Instructions For Form 1120-Reit - 2003 (Page 6 of 12) in pdf

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If the REIT has changed its address since it

6, except amounts that must be reported in

New York Liberty Zone business employee

last filed a return, check the box for “Address

Part II or IV. List the type and amount of

credit.

change.”

income on an attached schedule. If the REIT

If the REIT has any of these credits, figure

has only one item of other income, describe it

Note: If a change in address occurs after the

each current year credit before figuring the

in parentheses on line 7. Examples of other

return is filed, use Form 8822, Change of

deduction for expenses on which the credit is

income to report on line 7 are:

Address, to notify the IRS of the new address.

based.

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Amounts received or accrued as

If the REIT is amending its return, check the

Line 9. Compensation of officers. Do not

consideration for entering into agreements to

box for “Amended Return,” complete the entire

include compensation deductible elsewhere on

make real property loans or to purchase or

return, correct the appropriate lines with the

the return, such as elective contributions to a

lease real property.

new information, and refigure the REIT’s tax

section 401(k) cash or deferred arrangement,

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Recoveries of bad debts deducted in prior

liability. Attach a statement that explains the

or amounts contributed under a salary

years under the specific charge-off method.

reason for the amendments and identifies the

reduction SEP agreement or a SIMPLE IRA

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The amount of the credit for alcohol used as

lines being changed on the amended return.

plan.

fuel (determined without regard to the limitation

Disallowance of deduction for employee

based on tax) that was entered on Form 6478,

compensation in excess of $1 million.

Credit for Alcohol Used as Fuel.

Part I—Real Estate

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Publicly held corporations may not deduct

Refunds of taxes deducted in prior years if

compensation to a “covered employee” to the

Investment Trust Taxable

they reduced income subject to tax in the year

extent that the compensation exceeds $1

deducted (see section 111). Do not offset

Income

million. Generally, a covered employee is:

current year taxes against tax refunds.

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The chief executive officer of the corporation

Any deduction previously taken under

Include in Part I the REIT’s share of gross

(or an individual acting in that capacity) as of

section 179A that is subject to recapture. The

income from partnerships in which the REIT is

the end of the tax year or

REIT must recapture the benefit of any

a partner, and the deductions attributable to

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An employee whose total compensation

allowable deduction for clean-fuel vehicle

the gross income items. See Regulations

must be reported to shareholders under the

property (or clean-fuel vehicle refueling

section 1.856-3(g).

Securities Exchange Act of 1934 because the

property), if the property later ceases to qualify.

Do not include the following in

employee is among the four highest

See Regulations section 1.179A-1 for details.

Part I:

compensated officers for that tax year (other

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Gross income, gains, losses, and deductions

than the chief executive officer).

Deductions

from foreclosure property (defined in section

For this purpose, compensation does not

856(e)) if the aggregate of such amounts

Limitations on Deductions

include the following:

results in net income. Report these amounts in

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Income from certain employee trusts,

Part II.

Direct and indirect costs (including taxes)

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annuity plans, or pensions and

Income or deductions from any prohibited

allocable to real or tangible personal

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Any benefit paid to an employee that is

transaction (defined in section 857(b)(6))

property constructed or improved by the

excluded from the employee’s income.

resulting in a gain. Report these amounts in

taxpayer. These costs must be capitalized

The deduction limit does not apply to:

Part IV.

according to section 263A.

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Commissions based on individual

Income

Transactions between related taxpayers.

performance,

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Generally, an accrual basis taxpayer may only

Qualified performance-based compensation,

Line 1. Dividends. Enter the total amount of

deduct business expenses and interest owed

and

dividends received during the tax year.

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to a related party in the year the payment is

Income payable under a written, binding

Line 2. Interest. Enter taxable interest on U.S.

included in the income of the related party. See

contract in effect on February 17, 1993.

obligations and on loans, notes, mortgages,

sections 163(e)(3), 163(j), and 267 for

The $1-million limit is reduced by amounts

bonds, bank deposits, corporate bonds, tax

limitations on deductions for unpaid interest

disallowed as excess parachute payments

refunds, etc. Do not offset interest expense

and expenses.

under section 280G.

against interest income. Special rules apply to

Golden parachute payments. A portion of

For details, see section 162(m) and

interest income from certain below-market rate

the payments made by a REIT to key

Regulations section 1.162-27.

loans. See section 7872 for more information.

personnel that exceeds their usual

Line 10. Salaries and wages. Enter the

Line 3. Gross rents. Include the following:

compensation may not be deductible. This

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amount of salaries and wages paid or incurred

Charges for services customarily furnished

occurs when the REIT has an agreement

for the tax year reduced by any work

or rendered in connection with renting real

(golden parachute) with these key employees

opportunity credit from Form 5884, any

property.

to pay them these excessive amounts if control

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empowerment zone and renewal community

Rent from personal property leased under or

of the REIT changes. See section 280G.

employment credit from Form 8844, any Indian

with a lease of real property (but only if the rent

employment credit from Form 8845, any

Business startup expenses. These

from the personal property does not exceed

welfare-to-work credit from Form 8861, and

expenses must be capitalized unless an

15% of the total rent for the tax year charged

any New York Liberty Zone business employee

election is made to amortize them over a

for both the real and personal property under

credit from Form 8884. See the instructions for

period of 60 months. See section 195 and

such lease). Figure the percentage of rents

these forms for more information. Do not

Regulations section 1.195-1.

from personal property by comparing the fair

include salaries and wages deductible

market value of the personal rental property to

Passive activity limitations. Limitations on

elsewhere on the return, such as elective

the fair market value of the total rental

passive activity losses and credits under

contributions to a section 401(k) cash or

property. See section 856(d)(1) for details.

section 469 apply to REITs that are closely

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deferred arrangement, or amounts contributed

Rent from a taxable REIT subsidiary (TRS)

held (as defined in section 856(h)). REITs

under a salary reduction SEP agreement or a

either (a) where at least 90% of the space at

subject to the passive activity limitations must

SIMPLE IRA plan.

issue is leased to third parties at rents

complete Form 8810 to compute their

comparable to the rent paid by the other

If the REIT provided taxable fringe

allowable passive activity loss and credit.

tenants of the REIT for comparable space or

benefits to its employees, such as

Before completing Form 8810, see Temporary

(b) for certain lodging facilities operated by an

personal use of a car, do not deduct as

Regulations section 1.163-8T, for rules on

CAUTION

eligible independent contractor. For more

wages the amounts allocated for depreciation

allocating interest expense among activities.

information, including definitions and additional

and other expenses claimed on lines 16 and

requirements, see sections 856(d)(8) and

Reducing certain expenses for which

18.

credits are allowable. For each credit listed

856(d)(9). Also, see Rev. Proc. 2003 – 66 for

Line 11. Repairs and maintenance. Enter the

the special rules on rents paid to a REIT by

below, the REIT must reduce the otherwise

cost of incidental repairs and maintenance,

allowable deductions for expenses used to

certain joint ventures that include a TRS.

such as labor and supplies, that do not add to

figure the credit by the amount of the current

See section 856(d)(2) for amounts excluded

the value of the property or appreciably prolong

year credit.

from “rents from real property.”

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its life. New buildings, machinery, or

Work opportunity credit.

Line 4. Other gross rents. Enter the gross

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permanent improvements that increase the

Research credit.

amount received for renting property not

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value of the property are not deductible. They

Enhanced oil recovery credit.

included on line 3.

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must be depreciated or amortized.

Disabled access credit.

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Line 5. Capital gain net income. Every sale

Line 12. Bad debts. Enter the total debts that

Empowerment zone and renewal community

or exchange of a capital asset must be

became worthless in whole or in part during the

employment credit.

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reported in detail on Schedule D (Form 1120),

tax year. A cash basis taxpayer may not claim

Indian employment credit.

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Capital Gains and Losses, even if there is no

a bad debt deduction unless the amount was

Employer credit for social security and

gain or loss.

previously included in income.

Medicare taxes paid on certain employee tips.

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Line 7. Other income. Enter any other

Orphan drug credit.

Line 13. Rents. If the REIT rented or leased a

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taxable income not reported on lines 1 through

Welfare-to-work credit.

vehicle, enter the total annual rent or lease

-6-

Instructions For Form 1120-Reit - 2003 Page 6

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