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Enter on line c the RIC net unrealized

A foreign citizen or nonresident alien.

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built-in gain reduced by the net recognized

An individual who is a citizen of a U.S.

Schedule K–Other

possession (but who is not a U.S. citizen or

built-in gain for prior years. See sections

resident).

1374(c)(2) and (d)(1).

Information

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A foreign partnership.

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The following instructions apply to questions 1

Line d. If the amount on line b exceeds the

A foreign corporation.

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through 11 on page 3, Form 1120-RIC.

amount on line a, the excess is treated as a

Any foreign estate or trust within the

Complete all questions that apply.

recognized built-in gain in the succeeding tax

meaning of section 7701(a)(31).

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A foreign government (or one of its agencies

year.

Question 3

or instrumentalities) to the extent that it is

Check the “Yes” box for question 3 if the RIC is

Line e. Enter the section 1374(b)(2)

engaged in the conduct of a commercial

a subsidiary in a parent-subsidiary controlled

deduction. Generally, this is any net operating

activity as described in section 892.

group (defined below). This applies even if the

loss carryforward or capital loss carryforward

Owner’s country. For individuals, the term

RIC is a subsidiary member of one group and

(to the extent of net capital gain included in

“owner’s country” means the country of

the parent corporation of another.

recognized built-in gain for the tax year) arising

residence. For all others, it is the country

Note. If the RIC is an “excluded member” of a

in tax years for which the RIC was a C

where incorporated, organized, created, or

controlled group (see section 1563(b)(2)), it is

corporation. A capital loss carryforward must

administered.

still considered a member of a controlled group

be used to reduce recognized built-in gain for

for this purpose.

Requirement to file Form 5472. If the RIC

the tax year to the greatest extent possible

checked “Yes,” it may have to file Form 5472.

before it can be used to reduce the investment

Parent-subsidiary controlled group. The

Generally, a 25% foreign-owned corporation

company taxable income.

term “parent-subsidiary controlled group”

that had a reportable transaction with a foreign

means one or more chains of corporations

or domestic related party during the tax year

Line h. Credit carryforwards arising in tax

connected through stock ownership (section

must file Form 5472.

years for which the RIC was a C corporation

1563(a)(1)). Both of the following requirements

must be used to reduce the tax on net built-in

must be met:

See Form 5472 for filing instructions and

gain for the tax year to the greatest extent

penalties for failure to file.

1. At least 80% of the total combined

possible before the credit carryforwards can be

voting power of all classes of voting stock

used to reduce the tax on the investment

Item 8

entitled to vote or at least 80% of the total

company taxable income.

value of all classes of stock of each corporation

Tax-exempt interest. Show any tax-exempt

in the group (except the parent) must be

interest received or accrued. Include any

Line i. The RIC’s tax on the net recognized

owned by one or more of the other

exempt-interest dividends received as a

built-in gain is treated as a loss sustained by

corporations in the group and

shareholder in another mutual fund or other

the RIC after October 31 of the same tax year.

2. The common parent must own at least

RIC.

Deduct the tax attributable to:

80% of the total combined voting power of all

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Ordinary gain as a deduction for taxes on

classes of stock entitled to vote or at least 80%

Item 10

Form 1120-RIC, line 12.

of the total value of all classes of stock of one

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Short-term capital gain as a short-term

or more of the other corporations in the group.

Election under section 853(a). A RIC may

capital loss on Schedule D (Form 1120), line 1.

Stock owned directly by other members of the

make an irrevocable election under section

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853(a) to allow its shareholders to apply their

group is not counted when computing the

Long-term capital gain as a long-term capital

voting power or value.

shares of the foreign taxes paid by the RIC

loss on Schedule D (Form 1120), line 6.

either as a credit or a deduction. If the RIC

See section 1563(d)(1) for the definition of

makes this election, the amount of foreign

How to report. If the RIC checked the “Other”

“stock” for purposes of determining stock

taxes it paid during the tax year may not be

box, attach a schedule showing the

ownership above.

taken as a credit or a deduction on Form

computation of each item included in the total

1120-RIC, but may be claimed on Form

for line 7, Schedule J; identify the applicable

Question 5

1120-RIC, Schedule A, line 5, as an addition to

Code section and the type of tax or interest.

Check the “Yes” box if one foreign person

the dividends-paid deduction.

owned at least 25% of (a) the total voting

Line 8 –Total Tax

Eligibility. To qualify to make the election,

power of all classes of stock of the RIC entitled

the RIC must meet the following requirements.

to vote or (b) the total value of all classes of

Include any deferred tax on the termination of a

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More than 50% of the value of the RIC’s total

stock of the RIC.

section 1294 election applicable to

assets at the end of the tax year must consist

shareholders in a qualified electing fund in the

The constructive ownership rules of section

of stock or securities in foreign corporations.

amount entered on line 8. See Form 8621, Part

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318 apply in determining if a RIC is foreign

The RIC must meet the holding period

V, and “How to report”, below.

owned. See section 6038A(c)(5) and the

requirements of section 901(k) with respect to

related regulations.

its common and preferred stock. If the RIC fails

Subtract from the total for line 8 the

Enter on line 5b(1) the percentage owned

to meet these holding period requirements, the

deferred taxes on the RIC’s share of the

by the foreign person specified in question 5.

election that allows a RIC to pass through to its

undistributed earnings of a qualified electing

For line 5b(2), write the name of the owner’s

shareholders the foreign tax credits for foreign

fund (see Form 8621, Part II).

country.

taxes paid by the RIC is disallowed. Although

the foreign taxes paid may not be taken as a

Note. If there is more than one 25%-or-more

How to report. Attach a schedule showing the

credit by either the RIC or the shareholder,

foreign owner, complete lines 5b(1) and 5b(2)

computation of each item included in, or

they are still deductible at the fund level.

for the foreign person with the highest

subtracted from, the total for line 8. On the

percentage of ownership.

dotted line next to line 8, enter the amount of

To make a valid election, in addition to

tax or interest, identify it as tax or interest, and

Foreign person. The term “foreign person”

timely filing Form 1120-RIC and checking the

specify the Code section that applies.

means:

box for line 10, the RIC must file:

Built-in Gains Tax Worksheet (keep for your records)

Excess of recognized built-in gains over recognized built-in losses . . . . . . . . . . . . . . . . . . . . . . . a.

b. Taxable income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b.

Enter the net unrealized built-in gain reduced by any net recognized built-in gain for all prior years c.

d. Net recognized built-in gain (enter the smallest of lines a, b, or c) . . . . . . . . . . . . . . . . . . . . . . . d.

Section 1374(b)(2) deduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e.

Subtract line e from line d. If zero, enter -0- here and on line i . . . . . . . . . . . . . . . . . . . . . . . . . . f.

g. Enter 35% of line f . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . g.

h. Business credit and minimum tax credit carryforwards under section 1374(b)(3) from C corporation h.

Tax. Subtract line h from line g (if zero or less, enter -0-). Enter here and include on line 7 of

Schedule J (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i.

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Instructions For Form 1120-Ric - U.s. Income Tax Return For Regulated Investment Companies - 2004 Page 12

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