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Line e. Enter the section 1374(b)(2)

tax or interest, and (b) the applicable

Note. If there is more than one

deduction. Generally, this is any net

Code section.

25%-or-more foreign owner, complete

operating loss or capital loss carryforward

lines 5b(1) and 5b(2) for the foreign

Line 7–Total Tax

(to the extent of net capital gain included

person with the highest percentage of

Include any deferred tax on the

in recognized built-in gain for the tax year)

ownership.

termination of a section 1294 election

arising in tax years for which the RIC was

Foreign person. The term “foreign

applicable to shareholders in a qualified

a C corporation. A capital loss

person” includes:

electing fund in the amount entered on

carryforward must be used to reduce

•

A foreign citizen or nonresident alien.

line 7. See Form 8621, Part V, and How

recognized built-in gain for the tax year to

•

An individual who is a citizen of a U.S.

to report, below.

the greatest extent possible before it can

possession (but who is not a U.S. citizen

be used to reduce the RIC’s taxable

Subtract from the total for line 7 the

or resident).

income.

•

deferred tax on the RIC’s share of the

A foreign partnership.

•

undistributed earnings of a qualified

Line h. Credit carryforwards arising in

A foreign corporation.

•

electing fund (see Form 8621, Part II).

tax years for which the RIC was a C

Any foreign estate or trust within the

corporation must be used to reduce the

meaning of section 7701(a)(31).

How to report

•

tax on net built-in gain for the tax year to

A foreign government (or one of its

Attach a schedule showing the

the greatest extent possible before the

agencies or instrumentalities) to the

computation of each item included in, or

credit carryforwards can be used to

extent that it is engaged in the conduct of

subtracted from, the total for line 7. On

reduce the tax on the RIC’s taxable

a commercial activity as described in

the dotted line next to line 7, enter the

income.

section 892.

amount of tax or interest, identify it as tax

Note. The RIC can elect to claim

Owner’s country. For individuals, the

or interest, and specify the Code section

certain unused research and minimum tax

term “owner’s country” means the country

that applies.

credits instead of claiming any additional

of residence. For all others, it is the

first-year special depreciation allowance

country where incorporated, organized,

for eligible qualified property. If the RIC

Schedule K–Other

created, or administered.

makes the election, the unused research

Requirement to file Form 5472. If the

Information

and minimum tax credits must first be

RIC checked “Yes,” it may have to file

used to reduce the tax on net built-in gain

The following instructions apply to

Form 5472, Information Return of a 25%

for the tax year to the greatest extent

questions 1 through 11. Complete all

Foreign Owned U.S. Corporation or a

possible. Any remaining unused research

items that apply.

Foreign Corporation Engaged In a U.S.

and minimum tax credits are included on

Trade or Business. Generally, a 25%

Question 3

line 28h to reduce the RIC’s taxable

foreign-owned corporation that had a

income. For more information, see the

Check the “Yes” box if the RIC is a

reportable transaction with a foreign or

instructions for line 28h. Also see the

subsidiary in a parent-subsidiary

domestic related party during the tax year

Instructions for Forms 3800 and 8827,

controlled group. This applies even if the

must file Form 5472. See Form 5472 for

Rev. Proc. 2008-65, 2008-44 I.R.B. 1082,

RIC is a subsidiary member of one group

filing instructions.

and Rev. Proc. 2009-16, 2009-6 I.R.B.

and the parent corporation of another.

449.

Item 8

Note. If the RIC is an “excluded

Line i. The RIC’s tax on the net

member” of a controlled group (see

Tax-exempt interest. Show any

recognized built-in gain is treated as a

section 1563(b)(2)), it is still considered a

tax-exempt interest received or accrued.

loss sustained by the RIC after October

member of a controlled group for this

Include any exempt-interest dividends

31 of the same tax year. Deduct the tax

purpose.

received as a shareholder in a mutual

attributable to:

•

fund or other RIC.

Question 5

Ordinary gain as a deduction for taxes

on Form 1120-RIC, line 12.

Item 10

Check the “Yes” box if one foreign person

•

Short-term capital gain as a short-term

owned at least 25% of (a) the total voting

Election under section 853(a). A RIC

capital loss on Schedule D (Form 1120),

power of all classes of stock of the RIC

may make an irrevocable election under

line 1.

entitled to vote or (b) the total value of all

•

section 853(a) to allow its shareholders to

Long-term capital gain as a long-term

classes of stock of the RIC.

apply their share of the foreign taxes paid

capital loss on Schedule D (Form 1120),

The constructive ownership rules of

by the RIC either as a credit or a

line 6.

section 318 apply in determining if a RIC

deduction. If the RIC makes this election,

How to Report

is foreign owned. See section 6038A(c)(5)

the amount of foreign taxes it paid during

and the related regulations.

If the RIC checked the “Other” box, enter

the tax year may not be taken as a credit

the tax or interest on line 6, Schedule J.

Enter on line 5b(1) the percentage

or a deduction on Form 1120-RIC, but

Also, attach a schedule, showing the

owned by the foreign person specified in

may be claimed on Form 1120-RIC,

computation of each item included in the

question 5. For line 5b(2), enter the name

Schedule A, line 5, as an addition to the

total for line 6, and identify (a) the type of

of the owner’s country.

dividends-paid deduction.

Built-in Gains Tax Worksheet (keep for your records)

Excess of recognized built-in gains over recognized built-in losses . . . . . . . . . . . . . . . . . . . . . . . a.

b. Taxable income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b.

Enter the net unrealized built-in gain reduced by any net recognized built-in gain for all prior years c.

d. Net recognized built-in gain (enter the smallest of lines a, b, or c) . . . . . . . . . . . . . . . . . . . . . . . d.

Section 1374(b)(2) deduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e.

Subtract line e from line d. If zero, enter -0- here and on line i . . . . . . . . . . . . . . . . . . . . . . . . . . . f.

g. Enter 35% of line f . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . g.

h. Business credit and minimum tax credit carryforwards under section 1374(b)(3) from C corporation

(see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . h.

Tax. Subtract line h from line g (if zero or less, enter -0-). Enter here and include on line 6 of

Schedule J (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i.

-12-

Instructions For Form 1120-Ric - U.s. Income Tax Return For Regulated Investment Companies Page 12

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