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have amended its articles of incorporation

Capital Loss. Enter the amount from

This occurs when the RIC has an

and filed the amendment with the state in

Schedule D (Form 1120), line 12. Every

agreement (golden parachute) with key

which it was incorporated.

sale or exchange of a capital asset must

employees to pay them an amount

•

If the RIC has changed its address

be reported in detail on Schedule D (Form

substantially in excess of their base

since it last filed a return (including a

1120), even if no gain or loss is indicated.

amount if control of the RIC changes. See

change to an “in care of” address), check

section 280G and Regulations section

Line 7. Other Income. Enter any other

the “Address change” box.

1.280G-1 for more information. Also, see

taxable income (loss) not reported on

the instructions for line 9.

lines 1 through 6, except net capital gain

Note. If a change in address occurs after

Business start-up and organizational

reported in Part II. List the type and

the return is filed, use Form 8822,

costs. For business start-up and

Change of Address, to notify the IRS of

amount of income on an attached

organizational costs paid or incurred after

schedule. If the RIC has only one item of

the new address.

September 8, 2008, a RIC can deduct up

other income, describe it in parentheses

Amended return. If the RIC is amending

to $5,000 of such costs for the year it

on line 7. Examples of other income to

its return, check the box for “Amended

begins business (unless the RIC elects to

report on line 7 include:

return,” complete the entire return, correct

•

capitalize all such costs). The $5,000

Gross rents.

the appropriate lines with the new

•

deduction is reduced by the amount the

Recoveries of fees or expenses in

information, and refigure the RIC’s tax

total costs exceed $50,000. If the total

settlement or litigation.

liability. Attach a statement that explains

•

costs are $55,000 or more, the deduction

Amounts received or accrued as

the reason for the amendments and

is reduced to zero. Any cost not deducted

consideration for entering into

identifies the lines being changed on the

must be amortized ratably over a

agreements to make real property loans

amended return.

180-month period, beginning with the

or to purchase or lease real property.

•

month the corporation begins business.

Recoveries of bad debts deducted in

The RIC is not required to attach a

prior years under the specific charge-off

Part I—Investment

statement or specifically identify the

method.

•

amount deducted in order for the election

Refunds of taxes deducted in prior

Company Taxable Income

to be effective. The RIC can choose to

years to the extent they reduced income

forgo the deduction and instead elect to

subject to tax in the year deducted (see

Income

capitalize all such costs. The election to

section 111). Do not offset current year

Line 1. Dividends. A RIC that is the

deduct or capitalize costs is irrevocable.

taxes against prior year tax refunds.

•

holder of record of any share of stock on

See Temporary Regulations sections

The recapture amount under section

the record date for a dividend payable on

1.195-1T and 1.248-1T.

280F if the business use of listed property

that stock must include the dividend in

drops to 50% or less. To figure the

For business start-up and

gross income by the later of: the date the

recapture amount, complete Part IV of

organizational costs paid after October

share became ex-dividend, or the date

Form 4797.

22, 2004, and before September 9, 2008,

•

the RIC acquired the share.

Ordinary income from trade or business

a RIC can elect to deduct up to $5,000 of

activities of a partnership (from Schedule

such costs for the year it begins business

Line 2. Interest. Enter taxable interest

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

(otherwise the RIC must capitalize all

on U.S. obligations and on loans, notes,

ordinary losses against ordinary income.

such costs). The $5,000 deduction is

mortgages, bonds, bank deposits,

Instead, include the losses on line 22.

reduced by the amount the total cost

corporate bonds, tax refunds, etc.

Show the partnership’s name, address,

exceeds $50,000. If the total costs are

Do not offset interest expense against

and EIN on a separate statement

$55,000 or more, the deduction is

interest income. Special rules apply to

attached to this return. If the amount

reduced to zero. Any costs not deducted

interest income from certain

entered is from more than one

must be amortized ratably over a

below-market-rate loans. See section

partnership, identify the amount from

180-month period, beginning with the

7872 for more information on the tax

each partnership.

month the RIC begins business. If the

•

treatment of loans on which inadequate or

Any net positive section 481 income

election is made, the RIC must attach any

no interest is charged.

adjustment. See Form 3115 and its

statements required by Regulations

instructions for more information.

Note. Report tax-exempt interest income

sections 1.195-1(b) and 1.248-1(c).

•

Part or all of the proceeds received

on Schedule K, item 8. Also, if required,

However, the RIC can apply the

from certain corporate-owned life

include the same amount on Schedule

provisions of Temporary Regulations

insurance contracts issued after August

M-1, line 7.

sections 1.195-1T and 1.248-1T to all

17, 2006. See section 101(j) for details.

expenses paid or incurred after October

Include interest income from qualified

22, 2004, provided the period of

Deductions

tax credit bonds on line 2. If the RIC

limitations on assessment has not expired

elects to pass through the credits to

for the year of the election. Otherwise the

Limitations on Deductions

shareholders, see the instructions for

provisions under Regulations sections

Part II, Schedule A, line 6.

Transactions between related

1.195-1(b) and 1.248-1(c) will apply.

Line 3. Net Foreign Currency Gain or

taxpayers. Generally, an accrual basis

For business start-up and organization

(Loss) from Section 988 Transactions.

taxpayer may only deduct business

costs paid or incurred before October 23,

Enter the net foreign currency gain (loss)

expenses and interest owed to a related

2004, a corporation can elect to amortize

from section 988 transactions treated as

party in the year the payment is includible

such costs over a period of 60-months or

ordinary income or loss under section

in the income of the related party. See

more.

988(a)(1)(A). Attach a schedule detailing

section 267 for limitations on deductions

Report the deductible amount of such

each separate transaction.

for interest and expenses paid to a

costs and any amortization on line 22. For

related party.

Line 4. Payments with respect to

amortization that begins during the 2008

securities loans. Enter the amount

Also see the instructions for Form

tax year, complete and attach Form 4562.

received or accrued from a broker as

8926, Disqualified Corporate Interest

For more details on business start-up and

compensation for securities loaned by the

Expense Disallowed Under Section 163(j)

organizational costs, see Pub. 535.

RIC to the broker for use in completing

and Related Information, with respect to

Section 265(a)(3) limitation. If the RIC

market transactions. The payments must

section 163(j).

paid exempt-interest dividends during the

meet the requirements of section

Golden parachute payments. A portion

tax year (including those dividends

512(a)(5).

of the payments made by a RIC to key

deemed paid under section 855), no

Line 5. Excess of Net Short-Term

personnel that exceeds their usual

deduction is allowed for that portion of

Capital Gain Over Net Long-Term

compensation may not be deductible.

otherwise deductible expenses allocable

-7-

Instructions For Form 1120-Ric - U.s. Income Tax Return For Regulated Investment Companies Page 7

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