Формуляр 1120-REIT Инструкции
Инструкция за формуляр 1120-REIT, данъчна декларация на САЩ за възстановяване на недвижимо имущество
Ревизия 2023
Свързани форми
- Формуляр 1120-REIT - Американска данъчна декларация за инвестиции в недвижими имоти
Department of the Treasury
Internal Revenue Service
2023
Instructions for Form
1120-REIT
U.S. Income Tax Return for Real Estate Investment Trusts
Section references are to the Internal Revenue Code unless
otherwise noted.
Contents
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Contents
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Future Developments
For the latest information about developments related to Form
1120-REIT and its instructions, such as legislation enacted after
What’s New
Increase in penalty for failure to file. For tax returns required
to be filed in 2024, the minimum penalty for failure to file a return
that is over 60 days late has increased to the smaller of the tax
Deduction for certain energy efficient commercial building
property. For tax years beginning in 2023, REITs claiming the
deduction for energy efficient commercial buildings should report
the deduction on line 18 of Form 1120-REIT. See the instructions
Expiration of 100% business meal expense deduction. The
temporary 100% business meal expense deduction for food and
beverages provided by a restaurant does not apply to amounts
paid or incurred after 2022.
Elective payment election. Applicable entities and electing
taxpayers can elect to treat certain credits as elective payments.
Any resulting overpayment may result in refunds. See the
3800.
Photographs of Missing Children
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You can help bring these children home by looking at the
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Item B. 100%-Owned Subsidiaries and Personal
Item F. Final Return, Name Change, Address
The Taxpayer Advocate Service
The Taxpayer Advocate Service (TAS) is an independent
organization within the IRS that helps taxpayers and protects
taxpayer rights. TAS's job is to ensure that every taxpayer is
treated fairly and knows and understands their rights under the
Part I—Real Estate Investment Trust Taxable
As a taxpayer, the REIT has rights that the IRS must abide by
in its dealings with the REIT. TAS can help the REIT if:
Part II—Tax on Net Income From Foreclosure
A problem is causing financial difficulty for the business;
The business is facing an immediate threat of adverse action;
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Part III—Tax for Failure To Meet Certain
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or
Part IV—Tax on Net Income From Prohibited
Jan 25, 2024
Cat. No. 64243J
The REIT has tried repeatedly to contact the IRS but no one
If a REIT meets the requirement for ascertaining actual
ownership (see Regulations section 1.857-8 for details), and did
not know (after exercising reasonable diligence), or have reason
to know, that it was closely held, it will be treated as meeting the
requirement that it is not closely held.
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has responded, or the IRS hasn't responded by the date
promised.
TAS has offices in every state, the District of Columbia, and
Puerto Rico. Local advocates' numbers are in their local
also call TAS at 877-777-4778.
TAS also works to resolve large-scale or systemic problems
that affect many taxpayers. If the REIT knows of one of these
broad issues, please report it to TAS through the Systemic
Other Requirements
The gross income and diversification of investment requirements
of section 856(c) must be met and the organization must:
Have been treated as a REIT for all tax years beginning after
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February 28, 1986, or
Had, at the end of the tax year, no accumulated earnings and
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profits from any tax year that it was not a REIT.
For this purpose, distributions are treated as made from the
earliest earnings and profits accumulated in any non-REIT tax
year. See section 857(d)(3).
How To Get Forms and Publications
Internet. You can access the IRS website 24 hours a day, 7
The organization must adopt a calendar tax year unless it first
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qualified for REIT status before October 5, 1976.
Download forms, instructions, and publications;
Order IRS products online;
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The deduction for dividends paid (excluding net capital gain
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dividends, if any) must equal or exceed:
Research your tax questions online;
Search publications online by topic or keyword;
View Internal Revenue Bulletins (IRBs) published in recent
1. 90% of the REIT's taxable income (excluding the
deduction for dividends paid and any net capital gain), plus
years; and
2. 90% of the excess of the REIT's net income from
foreclosure property over the tax imposed on that income by
section 857(b)(4)(A); less
Sign up to receive local and national tax news by email.
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Tax forms and publications. The REIT can view, download, or
print all of the forms and publications it may need at IRS.gov/
3. Any excess noncash income, as determined under
section 857(e).
See sections 856 and 857, and the related regulations for
details and exceptions.
an order and have forms mailed to it.
Termination of Election
General Instructions
The election to be treated as a REIT remains in effect until
terminated, revoked, or the REIT has failed to meet the
requirements of the statutory relief provisions. It terminates
automatically for any tax year in which the corporation, trust, or
association is not a qualified REIT.
Purpose of Form
Use Form 1120-REIT, U.S. Income Tax Return for Real Estate
Investment Trusts, to report the income, gains, losses,
deductions, credits, certain penalties; and to figure the income
tax liability of a REIT.
The organization may revoke the election for any tax year
after the first tax year the election is effective by filing a
statement with the service center where it files its income tax
return. The statement must be filed on or before the 90th day
after the first day of the tax year for which the revocation is to be
effective. The statement must include the following.
Who Must File
A corporation, trust, or association that meets certain conditions
(discussed below) must file Form 1120-REIT if it elects to be
treated as a REIT for the tax year (or has made that election for a
prior tax year and the election has not been terminated or
revoked). The election is made by figuring taxable income as a
REIT on Form 1120-REIT.
The name, address, and employer identification number (EIN)
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of the organization;
The tax year for which the election was made;
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A statement that the organization (according to section 856(g)
Qualified opportunity funds. To certify as a qualified
opportunity fund (QOF), the corporation must file Form
1120-REIT and attach Form 8996, even if the corporation had no
later. Also, see the Instructions for Form 8996.
(2)) revokes its election under section 856(c)(1) to be a REIT;
and
The signature of an official authorized to sign the income tax
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return of the organization.
The organization may not make a new election to be taxed as
a REIT during the 4 years following the first year for which the
termination or revocation is effective. See section 856(g)(4) for
exceptions.
General Requirements To Qualify as a
REIT
To qualify as a REIT, an organization:
Taxable REIT Subsidiaries (TRS)
Must be a corporation, trust, or association.
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Must be managed by one or more trustees or directors.
Must have beneficial ownership (a) evidenced by transferable
A REIT may own up to 100% of the stock in one or more taxable
REIT subsidiaries (TRS). A TRS must be a corporation (other
than a REIT or a qualified REIT subsidiary) and may provide
services to the REIT's tenants without disqualifying the rent
received by the REIT. See section 856(l) for details, including
certain restrictions on the type of business activities a TRS may
perform. Also, not more than 20% of the fair market value (FMV)
of a REIT's total assets (25% for tax years beginning after July
30, 2008, and no later than December 31, 2017) may be
securities of one or more TRSs (see section 856(c)(4) for
details).
shares, or by transferable certificates of beneficial interest; and
(b) held by 100 or more persons. (The REIT does not have to
meet this requirement until its 2nd tax year.)
Would otherwise be taxed as a domestic corporation.
Must be neither a financial institution (referred to in section
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582(c)(2)), nor a subchapter L insurance company.
Cannot be closely held, as defined in section 856(h). (The
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REIT does not have to meet this requirement until its second tax
year.)
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Transactions between a TRS and its associated REIT must
be at arm's length. A REIT may be subject to a 100% tax to the
extent it improperly allocates income and deductions between
the REIT and the TRS (see section 857(b)(7) for details).
Additional limitations on transactions between a TRS and its
associated REIT include:
section 355 applied, the corporation will not be eligible to make a
REIT election for any tax year beginning before the end of the
10-year period beginning on the date of such distribution.
See sections 355(h) and 856(c)(8) for more details.
When To File
Limitations on income from a TRS that may be treated as
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Generally, a REIT must file its income tax return by the 15th day
of the 4th month after the end of its tax year. A new REIT filing a
short-period return must generally file by the 15th day of the 4th
month after the short period ends. A REIT that has dissolved
must generally file by the 15th day of the 4th month after the date
it dissolved.
rents from real property by the REIT (see section 856(d)(8)), and
Limitations on a TRS's deduction for interest paid to its
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associated REIT (see section 163(j)).
To elect to have an eligible corporation treated as a TRS, the
corporation and the REIT must jointly file Form 8875, Taxable
REIT Subsidiary Election.
However, a REIT with a fiscal tax year ending June 30 must
file by the 15th day of the 3rd month after the end of its tax year.
A REIT with a short tax year ending anytime in June will be
treated as if the short year ended on June 30, and must file by
the 15th day of the 3rd month after the end of its tax year.
Restrictions on tax-free spinoffs from REITs. For
distributions after December 6, 2015, a REIT is generally
ineligible to participate in a tax-free spinoff as either a
distributing or controlled corporation under section 355. This
general rule does not apply if both the distributing corporation
and the controlled corporation are REITs immediately after the
distribution. Also, a REIT may spin off a TRS if the following
apply.
If the due date falls on a Saturday, Sunday, or legal holiday,
the REIT can file on the next business day.
Private Delivery Services
The REIT can use certain private delivery services (PDS)
designated by the IRS to meet the “timely mailing as timely filing”
designated services.
The distributing corporation has been a REIT at all times
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during the 3-year period ending on the date of distribution;
The controlled corporation has been a TRS of the REIT at all
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times during such period; and
The REIT has had control (as defined in section 368(c)
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The PDS can tell you how to get written proof of the mailing
applied by taking into account stock owned, directly and
indirectly, including through partnerships, by the REIT) of the
TRS at all times during such period.
date.
For the IRS mailing address to use if you're using a PDS, go
A controlled corporation is treated as meeting the control
requirements if the stock of the corporation was distributed by a
TRS in a transaction to which section 355 applies and the assets
of the corporation consist solely of the stock or assets held by
one or more TRSs of the distributing corporation meeting the
control requirements described above.
Private delivery services can't deliver items to P.O.
boxes. You must use the U.S. Postal Service to mail any
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CAUTION
item to an IRS P.O. box address.
Extension of Time To File
If a corporation that is not a REIT was a distributing or
File Form 7004, Application for Automatic Extension of Time To
File Certain Business Income Tax, Information, and Other
controlled corporation with respect to any distribution to which
Where To File
File the REIT's return at the applicable IRS address listed below.
If the REIT's principal business, office, or And the total assets at the end of the Use the following address:
agency is located in:
tax year are:
Connecticut, Delaware, District of Columbia,
Georgia, Illinois, Indiana, Kentucky, Maine,
Maryland, Massachusetts, Michigan, New
Hampshire, New Jersey, New York, North
Carolina, Ohio, Pennsylvania, Rhode Island,
South Carolina, Tennessee, Vermont,
Virginia, West Virginia, Wisconsin
Department of the Treasury
Internal Revenue Service
Kansas City, MO 64999-0012
Less than $10 million and Schedule M-3
is not filed
Department of the Treasury
Internal Revenue Service
Ogden, UT 84201-0012
$10 million or more, or less than $10
million and Schedule M-3 is filed
Alabama, Alaska, Arizona, Arkansas,
California, Colorado, Florida, Hawaii, Idaho,
Iowa, Kansas, Louisiana, Minnesota,
Mississippi, Missouri, Montana, Nebraska,
Nevada, New Mexico, North Dakota,
Oklahoma, Oregon, South Dakota, Texas,
Utah, Washington, Wyoming
Department of the Treasury
Internal Revenue Service
Ogden, UT 84201-0012
Any Amount
Any Amount
Internal Revenue Service
P.O. Box 409101
Ogden, UT 84409
A foreign country or U.S. territory
A group of corporations with members located in more than one service center area will often keep all the books and records at the
principal office of the managing corporation. In this case, the tax returns of the corporations may be filed with the service center for the
area in which the principal office of the managing corporation is located.
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Returns, to request an extension of time to file. Generally, file
Form 7004 by the regular due date of the REIT's income tax
return. See the Instructions for Form 7004 for more information.
4. Form 8996.
5. Form 4136.
6. Form 8978.
Who Must Sign
7. Form 965-B.
8. Form 8941.
9. Form 3800.
10. Form 8997
11. Additional schedules in alphabetical order.
12. Additional forms in numerical order.
13. Supporting statements and attachments.
The return must be signed and dated by:
The president, vice president, treasurer, assistant treasurer,
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chief accounting officer; or
Any other corporate officer (such as a tax officer) authorized
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to sign.
If a return is filed on behalf of a REIT by a receiver, trustee, or
assignee, the fiduciary must sign the return, instead of the
corporate officer. Returns and forms signed by a receiver or
trustee in bankruptcy on behalf of a REIT must be accompanied
by a copy of the order or instructions of the court authorizing
signing of the return or form.
Complete every applicable entry space on Form 1120-REIT.
Do not enter “See attached” instead of completing the entry
spaces. If more space is needed on the forms or schedules,
attach separate sheets using the same size and format as the
printed forms.
Paid Preparer Use Only section. If an employee of the REIT
completes Form 1120-REIT, the paid preparer's section should
remain blank. Anyone who prepares Form 1120-REIT but does
not charge the REIT should not complete that section. Generally,
anyone who is paid to prepare the return must sign it and
complete the section.
If there are supporting statements and attachments, arrange
them in the same order as the schedules or forms they support
and attach them last. Show the totals on the printed forms. Enter
the REIT's name and EIN on each supporting statement or
attachment.
The paid preparer must complete the required preparer
information and:
Tax Payments
Sign the return in the space provided for the preparer's
Generally, the REIT must pay the tax due in full no later than the
due date for filing its tax return (not including extensions). See
Saturday, Sunday, or legal holiday, the payment is due on the
next day that isn't a Saturday, Sunday, or legal holiday.
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signature,
Include their Preparer Tax Identification Number (PTIN), and
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Give a copy of the return to the REIT.
A paid preparer may sign the original or amended
returns by rubber stamp, mechanical device, or
computer software program.
TIP
Electronic Deposit Requirement
REITs must use electronic funds transfers to make all federal tax
deposits (such as deposits of employment, excise, and
corporate income tax). Generally, electronic funds transfers are
made using the Electronic Federal Tax Payment System
(EFTPS). However, if the REIT does not want to use EFTPS, it
can arrange for its tax professional, financial institution, payroll
service, or other trusted third party to make deposits on its
behalf. Also, it may arrange for its financial institution to submit a
same-day wire payment (discussed below) on its behalf. EFTPS
is a free service provided by the Department of the Treasury.
Services provided by a tax professional, financial institution,
payroll service, or other third party may have a fee.
Paid Preparer Authorization
If the REIT wants to allow the IRS to discuss its 2023 tax return
with the paid preparer who signed it, check the “Yes” box in the
signature area of the return. This authorization applies only to the
individual whose signature appears in the “Paid Preparer Use
Only” section of the REIT's return. It does not apply to the firm, if
any, shown in that section.
If the “Yes” box is checked, the REIT is authorizing the IRS to
call the paid preparer to answer any questions that may arise
during the processing of its return. The REIT is also authorizing
the paid preparer to:
To get more information about EFTPS or to enroll in EFTPS,
Relay Services (TRS) for people who are deaf, hard of hearing,
or have a speech disability, dial 711 and provide the TRS
assistant the 800-555-4477 number above or 800-733-4829.
Additional information about EFTPS is also available in Pub. 966.
Give the IRS any information that is missing from the return;
Call the IRS for information about the processing of the return
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or the status of any related refund or payment(s); and
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Respond to certain IRS notices about math errors, offsets,
and return preparation.
Depositing on time. For any deposit made by EFTPS to be on
time, the REIT must submit the deposit by 8 p.m. Eastern time
the day before the date the deposit is due. If the REIT uses a
third party to make deposits on its behalf, they may have different
cutoff times.
The REIT is not authorizing the paid preparer to receive any
refund check, bind the REIT to anything (including any additional
tax liability), or otherwise represent the REIT before the IRS.
The authorization will automatically end no later than the due
date (without regard to extensions) for filing the REIT's 2024 tax
return. If the REIT wants to expand the paid preparer's
authorization, see Pub. 947, Practice Before the IRS and Power
of Attorney.
Same-day wire payment option. If the REIT fails to submit a
deposit transaction on EFTPS by 8 p.m. Eastern time on the day
before the date a deposit is due, it can still make its deposit on
time by using the Federal Tax Collection Service (FTCS). To use
the same-day payment method, the REIT will need to make
arrangements with its financial institution ahead of time
regarding availability, deadlines, and costs. Financial institutions
may charge a fee for payments made this way. To learn more
about the information the REIT will need to provide its financial
institution to make a same-day wire payment, visit the IRS
Assembling the Return
To ensure that the REIT's tax return is correctly processed,
attach all schedules and other forms after page 5 of Form
1120-REIT, in the following order.
1. Schedule N (Form 1120).
2. Schedule D (Form 1120).
3. Form 8949.
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collecting, accounting for, or paying over these taxes, and who
acted willfully in not doing so. The penalty is equal to the full
amount of the unpaid trust fund tax. See the Instructions for
Form 720 or Pub. 15 (Circular E), Employer's Tax Guide, for
details, including the definition of responsible persons.
Estimated Tax Payments
Generally, the following rules apply to the REIT's payments of
estimated tax.
The REIT must make installment payments of estimated tax if
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it expects its total tax for the year (less applicable credits) to be
$500 or more.
Note. The trust fund recovery penalty will not apply to any
amount of trust fund taxes an employer holds back in anticipation
of the credit for qualified sick and family leave wages or the
employee retention credit that they are entitled to. See Pub. 15 or
Pub. 51 for more information.
The REIT must use electronic funds transfers to make
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installment payments of estimated tax.
The installments are due by the 15th day of the 4th, 6th, 9th,
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and 12th months of the tax year. If any date falls on a Saturday,
Sunday, or legal holiday, the installment is due on the next
regular business day.
Failure to ascertain ownership. If the REIT fails to comply
with Regulations section 1.857-8 for ascertaining ownership and
maintaining factual ownership records for a tax year, it must pay
a $25,000 penalty ($50,000 for intentional disregard) upon
notice and demand by the IRS. If the REIT can show that the
failure was due to reasonable cause, the penalty may not be
imposed. For more information, see section 857(f).
If, after the REIT figures and deposits estimated tax, it finds
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that its tax liability for the year will be more or less than originally
estimated, it may have to refigure its required installments. If
earlier installments were underpaid, the REIT may owe a penalty.
If the REIT overpaid its estimated tax, it may be able to get a
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quick refund by filing Form 4466, Corporation Application for
Quick Refund of Overpayment of Estimated Tax. The
overpayment must be at least 10% of the REIT's expected
income tax liability and at least $500.
Failure to satisfy certain REIT qualification provisions. If
the REIT is required to pay the $50,000 penalty under section
856(g)(5)(C) for each failure to satisfy a REIT qualification
provision of sections 856–859 (other than section 856(c)(2),
856(c)(3), or 856(c)(4)) due to reasonable cause and not willful
See section 6655 and Pub. 542, Corporations, for more
information on how to figure estimated taxes.
Other penalties. Other penalties can be imposed for
negligence, substantial understatement of tax, reportable
transaction understatements, and fraud. See sections 6662,
6662A, and 6663.
Interest and Penalties
If the corporation receives a notice about penalties after
it files its return, send the IRS an explanation and we will
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CAUTION
determine if the corporation meets the reasonable-cause
Accounting Methods
criteria. Do not attach an explanation when the corporation’s
Figure taxable income using the method of accounting regularly
used in keeping the REIT's books and records. In all cases, the
method used must clearly show taxable income.
return is filed.
Interest. Interest is charged on taxes paid late even if an
extension of time to file is granted. Interest is also charged on
penalties imposed for failure to file, negligence, fraud, substantial
valuation misstatements, and substantial understatements of tax
from the due date (including extensions) to the date of payment.
The interest charge is figured at a rate determined under section
6621.
Generally, permissible methods include:
Cash,
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Accrual, or
Any other method authorized by the Internal Revenue Code.
Accrual method. Generally, a REIT must use the accrual
method of accounting if its average annual gross receipts for the
3 prior tax years exceed $29 million. See section 448(c).
Late filing of return. A REIT that does not file its tax return by
the due date, including extensions, may be penalized 5% of the
unpaid tax for each month or part of a month the return is late, up
to a maximum of 25% of the unpaid tax. The minimum penalty
for a tax return required to be filed in 2024 that is over 60 days
late is the smaller of the tax due or $485. The penalty will not be
imposed if the REIT can show that the failure to file on time was
For more information, see Pub. 538, Accounting Periods and
Methods.
Change in accounting method. Generally, the REIT must get
IRS consent to change either an overall method of accounting or
the accounting treatment of any material item for income tax
purposes. To obtain consent, the REIT must generally file Form
3115, Application for Change in Accounting Method. See the
Instructions for Form 3115 and Pub. 538 for more information
and exceptions. Also, see the Instructions for Form 3115 for
procedures that may apply for obtaining automatic consent to
change certain methods of accounting, non-automatic change
procedures, and reduced Form 3115 filing requirements.
Section 481(a) adjustment. If the REIT's taxable income for
the current tax year is figured under a method of accounting
different from the method used in the preceding tax year, the
REIT may have to make an adjustment under section 481(a) to
prevent amounts of income or expenses from being duplicated
or omitted. This is referred to as a “section 481(a) adjustment.”
The section 481(a) adjustment period is generally 1 year for a
net negative adjustment and 4 years for a net positive
Late payment of tax. A REIT that does not pay the tax when
due may generally be charged a penalty for the failure to pay tax.
The amount of the penalty is 1/2 of 1% of the unpaid tax for each
month or part of a month the tax is not paid, up to a maximum of
25% of the unpaid tax. The penalty will not be imposed if the
REIT can show that the failure to pay on time was due to
Trust fund recovery penalty. This penalty may apply if certain
excise, income, social security, and Medicare taxes that must be
collected or withheld are not collected or withheld, or these taxes
are not paid. These taxes are generally reported on:
Form 720, Quarterly Federal Excise Tax Return;
Form 941, Employer's QUARTERLY Federal Tax Return;
Form 943, Employer Annual Federal Tax Return for
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adjustment. However, in some cases, a REIT can elect to modify
the section 481(a) adjustment period. The REIT must complete
the appropriate lines of Form 3115 to make the election. See the
Instructions for Form 3115 for more information and exceptions.
If the net section 481(a) adjustment is positive, report it on line 7
Agricultural Employees;
Form 944, Employer's ANNUAL Federal Tax Return; or
Form 945, Annual Return of Withheld Federal Income Tax.
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The trust fund recovery penalty may be imposed on all
persons who are determined by the IRS to be responsible for
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as other income. If the net section 481(a) adjustment is negative,
report it on line 19 as a deduction.
Source Income Subject to Withholding; and Form 1042-T,
Annual Summary and Transmittal of Forms 1042-S. Use these
forms to report and send withheld tax on payments or
distributions made to nonresident alien individuals, foreign
partnerships, or foreign corporations to the extent these
payments constitute gross income from sources within the
United States (see sections 861 through 865).
Note. Include any net positive section 481(a) adjustment on
Part I, line 7. Report any negative adjustment on Part I, line 19.
Accounting Period
A REIT must figure its taxable income on the basis of a tax year.
A tax year is the annual accounting period a REIT uses to keep
its records and report its income and expenses. A REIT adopts a
tax year when it files its first income tax return. It must adopt a
tax year by the due date (not including extensions) of its initial
income tax return.
Also, see sections 1441 and 1442, and Pub. 515, Withholding
of Tax on Nonresident Aliens and Foreign Entities.
Form 1099-DIV, Dividends and Distributions. Use this form to
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report certain dividends and distributions.
Form 2438, Undistributed Capital Gains Tax Return, must be
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filed by the REIT if it designates undistributed net long-term
capital gains under section 857(b)(3)(C).
Note. A REIT must adopt a calendar year unless it first qualified
Form 2439, Notice to Shareholder of Undistributed
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for REIT status before October 5, 1976.
Long-Term Capital Gains, must be completed and a copy given
to each shareholder for whom the REIT paid tax on undistributed
net long-term capital gains under section 857(b)(3)(C).
Change of tax year. A REIT may not change its tax year to any
tax year other than the calendar year. Generally, a REIT must
receive consent from the IRS before changing its tax year by
filing Form 1128, Application To Adopt, Change, or Retain a Tax
Year.
However, upon electing to be taxed as a REIT, an entity that
has not engaged in any active trade or business may change its
tax year to a calendar year without obtaining the consent.
Form 3520, Annual Return To Report Transactions With
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Foreign Trusts and Receipt of Certain Foreign Gifts, is required
either if the REIT received a distribution from a foreign trust or if
the REIT was a grantor of, transferor of, or transferor to a foreign
trust that existed during the tax year. See Question 5 of
Schedule N (Form 1120).
Form 5471, Information Return of U.S. Persons With Respect
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See the Instructions for Form 1128 and Pub. 538 for more
to Certain Foreign Corporations, is required if the REIT is a U.S.
shareholder of a controlled foreign corporation, a specified
foreign corporation, or otherwise subject to the reporting
requirements of section 6038 or 6046, and the related
regulations.
information on accounting periods and tax years.
Rounding Off to Whole Dollars
The REIT may enter decimal points and cents when completing
its return. However, the REIT should round off cents to whole
dollars on its return, forms, and schedules to make completing
its return easier. The REIT must either round off all amounts on
its return to whole dollars, or use cents for all amounts. To round,
drop amounts under 50 cents and increase amounts from 50 to
99 cents to the next dollar. For example, $8.40 rounds to $8 and
$8.50 rounds to $9.
Form 5472, Information Return of a 25% Foreign-Owned U.S.
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Corporation or a Foreign Corporation Engaged in a U.S. Trade or
Business. This form is filed if the REIT is 25% or more foreign
Form 6198, At-Risk Limitations. Use this form if a REIT is
•
closely held, as described in section 465(a)(1)(B), and (1)
directly or indirectly has any amounts not at risk that are invested
in an at-risk activity that incurred a loss; or (2) engages in certain
activities and has borrowed amounts not at risk. See section 465
and the Instructions for Form 6198.
If two or more amounts must be added to figure the amount to
enter on a line, include cents when adding the amounts and
round off only the total.
Form 7205, Energy Efficient Commercial Buildings
•
Deduction. Use Form 7205 to calculate and claim the deduction
under section 179D for qualifying energy efficient commercial
buildings placed in service during the tax year.
Recordkeeping
Keep the REIT's records for as long as they may be needed for
the administration of any provision of the Internal Revenue Code.
Usually, records that support an item of income, deduction, or
credit on the return must be kept for 3 years from the date the
return is due or filed, whichever is later. Keep records that verify
the REIT's basis in property for as long as they are needed to
figure the basis of the original or replacement property.
Form 8275, Disclosure Statement, and Form 8275-R,
•
Regulation Disclosure Statement, are used to disclose items or
positions taken on a tax return that are not otherwise adequately
disclosed on a tax return or that are contrary to Treasury
regulations (to avoid parts of the accuracy-related penalty or
certain preparer penalties).
The REIT should also keep copies of all filed returns. They
help in preparing future and amended returns and in the
calculation of earnings and profits.
Form 8300, Report of Cash Payments Over $10,000
•
Received in a Trade or Business. Use this form to report the
receipt of more than $10,000 in cash or foreign currency in one
transaction or a series of related transactions.
Other Forms That May Be Required
Form 8612, Return of Excise Tax on Undistributed Income of
•
In addition to Form 1120-REIT, the REIT may have to file some of
the following forms.
Real Estate Investment Trusts, is filed if the REIT is liable for the
4% excise tax on undistributed income imposed under section
4981.
Form 926, Return by a U.S. Transferor of Property to a
•
Foreign Corporation, is filed to report certain transfers to foreign
corporations under section 6038B.
Form 8621, Information Return by a Shareholder of a Passive
•
Foreign Investment Company or Qualified Electing Fund, is
required if the REIT is a direct or indirect shareholder of a
passive foreign investment company, as defined in section
1297(a).
Form 966, Corporate Dissolution or Liquidation, is used to
•
report the adoption of a resolution or plan to dissolve the
corporation or liquidate any of its stock.
Form 976, Claim for Deficiency Dividends Deductions by a
•
Form 8810, Corporate Passive Activity Loss and Credit
•
Personal Holding Company, Regulated Investment Company, or
a Real Estate Investment Trust, is used to claim a deduction for
deficiency dividends. See section 860 and the related
regulations.
Limitations. Use this form if a REIT is closely held, as described
in section 469(j)(1), and has losses or credits from passive
activities. See section 469, the related regulations, and the
Instructions for Form 8810.
Form 1042, Annual Withholding Tax Return for U.S. Source
•
Income of Foreign Persons; Form 1042-S, Foreign Person's U.S.
6
Form 8865, Return of U.S. Persons With Respect To Certain
corporation's GILTI under section 951A and attach it to Form
1120-REIT.
•
Foreign Partnerships. A REIT may have to file Form 8865 if it:
Form 8996, Qualified Opportunity Fund. Use this form to
•
1. Controlled a foreign partnership (that is, owned more than
certify that the REIT organized as a qualified opportunity fund
(QOF) to invest in qualified opportunity zone property. In
addition, a QOF REIT files Form 8996 annually to report that it
meets the 90% investment standard of section 1400Z-2 or to
compute the penalty if it fails to meet the investment standard.
a 50% direct or indirect interest in the partnership).
2. Owned at least a 10% direct or indirect interest in a
foreign partnership while U.S. persons controlled that
partnership.
3. Had an acquisition, disposition, or change in proportional
Form 8997, Initial and Annual Statement of Qualified
•
interest in a foreign partnership that:
Opportunity Fund (QOF) Investments. Use this form to report
investments in one or more QOFs. Report the amount of
deferred gains invested in QOFs for the current tax year, which
include capital gains deferred and invested in QOFs and
disposal investments in QOFs, and the amount of deferred gains
invested in QOFs at the end of the current tax year.
Increased its direct interest to at least 10% or reduced its
•
direct interest of at least 10% to less than 10%.
Changed its direct interest by at least a 10% interest.
•
4. Contributed property to a foreign partnership in exchange
for a partnership interest if:
Immediately after the contribution, the REIT owned, directly or
•
Statements
indirectly, at least a 10% interest in the foreign partnership; or
The FMV of the property the REIT contributed to the foreign
•
Reportable transaction disclosure statement. Disclose
information for each reportable transaction in which the REIT
participated. Form 8886, Reportable Transaction Disclosure
Statement, must be filed for each tax year that the federal
income tax liability of the REIT is affected by its participation in
the transaction. The following are reportable transactions.
partnership in exchange for a partnership interest, when added
to other contributions of property made to the foreign partnership
during the preceding 12-month period, exceeds $100,000.
Also, the REIT may have to file Form 8865 to report certain
dispositions by a foreign partnership of property it previously
contributed to that foreign partnership if it was a partner at the
time of the disposition. For more details, including penalties for
failing to file Form 8865, see Form 8865 and its separate
instructions.
1. Any listed transaction, which is a transaction that is the
same as or substantially similar to one of the types of
transactions that the IRS has determined to be a tax avoidance
transaction and identified by notice, regulation, or other
published guidance as a listed transaction.
2. Any transaction offered under conditions of confidentiality
for which the REIT (or a related party) paid an advisor a fee of at
least $250,000.
3. Certain transactions for which the REIT (or a related
party) has contractual protection against disallowance of the tax
benefits.
4. Certain transactions resulting in a loss of at least $10
million in any single year or $20 million in any combination of
years.
Form 8875, Taxable REIT Subsidiary Election, is filed jointly
•
by a corporation and a REIT to have the corporation treated as a
taxable REIT subsidiary.
Form 8927, Determination Under Section 860(e)(4) by a
•
Qualified Investment Entity. Use Form 8927 to make a
determination under section 860(e)(4) and to establish the date
of determination for purposes of making a deficiency dividend
distribution.
Form 8937, Report of Organizational Actions Affecting Basis
•
of Securities. Use this form when any organizational action
affects the basis of holders of either a security or a class of the
security. For example, a REIT may use this form in connection
with transactions such as a nontaxable cash or stock distribution
to shareholders, or a conversion rate adjustment on a convertible
debt instrument that results in a distribution under section
305(c). However, a REIT that reports undistributed capital gains
to shareholders on Form 2439 can satisfy the organizational
action reporting requirements for those undistributed gains if the
REIT timely files and gives Form 2439 to all proper parties for the
organizational action. For more information, see the Instructions
for Form 8937.
5. Any transaction identified by the IRS by notice, regulation,
or other published guidance as a “transaction of interest.” See
Notice 2009-55, 2009-31 I.R.B. 170.
For more information, see Regulations section 1.6011-4.
Also, see the Instructions for Form 8886.
Penalties. The REIT may have to pay a penalty if it is required
to disclose a reportable transaction under section 6011 and fails
to properly complete and file Form 8886. Penalties may also
apply under section 6707A if the REIT fails to file Form 8886 with
its Form 1120-REIT, fails to provide a copy of Form 8886 to the
Office of Tax Shelter Analysis (OTSA), or files a form that fails to
include all the information required (or includes incorrect
information). Other penalties, such as an accuracy-related
penalty under section 6662A, may also apply. See the
Instructions for Form 8886 for details on these and other
penalties.
Form 8975, Country-by-Country Report. Certain U.S.
•
persons that are the ultimate parent entity of a U.S. multinational
enterprise group with annual revenue for the preceding reporting
period of $850 million or more are required to file Form 8975.
Form 8975 and its Schedules A (Form 8975) must be filed with
the income tax return of the ultimate parent entity of a U.S.
multinational enterprise group for the tax year in or within which
the reporting period covered by Form 8975 ends. The first
required reporting period for an ultimate parent entity is the
12-month reporting period that begins on or after the first day of
a tax year of the ultimate parent entity that begins on or after
June 30, 2016. For more information, see Form 8975,
Schedule A (Form 8975) and the Instructions for Form 8975 and
Schedule A (Form 8975).
Reportable transactions by material advisors. Material
advisors to any reportable transaction must disclose certain
information about the reportable transaction by filing Form 8918,
Material Advisor Disclosure Statement, with the IRS. For details,
see the Instructions for Form 8918.
Transfers to a corporation controlled by the transferor.
Every significant transferor (as defined in Regulations section
1.351-3(d)(1)) that receives stock of a corporation in exchange
for property in a nonrecognition event must include the
Form 8990, Limitation on Business Interest Expense Under
•
Section 163(j). Use this form to calculate the amount of business
interest expense you can deduct and the amount to carry
forward to the next year.
statement required by Regulations section 1.351-3(a) on or with
the transferor's tax to its return for the tax year of the exchange.
The transferee corporation must include the statement required
by Regulations section 1.351-3(b) on or with its return for the tax
Form 8992, U.S. Shareholder Calculation of Global Intangible
•
Low-Taxed Income (GILTI). Use this form to figure the domestic
7
year of the exchange, unless all the required information is
included in any statement(s) provided by a significant transferor
that is attached to the same return for the same section 351
exchange. If the transferor or transferee corporation is a
controlled foreign corporation (CFC), each U.S. shareholder
(within the meaning of section 951(b)) must include the required
statement on or with its return.
corporation's principal office is located in Little Rock, Arkansas,
the corporation should enter the Little Rock address.
If the REIT receives its mail in care of a third party (such as an
accountant or an attorney), enter on the street address line “C/O”
followed by the third party's name and street address or P.O. box.
Item B. 100%-Owned Subsidiaries
and Personal Holding Companies
Distributions under section 355. Every REIT that makes a
distribution of stock or securities of a controlled corporation, as
described in section 355 (or so much of section 356 as it relates
to section 355), must include the statement required by
Regulations section 1.355-5(a) on or with its return for the year of
the distribution. A significant distributee (as defined in
REITs With 100%-Owned Subsidiaries
Check this box if this return is filed for a REIT with 100%-owned
REIT subsidiaries under section 856(i). These subsidiaries are
not treated as separate corporations.
Regulations section 1.355-5(c)) that receives stock or securities
of a controlled corporation must include the statement required
by Regulations section 1.355-5(b) on or with its return for the
year of receipt. If the distributing or distributee corporation is a
CFC, each U.S. shareholder (within the meaning of section
951(b)) must include the statement on or with its return.
Do not check this box for a taxable REIT subsidiary. See the
Personal Holding Companies
Personal holding companies must attach to Form 1120-REIT a
Schedule PH (Form 1120), U.S. Personal Holding Company
(PHC) Tax. See the Instructions for Schedule PH (Form 1120) for
details.
Dual consolidated losses. If a domestic corporation incurs a
dual consolidated loss (as defined in Regulations section
1.1503-2(c)(5)), the corporation (or consolidated group) may
need to attach an elective relief agreement and/or an annual
certification, as provided in Regulations section 1.1503-2(g)(2).
Item C. Employer Identification
Number (EIN)
Election to reduce basis under section 362(e)(2)(C). If
property is transferred to a corporation subject to section 362(e)
(2), the transferor and the transferee corporation may elect under
section 362(e)(2)(C) to reduce the transferor's basis in the stock
received instead of reducing the transferee corporation's basis in
the property transferred. Once made, the election is irrevocable.
For more information, see section 362(e)(2) and Regulations
section 1.362-4. If an election is made, a statement must be filed
in accordance with Regulations section 1.362-4(d)(3).
Enter the REIT's EIN. If the REIT does not have an EIN, it must
apply for one. An EIN may be applied for:
•
once the application information is validated.
By faxing or mailing Form SS-4, Application for Employer
•
Identification Number.
If the REIT has not received its EIN by the time the return is
due, enter “Applied for” in the space for the EIN. For more
details, see the Instructions for Form SS-4.
Other forms and statements. See Pub. 542 for a list of other
forms and statements a REIT may need to file in addition to the
forms and statements discussed throughout these instructions.
Note. REITs located in the United States or U.S. territories can
use the online application process.
Specific Instructions
Item D. Date REIT Established
If the REIT is a corporation under state or local law, enter the
date incorporated. If it is a trust or association, enter the date
organized.
Period Covered
File the 2023 return for calendar year 2023 and fiscal years that
begin in 2023 and end in 2024. For a fiscal year return, fill in the
tax year in the space at the top of the form.
Item E. Total Assets
Enter the REIT's total assets (as determined by the accounting
method regularly used in keeping its books and records) at the
end of the tax year. If there are no assets at the end of the tax
year, enter -0-.
Note. The 2023 Form 1120-REIT can also be used if:
The REIT has a tax year of less than 12 months that begins
•
and ends in 2024, and
The 2024 Form 1120-REIT is not available at the time the
•
Item F. Final Return, Name Change,
Address Change, or Amended Return
REIT is required to file its return.
The REIT must show its 2024 tax year on the 2023 Form
1120-REIT and take into account any tax law changes that are
effective for tax years beginning after December 31, 2023.
If this is the REIT's final return, and it will no longer exist,
•
of Election, earlier.
If the REIT has changed its name since it last filed a return,
•
Name and Address
check the box for “Name change.” Generally, a REIT must also
have amended its articles of incorporation and filed the
amendment with the state in which it was incorporated.
Enter the REIT's true name (as set forth in the charter or other
legal document creating it), address, and EIN on the appropriate
lines. Include the suite, room, or other unit number after the
street address. Enter the address of the REIT's principal office or
place of business. If the post office does not deliver mail to the
street address and the REIT has a P.O. box, show the box
number instead.
If the REIT has changed its address since it last filed a return
•
(including a change to an “in care of” address), check the box for
“Address change.”
Note. If a change in address or responsible party occurs after
the return is filed, use Form 8822-B, Change of Address or
Responsible Party—Business, to notify the IRS of the new
address. See the instructions for Form 8822-B for details.
Note. Do not use the address of the registered agent for the
state in which the corporation is incorporated. For example, if a
business is incorporated in Delaware or Nevada and the
If the REIT is amending its return, check the box for “Amended
•
Return,” complete the entire return, correct the appropriate lines
8
with the new information, and refigure the REIT's tax liability.
Attach a statement that explains the reasons for the
amendments and identifies the lines being changed on the
amended return.
Rent from a taxable REIT subsidiary (TRS) either (a) if at least
•
90% of the leased space of the property is leased to persons
other than TRSs of the REIT and other than persons described
in section 856(d)(2)(B) at rents comparable to the rent paid by
the other tenants of the REIT for comparable space; or (b) for
certain lodging facilities or health care property operated by an
eligible independent contractor. For more information, including
definitions and additional requirements, see sections 856(d)(8)
and 856(d)(9). Also, see Rev. Proc. 2003-66, 2003-33 I.R.B. 364,
for the special rules on rents paid to a REIT by certain joint
ventures that include a TRS.
Item G. Type of REIT
Check the appropriate box to indicate whether you are filing a
return for a “Mortgage REIT” or an “Equity REIT.” If the primary
source of gross receipts is derived from mortgage interest and
fees, check the “Mortgage” box. Otherwise, check the “Equity”
box.
See section 856(d)(2) for amounts excluded from “rents from
Item H. PBA Code (Equity REITs Only)
real property.”
Enter only one code that best reflects the principal business
activity of an equity REIT from the selection below.
Line 4. Other gross rents. Enter the gross amount received for
renting property not included on line 3.
531110– Lessors of Residential Buildings & Dwellings.
531120– Lessors of Nonresidential Buildings (except
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Line 5. Capital gain net income. Every sale or exchange of a
capital asset must be reported on Schedule D (Form 1120),
Capital Gains and Losses, even if there is no gain or loss.
•
Miniwarehouses).
531130– Lessors of Miniwarehouses & Self-Storage Units.
531190– Lessors of Other Real Estate Property.
•
•
Line 7. Other income. Enter any other taxable income not
reported on lines 1 through 6, except amounts that must be
reported in Part II or IV.
Enter amounts included in income under the section 951A
GILTI provisions. See Form 8992, Part II, line 5, and the
Instructions for Form 8992. Also, consider the applicability of
section 951A with respect to controlled foreign corporations
owned by domestic partnerships in which the REIT has an
interest. If the REIT also has a Form 5471 reporting requirement,
attach the form.
Part I—Real Estate Investment Trust
Taxable Income
Include in Part I the REIT's share of gross income from
partnerships in which the REIT is a partner, and the deductions
attributable to the gross income items. See Regulations section
1.856-3(g).
Real estate investment trust taxable income does not include
the following.
List the type and amount of income on an attached schedule.
If the REIT has only one item of other income, describe it in
parentheses on line 7. Examples of other income to report on
line 7 include the following.
Gross income, gains, losses, and deductions from foreclosure
•
property (defined in section 856(e)). If the aggregate of such
amounts results in net income, report these amounts in Part II.
Amounts received or accrued as consideration for entering
•
Income or deductions from any prohibited transaction (defined
•
into agreements to make real property loans or to purchase or
lease real property.
in section 857(b)(6)) resulting in a gain. Report these amounts in
Part IV.
Recoveries of bad debts deducted in prior years under the
•
specific charge-off method.
Income
Refunds of taxes deducted in prior years if they reduced
•
Line 1. Dividends. Enter the total amount of dividends received
income subject to tax in the year deducted (see section 111). Do
not offset current year taxes against tax refunds.
during the tax year.
Any deduction previously taken under section 179A that is
•
Line 2. Interest. Enter taxable interest on U.S. obligations and
on loans, notes, mortgages, bonds, bank deposits, corporate
bonds, tax refunds, etc. Do not offset interest expense against
interest income. Special rules apply to interest income from
certain below-market-rate loans. See section 7872 for details.
subject to recapture. The REIT must recapture the benefit of any
allowable deduction for clean-fuel vehicle property (or clean-fuel
vehicle refueling property), if the property later ceases to qualify.
See Regulations section 1.179A-1 for details.
Ordinary income from trade or business activities of a
•
Note. Report tax-exempt interest income on Form 1120-REIT,
Schedule K, line 8. Do not include tax-exempt interest on line 2.
Also, if required, include the same amount on Schedule M-1,
line 7.
partnership (from Schedule K-1 (Form 1065)). Do not offset
ordinary losses against ordinary income. Instead, include the
losses on line 19 of Form 1120-REIT. Show the partnership's
name, address, and EIN on a separate statement attached to
this return. If the amount entered is from more than one
partnership, identify the amount from each partnership.
Include interest income from tax credit bonds on line 2.
Line 3. Gross rents. Include the following.
Any net positive section 481(a) adjustment. See Section
•
Charges for customary services that may qualify as rents from
•
481(a) adjustment, earlier.
Income from cancellation of debt (COD) from the repurchase
real property are described in Regulations section 1.856-4(b)(1).
Services customarily furnished to tenants of a REIT include
parking facilities. See Rev. Rul. 2004-24, 2004-10 I.R.B. 550, for
guidance to determine whether amounts received by a REIT that
provides parking facilities at its rental real properties qualify as
rents from real property.
•
of a debt instrument for less than its adjusted issue price.
If the REIT elected to take section 965(a) inclusions and
•
corresponding section 965(c) deductions into account over 8
years in accordance with section 965(m), include the
current-year net section 965 inclusion (the section 965(a)
inclusion less the corresponding section 965(c) deduction) on
this line 7. You must also complete and attach Form 965-B,
Corporate and Real Estate Investment Trust (REIT) Report of
Net 965 Tax Liability and Electing REIT Report of 965 Amounts.
Rent from personal property leased under or with a lease of
•
real property (but only if the rent from the personal property does
not exceed 15% of the total rent for the tax year charged for both
the real and personal property under such lease). Figure the
percentage of rents from personal property by comparing the
FMV of the personal rental property to the FMV of the total rental
property. See section 856(d)(1) for details.
Form 965-B must be completed by an electing REIT for every
•
tax year for which the REIT has any section 965 amounts taken
into account in accordance with section 965(m) or not fully taken
9
into account at any point during the tax year. For more
information, see Form 965-B and the related instructions.
For more details, see the Instructions for Form 4562,
Depreciation and Amortization.
Any payroll tax credit taken by an employer on its 2023
•
If the REIT timely filed its return for the year without making an
election, it can still make an election by filing an amended return
within 6 months of the due date of the return (excluding
extensions). Clearly indicate the election on the amended return
and write “Filed pursuant to section 301.9100-2” at the top of the
amended return. File the amended return at the same address
the REIT filed its original return. The election applies when
figuring taxable income for the current tax year and all
subsequent years.
employment tax returns (Forms 941, 943, and 944) for qualified
paid sick and qualified paid family leave under the FFCRA and
the ARP (both the nonrefundable and refundable portions). The
REIT must include the full amount of the credit for qualified sick
and family leave wages in gross income for the tax year that
includes the last day of any calendar quarter in which the credit
is allowed.
Note. A credit is available only if the leave was taken after March
31, 2020, and before October 1, 2021, and only after the
qualified leave wages were paid, which might under certain
circumstances not occur until a quarter after September 30,
2021, including quarters in 2023.
Note. The REIT can choose to forgo the elections above by
clearly electing to capitalize its start-up or organizational costs
on an income tax return filed by the due date (including
extensions) for the tax year in which the active trade or business
begins.
Report the deductible amount of such costs and any
amortization on line 19. For amortization that begins during the
current tax year, complete and attach Form 4562.
Deductions
Limitations on Deductions
Section 263A uniform capitalization rules. The uniform
capitalization rules of section 263A generally require REITs to
capitalize certain costs to inventory or other property.
Passive activity and at-risk limitations. Loss and credit
limitations under sections 465 and 469 apply to REITs that are
closely held, as described in sections 465(a)(1)(B) and 469(j)(1).
REITs subject to sections 465 and 469 must complete Forms
6198 and 8810 to compute allowable losses or credits. Before
completing Form 8810, see Temporary Regulations section
1.163-8T for rules on allocating interest expense among
activities.
REITs subject to the section 263A uniform capitalization rules
are required to capitalize:
1. Direct costs of assets produced or acquired for resale,
and
2. Certain indirect costs (including taxes) that are properly
allocable to property produced or property acquired for resale.
Reducing certain expenses for which credits are allowable.
For each credit listed below, the REIT must reduce the otherwise
allowable deductions for expenses used to figure the credit by
the amount of the current-year credit. Do not reduce the amount
of the allowable deduction for any portion of the credit that was
passed through to the REIT from a pass-through entity on
Schedule K-1.
A REIT cannot deduct the costs required to be capitalized
under section 263A until it sells, uses, or otherwise disposes of
the property (to which the costs relate). The REIT recovers these
costs through depreciation, amortization, or costs of goods sold.
For more details, including exemptions to the uniform
capitalization rules, see Pub. 538. See section 263A(i) for
exemption for certain small businesses. For non-small business
taxpayers, see Regulations sections 1.263A-1 through 1.263A-3.
See section 263A(d), Regulations section 1.263A-4, and Pub.
225 for rules for property produced in a farming business.
Disabled access credit (Form 8826).
•
•
•
Credit for employer social security and Medicare taxes paid
on certain employee tips (Form 8846).
Credit for small employer pension plan start-up costs (Form
•
Transactions between related taxpayers. Generally, an
accrual basis taxpayer may only deduct business expenses and
interest owed to a related party in the year the payment is
included in the income of the related party. See sections 163(e)
(3) and 267 for limitations on deductions for unpaid interest and
expenses.
8881).
Credit for employer-provided childcare facilities and services
•
(Form 8882).
If the REIT is eligible to claim any of these credits, figure each
current-year credit before figuring the deduction for expenses on
which the credit is based. If the REIT capitalized any costs on
which it figured the credit, reduce the amount capitalized by the
credit attributable to these costs.
Limitations on business interest expense. Business interest
expense may be limited. See section 163(j) and Form 8990.
See the instructions for the form used to figure the applicable
credit.
Golden parachute payments. A portion of the payments made
by a REIT to key personnel that exceeds their usual
Line 9. Compensation of officers. Enter the deductible
officers’ compensation on line 9. Do not include compensation
deductible elsewhere on the return, such as elective
contributions to a section 401(k) cash or deferred arrangement,
or amounts contributed under a salary reduction SEP agreement
or a SIMPLE IRA plan.
compensation may not be deductible. This occurs when the
REIT has an agreement (golden parachute) with these key
employees to pay them these excessive amounts if control of the
REIT changes. See section 280G and Regulations section
If the REIT's total receipts are $500,000 or more, complete
Business start-up and organizational costs. A REIT can
elect to deduct a limited amount of start-up and organizational
costs it paid or incurred. Any remaining costs must generally be
amortized over a 180-month period. See sections 195 and 248
and the related regulations.
Time for making an election. The REIT generally elects to
deduct start-up or organizational costs by claiming the deduction
on its income tax return filed by the due date (including
extensions) for the tax year in which the active trade or business
begins.
and attach Form 1125-E. Total receipts are figured by adding:
Part I, line 8;
•
•
•
Net capital gain from Part III, line 10; and
Form 2438, line 9a.
Enter on line 9 the amount from Form 1125-E, line 4.
Line 10. Salaries and wages. Enter the total salaries and
wages paid for the tax year, reduced by the amount claimed on:
Form 5884, Work Opportunity Credit;
•
Form 8844, Empowerment Zone Employment Credit;
•
10
Form 8932, Credit for Employer Differential Wage Payments;
terms beginning in 2024 will be published in the Internal
Revenue Bulletin in early 2024.
•
and
Form 8994, Employer Credit for Paid Family and Medical
•
Line 14. Taxes and licenses. Enter taxes paid or incurred
Leave.
during the tax year, but do not include the following.
See the instructions for these forms for more information.
Federal income taxes (except for the tax imposed on net
•
recognized built-in gain allocable to ordinary income).
Do not include salaries and wages deductible elsewhere on
the return, such as amounts included in officers compensation,
elective contributions to a section 401(k) cash or deferred
arrangement, or amounts contributed under a salary reduction
SEP agreement or a SIMPLE IRA plan.
Foreign or U.S. territory income taxes if a tax credit is claimed
•
(however, see the Instructions for Form 5735 for special rules for
territory income taxes).
Taxes not imposed on the REIT.
•
Taxes, including state or local sales taxes, that are paid or
•
If the REIT provided taxable fringe benefits to its
incurred in connection with an acquisition or disposition of
property (these taxes must be treated as a part of the cost of the
acquired property or, in the case of a disposition, as a reduction
in the amount realized on the disposition).
employees, such as personal use of a car, do not deduct
!
CAUTION
as wages the amounts allocated for depreciation and
other expenses claimed on lines 16 and 19.
Taxes assessed against local benefits that increase the value
•
If the REIT claims a credit for any wages paid or
of the property assessed (such as for paving, etc.).
incurred, it may need to reduce any corresponding
!
Taxes deducted elsewhere on the return.
•
•
CAUTION
deduction for officers’ compensation and salaries and
Excise taxes imposed under section 4981 on undistributed
wages. See the instructions for the form used to figure the
applicable credit for more details.
REIT income.
See section 164(d) for information on apportionment of taxes
on real property between the seller and the purchaser.
Line 11. Repairs and maintenance. Enter the cost of repairs
and maintenance not claimed elsewhere on the return, such as
labor and supplies, that are not payments to produce or improve
tangible or real property. See Regulations section 1.263(a)-1.
For example, amounts are paid for improvements if they are for
betterments to the property, restorations of the property (such as
replacements of major components or substantial structural
parts), or if they adapt the property to a new or different use.
Amounts paid to produce or improve property must be
capitalized. See Regulations sections 1.263(a)-2 and -3. The
REIT can deduct repair and maintenance expenses only to the
extent they relate to a trade or business activity. See Regulations
section 1.162-4. The REIT may elect to capitalize certain repair
and maintenance costs consistent with its books and records.
See Regulations section 1.263(a)-3(n) for information on how to
make the election.
Do not reduce the REIT’s deduction for social security
and Medicare taxes by the nonrefundable and
!
CAUTION
refundable portions of any FFCRA and ARP credits for
qualified sick and family leave wages claimed on its employment
tax returns. Instead, report this amount as income on line 7.
Line 15. Interest. The deduction for interest is limited when the
REIT is a policyholder or beneficiary with respect to a life
insurance, endowment, or annuity contract issued after June 8,
1997. For details, see section 264(f). Attach a statement
showing the computation of the deduction.
The REIT must make an interest allocation if the proceeds of
a loan were used for more than one purpose. For example, the
loan proceeds were used to purchase a financial investment and
acquire an interest in a passive activity. See Temporary
Line 12. Bad debts. Enter the total debts that became
worthless in whole or in part during the tax year. A cash basis
taxpayer may not claim a bad debt deduction unless the amount
was previously included in income.
Regulations section 1.163-8T for the interest allocation rules.
The following interest is not deductible.
Interest on indebtedness incurred or continued to purchase or
•
carry obligations if the interest is wholly exempt from income tax.
See section 265(b) for special rules and exceptions for financial
institutions. Also, see section 265(b)(7) for a temporary de
minimis safe-harbor exception for certain financial institutions for
tax-exempt bonds issued in 2009 and 2010.
Line 13. Rents. If the REIT rented or leased a vehicle, enter the
total annual rent or lease expense paid or incurred during the
year. Also, complete Part V of Form 4562. If the REIT leased a
vehicle for a term of 30 days or more, the deduction for the
vehicle lease expense may have to be reduced by an amount
called the inclusion amount.
For cash basis taxpayers, prepaid interest allocable to years
•
following the current tax year (for example, a cash basis calendar
year taxpayer who in 2023 prepaid interest allocable to any
period after 2023 can deduct only the amount allocable to 2023).
The REIT may have an inclusion amount if:
And the vehicle's FMV on the first day of the
Interest and carrying charges on straddles. Generally, these
•
The lease term began:
lease exceeded:
amounts must be capitalized. See section 263(g).
Cars (excluding trucks and vans):
Interest paid or incurred on any portion of an underpayment of
•
After 12/31/22 but before 1/1/24
After 12/31/21 but before 1/1/23
After 12/31/20 but before 1/1/22
After 12/31/17 but before 1/1/21
After 12/31/12 but before 1/1/18
Trucks and vans:
.
.
.
.
.
.
.
.
.
.
$60,000
$56,000
$51,000
$50,000
$19,000
tax that is attributable to an understatement arising from an
undisclosed listed transaction or an undisclosed reportable
avoidance transaction (other than a listed transaction) entered
into in tax years beginning after October 22, 2004.
.
.
.
.
Limitation on deduction. Under section 163(j), business
interest expense is generally limited to the sum of business
interest income, 30% of the adjusted taxable income, and floor
plan financing interest. Business interest expense includes any
interest paid or accrued on indebtedness properly allocable to a
trade or business.
A taxpayer, other than a tax shelter, that meets the gross
receipts test is not required to limit business interest expense
under section 163(j). A taxpayer meets the gross receipts test if
the taxpayer has average annual gross receipts of $29 million or
less for the 3 prior tax years. Gross receipts generally include the
After 12/31/22 but before 1/1/24
After 12/31/21 but before 1/1/23
After 12/31/20 but before 1/1/22
After 12/31/17 but before 1/1/21
After 12/31/13 but before 1/1/18
After 12/31/09 but before 1/1/14
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
$60,000
$56,000
$51,000
$50,000
$19,500
$19,000
See Pub. 463, Travel, Gift, and Car Expenses, for instructions
on figuring the inclusion amount. The inclusion amount for lease
11
aggregate gross receipts from all persons treated as a single
employer such as a controlled group of corporations, commonly
controlled partnerships or proprietorships, and affiliated service
groups.
If the corporation fails to meet the gross receipts test, Form
8990 is generally required. An electing real property trade or
business is excepted from the interest expense limitation of
section 163(j). See section 163(j)(7), Form 8990, and the related
instructions. Also, see the questions on Schedule K, line 10, for
business interest expense elections, and on Schedule K, line 11,
regarding conditions for filing Form 8990.
after December 21, 2017. See section 162(f), as amended by
P.L. 115-97, section 13306 (discussed later).
Lobbying expenses. However, see exceptions (discussed
•
later).
Amounts paid or incurred after December 22, 2017, for any
•
settlement, payout, or attorney fees related to sexual harassment
or sexual abuse, if such payments are subject to a nondisclosure
agreement. See new section 162(q).
Charitable contributions. Enter contributions or gifts actually
paid within the tax year to or for the use of charitable and
governmental organizations described in section 170(c) and any
unused contributions carried over from prior years.
REITs reporting taxable income on the accrual method may
elect to treat as paid during the tax year any deductible
contributions paid by the due date of the REIT’s tax return (not
including extensions) if the contributions were authorized by the
board of directors during the tax year. Attach a declaration to the
return stating that the resolution authorizing the contributions
was adopted by the board of directors during the tax year. The
declaration must include the date the resolution was adopted.
See Regulations section 1.170(a)(2)(B).
Special rules apply to:
Foregone interest on certain below-market-rate loans (see
•
section 7872).
Original issue discount (OID) on certain high-yield discount
•
obligations. See section 163(e)(5) to determine the amount of
the deduction for OID that is deferred and the amount that is
disallowed on a high-yield discount obligation. The rules under
section 163(e)(5) do not apply to certain high-yield discount
obligations issued after August 31, 2008, and before January 1,
2011. See section 163(e)(5)(F). Also, see Notice 2010-11,
2010-4 I.R.B. 326.
Limitation on deduction. Generally, the total amount
claimed may not be more than 10% of taxable income (the sum
of Part I, line 23; Part II, line 5; Part IV, line 3; and Form 2438,
line 11) computed without regard to the following.
Interest expense cannot be used to offset interest
income.
!
CAUTION
Any deduction for contributions.
•
Line 16. Depreciation. Include on line 16 depreciation and the
cost of certain property that the REIT elected to expense under
section 179. See Form 4562 and the related instructions to figure
the amount to enter on this line.
The limitation under section 249 on the deduction for bond
•
premium.
Any net operating loss (NOL) carryback to the tax year under
•
section 172.
Any capital loss carryback to the tax year under section
•
Line 18. Energy efficient commercial buildings deduction.
Complete and attach Form 7205 if claiming the energy efficient
building deduction. See the Instructions for Form 7205 for more
information. Also, see section 179D.
1212(a)(1).
Carryover. Charitable contributions that exceed the 10%
limitation cannot be deducted for the tax year but may be carried
over to the next 5 tax years.
Special rules apply if the REIT has an NOL carryover to the
tax year. In figuring the charitable contributions deduction for the
tax year, the 10% limit is applied using the taxable income after
taking into account any deduction for the NOL.
To figure the amount of any remaining NOL carryover to later
years, taxable income must be modified (see section 172(b)). To
the extent that contributions are used to reduce taxable income
for this purpose and increase an NOL carryover, a contributions
carryover is not allowed. See section 170(d)(2)(B).
Cash contributions. For contributions of cash, check, or
other monetary gifts (regardless of the amount), the REIT must
maintain a bank record, or a receipt, letter, or other written
communication from the donee organization indicating the name
of the organization, the date of the contribution, and the amount
of the contribution.
Contributions of $250 or more. A REIT can deduct a
contribution of $250 or more only if the REIT receives a written
acknowledgment from the donee organization that shows the
amount of cash contributed, describes any property contributed,
and gives a description and a good faith estimate of the value of
any goods or services provided in return for the contribution, or
states that no goods or services were provided in return for the
contribution. The acknowledgment must be obtained by the due
date (including extensions) of the REIT's return, or, if earlier, the
date the return is filed. Do not attach the acknowledgment to the
tax return, but keep it with the REIT's records.
For more information on charitable contributions, including
substantiation and recordkeeping requirements, see section 170
and the related regulations, and Pub. 526, Charitable
Contributions. For special rules that apply to corporations, see
Pub. 542.
Line 19. Other deductions. Attach a statement listing, by type
and amount, all allowable deductions that are not deductible
elsewhere on the return. Enter the total on line 19. Include
amortization and organization expenses. Generally, a deduction
may not be taken for any amount that is allocable to a class of
exempt income. See section 265(b) for exceptions.
Examples of other deductions include the following.
Amortization (see Form 4562).
•
•
Certain business start-up and organizational costs that the
REIT elects to deduct.
Depletion. Attach Form T (Timber), Forest Activities Schedule,
•
if a deduction for depletion of timber is taken.
Reforestation costs. The REIT can elect to deduct up to
•
$10,000 of qualified reforestation expenses for each qualifying
timber property. The REIT can elect to amortize over 84 months
any amount not deducted.
Insurance premiums.
•
•
•
•
•
Legal and professional fees.
Supplies used and consumed in the business.
Utilities.
Ordinary losses from trade or business activities of a
partnership (from Schedule K-1 (Form 1065)). Do not offset
ordinary income against ordinary losses. Instead, include the
income on line 7. Show the partnership's name, address, and
EIN on a separate statement attached to this return. If the
amount is from more than one partnership, identify the amount
from each partnership.
Any net negative section 481(a) adjustment. See Section
•
481(a) adjustment, earlier.
Do not deduct expenses such as the following.
Fines or penalties paid to a government for violating any law.
•
However, exceptions apply for certain amounts paid or incurred
12
However, no deduction is allowed if a principal purpose of the
organization is to entertain or provide entertainment facilities to
members or their guests. In addition, REITs cannot deduct
membership dues to any club organized for business, pleasure,
recreation, or other social purpose. This includes country clubs,
golf and athletic clubs, airline and hotel clubs, and clubs
operated to provide meals under conditions favorable to
business discussion.
Entertainment facilities. Generally, the REIT cannot deduct
an expense paid or incurred for a facility (such as a yacht or
hunting lodge) used for an activity usually considered
entertainment, amusement, or recreation.
Amounts treated as compensation. Generally, the REIT
may be able to deduct otherwise nondeductible meals, travel,
and entertainment expenses if the amounts are treated as
compensation to the recipient and reported on Form W-2 for an
employee or on Form 1099-NEC for an independent contractor.
However, if the recipient is an officer, director, beneficial
owner (directly or indirectly), or other “specified individual” (as
defined in section 274(e)(2)(B) and Regulations section
1.274-9(b)), special rules apply.
Pension, profit-sharing, etc., plans. Include the deduction for
contributions to qualified pension, profit-sharing, or other funded
deferred compensation plans. Employers who maintain such a
plan must generally file one of the forms listed below unless
exempt from filing under regulations or other applicable
guidance, even if the plan is not a qualified plan under the
Internal Revenue Code. The filing requirement applies even if the
REIT does not claim a deduction for the current tax year. There
are penalties for failure to file these forms on time and for
overstating the pension plan deduction. See sections 6652(e)
and 6662(f). Also, see the instructions for the applicable forms.
Form 5500, Annual Return/Report of Employee Benefit Plan.
Form 5500-SF, Short Form Annual Return/Report of Small
•
•
Employee Benefit Plan, instead of Form 5500, generally if under
100 participants at the beginning of the plan year.
Note. Form 5500 and Form 5500-SF must be filed electronically
under the computerized ERISA Filing Acceptance System
(EFAST2). For more information, see the EFAST2 website at
Form 5500-EZ, Annual Return of One-Participant (Owners/
•
Partners and Their Spouses) Retirement Plan or a Foreign Plan.
File this form for a plan that only covers the owner (or the owner
and spouse) or a foreign plan that is required to file an annual
return and does not file the annual return electronically on Form
5500-SF. See the Instructions for Form 5500-EZ.
Fines or similar penalties. Generally, no deduction is allowed
for fines or similar penalties paid or incurred to, or at the direction
of a government or governmental entity for violating any law, or
for the investigation or inquiry into the potential violation of a law,
except:
Travel, meals, and entertainment. Subject to limitations and
restrictions discussed below, a REIT can deduct ordinary and
necessary travel, meals, and non-entertainment expenses paid
or incurred in its trade or business. Generally, entertainment
expenses, membership dues, and facilities used in connection
with these activities cannot be deducted. In addition, no
deduction is generally allowed for qualified transportation fringe
benefits. Also, special rules apply to deductions for gifts, luxury
water travel, and convention expenses. See section 274 and
Pub. 463, for more details.
Travel. A REIT cannot deduct travel expenses of any
individual accompanying a corporate officer or employee,
including a spouse or dependent of the officer or employee,
unless:
Amounts that constitute restitution;
•
•
•
Amounts paid to come into compliance with the law;
Amounts paid or incurred as the result of orders or
agreements in which no government or governmental entity is a
party; and
Amounts paid or incurred for taxes due.
•
No deduction is allowed unless the amounts are specifically
identified in the order or agreement and the REIT establishes
that the amounts were paid for that purpose. Also, any amount
paid or incurred as reimbursement to the government for the
costs of any investigation or litigation are not eligible for the
exceptions and are nondeductible. See section 162(f).
Lobbying expenses. Generally, lobbying expenses are not
That individual is an employee of the REIT, and
deductible. These expenses include:
•
That individual’s travel is for a bona fide business purpose and
Amounts paid or incurred in connection with influencing
•
•
would otherwise be deductible by that individual.
federal, state, or local legislation; or
Amounts paid or incurred in connection with any
•
Meals. Generally, the REIT can deduct only 50% of the
amount otherwise allowable for non-entertainment related meal
expenses paid or incurred in its trade or business.
communication with certain federal executive branch officials in
an attempt to influence the official actions or positions of the
officials. See Regulations section 1.162-29 for the definition of
“influencing legislation.”
Meals not separately stated from entertainment are generally
not deductible. In addition (subject to exceptions under section
274(k)(2)):
Dues and other similar amounts paid to certain tax-exempt
organizations may not be deductible. If certain in-house lobbying
expenditures do not exceed $2,000, they are deductible.
Meals must not be lavish or extravagant, and
•
An employee of the REIT must be present at the meal.
•
See section 274(n)(3) for a special rule that applies to
Line 21. Taxable income before NOL deduction, total de-
duction for dividends paid, and section 857(b)(2)(E) de-
duction. Generally, special at-risk rules under section 465 apply
to closely held corporations engaged in any activity as a trade or
business or for the production of income. Those REITs that are
closely held may have to adjust the amount on line 21.
expenses for meals consumed by individuals subject to the
hours of service limits of the Department of Transportation.
Qualified transportation fringes (QTFs). Generally, no
deduction is allowed under section 274(a)(4) for QTFs provided
by employers to their employees. QTFs are defined in section
132(f)(1) and include:
The at-risk rules do not apply to:
Transportation in a commuter highway vehicle between the
•
Holding real property placed in service by the taxpayer before
•
employee’s residence and place of employment,
1987;
Any transit pass, and
Qualified parking.
•
•
Equipment leasing under sections 465(c)(4), (5), and (6); or
•
•
Any qualifying business of a qualified REIT under section
See section 274 and Pub. 15-B for details.
465(c)(7).
Membership dues. The REIT can deduct amounts paid or
incurred for membership dues in civic or public service
organizations, professional organizations (such as bar and
medical associations), business leagues, trade associations,
chambers of commerce, boards of trade, and real estate boards.
However, the at-risk rules do apply to the holding of mineral
property.
If the at-risk rules apply, adjust the amount on this line for any
section 465(d) losses. These losses are limited to the amount for
13
which the REIT is at risk for each separate activity at the close of
the tax year. If the REIT is involved in one or more activities, any
of which incurs a loss for the year, report the losses for each
activity separately. Attach Form 6198, At-Risk Limitations,
showing the amount at risk and gross income and deductions for
the activities with the losses.
If the REIT sells or otherwise disposes of an asset or its
interest (either total or partial) in an activity to which the at-risk
rules apply, determine the net profit or loss from the activity by
combining the gain or loss on the sale or disposition with the
profit or loss from the activity. If the REIT has a net loss, it may be
limited because of the at-risk rules.
that may offset recognized built-in gains is limited (see section
384).
A REIT may elect under section 965(n) to reduce the amount
•
of the NOL for a tax year determined under section 172 and the
amount of taxable income reduced by NOL carryovers to such
tax year. The reduction amount is equal to the amount of the
section 965(a) inclusion (net of the section 965(c) deduction)
plus, in the case of a domestic corporation that claims a credit for
deemed paid foreign taxes, the section 78 gross-up with respect
to the foreign taxes deemed paid with respect to the section
965(a) inclusion. If, as a result of an election under section
965(n), the amount of the NOL for the tax year is reduced, the
reduction amount is included in other income on line 7. If, as a
result of an election under section 965(n), the taxable income
reduced by NOL carryovers is reduced, the NOL deduction on
line 22a is reduced by the reduction amount. See section 965(n)
for more information.
Treat any loss from an activity not allowed for the tax year as a
deduction allocable to the activity in the next tax year.
Line 22a. Net operating loss deduction. A REIT can use the
net operating loss (NOL) incurred in one tax year to reduce its
taxable income in another tax year.
Generally, a REIT may carry an NOL over indefinitely to tax
years following the year of loss. REITs are not permitted to carry
back an NOL to any year preceding the year of the loss.
Tax and Payments
Line 25b. Estimated tax payments. Enter any estimated tax
payments the REIT made for the current tax year.
Enter the total NOL carryovers from other tax years, but do
not enter more than the REIT's taxable income. The REIT's
taxable income for purposes of the NOL deduction is taxable
income (line 21) reduced by the dividends paid deduction
(line 22b) and the section 857(b)(2)(E) deduction (line 22c). If
this amount is less than zero, an NOL deduction cannot be taken
for the tax year. Attach a statement showing the computation of
the NOL deduction. Also, complete item 9 on Schedule K.
Line 25f. Credit from Form 2439. Enter the credit (from Form
2439) for the REIT's share of the tax paid by a Regulated
Investment Company (RIC) or another REIT on undistributed
long-term capital gains included in the REIT's income. Attach
Form 2439 to Form 1120-REIT.
Line 25g. Credit for federal tax on fuels. Enter the credit from
Form 4136, Credit for Federal Tax Paid on Fuels, if the REIT
qualifies to claim this credit. Attach Form 4136 to Form
1120-REIT.
If capital gain dividends are paid during any tax year, the
amount of the net capital gain for such tax year (to the extent of
the capital gain dividends) is excluded in determining:
Line 25h. Elective payment election amount from Form
3800. Enter on line 25h the total net elective payment election
amount from Form 3800, General Business Credit, Part III, line 6,
column (i). See the Instructions for Form 3800.
1. The NOL for the tax year, and
2. The amount of the NOL of any prior tax year that may be
carried over to any succeeding tax year.
Line 25i. Total payments and credits. Add the amounts on
Carryover rules. The NOL for the current year is computed
using the REIT's taxable income before it is reduced by the
dividends paid deduction. After the REIT applies the NOL to the
first tax year to which it may be carried, the taxable income of
that year must be modified (as described by section 172(b) and
the modified rules for REITs in section 172(d)(6)) to determine
how much of the remaining loss may be carried to other years.
Although the current-year NOL is computed without regard to the
dividends paid deduction, an NOL carryover from a prior year is
applied to the current year using taxable income after it is
reduced by the dividends paid deduction. The NOL amounts
carried forward by the REIT are not reduced by subsequent year
dividends paid deductions. See Example 1 in Regulations
section 1.172-5(a)(4).
lines 25d through 25h and enter the total on line 25i.
Backup withholding. If the REIT had income tax withheld from
any payments it received because, for example, it failed to give
the payer its correct EIN, include the amount withheld in the total
for line 25i. Enter the amount withheld and the words “Backup
Withholding” in the blank space above line 25i.
Line 26. Estimated tax penalty. A REIT that does not make
estimated tax payments when due may be subject to an
underpayment penalty for the period of underpayment.
Generally, a REIT is subject to the penalty if its tax liability is
$500 or more and it did not timely pay the smaller of:
Its total tax for the current tax year, or
•
Its prior year's tax.
•
Use Form 2220, Underpayment of Estimated Tax by
Note. Generally, NOL deductions arising in tax years beginning
after 2017 are limited to 80% of taxable income (determined
without regard to the NOL). However, NOLs arising in taxable
years prior to January 1, 2018, and carried over to the current
taxable year are not subject to this limitation.
Corporations, to determine whether the REIT owes a penalty and
to figure the amount of the penalty. Generally, the REIT does not
have to file this form because the IRS can figure the amount of
any penalty and bill the REIT for it. However, even if it does not
owe the penalty, the REIT must complete and attach Form 2220
if the annualized income or adjusted seasonal installment
method is used, or the REIT is a large corporation computing its
first required installment based on the prior year's tax. See the
Instructions for Form 2220 for the definition of a “large
corporation.”
Special NOL rules apply when:
An ownership change (described in section 382(g)) occurs,
•
the amount of the taxable income of a loss REIT that may be
offset by the pre-change NOL carryovers is limited (see section
382 and the related regulations). A loss REIT must file an
information statement with its income tax return for each tax year
that certain ownership shifts occur (see Temporary Regulations
section 1.382-2T(a)(2)(ii) for details). See Regulations section
1.382-6(b) for details on how to make the closing-of-the-books
election.
If Form 2220 is attached, check the box on this line and enter
the amount of any penalty.
Line 27. Tax due. If the REIT cannot pay the full amount of tax
owed, it can apply for an installment agreement online. The REIT
can apply for an installment agreement online if:
When a REIT acquires control of another REIT (or acquires its
•
It cannot pay the full amount shown on line 27;
assets in a reorganization), the amount of pre-acquisition losses
•
14
The total amount owed is $25,000 or less (including tax,
•
penalties, and interest); and
Part III—Tax for Failure To Meet
Certain Source-of-Income
Requirements
The REIT can pay the liability in full in 24 months.
•
.
To apply using the Online Payment Agreement Application,
Section 856(c)(6) provides REITs with a relief provision if they
have failed to satisfy the source-of-income requirements of
sections 856(c)(2) and 856(c)(3). If section 856(c)(6) applies to a
REIT for any tax year, a tax is imposed on the REIT under
section 857(b)(5).
Under an installment agreement, the REIT can pay what it
owes in monthly installments. There are certain conditions that
must be met to enter into and maintain an installment
agreement, such as paying the liability within 72 months and
making all required deposits and timely filing tax returns during
the length of the agreement.
If the installment agreement is accepted, the REIT will be
charged a fee and it will be subject to penalties and interest on
the amount of tax not paid by the due date of the return.
All REITs must complete lines 1a through 8 of Part III to
determine whether they are subject to the tax imposed under
section 857(b)(5). If line 8 is zero, the tax does not apply, and the
REIT does not have to complete the rest of Part III. However, if
line 8 is greater than zero, the REIT is subject to this tax, and
must complete the rest of Part III to determine the amount of tax.
Part II—Tax on Net Income From
Foreclosure Property
If a REIT reports passive foreign exchange gain on line 2b or
real estate foreign exchange gain on line 5b, and any part of
such gain is characterized as such by a determination of the
Secretary under section 856(n)(3)(C) or 856(n)(2)(C), the REIT
must attach a copy of this determination to its return. Similarly, if
a REIT reports income that is excluded from section 856(c)(2)
pursuant to a determination of the Secretary under section
856(c)(5)(J)(i) on line 2c or excluded from section 856(c)(3)
pursuant to a determination of the Secretary under section
856(c)(5)(J)(i) on line 5c, the REIT must attach a copy of this
determination allowing for such exclusion to its return.
Additionally, if a REIT reports income on line 7 in Part I that is
excluded from sections 856(c)(2) and 856(c)(3) pursuant to
section 965(m)(1), report that amount on lines 2d and 5d of Part
III. The REIT must attach Forms 965 and 965-B, as applicable, to
its return.
A REIT that has failed the source-of-income requirements of
sections 856(c)(2) and 856(c)(3) may avoid loss of its REIT
status as a result of the failure if, following identification of its
failure to meet the source-of-income requirements, the REIT sets
forth a description of each item of its gross income described in
sections 856(c)(2) and 856(c)(3) on an attached schedule. In
addition, its failure to meet the source-of-income requirements
must be due to reasonable cause and not due to willful neglect.
Complete Part II only if the gross income, gains, losses, and
deductions from foreclosure property (defined in section 856(e))
result in net income. If an overall net loss results, report the gross
income, gains, losses, and deductions from foreclosure property
on the appropriate lines of Part I.
Property may be treated as foreclosure property only if it
meets the requirements of section 856(e) and the REIT elects to
treat the property as foreclosure property in the year it was
acquired. The property continues to be foreclosure property until
the close of the 3rd tax year following the tax year in which the
REIT acquired it. For more information, see section 856(e).
However, if the foreclosure property is qualified health care
property, it will cease to be foreclosure property as of the close of
the 2nd year following the tax year the REIT acquired it (although
the REIT may request one or more extensions to this 2-year
grace period not to extend beyond the 6th year). See section
856(e)(6) for details.
This election must be made by the due date for filing Form
1120-REIT (including extensions). To make the election, attach a
statement that:
Indicates that the election under section 856(e) is being
•
For information on the relief provisions under sections 856(c)
(7) and 856(g)(5), see the instructions for Schedule J, lines 2f
and 2g.
made;
Identifies the property to which the election applies;
•
•
Includes the name, address, and EIN of the REIT, the date the
property was acquired, and a brief description of how the
property was acquired (including the name of the person from
whom the property was acquired); and
Part IV—Tax on Net Income From
Prohibited Transactions
Gives a description of the lease or debt with respect to which
•
default occurred or was imminent.
Section 857(b)(6) imposes a tax equal to 100% of the net
income derived from prohibited transactions. The 100% tax is
imposed to prevent a REIT from retaining any profit from ordinary
retailing activities such as sales to customers of condominium
units or subdivided lots in a development tract.
The REIT can revoke the election by filing a revocation on or
before the due date (including extensions) for filing Form
1120-REIT. See section 856(e) for more details.
Line 2. Gross income from foreclosure property. Do not
include income that qualifies under the REIT's 75% gross
income test under section 856(c)(3)(A), (B), (C), (D), (E), or (G).
These amounts must be reported in Part I.
Line 1. Gain from sale or other disposition of property.
Include only gain from the sale or other disposition of property
described in section 1221(a)(1) that is not foreclosure property
and that does not qualify as an exception. See section 857(b)(6)
(C) for information on certain sales that do not qualify as
prohibited transactions. See section 856(j) for a special rule
regarding a shared appreciation mortgage. Exceptions apply for
certain sales of timber property by a timber REIT. See section
857(b)(6)(D).
Line 4. Deductions. Deduct only those expenses that have a
proximate and primary relationship to earning the income shown
on line 3. This includes:
Depreciation on foreclosure property;
•
Interest paid or accrued on debt of the REIT that is attributable
•
to the carrying of the property;
Do not net losses from prohibited transactions against gains
in determining the amount to enter on line 1. Enter losses from
prohibited transactions on the appropriate line in Part I.
Real estate taxes; and
•
Fees charged by an independent contractor to manage such
•
property.
Do not deduct general overhead and administrative expenses
Line 2. Deductions. Deduct only those expenses that have a
in Part II.
proximate and primary relationship to the earning of the income
15
shown on line 1. Do not deduct general overhead and
administrative expenses in Part IV.
the REIT instead of being reported by the TRS (see section
857(b)(7)(B));
Deductions that are improperly allocated between the REIT
•
and its TRS (see section 857(b)(7)(C));
Schedule A—Deduction for Dividends
Paid
Lines 1 through 5. Section 561 (taking into account sections
857(b)(9), 857(d)(3)(B), and 858(a)) determines the deduction
for dividends paid.
Line 3. Dividends declared in October, November, or December
and payable to shareholders of record in October, November, or
December are treated by the REIT as paid on December 31 of
that calendar year. The REIT is then eligible for the deduction for
dividends paid for the year the dividends are declared even
though they are not actually paid until January of the following
calendar year.
If the REIT declared dividends in any of those months and
actually paid them in January, as discussed above, enter on
line 3 those dividends not already included on lines 1, 2, and 4 of
Schedule A.
Interest deductions of a TRS to the extent that interest
•
payments to its REIT are in excess of a rate that is commercially
reasonable (see section 857(b)(7)(D)); and
Gross income of a TRS of a REIT attributable to services
•
provided to, or on behalf of, the REIT (less the deductions
properly allocable thereto) that is improperly allocated between
the REIT and the TRS (see section 857(d)(7)(E)).
See section 857(b)(7) for details and exceptions.
Line 2f—Tax Imposed Under Section 856(c)(7)
Enter the tax imposed for relief provisions under section 856(c)
(7) relating to failures to meet the requirements of the asset test
of section 856(c)(4). See section 856(c)(7) for detailed
information on the requirements for this relief provision.
If a tax is imposed under section 856(c)(7), attach a
statement providing an explanation of why the REIT failed to
meet the requirements of the asset test and a description of why
such failure is due to reasonable cause and not willful neglect.
Line 7. If, for any tax year the REIT has net income from
foreclosure property (as defined in section 857(b)(4)(B)), the
deduction for dividends paid to be entered on line 6 (and on Part
I, line 22b) is determined by multiplying the amount on line 5 by
the following fraction.
Failure to meet the asset test requirements of section
856(c)(4) (other than de minimis failures). Under section
856(c)(7)(A), a REIT may avoid loss of its REIT status as a result
of certain failures to meet the asset test requirements of section
856(c)(4) if, following identification of the failure, each of the
following requirements are met.
REIT taxable income (determined without regard to the deduction for
dividends paid)
The REIT sets forth a description of each asset that causes
•
REIT taxable income (determined without regard to the deduction for
dividends paid) +
(Net income from foreclosure property minus the tax on net income from
foreclosure property)
the REIT to fail to satisfy the requirements of the asset test at the
close of a quarter in a statement for the quarter attached to its
timely filed Form 1120-REIT;
The failure must be due to reasonable cause and not due to
•
willful neglect; and
The REIT either (a) disposes of the assets shown on the
•
specified statement within 6 months after the last day of the
quarter in which the REIT's identification of the failure occurred
(or such other time and in the manner prescribed by regulations);
or (b) the requirements of the asset test of section 856(c)(4) are
otherwise met within the specified time period.
Schedule J—Tax Computation
Line 1
A member of a controlled group must check the box on line 1
and complete and attach Schedule O (Form 1120). See
Schedule O (Form 1120) and its instructions for more
information.
In addition, if section 856(c)(7)(A) applies to a REIT for any
tax year, the REIT must pay a tax that is the greater of:
$50,000, or
•
•
The amount determined (as prescribed by regulations to be
Line 2a—Tax on REIT Taxable Income
promulgated by the Secretary) by multiplying the net income
generated by the assets described in the specified schedule for
the quarter in which the failure occurred by 21%.
Most REITs figure their tax by multiplying taxable income by
21%. A member of a controlled group must use Schedule O
(Form 1120) to figure its tax.
Note. There is no tax imposed and you are not required to
attach a schedule of assets to Form 1120-REIT for the de
minimis relief provision under section 856(c)(7)(B).
Under section 856(c)(7)(B), a REIT may avoid loss of its REIT
status as a result of certain failures to meet the asset test
requirements of section 856(c)(4)(B)(iv) if:
Line 2c
Taxes are imposed for the failure to meet the requirements of the
asset test and/or gross income test. To qualify for relief from the
failure to meet these requirements, attach an explanation of why
the REIT failed to meet the asset test and/or gross income test.
Attach supporting schedules and a statement showing the
computation of the amount of tax. Also, include a reason why the
failure was due to reasonable cause and not willful neglect. See
sections 856(c)(2), 856(c)(3), and 856(c)(4).
Following its identification of the failure, the REIT disposes of
•
assets within 6 months after the last day of the quarter in which
the REIT's identification of the failure occurred (or such time
period prescribed by the Secretary and in the manner prescribed
by the Secretary); or
The statement for reasonable cause should be attached to
Form 1120-REIT at the time it is filed.
The requirements of the asset test of section 856(c)(4)(B)(iv)
•
are otherwise met within the specified time period.
Line 2e
Line 2g—Tax Imposed Under Section 856(g)(5)
Enter the amount of the 100% REIT tax imposed on the
following.
Enter the tax imposed for relief provisions under section 856(g)
(5) relating to failures to meet certain requirements under
sections 856 through 859 (other than sections 856(c)(2), 856(c)
(3), and 856(c)(4)). See section 856(g)(5) for detailed
information on the requirements for this relief provision.
Income of a REIT for services provided to the REIT's tenants
•
that is improperly included in rents from real property reported by
16
If a tax is imposed for section 856(g)(5), attach a statement
providing an explanation of why the REIT failed to meet the other
qualification requirements under sections 856–859, and a
description of why such failure is due to reasonable cause and
not willful neglect.
Bond credits from Form 8912. Enter the allowable credits
from Form 8912, Credit to Holders of Tax Credit Bonds, line 12.
Decrease attributable to partner’s audit liability under sec-
tion 6226. If the REIT is filing Form 8978 to report adjustments
shown on Form 8986 they received from partnerships that have
been audited and have elected to push out imputed
Certain REIT qualification failures of sections 856–859
(other than sections 856(c)(2), 856(c)(3), and 856(c)(4)).
Under section 856(g)(5), a REIT that fails to meet the REIT
qualification requirements under sections 856–859, except for
section 856(c)(2), 856(c)(3), and 856(c)(4), may avoid loss of its
REIT status if the failure is due to reasonable cause and not due
to willful neglect. In addition, the REIT must pay (as prescribed
by regulations and in the same manner as tax) a penalty of
$50,000 for each failure to satisfy a provision of sections 856–
859. See section 856(g)(5).
underpayments to their partners, include any decrease in taxes
due (negative amount) from Form 8978, line 14, in the total for
Form 1120-REIT, Schedule J, line 3d. Attach Form 8978. If Form
8978, line 14, shows an increase in tax, see the instructions for
Schedule J, line 2h.
Line 5—Personal Holding Company Tax
A REIT is taxed as a personal holding company under section
542 if:
At least 60% of its adjusted ordinary gross income for the tax
•
Line 2h—Income Tax
year is personal holding company income, and
Deferred tax under section 1291. If the REIT was a
shareholder in a passive foreign investment company (PFIC) and
received an excess distribution or disposed of its investment in
the PFIC during the year, it must include the increase in taxes
due under section 1291(c)(2) in the total for line 2h. On the
dotted line to the left of line 2h, enter “Section 1291” and the
amount.
At any time during the last half of the tax year more than 50%
•
in value of its outstanding stock is owned, directly or indirectly, by
five or fewer individuals.
See Schedule PH (Form 1120), U.S. Personal Holding
Company (PHC) Tax, for definitions and details on how to figure
the tax.
Do not include on line 2h any interest due under section
1291(c)(3). Instead, include the amount of interest owed on
Schedule J, line 10, Other taxes.
Line 6—Interest on Deferred Tax Liability Under
Section 453A(c)
Include any interest on deferred tax attributable to certain
nondealer installment obligations (section 453A(c)).
For more information on reporting the deferred tax and
interest, see the Instructions for Form 8621.
Additional tax under section 197(f). A REIT that elects to
recognize gain and pay tax on the sale of a section 197
intangible under the related person exception to the
Line 7—Interest on Deferred Tax Liability Under
Section 453(l)
Include any interest on deferred tax attributable to certain dealer
installment obligations under section 453(l).
anti-churning rules should include any additional tax due in the
total for line 2h. On the dotted line next to line 2h, enter “Section
197” and the amount. See section 197(f)(9)(B)(ii).
Line 8 —Recapture of Investment Credit
Increase in tax attributable to partner’s audit liability under
section 6226. If the REIT is filing Form 8978, Partner’s
If the REIT disposed of investment credit property or changed its
use before the end of the 5-year recapture period under section
50(a), enter the increase in tax from Form 4255, Recapture of
Investment Credit. See the Instructions for Form 4255.
Additional Reporting Year Tax, to report adjustments shown on
Form 8986, Push Out to Partners Under IRC 6226(a)(2), they
received from partnerships that have been audited and have
elected to push out imputed underpayments to their partners,
include any increase in taxes due (positive amount) from Form
8978, line 14, in the total for Form 1120-REIT, Schedule J,
line 2h. On the dotted line next to line 2h, enter “Section 6226”
and the amount. Attach Form 8978. If Form 8978, line 14, shows
a decrease in tax, see the instructions for Schedule J, line 3d.
Line 9—Recapture of Low-income Housing
Credit
If the REIT disposed of property (or there was a reduction in the
qualified basis of the property) for which it took the low-income
housing credit, and the REIT did not follow the procedures that
would have prevented recapture of the credit, it may owe a tax.
See Form 8611, Recapture of Low-Income Housing Credit.
Line 3a—Foreign Tax Credit
To find out when a REIT can claim the foreign tax credit for
payment of income tax to a foreign country or U.S. territory, see
Form 1118, Foreign Tax Credit—Corporations.
Line 10—Other Taxes
Include on line 10 additional taxes and interest such as the
following. Attach a statement showing the computation of each
item included in the total for line 10 and identify the applicable
Code section and the type of tax or interest.
Line 3b—Credit From Form 8834
Enter any qualified electric vehicle passive activity credits from
prior years allowed for the current tax year from Form 8834,
Qualified Electric Vehicle Credit, line 7.
Recapture of Indian employment credit. Generally, if an
•
employer terminates the employment of a qualified employee
less than 1 year after the date of initial employment, any Indian
employment credit allowed for a prior tax year because of wages
paid or incurred to that employee must be recaptured. For
details, see Form 8845 and section 45A.
Line 3c—General Business Credit
Use Form 3800 to claim any general business credits. Enter on
line 3c the allowable credit from Form 3800, Part II, line 38. See
the Instructions for Form 3800.
Recapture of new markets credit (see Form 8874 and Form
•
8874-B.
Recapture of employer-provided childcare facilities and
•
Line 3d—Other Credits
Minimum tax credit. Enter any allowable credit from Form
8827, Credit for Prior Year Minimum Tax—Corporations.
Complete and attach Form 8827.
services credit (see Form 8882).
Interest due on deferred gain (section 1260(b)).
•
•
Interest due under section 1291(c)(3). See Form 8621 and the
Instructions for Form 8621.
17
Interest due under the look-back methods. If the REIT used
the look-back method under section 460(b)(2) for certain
long-term contracts, use Form 8697, Interest Computation Under
the Look-Back Method for Completed Long-Term Contracts, to
figure the interest the REIT may have to include. See the
Instructions for Form 8697.
The REIT may also have to include interest due under the
look-back method for property depreciated under the income
forecast method. Use Form 8866, Interest Computation Under
the Look-Back Method for Property Depreciated Under the
Income Forecast Method, to figure any interest due or to be
refunded. See the Instructions Form 8866.
Line a. Enter the amount that would be the taxable income of
the REIT for the tax year if only recognized built-in gain,
recognized built-in loss, and recognized built-in gain carryover
were taken into account, reduced by any portion of the REIT's
recognized built-in gain from:
Net income from foreclosure property,
•
Amounts subject to tax for failure to meet certain
•
source-of-income requirements under section 857(b)(5)
computed in accordance with Regulations section 1.337(d)-6(c)
(2),
Net income from prohibited transactions under section 857(b)
•
(6), and
Amounts subject to tax under section 857(b)(7).
•
Include the interest due under the look-back methods on
Line b. Add the amounts shown on:
line 10.
Form 1120-REIT, Part l, line 21;
Form 1120-REIT, Part II, line 5; and
Form 2438, line 11.
•
•
•
Built-in Gains Tax and Worksheet
Built-in Gains Tax
Subtract from the total the amount on Form 1120-REIT,
If, on or after January 2, 2002, property of a C corporation
becomes property of a REIT by either (a) the qualification of the
C corporation as a REIT, or (b) the transfer of such property to a
REIT, then the REIT will be subject to the built-in gains tax under
section 1374 unless the C corporation elects deemed sale
treatment on the transferred property. Generally, if the C
corporation does not make this election for tax years beginning
in 2020, the REIT must pay tax on the net recognized built-in
gain during the 5-year period beginning on its first day as a REIT
or the day it acquired the property. Special rules apply to
conversion transactions on or after June 7, 2019, as well as
conversion transactions with a related section 355 distribution.
See Regulations section 1.337(d)-7 for details.
Line c. The REIT's net unrealized built-in gain is the amount, if
any, by which the fair market value of the assets of the REIT at
the beginning of its first REIT year (or as of the date the assets
were acquired, for any asset with a basis determined by
reference to its basis (or the basis of any other property) in the
hands of a C corporation) exceeds the aggregate adjusted basis
of such assets at that time.
Enter on line c the REIT's net unrealized built-in gain reduced
by the net recognized built-in gain for prior years. See sections
1374(c)(2) and (d)(1).
Line d. If the amount on line b exceeds the amount on line a,
the excess is treated as a recognized built-in gain in the
succeeding tax year.
A REIT’s recognition period for conversion transactions that
occur on or after August 8, 2016, and on or before February 17,
2017, is the 10-year period beginning on its first day as a REIT or
the day the REIT acquired the property, as described in
Temporary Regulations section 1.337(d)-7T(b)(2)(iii), as in effect
on August 8, 2016. However, under the provisions of final
Regulations section 1.337(d)-7(g)(2)(iii), a REIT may choose to
apply a 5-year recognition period to conversion transactions that
occur on or after August 8, 2016, and on or before February 17,
2017. See final Regulations section 1.337(d)-7 and Temporary
Regulations section 1.337(d)-7T for details.
Line e. Enter the section 1374(b)(2) deduction. Generally, this is
any NOL carryforward or capital loss carryforward (to the extent
of the net capital gain included in recognized built-in gain for the
tax year) arising in tax years for which the REIT was a C
corporation. These loss carryforwards must be used to reduce
recognized built-in gain for the tax year to the greatest extent
possible before they can be used to reduce the REIT's taxable
income.
Line g. A REIT reporting built-in gain for a tax year ending
before 2023 will enter 21% of line f.
Recognized built-in gains and losses generally retain their
character (for example, ordinary income or capital gain) and are
treated the same as other gains or losses of the REIT. The
REIT's tax on net recognized built-in gain is treated as a loss
incurred by the REIT during the same tax year (see the
See Regulations section 1.337(d)-7 for details.
Line h. Credit carryforwards arising in tax years for which the
REIT was a C corporation must be used to reduce the tax on net
built-in gain for the tax year to the greatest extent possible before
the credit carryforwards can be used to reduce the tax on the
REIT's taxable income.
Line i. The REIT's tax on net recognized built-in gain is treated
as a loss sustained by the REIT during the same tax year.
Deduct the tax attributable to:
Different rules apply to elections to be a REIT and transfers of
property in a carryover basis transaction that occurred prior to
January 2, 2002. For REIT elections and property transfers
before this date, the C corporation is subject to deemed sale
treatment on the transferred property unless the REIT elects
section 1374 treatment. See Regulations section 1.337(d)-6 for
information on how to make the election and figure the tax for
REIT elections and property transfers before this date. The REIT
may also rely on Regulations section 1.337(d)-5 for REIT
elections and property transfers that occurred before January 2,
2002.
Ordinary gain as a deduction for taxes on Form 1120-REIT,
•
line 14.
Short-term capital gain as a short-term capital loss in Part I of
•
Form 8949.
Long-term capital gain as a long-term capital loss in Part II of
•
Form 8949.
Line 11—Total Tax
Include any deferred tax on the termination of a section 1294
election applicable to shareholders in a qualified electing fund in
the amount entered on line 11. See Form 8621 and How To
Report below.
Built-in Gains Tax Worksheet Instructions
gains tax under Regulations section 1.337(d)-7 or 1.337(d)-6.
18
Keep for Your Records
Built-in Gains Tax Worksheet
a. Excess of recognized built-in gains over recognized built-in losses . . . . . . . . . . . . . . . . . . . . . . . . . . .
b. Taxable income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
c. Enter the net unrealized built-in gain reduced by any net recognized built-in gain for all prior
a.
b.
years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c.
d. Net recognized built-in gain (enter the smallest of line a, b, or c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
e. Section 1374(b)(2) deduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
f. Subtract line e from line d. If zero, enter -0- here and on line i . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
g. Enter 21% (0.21) of line f . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
h. Business credit and minimum tax credit carryforwards under section 1374(b)(3) from C corporation
d.
e.
f.
g.
years (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . h.
i. Tax. Subtract line h from line g (if zero or less, enter -0-). Enter here and include on line 10 of
Schedule J. See instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i.
Subtract from the total for line 11 the deferred tax on the
REIT's share of the undistributed earnings of a qualified electing
fund (see Form 8621).
The constructive ownership rules of section 318 apply in
determining if a REIT is foreign owned. See section 6038A(c)(5)
and the related regulations.
Enter on line 5a the percentage owned by the foreign person
specified on line 5. On line 5b, enter the name of the owner's
country.
How To Report
Attach a statement showing the computation of each item
included in, or subtracted from the total for line 11. On the dotted
line next to line 11, enter the amount of tax or interest, identify it
as tax or interest, and specify the Code section that applies.
Note. If there is more than one 25%-or-more foreign owner,
complete lines 5a and 5b for the foreign person with the highest
percentage of ownership.
Schedule K—Other Information
Foreign person. The term “foreign person” means:
A foreign citizen or nonresident alien.
•
Be sure to answer all the lines that apply to the REIT.
An individual who is a citizen or resident of a U.S. territory (but
•
who is not a U.S. citizen or resident).
Question 3
A foreign partnership.
•
•
•
Check the “Yes” box if the REIT is a subsidiary in a
parent-subsidiary controlled group (defined below), even if the
REIT is a subsidiary member of one group and the parent
corporation of another.
A foreign corporation.
Any foreign estate or trust within the meaning of section
7701(a)(31).
A foreign government (or one of its agencies or
•
instrumentalities) if it is engaged in the conduct of a commercial
activity as described in section 892.
Note. If the REIT is an “excluded member” of a controlled group
(see section 1563(b)(2)), it is still considered a member of a
controlled group for this purpose.
Owner's country. For individuals, the term “owner's country”
means the country of residence. For all others, it is the country
where incorporated, organized, created, or administered.
Parent-subsidiary controlled group. The term
“parent-subsidiary controlled group” means one or more chains
of corporations connected through stock ownership (section
1563(a)(1)). Both of the following requirements must be met.
Requirement to file Form 5472. If the REIT checked “Yes” on
line 5, it may have to file Form 5472. Generally, a 25%
foreign-owned corporation that had a reportable transaction with
a foreign or domestic related party during the tax year must file
Form 5472.
1. At least 80% of the total combined voting power of all
classes of voting stock entitled to vote or at least 80% of the total
value of all classes of stock of each corporation in the group
(except the parent) must be owned by one or more of the other
corporations in the group, and
See Form 5472 for filing instructions and penalties for failure
to file.
2. The common parent must own at least 80% of the total
combined voting power of all classes of stock entitled to vote or
at least 80% of the total value of all classes of stock of one or
more of the other corporations in the group. Stock owned directly
by other members of the group is not counted when computing
the voting power or value.
Item 8
Tax-exempt interest. Show any tax-exempt interest received or
accrued. Include any exempt-interest dividends received as a
shareholder in a mutual fund or other RIC.
Item 9
See section 1563(d)(1) for the definition of “stock” for
purposes of determining stock ownership above.
Enter the amount of the net operating loss (NOL) carryforward to
the tax year from prior years, even if some of the loss is used to
offset income on this return. The amount to enter is the total of all
NOLs generated in prior years but not used to offset income in a
tax year prior to 2023. Do not reduce the amount by any NOL
deduction reported on line 22a.
Question 5
Check the “Yes” box if one foreign person owned at least 25% of
(a) the total voting power of all classes of stock of the REIT
entitled to vote, or (b) the total value of all classes of stock of the
REIT.
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Question 10
Business Interest Expense Election
Question 12
To certify as a QOF, the REIT must file Form 1120-REIT and
attach Form 8996, even if the REIT had no income or expenses
to report. If the REIT is attaching Form 8996, check the “Yes” box
for Question 12. On the line following the dollar sign, enter the
amount from Form 8996, line 15.
The limitation on business interest expense applies to every
taxpayer with a trade or business, unless the taxpayer meets
certain specified exceptions. A taxpayer may elect out of the
limitation for certain businesses otherwise subject to the
business interest expense limitation.
Schedule L—Balance Sheets per
Books
Certain real property trades or businesses and farming
businesses qualify to make an election not to limit business
interest expense. This is an irrevocable election. If you make this
election, you are required to use the alternative depreciation
system to depreciate any property with a recovery period of 10
years or more. Also, you are not entitled to the special
depreciation allowance for that property. For a taxpayer with
more than one qualifying business, the election is made with
respect to each business.
The balance sheets should agree with the REIT's books and
records.
Line 1. Cash. Include certificates of deposits as cash on line 1.
Line 4. Tax-exempt securities. Include on this line:
State and local government obligations, the interest on which
•
is excludable from gross income under section 103(a), and
Stock in a mutual fund or other RIC that distributed
•
exempt-interest dividends during the tax year of the REIT.
Check “Yes” if the taxpayer has an election in effect to
exclude a real property trade or business or a farming business
from section 163(j). For more information, see section 163(j) and
the Instructions for Form 8990.
Line 24. Adjustments to shareholders' equity. Examples of
adjustments to report on this line include:
Unrealized gains and losses on securities held “available for
•
sale.”
Question 11
Conditions for Filing Form 8990
Foreign currency translation adjustments.
•
•
The excess of additional pension liability over unrecognized
prior service cost.
Guarantees of employee stock (ESOP) debt.
•
•
Generally, a REIT with a trade or business must file Form 8990 to
claim a deduction for business interest. In addition, Form 8990
must be filed by any REIT that owns an interest in a partnership
with current or prior-year carryover from excess business interest
expense allocated from the partnership.
Compensation related to employee stock award plans.
If the total adjustment to be entered on line 24 is a negative
number, enter the amount in parentheses.
Schedule M-1
Reconciliation of Income (Loss) per Books With
Income per Return
Exclusions from filing. A REIT is not required to file Form
8990 if the REIT is a small business taxpayer and does not have
excess business interest expense from a partnership. A REIT is
also not required to file Form 8990 if the REIT only has business
interest expense from the following excepted trades or
businesses.
Line 5c. Travel and entertainment. Include any of the
following.
An electing real property trade or business,
An electing farming business, or
Certain utility businesses.
•
•
•
Entertainment not deductible under section 274(a).
Entertainment-related meal expenses.
•
•
•
Non-entertainment meal expenses not deductible under
Small business taxpayer. For 2023, a small business taxpayer
is not subject to the business interest expense limitation and is
not required to file Form 8990.
A small business taxpayer is a taxpayer that (a) is not a tax
shelter (as defined in section 448(d)(3)); and (b) meets the gross
receipts test of section 448(c), discussed next.
Gross receipts test. For 2023, a taxpayer meets the gross
receipts test if the taxpayer has average annual gross receipts of
$29 million or less for the 3 prior tax years. A taxpayer's average
annual gross receipts for the 3 prior tax years is determined by
adding the gross receipts for the 3 prior tax years and dividing
the total by 3.
section 274(n).
Expenses for the use of an entertainment facility.
The part of business gifts over $25.
•
•
•
Expenses of an individual over $2,000, that are allocable to
conventions on cruise ships.
Employee achievement awards of nontangible or tangible
•
property over $400 ($1,600 if part of a qualified plan).
The cost of skyboxes.
•
•
•
Nondeductible club dues.
The part of luxury water travel not deductible under section
274(m).
Expenses for travel as a form of education.
•
Other nondeductible travel and entertainment expenses.
•
Gross receipts include the aggregate gross receipts from all
persons treated as a single employer, such as a controlled group
of corporations, commonly controlled partnerships, or
Line 7. Tax-exempt interest. Include as interest any
exempt-interest dividends received by the REIT as a shareholder
in a mutual fund or other RIC.
proprietorships, and affiliated service groups. See section 448(c)
and the Instructions for Form 8990 for additional information.
Paperwork Reduction Act Notice. We ask for the information on these forms to carry out the Internal Revenue laws of the United
States. You are required to give us the information. We need it to ensure that you are complying with these laws and to allow us to
figure and collect the right amount of tax.
You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the form
displays a valid OMB control number. Books or records relating to a form or its instructions must be retained as long as their contents
may become material in the administration of any Internal Revenue law. Generally, tax returns and return information are confidential,
as required by section 6103.
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Estimates of Taxpayer Burden. The following tables show burden estimates based on current statutory requirements as of
December 2023 for taxpayers filing 2023 Forms 1065, 1066, 1120, 1120-C, 1120-F, 1120-H, 1120-ND, 1120-S, 1120-SF, 1120-FSC,
1120-L, 1120-PC, 1120-REIT, 1120-RIC, 1120-POL, and related attachments. Time spent and out-of-pocket costs are presented
separately. Time burden is broken out by taxpayer activity, with reporting representing the largest component. Out-of-pocket costs
include any expenses incurred by taxpayers to prepare and submit their tax returns. Examples include tax return preparation and
submission fees, postage and photocopying costs, and tax preparation software costs. While these estimates don’t include burden
associated with post-filing activities, IRS operational data indicate that electronically prepared and filed returns have fewer arithmetic
errors, implying lower post-filing burden.
Reported time and cost burdens are national averages and don’t necessarily reflect a “typical” case. Most taxpayers experience
lower than average burden, with taxpayer burden varying considerably by taxpayer type.
The average burden for partnerships filing Forms 1065 and related attachments is about 60 hours and $5,000; the average burden
for corporations filing Form 1120 and associated forms is about 105 hours and $6,700; and the average burden for Forms 1066,
1120-REIT, 1120-RIC, 1120-S, and all related attachments is 65 hours and $4,400. Within each of these estimates there is significant
variation in taxpayer activity. Tax preparation fees and other out-of-pocket costs vary extensively depending on the tax situation of the
taxpayer, the type of software or professional preparer used, and the geographic location. Third-party burden hours are not included in
these estimates.
Table 1 – Taxpayer Burden for Entities Taxed as Partnerships
Forms 1065, 1066, and all attachments
Primary Form Filed or Type of
Taxpayer
Total Number of Returns
(millions)
Average Time (hours)
Average Cost ($)
Average Monetized
Burden ($)
All Partnerships
Small
5.3
4.9
0.4
60
50
200
5,000
3,200
27,800
8,700
5,200
50,800
Large*
* A large business is defined as one having end-of-year assets greater than $10 million. A large business is defined the same way for partnerships, taxable corporations, and
pass-through corporations. A small business is any business that doesn’t meet the definition of a large business.
Table 2 – Taxpayer Burden for Entities Taxed as Taxable Corporations
Forms 1120, 1120-C, 1120-F, 1120-H, 1120-ND, 1120-SF, 1120-FSC, 1120-L, 1120-PC, 1120-POL, and all attachments
Primary Form Filed or Type of
Taxpayer
Total Number of Returns
(millions)
Average Time (hours)
Average Cost ($)
Average Monetized
Burden ($)
All Taxable Corporations
2.1
2.0
0.1
105
55
830
6,700
3,600
53,800
14,900
6,200
149,000
Small
Large*
*A large business is defined as one having end-of-year assets greater than $10 million. A large business is defined the same way for partnerships, taxable corporations, and
pass-through corporations. A small business is any business that doesn’t meet the definition of a large business.
Table 3 – Taxpayer Burden for Entities Taxed as Pass-Through Corporations
Forms 1120-REIT, 1120-RIC, 1120-S, and all attachments
Primary Form Filed or Type of
Taxpayer
Total Number of Returns
(millions)
Average Time (hours)
Average Cost ($)
Average Monetized
Burden ($)
All Pass-Through Corporations
5.8
5.7
0.1
65
60
295
4,400
3,800
37,700
7,500
6,400
71,800
Small
Large*
*A large business is defined as one having end-of-year assets greater than $10 million. A large business is defined the same way for partnerships, taxable corporations, and
pass-through corporations. A small business is any business that doesn’t meet the definition of a large business.
Comments. If you have comments concerning the accuracy of these time estimates or suggestions for making these forms simpler,
we would be happy to hear from you. You can send us comments from IRS.gov/FormComments. Or you can write to the Internal
Revenue Service, Tax Forms and Publications, 1111 Constitution Ave. NW, IR-6526, Washington, DC 20224. Do not send the tax form
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