Instructions For Form 1120-Reit - 2001 (Page 8 of 15) in pdf

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The chief executive officer of the

may have to be reduced by an amount

current tax year (e.g., a cash basis

corporation (or an individual acting in that

called the inclusion amount.

calendar year taxpayer who in 2001

capacity) as of the end of the tax year or

prepaid interest allocable to any period

The REIT may have an inclusion

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An employee whose total

after 2001 can deduct only the amount

amount if:

compensation must be reported to

allocable to 2001).

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shareholders under the Securities

Interest and carrying charges on

And the vehicle’s

Exchange Act of 1934 because the

straddles. Generally, these amounts must

FMV on the first

employee is among the four highest

be capitalized. See section 263(g).

day of the lease

compensated officers for that tax year

Special rules apply to:

The lease term began:

exceeded:

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(other than the chief executive officer).

Interest on which no tax is imposed

For this purpose, compensation does

After 12/31/98 . . . . . . . . . . . . . . .

$15,500

(see section 163(j));

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not include the following:

Foregone interest on certain

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After 12/31/96 but before 1/1/99 . . .

$15,800

Income from certain employee trusts,

below-market-rate loans (see section

annuity plans, or pensions and

7872); and

After 12/31/94 but before 1/1/97 . . .

$15,500

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Any benefit paid to an employee that is

Original issue discount on certain

After 12/31/93 but before 1/1/95 . . .

$14,600

excluded from the employee’s income.

high-yield discount obligations. (See

The deduction limit does not apply to:

section 163(e) to figure the disqualified

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Commissions based on individual

If the lease term began before January

portion.)

performance;

1, 1994, or, the leased vehicle was an

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Line 16. Depreciation. Besides

Qualified performance-based

electric vehicle, see Pub. 463, Travel,

depreciation, include on line 16 the part of

compensation; and

Entertainment, Gift and Car Expenses, to

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the cost that the REIT elected to expense

Income payable under a written,

find out if the REIT has an inclusion

under section 179 for certain tangible

binding contract in effect on February 17,

amount. See Pub. 463 for instructions on

property placed in service during tax year

1993.

figuring the inclusion amount.

2001 or carried over from 2000. See

The $1-million limit is reduced by

Line 14. Taxes and licenses. Enter

Form 4562 and its instructions.

amounts disallowed as excess parachute

taxes paid or incurred during the tax year,

payments under section 280G.

Line 18. Other Deductions

but do not include the following:

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For details, see section 162(m) and

Federal income taxes (except for the

Note: Do not deduct fines or penalties

Regulations section 1.162-27.

tax imposed on net recognized built-in

paid to a government for violating any

gain allocable to ordinary income).

Line 10. Salaries and wages. Enter total

law.

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Foreign income taxes if a tax credit is

salaries and wages paid or incurred for

Attach a schedule, listing by type and

claimed.

the tax year reduced by any work

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amount, all allowable deductions that are

Taxes not imposed on the REIT.

opportunity credit from Form 5884, any

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not deductible elsewhere on the return.

Taxes, including state or local sales

empowerment zone credit from Form

Enter the total on line 18. Include

taxes, that are paid or incurred in

8844, any Indian employment credit from

amortization and organization expenses.

connection with an acquisition or

Form 8845, and any welfare-to-work

Generally, a deduction may not be taken

disposition of property (these taxes must

credit from Form 8861. See the

for any amount that is allocable to a class

be treated as a part of the cost of the

instructions for these forms for more

of exempt income. See section 265(b) for

acquired property or, in the case of a

information. Do not include salaries and

exceptions.

disposition, as a reduction in the amount

wages deductible elsewhere on the

realized on the disposition).

return, such as elective contributions to a

Charitable contributions. Enter

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Taxes assessed against local benefits

section 401(k) cash or deferred

contributions or gifts actually paid within

that increase the value of the property

arrangement, or amounts contributed

the tax year to or for the use of charitable

assessed (such as for paving, etc.).

under a salary reduction SEP agreement

and governmental organizations

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Taxes deducted elsewhere on the

or a SIMPLE IRA plan.

described in section 170(c) and any

return.

unused contributions carried over from

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If the REIT provided taxable fringe

Excise taxes imposed under section

prior years.

benefits to its employees, such as

4981 on undistributed REIT income.

personal use of a car, do not

CAUTION

REITs reporting taxable income on the

See section 164(d) for apportionment

deduct as wages the amounts allocated

accrual method may elect to treat as paid

of taxes on real property between seller

for depreciation and other expenses

during the tax year any deductible

and purchaser.

claimed on lines 16 and 18.

contributions paid by the 15th day of the

Line 15. Interest

3rd month after the end of the tax year if

Note: The deduction for interest is limited

Line 11. Repairs and maintenance.

the contributions were authorized by the

when the REIT is a policyholder or

Enter the cost of incidental repairs and

board of directors during the tax year.

beneficiary with respect to a life

maintenance, such as labor and supplies,

Attach a declaration to the return, signed

insurance, endowment, or annuity

that do not add to the value of the

by an officer, stating that the resolution

contract issued after June 8, 1997. For

property or appreciably prolong its life.

authorizing the contributions was adopted

details, see section 264(f). Attach a

New buildings, machinery, or permanent

by the board of directors during the tax

statement showing the computation of the

improvements that increase the value of

year. Also attach a copy of the resolution.

deduction.

the property are not deductible. They

Limitation on deduction. The total

must be depreciated or amortized.

The REIT must make an interest

amount claimed may not be more than

allocation if the proceeds of a loan were

Line 12. Bad debts. Enter the total debts

10% of taxable income computed without

used for more than one purpose (e.g., to

that became worthless in whole or in part

regard to the following:

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purchase a portfolio investment and to

during the tax year. A cash basis taxpayer

Any deduction for contributions,

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acquire an interest in a passive activity).

may not claim a bad debt deduction

The special deductions on line 21b,

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See Temporary Regulations section

unless the amount was previously

The deduction allowed under section

1.163-8T for the interest allocation rules.

included in income.

249,

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Line 13. Rents. If the REIT rented or

Do not deduct the following interest:

Any net operating loss (NOL) carryback

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leased a vehicle, enter the total annual

Interest on indebtedness incurred or

to the tax year under section 172, and

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rent or lease expense paid or incurred

continued to purchase or carry obligations

Any capital loss carryback to the tax

during the year. Also complete Part V of

if the interest is wholly exempt from

year under section 1212(a)(1).

Form 4562, Depreciation and

income tax. For exceptions, see section

Charitable contributions over the 10%

Amortization. If the REIT leased a vehicle

265(b).

limitation may not be deducted for the tax

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for a term of 30 days or more, the

For cash basis taxpayers, prepaid

year but may be carried over to the next 5

deduction for the vehicle lease expense

interest allocable to years following the

tax years.

-8-

Instructions For Form 1120-Reit - 2001 Page 8

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