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source. Section 29 contains a definition of

Line 6–Personal Holding

transferred property in a carryover basis

qualified fuels, provisions for figuring the

transaction to a REIT on or after January

Company Tax

credit, and other special rules. Attach a

2, 2002, the REIT is subject to the built-in

A REIT is taxed as a personal holding

separate schedule to the return showing

gains tax under section 1374 unless the

company under section 542 if:

the computation of the credit.

C corporation elects deemed sale

•

At least 60% of its adjusted ordinary

treatment on the transferred property. If

gross income for the tax year is personal

Qualified electric vehicle credit. Use

the C corporation does not make this

holding company income, and

Form 8834, Qualified Electric Vehicle

election, the REIT must pay tax on any

•

At any time during the last half of the

Credit, if the corporation can claim a

built-in gain during the 10-year period

tax year more than 50% in value of its

credit for the purchase of a new qualified

beginning on its first day as a REIT or the

outstanding stock is owned, directly or

electric vehicle. Vehicles that qualify for

day it acquired the assets in a carryover

indirectly, by five or fewer individuals.

this credit are not eligible for the

basis transaction. Recognized built-in

See Schedule PH (Form 1120), U.S.

deduction for clean-fuel vehicles under

gains and losses on which a REIT pays

Personal Holding Company (PHC) Tax,

section 179A.

tax generally retain their character (e.g.,

for definitions and details on how to figure

ordinary income or capital gain) and are

Line 4c–General Business

the tax.

treated the same as other gains or losses

Credit

Line 7–Other Taxes

of the REIT. The REIT’s tax on net

Enter on line 4c the REIT’s total general

recognized built-in gain is treated as a

Include any of the following taxes and

business credit.

loss sustained by the REIT during the

interest in the total on line 7. Check the

same tax year (see the instructions for

appropriate box(es) for the form, if any,

If the REIT is filing Form 8844,

line i of the Built-in Gains Tax

used to compute the total.

Empowerment Zone and Renewal

Worksheet. See Temporary Regulations

Community Employment Credit, or Form

Recapture of Investment Credit

section 1.337(d)-7T for details.

8884, New York Liberty Zone Business

If the REIT disposed of investment credit

Different rules apply to elections to be

Employee Credit, check the “Form(s)”

property or changed its use before the

a REIT and transfers of property in a

box, write the form number in the space

end of its useful life or recovery period, it

carryover basis transaction that occurred

provided, and include the allowable credit

may owe a tax. See Form 4255,

prior to January 2, 2002. For REIT

on line 4c.

Recapture of Investment Credit.

elections and property transfers before

If the REIT is required to file Form

this date, the C corporation is subject to

Recapture of Low-Income Housing

3800, General Business Credit, check the

deemed sale treatment on the transferred

Credit

“Form 3800” box and include the

property unless the REIT elects to pay tax

If the REIT disposed of property (or there

allowable credit on line 4c. If the REIT is

on the built-in gain during the 10-year

was a reduction in the qualified basis of

not required to file Form 3800, check the

period. See Temporary Regulations

the property) for which it took the

“Form(s)” box, write the form number in

section 1.337(d)-6T for information on

low-income housing credit, it may owe a

the space provided, and include on line

how to make the election and figure the

tax. See Form 8611, Recapture of

4c the allowable credit from the applicable

tax for REIT elections and property

Low-Income Housing Credit.

form listed below.

transfers before this date. The REIT may

•

Investment Credit (Form 3468).

Other

also rely on Temporary Regulations

•

Work Opportunity Credit (Form 5884).

section 1.337(d)-5T for REIT elections

Additional taxes and interest amounts

•

Credit for Alcohol Used as Fuel (Form

and property transfers that occurred

may be included in the total entered on

6478).

before January 2, 2002.

line 7. Check the box for “Other” if the

•

Credit for Increasing Research

REIT includes any of the taxes and

Worksheet instructions. Complete

Activities (Form 6765).

interest discussed below. See How to

the worksheet on page 14 to figure the

•

Low-Income Housing Credit (Form

report, on page 14, for details on

built-in gains tax under Temporary

8586).

reporting these amounts on an attached

Regulations section 1.337(d)-7T or

•

Orphan Drug Credit (Form 8820).

schedule.

1.337(d)-6T.

•

Disabled Access Credit (Form 8826).

Recapture of qualified electric vehicle

•

Line a. Enter the amount that would

Enhanced Oil Recovery Credit (Form

(QEV) credit. The REIT must recapture

be the taxable income of the REIT for the

8830).

•

part of the QEV credit it claimed in a prior

tax year if only recognized built-in gain,

Renewable Electricity Production Credit

year, if within 3 years of the date the

recognized built-in loss, and recognized

(Form 8835).

•

vehicle was placed in service, it ceases to

built-in gain carryover were taken into

Indian Employment Credit (Form 8845).

•

qualify for the credit. See Regulations

account, reduced by any portion of the

Credit for Employer Social Security and

section 1.30-1 for details on how to figure

REIT’s recognized built-in gain from:

Medicare Taxes Paid on Certain

•

the recapture.

Net income from foreclosure property,

Employee Tips (Form 8846).

•

Recapture of Indian employment

Amounts subject to tax for failure to

Credit for Contributions to Selected

credit. Generally, if an employer

meet certain source-of-income

Community Development Corporations

terminates the employment of a qualified

requirements under section 857(b)(5)

(Form 8847).

•

employee less than 1 year after the date

computed in accordance with Temporary

Welfare-to-Work Credit (Form 8861).

•

of initial employment, any Indian

regulations section 1.337(d)-6T(c)(2),

New Markets Credit (Form 8874).

•

employment credit allowed for a prior tax

Net income from prohibited

Credit for Small Employer Pension Plan

year because of wages paid or incurred to

transactions under section 857(b)(6), and

Startup Costs (Form 8881).

•

that employee must be recaptured. For

Amounts subject to tax under section

Credit for Employer-Provided Child

details, see Form 8845 and section 45A.

857(b)(7).

Care Facilities and Services (Form 8882).

Recapture of New Markets Credit (see

Line b. Add the amounts shown on

Line 4d–Credit for Prior Year

Form 8874).

Form 1120-REIT, page 1, line 20; Form

Minimum Tax

1120-REIT, Part II, line 5; and Form 2438,

Interest due on:

•

line 11. Subtract from the total the amount

Deferred tax attributable to (a)

To figure the minimum tax credit and any

on Form 1120-REIT, line 21c. Enter the

installment sales of certain timeshares

carryforward of that credit, use Form

result on line b of the worksheet on page

and residential lots (section 453(l)(3)) and

8827, Credit for Prior Year Minimum

14.

(b) certain nondealer installment

Tax – Corporations. Also see Form 8827 if

obligations (section 453A(c))

any of the 2001 nonconventional source

Line c. The REIT’s net unrealized

•

Deferred gain (section 1260(b)).

fuel credit or qualified electric vehicle

built-in gain is the amount, if any, by

credit was disallowed solely because of

Built-in gains tax. If a C corporation

which the fair market value of the assets

the tentative minimum tax limitation. Also

elected to be taxed as a REIT for a tax

of the REIT at the beginning of its first

see section 53(d).

year beginning after January 1, 2002, or

REIT year (or as of the date the assets

-13-

Instructions For Form 1120-Reit - U.s. Income Tax Return For Real Estate Investment Trusts - 2002 Page 13

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