Instructions For Form 1120-Ric - 2016 (Page 5 of 16) in pdf

15 (Circular E), for details, including the

in the case of an election for traders in

income, deduction, or credit on the return

definition of responsible persons.

securities or commodities, the trade or

must be kept for 3 years from the date the

business for which the election is made.

return is due or filed, whichever is later.

Other penalties. Other penalties can be

Except for new taxpayers, the statement

Keep records that verify the RIC's basis in

imposed for negligence, substantial

must be filed by the due date (not

property for as long as they are needed to

understatement of tax, reportable

including extensions) of the income tax

figure the basis of the original or

transaction understatements, and fraud.

return for the tax year immediately

replacement property.

See sections 6662, 6662A, and 6663.

preceding the election year and attached

The RIC should keep copies of all filed

to that return, or if applicable, to a request

Accounting Methods

returns. They help in preparing future and

for an extension of time to file that return.

Figure taxable income using the method of

amended returns and in the calculation of

For more details, see Rev. Proc. 99-17,

accounting regularly used in keeping the

earnings and profits.

1999-7 I.R.B. 52, and sections 475(e) and

RIC's books and records. In all cases, the

(f).

Other Forms That May Be

method used must clearly reflect taxable

Change in accounting method.

income.

Required

Generally, the RIC must get IRS consent

to change either an overall method of

In addition to Form 1120-RIC, the RIC

Generally, permissible methods

accounting or the accounting treatment of

may have to file some of the following

include:

any material item. To do so, the RIC must

forms. Also see Pub. 542, Corporations,

Cash,

file Form 3115, Application for Change in

for an expanded list of forms the RIC may

Accrual, or

Accounting Method. See the Instructions

be required to file.

Any other method authorized by the

for Form 3115 for more information and

Internal Revenue Code.

Form 976, Claim for Deficiency

exceptions. Also see Rev. Proc. 2016-29,

Dividends Deductions by a Personal

Accrual method. Generally, a RIC must

2016-21 I.R.B. 880 (or any successor,

Holding Company, Regulated Investment

use the accrual method of accounting if its

Notice 2017-6, and Pub. 538, Accounting

Company, or Real Estate Investment

average annual gross receipts exceed $5

Periods and Methods.

Trust. Use this form to claim a deficiency

million. See section 448(c).

dividend under section 860.

Accounting Periods

Under the accrual method, an amount

is includible in income when:

Form 1096, Annual Summary and

A RIC must figure its taxable income on

Transmittal of U.S. Information Returns.

1. All the events have occurred that fix

the basis of a tax year. A tax year is the

Use Form 1096 to transmit Forms 1099

the right to receive the income, which is

annual accounting period a RIC uses to

and 5498 to the Internal Revenue Service.

the earliest of the date:

keep its records and report its income and

expenses. RICs can use a calendar year

a. the required performance takes

Form 1099-DIV, Dividends and

or a fiscal year. For more information

Distributions. Report certain dividends and

place,

about accounting periods, see

distributions.

b. payment is due, or

Regulations sections 1.441-1 and 1.441-2.

Form 1099-INT, Interest Income. Report

c. payment is received, and

Change of tax year. Generally, a RIC

interest income.

2. The amount can be determined

must receive consent from the IRS before

with reasonable accuracy.

Form 2438, Undistributed Capital Gains

changing its tax year. To obtain the

Tax Return, must be filed by the RIC if it

consent, file Form 1128, Application To

See Regulations section 1.451-1(a)

designates undistributed net long-term

Adopt, Change, or Retain a Tax Year.

and Pub. 538, Accounting Periods and

capital gains under section 852(b)(3)(D).

However, under certain conditions, a RIC

Methods, for details.

may change its tax year without obtaining

Form 2439, Notice to Shareholder of

Mark-to-market accounting method.

the consent.

Undistributed Long-Term Capital Gains,

Generally, dealers in securities must use

must be completed and a copy given to

See the Instructions for Form 1128 and

the mark-to-market accounting method

each shareholder for whom the RIC paid

Pub. 538 for more information on

described in section 475. Under this

tax on undistributed net long-term capital

accounting periods and tax years.

method, any security that is inventory to

gains under section 852(b)(3)(D).

the dealer must be held at its fair market

Rounding Off to

value (FMV).

Form 3520, Annual Return to Report

Whole Dollars

Transactions With Foreign Trusts and

Any security held by a dealer that is not

Receipt of Certain Foreign Gifts, may be

inventory and held at the close of the tax

A RIC can round off cents to whole dollars

required if the RIC received a distribution

year is treated as sold at its FMV on the

on its return and schedules. If the RIC

from, was a grantor of, or transferor to, a

last business day of the tax year. Any

does round to whole dollars, it must round

foreign trust during the tax year. See

resulting gain or loss must be taken into

all amounts. To round, drop amounts

Question 5 of Schedule N (Form 1120).

account that year in determining gross

under 50 cents and increase amounts

income. The gain or loss taken into

from 50 cents to 99 cents to the next dollar

Form 8613, Return of Excise Tax on

account is generally treated as ordinary

(for example, $1.39 becomes $1 and

Undistributed Income of Regulated

gain or loss.

$2.50 becomes $3).

Investment Companies. If the RIC is liable

for the 4% excise tax on undistributed

For details, including exceptions, see

If two or more amounts must be added

income under section 4982 or makes an

section 475, the related regulations, and

to figure the amount to enter on a line,

election under section 4982(e)(4), it must

Rev. Rul. 97-39, 1997-39 I.R.B. 4.

include cents when adding the amounts

file this return for the calendar year.

and round off only the total.

Dealers in commodities and traders in

securities and commodities may elect,

Form 8927, Determination Under Section

Recordkeeping

with some exceptions, to use the

860(e)(4) by a Qualified Investment Entity.

mark-to-market accounting method. To

Use Form 8927 to establish a

Keep the RIC's records for as long as they

make the election, the RIC must file a

determination date under Section 860(e)

may be needed for administration of any

statement describing the election, the first

(4) for purposes of making a deficiency

provision of the Internal Revenue Code.

tax year the election is to be effective, and

dividend distribution.

Usually, records that support an item of

-5-

Instructions For Form 1120-Ric - 2016 Page 5

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