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Credit for Increasing Research Activities

2. Recapture of Indian employment credit.

Line 3d — Income Tax

(Form 6765).

Generally, if an employer terminates the

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Deferred tax under section 1291. If the RIC

Low-Income Housing Credit (Form 8586).

employment of a qualified employee less than

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was a shareholder in a passive foreign

Orphan Drug Credit (Form 8820).

1 year after the date of initial employment, any

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investment company (PFIC), and it received an

Disabled Access Credit (Form 8826).

Indian employment credit allowed for a prior

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excess distribution or disposed of its

Enhanced Oil Recovery Credit (Form 8830).

tax year because of wages paid or incurred to

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investment in the PFIC during the year, it must

Renewable Electricity Production Credit

that employee must be recaptured. For details,

include the increase in taxes due under section

(Form 8835).

see Form 8845 and section 45A.

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1291(c)(2) in the total for line 3d, Schedule J.

Indian Employment Credit (Form 8845).

3. Recapture of new markets credit (see

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On the dotted line to the left of line 3d,

Credit for Employer Social Security and

Form 8874).

Schedule J, write “Section 1291” and the

Medicare Taxes Paid on Certain Employee

4. Recapture of employer-provided

amount.

Tips (Form 8846).

childcare facilities and services credit (see

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Credit for Contributions to Selected

Form 8882).

Do not include on line 3d any interest due

Community Development Corporations (Form

5. Interest due on deferred tax attributable

under section 1291(c)(3). Instead, show the

8847).

to (a) installment sales of certain timeshares

amount of interest owed in the bottom margin

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Welfare-to-Work Credit (Form 8861).

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

of page 1, Form 1120-RIC, and write “Section

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Biodiesel Fuels Credit (Form 8864).

certain nondealer installment obligations

1291 interest.” For details, see Form 8621,

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New Markets Credit (Form 8874).

(section 453A(c)).

Return by a Shareholder of a Passive Foreign

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Credit for Small Employer Pension Plan

6. Interest due on deferred gain (section

Investment Company or Qualified Electing

Startup Costs (Form 8881).

1260(b)).

Fund.

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Credit for Employer-Provided Child Care

Additional tax under section 197(f). A RIC

Built-in gains tax. If, on or after January 2,

Facilities and Services (Form 8882).

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that elects to pay tax on the gain from the sale

2002, property of a C corporation becomes

Low Sulfur Diesel Fuel Production Credit

of an intangible under the related person

property of a RIC by either (a) the qualification

(Form 8896).

exception to the anti-churning rules should

of the C corporation as a RIC or (b) the transfer

Line 4d –Credit for Prior Year

include any additional tax due under section

of such property to a RIC, then the RIC will be

197(f)(9)(B) in the total for line 3d. On the

subject to the built-in gain tax under section

Minimum Tax

dotted line to the left of line 3d, write “Section

1374 unless the C corporation elects deemed

To figure the minimum tax credit and any

197” and the amount. For more information,

sale treatment on the transferred property. If

carryforward of that credit, use Form 8827,

see Pub. 535.

the C corporation does not make this election,

Credit for Prior Year Minimum Tax —

the RIC must pay tax on the net recognized

Corporations. Also see Form 8827 if any of the

Line 4a – Foreign Tax Credit

built-in gain during the 10-year period

RIC’s 2003 nonconventional source fuel credit

beginning on its first day as a RIC or the day it

To find out when a RIC can claim this credit for

or qualified electric vehicle credit was

acquired the property. Recognized built-in

payment of income tax to a foreign country or

disallowed solely because of the tentative

gains and losses generally retain their

U.S. possession, see Form 1118, Foreign Tax

minimum tax limitation. See section 53(d).

character (for example, ordinary income or

Credit — Corporations. The RIC may not claim

capital gain) and are treated the same as other

this credit if an election under section 853 was

Line 6 – Personal Holding

gains or losses of the RIC. The RIC’s tax on

made for the tax year. See Item 10, Schedule

Company Tax

net recognized built-in gain is treated as a loss

K, on page 12.

A RIC is taxed as a personal holding company

sustained by the RIC after October 31 of the

Line 4b

under section 542 if:

same tax year (see the instructions for line i of

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At least 60% of its adjusted ordinary gross

the Built-in Gains Tax Worksheet on page 12).

If the RIC can claim either of the following

income for the tax year is personal holding

See Regulations section 1.337(d)-7 for details.

credits, check the appropriate box(es) and

company income and

Different rules apply to elections to be a

include the amount of the credits in the total for

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At any time during the last half of the tax

RIC and to transfers of property in a carryover

line 4b.

year more than 50% in value of its outstanding

basis transaction that occurred prior to January

Nonconventional source fuel credit. A credit

stock is owned, directly or indirectly, by five or

2, 2002. For RIC elections and property

is allowed for the sale of qualified fuels

fewer individuals.

transfers before this date, the C corporation is

produced from a nonconventional source.

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

subject to deemed sale treatment on the

Section 29 contains a definition of qualified

Personal Holding Company (PHC) Tax, for

transferred property unless the RIC elects

fuels, provisions for figuring the credit, and

definitions and details on how to figure the tax.

section 1374 treatment. See Regulations

other special rules. Attach a separate schedule

section 1.337(d)-6 for information on how to

to the return showing the computation of the

Line 7 –Other Taxes

make the election and figure the tax for RIC

credit.

Include any of the following taxes and interest

elections and property transfers before this

Qualified electric vehicle (QEV) credit. Use

in the total on line 7. Check the appropriate

date. The RIC may also rely on Regulations

Form 8834, Qualified Electric Vehicle Credit, if

box(es) for the form, if any, used to compute

section 1.337(d)-5 for RIC elections and

the RIC can claim a credit for the purchase of a

the total.

property transfers that occurred before January

new qualified electric vehicle. Vehicles that

2, 2002.

Recapture of Investment Credit. If the RIC

qualify for this credit are not eligible for the

disposed of investment credit property or

Worksheet instructions. Complete the

deduction for clean-fuel vehicles under section

changed its use before the end of its useful life

worksheet on page 12 to figure the built-in

179A.

or recovery period, it may owe a tax. See Form

gains tax under Regulations section 1.337(d)-7

4255, Recapture of Investment Credit, for

or 1.337(d)-6.

Line 4c –General Business Credit

details.

Line a. Enter the amount that would be the

Enter on line 4c the RIC’s total general

Recapture of Low-Income Housing Credit.

taxable income of the RIC for the tax year if

business credit.

If the RIC disposed of property (or there was a

only recognized built-in gain, recognized

reduction in the qualified basis of the property)

If the RIC is filing Form 8844,

built-in loss, and recognized built-in gain

Empowerment Zone and Renewal Community

for which it took the low-income housing credit,

carryover were taken into account.

Employment Credit, or Form 8884, New York

it may owe a tax. See Form 8611, Recapture of

Line b. Add the amounts shown on Form

Low-Income Housing Credit.

Liberty Zone Business Employee Credit, check

1120-RIC, page 1, line 24; Form 1120-RIC,

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

Other. Additional taxes and interest amounts

Part II, line 1; and Form 2438, line 11. For this

space provided, and include the allowable

can be included in the total entered on line 7.

purpose, refigure line 24 on page 1 of Form

credit on line 4c.

Check the box for “Other” if the RIC includes

1120-RIC without regard to any election under

any of the taxes and interest discussed below.

section 852(b)(2)(F). Enter the result on line b

If the RIC is required to file Form 3800,

See How to report, below for details on

of the worksheet.

General Business Credit, check the “Form

reporting these amounts on an attached

3800” box and include the allowable credit on

Line c. The RIC’s net unrealized built-in

schedule.

line 4c. If the RIC is not required to file Form

gain is the amount, if any, by which the FMV of

3800, check the “Form(s)” box, write the form

1. Recapture of qualified electric vehicle

the assets of the RIC at the beginning of its

number in the space provided, and include on

(QEV) credit. The RIC must recapture part of

first RIC year (or as of the date the assets were

line 4c the allowable credit from the applicable

the QEV credit it claimed in a prior year if,

acquired, for any asset with a basis determined

form listed below.

within 3 years of the date the vehicle was

by reference to its basis (or the basis of any

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Investment Credit (Form 3468).

placed in service, it ceases to qualify for the

other property) in the hands of a C corporation)

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Work Opportunity Credit (Form 5884).

credit. See Regulations section 1.30-1 for

exceeds the aggregate adjusted basis of such

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Credit for Alcohol Used as Fuel (Form 6478).

details on how to figure the recapture.

assets at that time.

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Instructions For Form 1120-Ric - U.s. Income Tax Return For Regulated Investment Companies - 2004 Page 11

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