
Built-in Gains Tax Worksheet on page
it took the low-income housing credit, it
12). See Regulations section 1.337(d)-7
may owe a tax. See Form 8611,
Line h. Credit carryforwards arising
Recapture of Low-Income Housing
for details.
in tax years for which the RIC was a C
Credit, and IRC section 42(j)(1) for
Different rules apply to elections to
corporation must be used to reduce the
more information.
be a RIC and to transfers of property in
tax on net built-in gain for the tax year
Other. Additional tax and interest
a carryover basis transaction that
to the greatest extent possible before
amounts can be included in the total
occurred prior to January 2, 2002. For
the credit carryforwards can be used to
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