Instructions For Form 1120-Reit - 2004 (Page 4 of 13) in pdf

•

Changed its direct interest by at least a

4. Additional schedules in alphabetical

complete the appropriate lines of Form 3115 to

10% interest.

order.

make the election.

4. Contributed property to a foreign

5. Additional forms in numerical order.

Include any net positive section 481(a)

partnership in exchange for a partnership

adjustment on page 1, line 7. If the net section

Complete every applicable entry space on

interest if:

481(a) adjustment is negative, report it on page

•

Form 1120-REIT. Do not enter “See attached”

Immediately after the contribution, the

1, line 18.

instead of completing the entry spaces. If more

REIT owned, directly or indirectly, at least a

space is needed on the forms or schedules,

10% interest in the foreign partnership; or

Accounting Periods

•

attach separate sheets using the same size

The fair market value of the property the

and format as the printed forms. If there are

A REIT must figure its taxable income on the

REIT contributed to the foreign partnership in

supporting statements and attachments,

basis of a tax year. A tax year is the annual

exchange for a partnership interest, when

arrange them in the same order as the

accounting period a REIT uses to keep its

added to other contributions of property made

schedules or forms they support and attach

records and report its income and expenses. A

to the foreign partnership during the preceding

them last. Show the totals on the printed forms.

REIT adopts a tax year when it files its first

12-month period, exceeds $100,000.

Also, be sure to enter the REIT’s name and

income tax return. It must adopt a tax year by

Also, the REIT may have to file Form 8865

EIN on each supporting statement or

the due date (not including extensions) of its

to report certain dispositions by a foreign

attachment.

first income tax return.

partnership of property it previously contributed

to that foreign partnership if it was a partner at

Calendar year. A REIT must adopt a

Accounting Methods

the time of the disposition. For more details,

calendar year unless it first qualified for REIT

including penalties for failing to file Form 8865,

status before October 5, 1976.

An accounting method is a set of rules used to

see Form 8865 and its separate instructions.

determine when and how income and

Change of tax year

expenses are reported. Figure taxable income

Form 8875, Taxable REIT Subsidiary Election,

using the method of accounting regularly used

A REIT may not change its tax year to any tax

is filed jointly by a corporation and a REIT to

in keeping the REIT’s books and records. In all

year other than the calendar year. Generally, a

have the corporation treated as a taxable REIT

cases, the method used must clearly show

REIT must get the consent of the IRS before

subsidiary.

taxable income.

changing its tax year by filing Form 1128,

Form 8886, Reportable Transaction

Application To Adopt, Change, or Retain a Tax

Generally, permissible methods include:

Disclosure Statement. Use this form to disclose

•

Year. However, upon electing to be taxed as a

Cash,

information for each reportable transaction in

•

REIT, an entity that has not engaged in any

Accrual, or

which the REIT participated. Form 8886 must

•

active trade or business may change its tax

Any other method authorized by the Internal

be filed for each tax year that the federal

year to a calendar year without getting the

Revenue Code.

income tax liability of the REIT is affected by its

consent.

participation in the transaction. The REIT may

For more information on change of tax year,

have to pay a penalty if it is required to file

Accrual method

see Form 1128, Regulations section 1.442-1,

Form 8886 and does not do so. The following

Generally, a REIT must use the accrual

and Pub. 538.

are reportable transactions:

•

method of accounting if its average annual

Any listed transaction that is the same as or

Rounding Off to Whole

gross receipts exceed $5 million. See section

substantially similar to tax avoidance

448(c).

transactions identified by the IRS.

Dollars

•

Under the accrual method, an amount is

Any transaction offered under conditions of

The REIT may round off cents to whole dollars

includible in income when:

confidentiality for which the REIT paid the paid

on its returns and schedules. If the REIT does

an advisor a fee of at least $250,000.

1. All the events have occurred that fix the

•

round to whole dollars, it must round all

Certain transactions for which the REIT has

right to receive the income, which is the

amounts. To round, drop amounts under 50

contractual protection against disallowance of

earliest of the date:

cents and increase amounts from 50 to 99

the tax benefits.

a. the required performance takes place,

•

cents to the next dollar (for example, $1.39

Certain transactions resulting in a loss of at

b. payment is due, or

becomes $1 and $2.50 becomes $3).

least $10 million in any single year or $20

c. payment is received, and

million in any combination of years.

If two or more amounts must be added to

2. The amount can be determined with

•

Certain transactions resulting in a book-tax

figure the amount to enter on a line, include

reasonable accuracy.

difference of more than $10 million on a gross

cents when adding the amounts and round off

basis.

only the total.

See Regulations section 1.451-1(a) for

•

Certain transactions resulting in a tax credit

details.

Recordkeeping

of more than $250,000, if the REIT held the

Generally, an accrual basis taxpayer can

asset generating the credit for 45 days or less.

deduct accrued expenses in the tax year when:

Keep the REIT’s records for as long as they

•

All events that determine the liability have

may be needed for the administration of any

Statements

occurred,

provision of the Internal Revenue Code.

•

The amount of the liability can be figured

Usually, records that support an item of

Stock ownership in foreign

with reasonable accuracy, and

income, deduction, or credit on the return must

•

personal holding companies

Economic performance takes place with

be kept for 3 years from the date the return is

respect to the expense.

due or filed, whichever is later. Keep records

(FPHC)

that verify the REIT’s basis in property for as

There are exceptions to the economic

Attach the statement required by section

long as they are needed to figure the basis of

performance rule for certain items, including

551(c) if:

the original or replacement property.

•

recurring expenses. See section 461(h) and

The REIT owned 5% or more in value of the

the related regulations for the rules for

The REIT should also keep copies of all

outstanding stock of a FPHC and

•

determining when economic performance

filed returns. They help in preparing future and

The REIT was required to include in its gross

takes place.

amended returns.

income any undistributed FPHC income from a

FPHC.

Change in accounting method

Depository Method of Tax

Transfers to a corporation

To change its method of accounting used to

Payment

report taxable income (for income as a whole

controlled by the transferor

or for the treatment of any material item), the

A REIT must pay the tax due in full no later

If a person receives stock of a corporation in

REIT must file Form 3115, Application for

than the 15th day of the 3rd month after the

exchange for property, and no gain or loss is

Change in Accounting Method. For more

end of the tax year. The two methods of

recognized under section 351, the person

information, see Form 3115 and Pub. 538,

depositing REIT income taxes, including the

(transferor) and the transferee must each

Accounting Periods and Methods.

capital gains tax, are discussed below.

attach to their tax returns the information

Section 481(a) adjustment. The REIT may

required by Regulations section 1.351-3.

Electronic Deposit Requirement

have to make an adjustment under section

481(a) to prevent amounts of income or

The REIT must make electronic deposits of all

Assembling the Return

expenses from being duplicated or omitted.

depository taxes (such as employment tax,

To ensure that the REIT’s tax return is correctly

This is called a section 481(a) adjustment. The

excise tax, and REIT income tax) using the

processed, attach all schedules and other

section 481(a) adjustment period is generally 1

Electronic Federal Tax Payment System

forms after page 4, Form 1120-REIT, and in

year for a net negative adjustment and 4 years

(EFTPS) in 2005 if:

•

the following order.

for a net positive adjustment. However, a REIT

The total deposits of such taxes in 2003

1. Schedule N (Form 1120).

may elect to use a 1-year adjustment period if

were more than $200,000 or

•

2. Form 4136.

the net section 481(a) adjustment for the

The REIT was required to use EFTPS in

3. Form 4626.

change is less than $25,000. The REIT must

2004.

-4-

Instructions For Form 1120-Reit - 2004 Page 4

Related Articles

Related forms

Related Categories