Instructions For Form 1120-Reit - 2003 (Page 7 of 12) in pdf

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expense paid or incurred during the year. Also

Original issue discount on certain high-yield

For more information on substantiation and

complete Part V of Form 4562, Depreciation

discount obligations. (See section 163(e) to

recordkeeping requirements, see the

and Amortization. If the REIT leased a vehicle

figure the disqualified portion.)

regulations under section 170 and Pub. 526,

for a term of 30 days or more, the deduction for

Charitable Contributions.

Line 16. Depreciation. Besides depreciation,

the vehicle lease expense may have to be

include on line 16 the part of the cost that the

Contributions to organizations conducting

reduced by an amount called the inclusion

REIT elected to expense under section 179 for

lobbying activities. Contributions made to an

amount.

certain property placed in service during tax

organization that conducts lobbying activities

The REIT may have an inclusion amount if:

year 2003 or carried over from 2002. See Form

are not deductible if:

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4562 and its instructions.

The lobbying activities relate to matters of

And the vehicle’s

direct financial interest to the donor’s trade or

Line 18. Other deductions.

FMV on the first day

business and

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Note: Do not deduct fines or penalties paid to

of the lease

The principal purpose of the contribution was

The lease term began:

exceeded:

a government for violating any law.

to avoid Federal income tax by obtaining a

deduction for activities that would have been

Attach a schedule, listing by type and

After 12/31/02 but before 1/1/04 . . . . . . .

$18,000

nondeductible under the lobbying expense

amount, all allowable deductions that are not

After 12/31/98 but before 1/1/03 . . . . . . .

$15,500

rules if conducted directly by the donor.

deductible elsewhere on the return. Enter the

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

$15,800

total on line 18. Include amortization and

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

$15,500

Contributions of property other than cash.

organization expenses. Generally, a deduction

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

$14,600

If a REIT (other than a closely held REIT see

may not be taken for any amount that is

If the lease term began before January 1, 1994, see Pub. 463,

below) contributes property other than cash

Travel, Entertainment, Gift, and Car Expenses, to find out if the

allocable to a class of exempt income. See

and claims over a $500 deduction for the

REIT has an inclusion amount. The inclusion amount for lease

section 265(b) for exceptions.

property, it must attach a schedule to the return

terms beginning in 2004 will be published in the Internal

describing the kind of property contributed and

Charitable contributions. Enter contributions

Revenue Bulletin in early 2004.

the method used to determine its fair market

or gifts actually paid within the tax year to or for

value (FMV). A closely held REIT must

the use of charitable and governmental

See Pub. 463 for instructions on figuring the

complete Form 8283 and attach it to its return.

organizations described in section 170(c) and

inclusion amount.

All other REITs generally must complete and

any unused contributions carried over from

Line 14. Taxes and licenses. Enter taxes

attach Form 8283 to their returns for

prior years.

paid or incurred during the tax year, but do not

contributions of property (other than money) if

REITs reporting taxable income on the

include the following:

the total claimed deduction for all property

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accrual method may elect to treat as paid

Federal income taxes (except for the tax

contributed was more than $5,000.

during the tax year any deductible contributions

imposed on net recognized built-in gain

paid by the 15th day of the 3rd month after the

If the REIT made a “qualified conservation

allocable to ordinary income).

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contribution” under section 170(h), also include

end of the tax year if the contributions were

Foreign income taxes if a tax credit is

authorized by the board of directors during the

the FMV of the underlying property before and

claimed.

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after the donation, as well as the type of legal

tax year. Attach a declaration to the return,

Taxes not imposed on the REIT.

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signed by an officer, stating that the resolution

interest contributed, and describe the

Taxes, including state or local sales taxes,

conservation purpose benefited by the

authorizing the contributions was adopted by

that are paid or incurred in connection with an

donation. If a contribution carryover is included,

the board of directors during the tax year. Also

acquisition or disposition of property (these

attach a copy of the resolution.

show the amount and how it was determined.

taxes must be treated as a part of the cost of

the acquired property or, in the case of a

Limitation on deduction. The total amount

Reduced deduction for contributions of

disposition, as a reduction in the amount

claimed may not be more than 10% of taxable

certain property. For a charitable

realized on the disposition).

income computed without regard to the

contribution of property, the REIT must reduce

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Taxes assessed against local benefits that

following:

the contribution by the sum of:

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increase the value of the property assessed

Any deduction for contributions,

The ordinary income and short-term capital

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(such as for paving, etc.).

The special deductions on line 21b,

gain that would have resulted if the property

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Taxes deducted elsewhere on the return.

were sold at its FMV and

The deduction allowed under section 249,

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Excise taxes imposed under section 4981 on

Any net operating loss (NOL) carryback to

For certain contributions, the long-term

undistributed REIT income.

capital gain that would have resulted if the

the tax year under section 172, and

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Any capital loss carryback to the tax year

property were sold at its FMV.

See section 164(d) for apportionment of

under section 1212(a)(1).

taxes on real property between seller and

The reduction for the long-term capital gain

purchaser.

Charitable contributions over the 10%

applies to:

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Line 15. Interest.

limitation may not be deducted for the tax year

Contributions of tangible personal property

but may be carried over to the next 5 tax years.

for use by an exempt organization for a

Note: The deduction for interest is limited

purpose or function unrelated to the basis for

when the REIT is a policyholder or beneficiary

Special rules apply if the REIT has an NOL

its exemption and

with respect to a life insurance, endowment, or

carryover to the tax year. In figuring the

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Contributions of any property to or for the

annuity contract issued after June 8, 1997. For

charitable contributions deduction for the tax

use of certain private foundations except for

details, see section 264(f). Attach a statement

year, the 10% limit is applied using the taxable

stock for which market quotations are readily

showing the computation of the deduction.

income after taking into account any deduction

available (section 170(e)(5)).

for the NOL.

The REIT must make an interest allocation

Larger deduction. A larger deduction is

if the proceeds of a loan were used for more

To figure the amount of any remaining NOL

allowed for certain contributions of:

than one purpose (e.g., to purchase a portfolio

carryover to later years, taxable income must

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Inventory and other property to certain

investment and to acquire an interest in a

be modified (see section 172(b)). To the extent

organizations for use in the care of the ill,

passive activity). See Temporary Regulations

that contributions are used to reduce taxable

needy, or infants (see section 170(e)(3) and

section 1.163-8T for the interest allocation

income for this purpose and increase an NOL

Regulations section 1.170A-4A);

rules.

carryover, a contributions carryover is not

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Scientific equipment used for research to

allowed. See section 170(d)(2)(B).

Do not deduct the following interest:

institutions of higher learning or to certain

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Interest on indebtedness incurred or

Substantiation requirements. Generally, no

scientific research organizations (other than by

continued to purchase or carry obligations if

deduction is allowed for any contributions of

personal holding companies and service

the interest is wholly exempt from income tax.

$250 or more unless the REIT gets a written

organizations) (see section 170(e)(4)); and

For exceptions, see section 265(b).

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acknowledgment from the donee organization

Computer technology and equipment for

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For cash basis taxpayers, prepaid interest

that shows the amount of cash contributed,

educational purposes.

allocable to years following the current tax year

describes any property contributed, and gives

Contributions of computer technology and

(e.g., a cash basis calendar year taxpayer who

a description and a good faith estimate of the

equipment for educational purposes. A

in 2003 prepaid interest allocable to any period

value of any goods or services provided in

REIT may take an increased deduction under

after 2003 can deduct only the amount

return for the contribution or states that no

section 170(e)(6) for qualified contributions of

allocable to 2003).

goods or services were provided in return for

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computer technology or equipment for

Interest and carrying charges on straddles.

the contribution. The acknowledgment must be

educational purposes. Computer technology

Generally, these amounts must be capitalized.

obtained by the due date (including extensions)

or equipment means computer software,

See section 263(g).

of the REIT’s return, or if earlier, the date the

computer or peripheral equipment, and fiber

Special rules apply to:

return is filed. Do not attach the

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optic cable related to computer use.

Interest on which no tax is imposed (see

acknowledgment to the tax return, but keep it

section 163(j));

with the REIT’s records. These rules apply in

A contribution is a qualified contribution if:

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Foregone interest on certain

addition to the filing requirements for Form

It is made to an eligible donee (see below);

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below-market-rate loans (see section 7872);

8283, Noncash Charitable Contributions,

Substantially all of the donee property’s use

and

described below.

is:

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Instructions For Form 1120-Reit - 2003 Page 7

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