Instructions For Form 1120-Reit - 2003 (Page 10 of 12) in pdf

statement) must show the part of the amount in

include the increase in taxes due under section

6. Enter line 5 or the REIT’s share of the

each taxable income bracket apportioned to

1291(c)(2) in the total for line 3g. On the dotted

$9,925,000 taxable income bracket,

that member. See Regulations section

line to the left of line 3g, write “Section 1291”

whichever is less . . . . . . . . . . . . . .

1.1561-3(b) for other requirements and for the

and the amount.

7. Subtract line 6 from line 5 . . . . . . . .

time and manner of making the consent.

Do not include on line 3g any interest due

8. Multiply line 2 by 15% . . . . . . . . . . .

Unequal apportionment plan. Members

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

of a controlled group may elect an unequal

amount of interest owed in the bottom margin

9. Multiply line 4 by 25% . . . . . . . . . . .

apportionment plan and divide the taxable

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

10. Multiply line 6 by 34% . . . . . . . . . . .

income brackets as they want. There is no

1291 interest.” For details, see Form 8621.

need for consistency between taxable income

11. Multiply line 7 by 35% . . . . . . . . . . .

Additional tax under section 197(f). A

brackets. Any member may be entitled to all,

12. If the taxable income of the controlled

corporation that elects to pay tax on the gain

some, or none of the taxable income brackets.

group exceeds $100,000, enter this

from the sale of an intangible under the related

However, the total amount for all members

member’s share of the smaller of: 5%

person exception to the anti-churning rules

cannot be more than the total amount in each

of the taxable income in excess of

should include any additional tax due under

taxable income bracket.

$100,000, or $11,750. (see the

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

instructions for line 2b above) . . . . . .

Equal apportionment plan. If no

the dotted line next to line 3g, write “Section

apportionment plan is adopted, the members of

13. If the taxable income of the controlled

197” and the amount. For more information,

the controlled group must divide the amount in

group exceeds $15 million, enter this

see Pub. 535.

each taxable income bracket equally among

member’s share of the smaller of 3%

Line 4a –Foreign Tax Credit

themselves. For example, Controlled Group AB

of the taxable income in excess of $15

consists of Corporation A and Corporation B.

million, or $100,000. (see the

To find out when a REIT can take the foreign

instructions for line 2b above) . . . . . .

They do not elect an apportionment plan.

tax credit for payment of income tax to a

Therefore, each corporation is entitled to:

14. Total. Add lines 8 through 13. Enter

foreign country or U.S. possession, see Form

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$25,000 (one-half of $50,000) on line 2a(1);

here and on line 3a, Schedule J . . . .

1118, Foreign Tax Credit — Corporations.

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$12,500 (one-half of $25,000) on line 2a(2);

and

Line 4b

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$4,962,500 (one-half of $9,925,000) on line

If the REIT can take either of the following

2a(3).

Line 3e

credits, check the appropriate box(es) and

Line 2b. Members of a controlled group are

include the amount of the credits in the total for

Enter the amount of the 100% excise tax

treated as one corporation to figure the

line 4b.

imposed on the following:

applicability of the additional 5% tax and the

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Income of a taxable REIT subsidiary (TRS)

Nonconventional source fuel credit. A credit

additional 3% tax. If an additional tax applies,

for services provided to the REIT’s tenants that

is allowed for the sale of qualified fuels

each member will pay that tax based on the

is improperly included in rents from real

produced from a nonconventional source.

part of the amount used in each taxable

property reported by the REIT instead of being

Section 29 contains a definition of qualified

income bracket to reduce that member’s tax.

reported by the TRS.

fuels, provisions for figuring the credit, and

See section 1561(a). If an additional tax

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Deductions that are improperly allocated

other special rules. Attach a separate schedule

applies, attach a schedule showing the taxable

between the REIT to its TRS.

to the return showing the computation of the

income of the entire group and how the

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Interest deductions of a TRS to the extent

credit.

corporation figured its share of the additional

that interest payments to its REIT are in excess

tax.

Qualified electric vehicle credit. Use Form

of a rate that is commercially reasonable.

8834, Qualified Electric Vehicle Credit, if the

Line 2b(1). Enter the corporation’s share of

See section 857(b)(7) for details and

corporation can claim a credit for the purchase

the additional 5% tax on line 2b(1).

exceptions.

of a new qualified electric vehicle. Vehicles that

Line 2b(2). Enter the corporation’s share of

qualify for this credit are not eligible for the

Line 3f – Alternative Minimum Tax

the additional 3% tax on line 2b(2).

deduction for clean-fuel vehicles under section

(AMT)

179A.

Line 3a – Tax on REIT Taxable

Unless the REIT is treated as a small

Income

Line 4c –General Business Credit

corporation exempt from the AMT, it may owe

Most REITs figure their tax by using the Tax

the AMT if it has any of the adjustments and

Enter on line 4c the REIT’s total general

Rate Schedule below. An exception applies to

tax preference items listed on Form 4626,

business credit.

members of a controlled group (see worksheet

Alternative Minimum Tax — Corporations. The

If the REIT is filing Form 8844,

below).

REIT must file Form 4626 if its taxable income

Empowerment Zone and Renewal Community

(loss) combined with these adjustments and

Tax Rate Schedule

Employment Credit, or Form 8884, New York

tax preference items is more than the smaller

Liberty Zone Business Employee Credit, check

of:

If taxable income (line 22, page 1) is:

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

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$40,000 or

space provided, and include the allowable

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Of the

The REIT’s allowable exemption amount

credit on line 4c.

But not

amount

(from Form 4626).

Over —

over —

Tax is:

over —

If the REIT is required to file Form 3800,

For this purpose, taxable income does not

General Business Credit, check the “Form

include the NOL deduction. See Form 4626 for

$50,000

15%

3800” box and include the allowable credit on

details.

50,000

75,000

$ 7,500 + 25%

50,000

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

Exemption for small corporations. A

75,000

100,000

13,750 + 34%

75,000

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

REIT is treated as a small corporation exempt

100,000

335,000

22,250 + 39%

100,000

number in the space provided, and include on

from the AMT for its tax year beginning in 2003

335,000 10,000,000

113,900 + 34%

335,000

line 4c the allowable credit from the applicable

if that year is the REIT’s first tax year in

10,000,00015,000,000

3,400,000 + 35% 10,000,000

form listed below.

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existence (regardless of its gross receipts) or:

15,000,00018,333,333

5,150,000 + 38% 15,000,000

Investment Credit (Form 3468).

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18,333,333

- - - - -

35%

1. It was treated as a small corporation

Work Opportunity Credit (Form 5884).

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exempt from the AMT for all prior tax years

Credit for Alcohol Used as Fuel (Form 6478).

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beginning after 1997 and

Credit for Increasing Research Activities

Tax Computation Worksheet for Members

2. Its average annual gross receipts for the

(Form 6765).

of a Controlled Group (keep for your records)

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3-tax-year period (or portion thereof during

Low-Income Housing Credit (Form 8586).

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which the REIT was in existence) ending

Orphan Drug Credit (Form 8820).

Note: Each member of a controlled group must

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before its tax year beginning in 2003 did not

Disabled Access Credit (Form 8826).

compute the tax using this worksheet.

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exceed $7.5 million ($5 million if the REIT had

Enhanced Oil Recovery Credit (Form 8830).

•

1. Enter REIT taxable income (line 22,

only 1 prior tax year).

Renewable Electricity Production Credit

page 1) . . . . . . . . . . . . . . . . . . .

(Form 8835).

•

For more details, see the Instructions for

Indian Employment Credit (Form 8845).

2. Enter line 1 or the REIT’s share of the

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Form 4626.

Credit for Employer Social Security and

$50,000 taxable income bracket,

whichever is less . . . . . . . . . . . . . .

Medicare Taxes Paid on Certain Employee

Line 3g – Income Tax

Tips (Form 8846).

3. Subtract line 2 from line 1 . . . . . . . .

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Deferred tax under section 1291. If the REIT

Credit for Contributions to Selected

4. Enter line 3 or the REIT’s share of the

was a shareholder in a passive foreign

Community Development Corporations (Form

$25,000 taxable income bracket,

investment company (PFIC) and received an

8847).

•

whichever is less . . . . . . . . . . . . . .

excess distribution or disposed of its

Welfare-to-Work Credit (Form 8861).

•

investment in the PFIC during the year, it must

New Markets Credit (Form 8874).

5. Subtract line 4 from line 3 . . . . . . . .

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Instructions For Form 1120-Reit - 2003 Page 10

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