Instructions For Form 1120-Reit - 2011 (Page 9 of 16) in pdf

Line 15. Interest.

contributions to a section 401(k) cash or

the property are not deductible. They

deferred arrangement, or amounts

must be depreciated or amortized.

Interest expense cannot be used

contributed under a salary reduction SEP

to offset interest income.

Line 12. Bad debts. Enter the total

agreement or a SIMPLE IRA plan.

debts that became worthless in whole or

CAUTION

Disallowance of deduction for

in part during the tax year. A cash basis

The deduction for interest is limited

employee compensation in excess of

taxpayer may not claim a bad debt

when the REIT is a policyholder or

$1 million. Publicly held REITs cannot

deduction unless the amount was

beneficiary with respect to a life

deduct compensation to a “covered

previously included in income.

insurance, endowment, or annuity

employee” to the extent that the

contract issued after June 8, 1997. For

compensation exceeds $1 million.

Line 13. Rents. If the REIT rented or

details, see section 264(f). Attach a

Generally, a covered employee is:

leased a vehicle, enter the total annual

statement showing the computation of the

•

The principal executive officer of the

rent or lease expense paid or incurred

deduction.

REIT (or an individual acting in that

during the year. Also complete Part V of

The REIT must make an interest

capacity) as of the end of the tax year; or

Form 4562, Depreciation and

•

allocation if the proceeds of a loan were

An employee whose total

Amortization. If the REIT leased a vehicle

used for more than one purpose. For

compensation must be reported to

for a term of 30 days or more, the

example, the loan proceeds were used to

shareholders under the Securities

deduction for the vehicle lease expense

purchase a financial investment and

Exchange Act of 1934 because the

may have to be reduced by an amount

acquire an interest in a passive activity.

employee is among the three highest

called the inclusion amount.

See Temporary Regulations section

compensated officers for that tax year

1.163-8T for the interest allocation rules.

(other than the principal executive officer).

The REIT may have an inclusion

The following interest is not deductible:

amount if:

For this purpose, compensation does

•

Interest on indebtedness incurred or

not include the following:

continued to purchase or carry obligations

And the

•

Income from certain employee trusts,

vehicle’s

if the interest is wholly exempt from

annuity plans, or pensions and

FMV on

income tax. See section 265(b) for special

•

Any benefit paid to an employee that is

the first

rules and exceptions for financial

excluded from the employee’s income.

day of

institutions. Also see section 265(b)(7) for

the lease

The deduction limit does not apply to:

a temporary de minimis safe-harbor

•

The lease term began:

exceeded:

Commissions based on individual

exception for certain financial institutions

performance,

for tax-exempt bonds issued in 2010 and

•

After 12/31/07 but before 1/1/12 . . $18,500

Qualified performance-based

2011.

•

compensation, and

For cash basis taxpayers, prepaid

After 12/31/06 but before 1/1/08 . . $15,500

•

Income payable under a written,

interest allocable to years following the

After 12/31/04 but before 1/1/07 . . $15,200

binding contract in effect on February 17,

current tax year (for example, a cash

1993.

basis calendar year taxpayer who in 2011

After 12/31/03 but before 1/1/05 . . $17,500

If the lease term began before January 1, 2004, see

prepaid interest allocable to any period

The $1-million limit is reduced by

Pub. 463, Travel, Entertainment, Gift, and Car

after 2011 can deduct only the amount

amounts disallowed as excess parachute

Expenses, to find out if the corporation has an

allocable to 2011).

payments under section 280G. See

inclusion amount. The inclusion amount for lease

•

Interest and carrying charges on

section 162(m) and Regulations section

terms beginning in 2012 will be published in the

straddles. Generally, these amounts must

Internal Revenue Bulletin in early 2012.

1.162-27. Also, see Notice 2007-49,

be capitalized. See section 263(g).

2007-25 I.R.B. 1429.

•

Interest paid or incurred on any portion

See Pub. 463 for instructions on

Line 10. Salaries and wages. Enter the

of an underpayment of tax that is

figuring the inclusion amount.

total salaries and wages paid for the tax

attributable to an understatement arising

year, reduced by the amount claimed on:

from an undisclosed listed transaction or

Line 14. Taxes and licenses. Enter

•

Form 5884, Work Opportunity Credit;

an undisclosed reportable avoidance

taxes paid or incurred during the tax year,

•

Form 8844, Empowerment Zone and

transaction (other than a listed

but do not include the following:

Renewal Community Employment Credit;

•

transaction) entered into in tax years

Federal income taxes (except for the

•

Form 8845, Indian Employment Credit;

beginning after October 22, 2004.

tax imposed on net recognized built-in

and

gain allocable to ordinary income).

Special rules apply to:

•

Form 8932, Credit for Employer

•

Foreign or U.S. possession income

Disqualified interest on certain

Differential Wage Payments.

taxes if a tax credit is claimed (however,

indebtedness under section 163(j). See

See the instructions for these forms for

see the Instructions for Form 5735 for

Form 8926, Disqualified Corporate

more information. Do not include salaries

special rules for possession income

Interest Expense Disallowed Under

and wages deductible elsewhere on the

taxes).

Section 163(j) and Related Information,

•

return, such as amounts included in

Taxes not imposed on the REIT.

and the related Instructions.

•

officer’s compensation, elective

Taxes, including state or local sales

Interest on which no tax is imposed

contributions to a section 401(k) cash or

(see section 163(j));

taxes, that are paid or incurred in

•

deferred arrangement, or amounts

connection with an acquisition or

Foregone interest on certain

contributed under a salary reduction SEP

disposition of property (these taxes must

below-market-rate loans (see section

agreement or a SIMPLE IRA plan.

be treated as a part of the cost of the

7872); and

•

Original issue discount (OID) on certain

acquired property or, in the case of a

If the REIT provided taxable fringe

disposition, as a reduction in the amount

high-yield discount obligations. See

benefits to its employees, such as

realized on the disposition).

section 163(e)(5) to determine the

personal use of a car, do not

•

CAUTION

amount of the deduction for OID that is

Taxes assessed against local benefits

deduct as wages the amounts allocated

deferred and the amount that is

that increase the value of the property

for depreciation and other expenses

disallowed on a high-yield discount

assessed (such as for paving, etc.).

claimed on lines 16 and 18.

•

obligation. The rules under section

Taxes deducted elsewhere on the

Line 11. Repairs and maintenance.

163(e)(5) do not apply to certain

return.

•

Enter the cost of incidental repairs and

high-yield discount obligations issued

Excise taxes imposed under section

maintenance, such as labor and supplies,

after August 31, 2008 and before January

4981 on undistributed REIT income.

that do not add to the value of the

1, 2011. See section 163(e)(5)(F). Also,

property or appreciably prolong its life.

See section 164(d) for information on

see Notice 2010-11, 2010-4 I.R.B. 326.

•

New buildings, machinery, or permanent

apportionment of taxes on real property

Section 108(i) OID deduction. If the

improvements that increase the value of

between seller and purchaser.

REIT issued a debt instrument with

-9-

Instructions For Form 1120-Reit - 2011 Page 9

Related Articles

Related forms

Related Categories