טופס 1120-RIC הוראות
הוראות טופס 1120-RIC, מס הכנסה בארה"ב חוזרים לחברות השקעות מוסדרות
2023
טפסים קשורים
- טופס 1120-RIC - מס הכנסה בארה"ב חוזר לחברות השקעות מוסדרות
Department of the Treasury
Internal Revenue Service
2023
Instructions for Form
1120-RIC
U.S. Income Tax Return for Regulated Investment Companies
Section references are to the Internal Revenue Code
Future Developments
unless otherwise noted.
For the latest information about developments related to
Form 1120-RIC and its instructions, such as legislation
enacted after this form and instructions were published,
Contents
Page
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 due or $485. See Late
filing of return, later.
Expiration of 100% business meal expense deduc-
tion. The temporary 100% business meal expenses
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
Instructions for Form 3800.
Photographs of Missing Children
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the Center may appear in instructions on pages that would
otherwise be blank. You can help bring these children
home by looking at the photographs and calling
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child.
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
Item E. Final Return, Name Change, Address
Part II—Tax on Undistributed Net Capital Gain Not
As a taxpayer, the RIC has rights that the IRS must
abide by in its dealings with the RIC. TAS can help the RIC
if:
Schedule B—Income From Tax-Exempt
A problem is causing financial difficulty for the business;
The business is facing an immediate threat of adverse
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action; or
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The RIC has tried repeatedly to contact the IRS but no
one 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
Jan 25, 2024
Cat. No. 64251J
Other Requirements
RIC can also call TAS at 877-777-4778.
In addition, the RIC must meet the (1) income test, (2)
asset test, and (3) distribution requirements explained
below.
TAS also works to resolve large-scale or systemic
problems that affect many taxpayers. If the RIC knows of
one of these broad issues, please report it to TAS through
the Systemic Advocacy Management System at
The income test: At least 90% of its gross income must
be derived from the following items:
Dividends;
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Interest (including tax-exempt interest income);
Payments with respect to securities loans (as defined in
How To Get Forms
and Publications
Internet. You can access the IRS website 24 hours a day,
section 512(a)(5));
Gains from the sale or other disposition of stock or
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securities (as defined in ICA section 2(a)(36)) or foreign
currencies;
Other income (including gains from options, futures, or
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Download forms, instructions, and publications;
Order IRS products online;
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forward contracts) derived from the RIC's business of
investing in such stock, securities, or currencies; and
Research your tax questions online;
Net income derived from an interest in a qualified
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Search publications online by topic or keyword;
View Internal Revenue Bulletins (IRBs) published in
publicly traded partnership (as defined in section 851(h)).
Income from a partnership (other than a qualified
publicly traded partnership) or trust qualifies under the
90% test to the extent the RIC's distributive share of such
income is from items described above as realized by the
partnership or trust.
Income that a RIC receives in the normal course of
business as a reimbursement from its investment advisor
is qualifying income for purposes of the 90% test if the
reimbursement is includible in the RIC's gross income.
recent years; and
Sign up to receive local and national tax news by email.
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Tax forms and publications. The RIC can view,
download, or print all of the forms and publications it may
place an order and have forms mailed to it.
General Instructions
A RIC that fails to meet the requirements of section
851(b)(2) may still be considered to have satisfied the
requirements of this test if:
Purpose of Form
Following the RIC's identification of the failure, a
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Use Form 1120-RIC, U.S. Income Tax Return for
Regulated Investment Companies, to report the income,
gains, losses, deductions, credits, and to figure the
income tax liability of a regulated investment company
(RIC) as defined in section 851.
description of each item of its gross income described in
section 851(b)(2) is set forth in a statement for the tax
year; and
Failure to meet the requirements of this test is due to
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reasonable cause and not due to willful neglect.
Who Must File
The asset test:
A domestic corporation that meets certain conditions
(discussed below) must file Form 1120-RIC if it elects to
be treated as a RIC for the tax year (or has made an
election for a prior tax year and the election has not been
terminated or revoked). The election is made by
1. At the end of each quarter of the RIC's tax year, at
least 50% of the value of its assets must be invested in the
following items:
Cash and cash items (including receivables);
Government securities;
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computing taxable income as a RIC on Form 1120-RIC.
Securities of other RICs; and
Qualified opportunity funds. To certify as a qualified
opportunity fund (QOF), the RIC must file Form 1120-RIC
and attach Form 8996, even if the RIC had no income or
see the Instructions for Form 8996.
Securities of other issuers, except that the investment in
a single issuer of securities may not exceed 5% of the
value of the RIC's assets or 10% of the outstanding voting
securities of the issuer (except as provided in section
851(e)).
2. At the end of each quarter of the RIC's tax year, no
more than 25% of the value of the RIC's assets may be
invested in the securities of:
General Requirements To Qualify as a
RIC
The term “regulated investment company” applies to any
domestic corporation that:
A single issuer (excluding government securities or
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securities of other RICs);
Two or more issuers controlled by the RIC and engaged
Is registered throughout the tax year as a management
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company or unit investment trust under the Investment
Company Act of 1940 (ICA),
in the same or related trades or businesses; or
One or more qualified publicly traded partnerships as
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Has an election in effect under the ICA to be treated as
defined in section 851(h).
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a business development company, or
See sections 851(b)(3) and 851(c) for further details.
Is a common trust fund or similar fund that is neither an
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investment company under section 3(c)(3) of the ICA nor
a common trust fund as defined under section 584(a).
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Where To File
File the RIC's return at the applicable IRS address listed below.
If the RIC's principal business, office, or
agency is located in:
And the total assets at the end of the
tax year are:
Use the following address:
Department of the Treasury
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
Less than $10 million and Schedule M-3 Internal Revenue Service
is not filed
Kansas City, MO
64999-0012
Department of the Treasury
$10 million or more or Schedule M-3 is Internal Revenue Service
filed
Ogden, UT
84201-0012
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
Any amount
84201-0012
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, file the tax returns with the service center for the
area in which the principal office of the managing corporation is located.
3. A RIC that fails to meet the requirements of section
851(b)(3) for a quarter may be considered to have
satisfied the requirements of this test if:
90% of the excess of the RIC's interest income
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excludable from gross income under section 103(a) over
its deductions disallowed under sections 265 and 171(a)
(2).
After the RIC identifies the failure, the RIC provides a
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statement with a description of each asset that causes the
RIC to fail to satisfy the requirements at the close of the
quarter;
A RIC that does not satisfy the distribution
requirements will be subject to taxation as a C
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CAUTION
corporation.
The failure is due to reasonable cause and not due to
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Earnings and profits. The RIC must either have been
a RIC for all tax years ending after November 7, 1983, or,
at the end of the current tax year, have had no
accumulated earnings and profits from any non-RIC tax
year.
willful neglect; and
The RIC disposes of the assets set forth on the
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statement (or the requirements of section 851(b)(3) are
otherwise met) within 6 months after the last day of the
quarter in which the RIC identified the failure.
4. De minimis failures. A RIC that fails to meet the
requirements of section 851(b)(3) for a quarter may be
considered to have satisfied the requirements of this test
if:
Note. For this purpose, current year distributions are
treated as made from the earliest earnings and profits
accumulated in any non-RIC tax year. See section 852(c)
(3). Also, see section 852(e) for procedures that may allow
the RIC to avoid disqualification for the initial year if the
RIC did not meet this requirement.
Such failure is due to ownership of assets, the total
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value of which does not exceed the lesser of:
a. 1% of the total value of the RIC's assets at the end
Definition of a Fund
of the quarter for which the measurement is done, or
The term “fund” refers to a separate portfolio of assets,
whose beneficial interests are owned by the holders of a
class or series of stock of the RIC that is preferred over all
other classes or series for that portfolio of assets.
b. $10 million; and
The RIC disposes of the assets following the
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identification of the failure (or the requirements of section
851(b)(3) are otherwise met) within 6 months after the last
day of the quarter in which the RIC identified the failure.
When To File
Note. For special rules regarding failure to meet the
requirements of the income and asset tests, see sections
851(d)(2) and 851(i).
Generally, a RIC must file its income tax return by the 15th
day of the 4th month after the end of its tax year. A new
RIC filing a short period return must generally file by the
15th day of the 4th month after the short period ends. A
RIC that has dissolved must generally file by the 15th day
of the 4th month after the date of dissolution.
Distribution requirements. The RIC's deduction for
dividends paid for the tax year (as defined in section 561,
but without regard to capital gain dividends) equals or
exceeds the sum of:
However, a RIC 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 RIC with a short tax year ending anytime in
June will be treated as if the short year ended on June 30,
90% of its investment company taxable income
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determined without regard to section 852(b)(2)(D); and
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and must file by the 15th day of the 3rd month after the
end of its tax year.
A paid preparer may sign original or amended
returns by rubber stamp, mechanical device, or
computer software program.
TIP
If the due date falls on a Saturday, Sunday, or legal
holiday, the RIC may file its return on the next business
day.
Paid Preparer Authorization
If the RIC wants to allow the IRS to discuss its 2023 tax
return with the paid preparer who signed the return, 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 RIC's return. It does not apply to the firm, if any,
shown in that section.
Private Delivery Services
RICs can use certain private delivery services (PDS)
designated by the IRS to meet the “timely mailing as
current list of designated services.
The PDS can tell you how to get written proof of the
mailing date.
If the “Yes” box is checked, the RIC is authorizing the
IRS to call the paid preparer to answer any questions that
may arise during the processing of its return. The RIC is
also authorizing the paid preparer to:
For the IRS mailing address to use if you're using PDS,
Give the IRS any information that is missing from the
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Private delivery services can't deliver items to P.O.
return;
boxes. You must use the U.S. Postal Service to
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Call the IRS for information about the processing of the
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CAUTION
mail any item to an IRS P.O. box address.
return or the status of any related refund or payment(s);
and
Extension of Time To File
Respond to certain IRS notices about math errors,
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File Form 7004, Application for Automatic Extension of
Time To File Certain Business Income Tax, Information,
and Other Returns, to request an extension of time to file.
Generally, the RIC must file Form 7004 by the regular due
date of the return.
offsets, and return preparation.
The RIC is not authorizing the paid preparer to receive
any refund check, bind the RIC to anything (including any
additional tax liability), or otherwise represent the RIC
before the IRS.
The authorization will automatically end no later than
the due date (excluding extensions) for filing the RIC's
2024 tax return. If the RIC wants to expand the paid
preparer's authorization or revoke the authorization before
it ends, see Pub. 947, Practice Before the IRS and Power
of Attorney.
Who Must Sign
The return must be signed and dated by:
The president, vice president, treasurer, assistant
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treasurer, chief accounting officer; or
Any other corporate officer (such as a tax officer)
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authorized to sign.
If a return is filed on behalf of a RIC 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 RIC
must be accompanied by a copy of the order or
instructions of the court authorizing signing of the return or
form.
Assembling the Return
To ensure that the RIC's tax return is correctly processed,
attach all schedules, statements, and other forms after
page 4, Form 1120-RIC, in the following order.
1. Schedule N (Form 1120).
2. Schedule D (Form 1120).
3. Form 8949.
4. Form 4136.
5. Form 8948.
Note. If this return is being filed for a series fund (as
defined in section 851(g)(2)), the return may be signed by
any officer authorized to sign for the corporation in which
the fund is a series.
6. Form 965-B.
Paid Preparer Use Only section. If an employee of the
RIC completes Form 1120-RIC, the paid preparer's
section should remain blank. Anyone who prepares Form
1120-RIC but does not charge the RIC should not
complete that section. Generally, anyone who is paid to
prepare the return must sign it and complete the section.
7. Form 8941.
8. Form 3800.
9. Form 8997.
10. Additional schedules in alphabetical order.
11. Additional forms in numerical order.
12. Supporting statements and attachments.
The paid preparer must complete the required preparer
information and:
Complete every applicable entry space on Form
1120-RIC. 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.
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
Sign the return in the space provided for the preparer's
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signature,
Include their Preparer Tax Identification Number (PTIN),
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and
Give a copy of the return to the RIC.
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printed forms. Enter the RIC's name and EIN on each
supporting statement or attachment.
If, after the RIC figures and deposits estimated tax, it
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finds 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 RIC may owe a penalty. See the
Tax Payments
Generally, the RIC must pay the tax due in full no later
than the due date for filing its tax return (not including
date falls on a Saturday, Sunday, or legal holiday, the
payment is due on the next day that isn't a Saturday,
Sunday, or legal holiday.
If the RIC overpaid its estimated tax, it may be able to
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get a 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 RIC's expected income tax liability and at least $500.
Electronic Deposit Requirement
See section 6655 and Pub. 542, Corporations, for more
information on how to figure estimated taxes.
RICs must use electronic funds transfer 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 RIC 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 tax 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.
Interest and Penalties
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, substantial
understatements of tax, and reportable transaction
understatements from the due date (including extensions)
to the date of payment. The interest charge is figured at a
rate determined under section 6621.
Late filing of return. A RIC 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
RIC can show that the failure to file on time was due to
reasonable cause.
To get more information about EFTPS or to enroll in
EFTPS using Telecommunications 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.
Depositing on time. For any deposit made by EFTPS to
be on time, the RIC must submit the deposit by 8 p.m.
Eastern time the day before the date the deposit is due. If
the RIC uses a third party to make deposits on its behalf,
they may have different cutoff times.
Same-day wire payment option. If the RIC 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 wire
payment method, the RIC 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 RIC will need to provide its
financial institution to make a same-day wire payment, go
Late payment of tax. A RIC that does not pay the tax
when due may generally be penalized 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 RIC can show that the
failure to pay on time was due to reasonable cause.
Reasonable cause determinations. If the RIC receives
a notice about a penalty after it files its return, send the
IRS an explanation and we will determine if the RIC meets
the reasonable cause criteria. Do not attach an
explanation when the RIC's return is filed.
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
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Estimated Tax Payments
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Return;
Generally, the following rules apply to the RIC's payments
of estimated tax.
Form 944, Employer's ANNUAL Federal Tax Return; or
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Form 945, Annual Return of Withheld Federal Income
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The RIC must make installment payments of estimated
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Tax.
tax if it expects its total tax for the year (less applicable
credits) to be $500 or more.
The trust fund recovery penalty may be imposed on all
The installments are due by the 15th day of the 4th, 6th,
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persons who are determined by the IRS to be responsible
for 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), for
details, including the definition of responsible persons.
9th, 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.
The RIC must use electronic funds transfer to make
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installment payments of estimated tax.
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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.
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.
Other penalties. Other penalties can be imposed for
negligence, substantial understatement of tax, reportable
transaction understatements, and fraud. See sections
6662, 6662A, and 6663.
Accounting Periods
A RIC must figure its taxable income on the basis of a tax
year. A tax year is the annual accounting period a RIC
uses to keep its records and report its income and
expenses. RICs can use a calendar year or a fiscal year.
For more information about accounting periods, see
Regulations sections 1.441-1 and 1.441-2.
Accounting Methods
Figure taxable income using the method of accounting
regularly used in keeping the RIC's books and records. In
all cases, the method used must clearly reflect taxable
income.
Change of tax year. Generally, a RIC must receive
consent from the IRS before changing its tax year. To
obtain the consent, file Form 1128, Application To Adopt,
Change, or Retain a Tax Year. However, under certain
conditions, a RIC may change its tax year without
obtaining the consent.
Generally, permissible methods include:
Cash,
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Accrual, or
Any other method authorized by the Internal Revenue
See the Instructions for Form 1128 and Pub. 538 for
Code.
more information on accounting periods and tax years.
For more information, see Pub. 538, Accounting
Rounding Off to
Whole Dollars
Periods and Methods.
Accrual method. Generally, a RIC must use the accrual
method of accounting if its average annual gross receipts
for the prior 3 years exceed $29 million. See section
448(c).
Mark-to-market accounting method. Generally,
dealers in securities must use the mark-to-market
accounting method described in section 475. Under this
method, any security that is inventory to the dealer must
be held at its fair market value (FMV).
Any security held by a dealer that is not inventory and
held at the close of the tax year is treated as sold at its
FMV on the last business day of the tax year. Any resulting
gain or loss must be taken into account that year in
determining gross income. The gain or loss taken into
account is generally treated as ordinary gain or loss.
The RIC may enter decimal points and cents when
completing its return. However, the RIC should round off
cents to whole dollars on its return, forms, and schedules
to make completing its return easier. The RIC 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.
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.
Recordkeeping
Keep the RIC's records for as long as they may be needed
for 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 RIC's basis in property for as
long as they are needed to figure the basis of the original
or replacement property.
For details, including exceptions, see section 475, the
related regulations, and Rev. Rul. 97-39, 1997-39 I.R.B. 4.
Dealers in commodities and traders in securities and
commodities may elect, with some exceptions, to use the
mark-to-market accounting method. To make the election,
the RIC must file a statement describing the election, the
first tax year the election is to be effective, and in the case
of an election for traders in securities or commodities, the
trade or business for which the election is made. Except
for new taxpayers, the statement must be filed by the due
date (not including extensions) of the income tax return for
the tax year immediately preceding the election year and
attached to that return, or if applicable, to a request for an
extension of time to file that return. For more details, see
Rev. Proc. 99-17, 1999-7 I.R.B. 52, and sections 475(e)
and (f).
Change in accounting method. Generally, the RIC
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 RIC
must file Form 3115, Application for Change in Accounting
Method, during the tax year for which the change is
requested. See the Instructions for Form 3115 and Pub.
The RIC should keep copies of all filed returns. They
help in preparing future and amended returns and in the
calculation of earnings and profits.
Other Forms That May Be Required
In addition to Form 1120-RIC, the RIC may have to file
some of the following forms.
Form 976, Claim for Deficiency Dividends Deductions by
a Personal Holding Company, Regulated Investment
Company, or Real Estate Investment Trust. Use this form
to claim a deficiency dividend deduction under section
860.
Form 1096, Annual Summary and Transmittal of U.S.
Information Returns. Use Form 1096 to transmit Forms
1099 and 5498 to the Internal Revenue Service.
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figure the domestic corporation's GILTI under section
951A and attach it to Form 1120-RIC.
Form 1099-DIV, Dividends and Distributions. Report
certain dividends and distributions.
Form 8996, Qualified Opportunity Fund. Use Form 8996
to certify that the RIC is organized as a qualified
opportunity fund (QOF) to invest in qualified opportunity
zone property. In addition, a QOF RIC 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.
Form 8997, Initial and Annual Statement of Qualified
Opportunity Fund (QOF) Investments. Use Form 8997 to
report investments in one or more QOFs. Report the
amount of deferred gains invested in QOFs at the
beginning of the current tax year, transactions related to
investments in QOFs for the current tax year, which
include capital gains deferred and invested in QOFs and
dispositions of investments in QOFs, and the amount of
deferred gains invested in QOFs at the end of the current
tax year.
Form 1099-INT, Interest Income. Report interest income.
Form 2438, Undistributed Capital Gains Tax Return,
must be filed by the RIC if it designates undistributed net
long-term capital gains under section 852(b)(3)(D).
Form 2439, Notice to Shareholder of Undistributed
Long-Term Capital Gains, must be completed and a copy
given to each shareholder for whom the RIC paid tax on
undistributed net long-term capital gains under section
852(b)(3)(D).
Form 3520, Annual Return To Report Transactions With
Foreign Trusts and Receipt of Certain Foreign Gifts, may
be required if the RIC received a distribution from, was a
grantor of, or transferor to a foreign trust during the tax
year. See Question 5 of Schedule N (Form 1120).
Form 5471, Information Return of U.S. Persons With
Respect To Certain Foreign Corporations. Use Form 5471
if the RIC 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.
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.
Form 8613, Return of Excise Tax on Undistributed
Income of Regulated Investment Companies. If the RIC is
liable for the 4% excise tax on undistributed income under
section 4982 or makes an election under section 4982(e)
(4), it must file this return for the calendar year.
Form 8621, Information Return by a Shareholder of a
Passive Foreign Investment Company or Qualified
Electing Fund. Use Form 8621 if the RIC is a direct or
indirect shareholder of a passive foreign investment
company, as defined in section 1297(a).
Statements
Reportable transaction disclosure statement.
Disclose information for each reportable transaction in
which the RIC participated. Form 8886, Reportable
Transaction Disclosure Statement, must be filed for each
tax year that the federal income tax liability of the RIC is
affected by its participation in the transaction. The
following are reportable transactions.
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 RIC (or a related party) paid
an advisor a fee of at least $250,000.
3. Certain transactions for which the RIC (or a related
party) has contractual protection against disallowance of
the tax benefits.
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) for purposes of
paying deficiency dividends.
4. Certain transactions resulting in a loss of at least
$10 million in any single year or $20 million in any
combination of years.
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.
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 Schedule 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. For more information,
see Form 8975, Schedule A (Form 8975) and the
For more information, see Regulations section
1.6011-4. Also, see the Instructions for Form 8886.
Penalties. The RIC 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 RIC
fails to file Form 8886 with its Form 1120-RIC, 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.
Instructions for Form 8975 and Schedule A (Form 8975).
Form 8990, Limitation on Business Interest Expense
Under Section 163(j). Use Form 8990 to calculate the
amount of business interest expense the RIC can deduct
and the amount to carry forward to the next year.
Form 8992, U.S. Shareholder Calculation of Global
Reportable transactions by material advisors.
Intangible Low-Taxed Income (GILTI). Use Form 8992 to
Material advisors to any reportable transaction must
7
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.
Certain dividends. A dividend received from a RIC is
taken into account in computing (a) the deduction under
section 243, or (b) qualified dividend income, only to the
extent reported by the RIC as eligible for such deduction
or such treatment in written statements furnished to its
shareholders. A RIC must determine the reportable
amounts under section 854(b). For purposes of the
dividends-received deduction, a capital gain dividend
received from a RIC is not treated as a dividend. The
capital gain dividend is treated as a long-term capital gain
by the shareholder.
Safe harbor under Temporary Regulations section
1.67-2T(j)(2). Generally, shareholders in a nonpublicly
offered fund that are individuals or pass-through entities
are treated as having received a dividend in an amount
equal to the shareholder's allocable share of affected RIC
expenses for the calendar year. They are also treated as
having paid or incurred an expense described in section
212 in the same amount for the calendar year.
Consent to partnership election to close its books
monthly. Certain money market funds that obtain an
interest in an eligible partnership that invests in assets
exempt from taxation under section 103 may be qualified
to pay exempt-interest dividends to their shareholders. To
qualify for payment of exempt-interest dividends, a RIC
must meet the quarterly net asset value (NAV)
requirements under section 852(b)(5). To maintain the
required NAV at the end of each quarter, the RIC may take
into account on a monthly basis its distributive share of
partnership items if the eligible partnership makes a
proper election to close its books at the end of each
month. See Rev. Proc. 2003-84, 2003-48 I.R.B. 1159, as
modified by Notice 2008-80, for details.
Election. A nonpublicly offered fund may elect to treat
its affected RIC expenses for a calendar year as equal to
40% of the amount determined under Temporary
Regulations section 1.67-2T(j)(1)(i) for that calendar year.
To make this election, attach to Form 1120-RIC for the
tax year that includes the last day of the calendar year for
which the fund makes the election a statement that it is
making an election under Temporary Regulations section
1.67-2T(j)(2). Once made, the election remains in effect
for all subsequent calendar years and may not be revoked
without IRS consent. See Temporary Regulations section
1.67-2T for definitions and other details.
Transfers to a corporation controlled by the transfer-
or. 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 statement required by Regulations section
1.351-3(a) on or with the transferor's tax 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 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.
Eligibility. A RIC is entitled to take into account its
distributive share of partnership items on a monthly basis
if:
The RIC is entitled to hold itself out as a money market
•
fund, or an equivalent of a money market fund;
The RIC provides a statement to the partnership that it
•
consents to the partnership's election to close its books
monthly and that the RIC will include in its taxable income
its distributive share of partnership items in a manner
consistent with the election. See Rev. Proc. 2003-84 for
the required contents of the statement of consent;
The RIC provides the statement of consent to the
•
custodian or manager of the partnership by the last day of
the second month after the month in which the RIC
acquires the partnership interest; and
shareholder (within the meaning of section 951(b)) must
include the required statement on or with its return.
The partnership is eligible under Rev. Proc. 2003-84 to
•
Distributions under section 355. Every RIC 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 attach the
statement required by Regulations section 1.355-5(a) to
its return for the year of the distribution. A significant
distributee (as defined in Regulations section 1.355-5(c)
(1)) 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.
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).
make the monthly closing election and the election is
effective by the second month after the month in which the
RIC acquires the partnership interest.
Statement of consent. The consent to a partnership's
monthly closing election is effective for the month in which
the RIC acquires the partnership interest, unless the RIC
requests that the consent be effective for either of the two
immediately following calendar months. In addition to
timely providing the partnership with the statement of
consent, the statement should be filed with Form
1120-RIC for the first tax year in which the consent is
effective. The monthly closing consent (and the
partnership's election) may be revoked only with the
consent of the Commissioner. However, the RIC's consent
becomes ineffective on any day when the RIC ceases to
be an eligible partner and the partnership's monthly
closing election is terminated as of the first day of any
month the partnership is no longer eligible for the election
under Rev. Proc. 2003-84. For more details, see the
revenue procedure.
8
Other forms and statements. See Pub. 542,
Corporations, for a list of other forms and statements a
RIC may need to file in addition to the forms and
statements discussed throughout these instructions.
Item D. Total Assets
Enter the RIC's total assets (as determined by the
accounting method regularly used in keeping the fund's
books and records) at the end of the tax year. If there are
no assets at the end of the tax year, enter -0-.
Specific Instructions
Item E. Final Return, Name Change,
Address Change, or Amended Return
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.
If this is the RIC's final return and it will no longer exist,
•
check the “Final return” box.
If the RIC has changed its name since it last filed a
•
return, check the “Name change” box. Generally, a RIC
must also have amended its articles of incorporation and
filed the amendment with the state in which it was
incorporated.
The 2023 Form 1120-RIC may also be used if:
The RIC has a tax year of less than 12 months that
•
begins and ends in 2024; and
If the RIC has changed its address since it last filed a
•
The 2024 Form 1120-RIC is not available at the time the
•
return (including a change to an “in care of” address),
check the “Address change” box.
RIC is required to file its return.
The RIC must show its 2024 tax year information on the
2023 Form 1120-RIC and take into account any tax law
changes that are effective for tax years beginning after
December 31, 2023.
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.
Amended return. If the RIC is amending its return, check
the box for “Amended return,” complete the entire return,
correct the appropriate lines with the new information, and
refigure the RIC's tax liability. Attach a statement that
explains the reason for the amendments and identifies the
lines being changed on the amended return.
Name and Address
Enter the RIC's true name (as set forth in the charter or
other legal document creating it), address, and EIN on the
appropriate lines. Enter the address of the RIC's principal
office or place of business. Include the suite, room, or
other unit number after the street address. If the post
office does not deliver mail to the street address and the
RIC has a P.O. box, show the box number instead.
Part I—Investment
Note. Do not use the address of the registered agent for
the state in which the RIC is incorporated. For example, if
a business is incorporated in Delaware or Nevada and the
RIC's principal office is located in Little Rock, AR, the RIC
should enter the Little Rock address.
Company Taxable Income
Income
Line 1. Dividends. A RIC that is the holder of record of
any share of stock on the record date for a dividend
payable on that stock must include the dividend in gross
income by the later of the date the share became
ex-dividend, or the date the RIC acquired the share.
If the RIC 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.
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 more
information on the tax treatment of loans on which
inadequate or no interest is charged.
Item B. Date RIC Was Established
If this return is being filed for a series fund (as described in
section 851(g)(2)), enter the date the fund was created.
Otherwise, enter the date the RIC was incorporated or
organized.
Item C. Employer
Identification Number (EIN)
Enter the RIC's EIN. If the RIC does not have an EIN, it
must apply for one. An EIN may be applied for:
Note. Report tax-exempt interest income on Schedule K,
item 8. Do not include tax-exempt interest on line 2. Also,
if required, include the same amount on Schedule M-1,
line 7.
Include interest income from tax credit bonds on line 2.
If the RIC elects to pass through the credits to
shareholders, see the instructions for Part II, Schedule A,
•
immediately once the application information is validated;
or
By mailing or faxing Form SS-4, Application for
•
Employer Identification Number.
If the RIC has not received its EIN by the time the return
is due, write “Applied for” and the date you applied in the
space for the EIN. See the Instructions for Form SS-4 for
details.
Line 3. Net foreign currency gain or (loss) from sec-
tion 988 transactions. Enter the net foreign currency
9
gain (loss) from section 988 transactions treated as
ordinary income or loss under section 988(a)(1)(A). Attach
a statement detailing each separate transaction.
Line 4. Payments with respect to securities loans.
Enter the amount received or accrued from a broker as
compensation for securities loaned by the RIC to the
broker for use in completing market transactions. The
payments must meet the requirements of section 512(a)
(5).
Line 5. Excess of net short-term capital gain over net
long-term capital loss. Enter the amount from
Schedule D (Form 1120), line 16. Every sale or exchange
of a capital asset must be reported even if no gain or loss
is indicated.
If a RIC has a net capital loss for any tax year, the
excess of the net short-term capital loss over the net
long-term capital gain shall be a short-term capital loss
arising on the first day of the next tax year. The excess of
the net long-term capital loss over the net short-term
capital gain shall be a long-term capital loss arising on the
first day of the next tax year. Also, there is no limit on the
number of tax years that a RIC is allowed to carry over a
net capital loss. See section 1212(a)(3) for more
information.
The recapture amount under section 280F if the
•
business use of listed property drops to 50% or less. To
figure the recapture amount, complete Part IV of Form
4797;
Ordinary income from trade or business activities of a
•
partnership (from Schedule K-1 (Form 1065)). Do not
offset ordinary losses against ordinary income. Instead,
include the losses on line 22. 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;
Any net positive section 481 income adjustment due to
•
a change in method of accounting. See Form 3115 and its
instructions for more information;
Part or all of the proceeds received from certain
•
corporate-owned life insurance contracts issued after
August 17, 2006. Corporations that own one or more
employer-owned life insurance contracts issued after this
date must file Form 8925, Report of Employer-Owned Life
Insurance Contracts. See section 101(j) for details;
Income from cancellation of debt (COD) from the
•
repurchase of a debt instrument for less than its adjusted
issue price;
The RIC's share of the following income from Form
•
8621, Information Return by a Shareholder of a Passive
Foreign Investment Company or Qualified Electing Fund.
Line 7. Other income. Enter any other taxable income
(loss) not reported on lines 1 through 6, except net capital
gain reported in Part II.
1. Ordinary earnings of a qualified electing fund
(QEF).
If the RIC owns any controlled foreign corporations or
qualified electing funds, enter the amount included in
gross income under section 951(a)(1)(A), plus the amount
of global intangible low-taxed income determined under
section 951A (which is treated as an amount included
under section 951(a)(1)(A)), and any amount included in
gross income under section 1293(a). See Regulations
section 1.851-2(b)(2)(iii). Do not include in this line any
amounts that are treated as dividends and reported on
line 1. See Regulations section 1.851-2(b)(2)(i). Refer to
Form 5471, Form 8621, and Form 8992, and their
2. Gain or loss from marking passive foreign
investment company income (PFIC) stock to market.
3. Gain or loss from sale or other disposition of
Section 1296 stock.
4. The amount of excess distributions from a Section
1291 fund that is treated as ordinary income.
See Form 8621 and the Instructions for Form 8621 for
details; and
Any payroll tax credit taken by an employer on its 2023
•
instructions, to determine the amount included in gross
income under section 951(a)(1)(A) (including the amount
of global intangible low-taxed income) and section
1293(a). Also, consider the applicability of section 951A
with respect to controlled foreign corporations owned by
domestic partnerships in which the RIC has an interest.
List the type and amount of income on an attached
statement. If the RIC has only one item of other income,
describe it in parentheses on line 7. Examples of other
income to report on line 7 include:
employment tax returns (Forms 941, 943, and 944) for
qualified paid sick and qualified paid family leave under
FFCRA and ARP (both the nonrefundable and refundable
portions). The RIC 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.
Gross rents;
•
Recoveries of fees or expenses in settlement or
•
litigation;
Amounts received or accrued as consideration for
•
Deductions
Limitations on Deductions
entering into agreements to make real property loans or to
purchase or lease real property;
Recoveries of bad debts deducted in prior years under
•
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 includible in the income of the related
party. See section 267 for limitations on deductions for
interest and expenses paid to a related party.
the specific charge-off method;
Refunds of taxes deducted in prior years to the extent
•
they reduced income subject to tax in the year deducted
(see section 111). Do not offset current year taxes against
prior year tax refunds;
10
Limitations on business interest expense. Business
interest expense may be limited. See section 163(j), Form
8990, and the related instructions. Also, see Limitation on
Question 14, later.
Golden parachute payments. A portion of the
payments made by a RIC to key personnel that exceeds
their usual compensation may not be deductible. This
occurs when the RIC has an agreement (golden
parachute) with key employees to pay them an amount
substantially in excess of their base amount if control of
the RIC changes. See section 280G and Regulations
section 1.280G-1 for more information. Also, see the
Business start-up and organizational costs. A RIC
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 RIC 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. However, for start-up
or organizational costs paid or incurred before September
9, 2008, the RIC may be required to attach a statement to
its return to elect to deduct such costs. See Regulations
sections 1.195-1 and 1.248-1 for details.
Passive activity limitations. Limitations on passive
activity losses and credits under section 469 apply to
RICs that are closely held (as defined in section 469(j)(1)).
RICs subject to the passive activity limitations must
complete Form 8810, Corporate Passive Activity Loss and
Credit Limitations, to compute their allowable passive
activity loss and credit. Before completing Form 8810, see
Temporary Regulations section 1.163-8T for rules on
allocating interest expense among activities.
Closely held corporation. A RIC is closely held if at
any time during the last half of the tax year more than 50%
in value of its outstanding stock is directly or indirectly
owned by or for not more than five individuals and it is not
a personal service corporation.
Line 9. Compensation of officers. Enter the deductible
officer's compensation on line 9. The RIC determines who
is an officer under the laws of the state where
incorporated. 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.
If the RIC's total receipts are $500,000 or more,
complete and attach Form 1125-E. Total receipts are
figured by adding:
1. Line 8, Part I;
2. Net capital gain from line 1, Part II; and
3. Line 9a, Form 2438.
Enter on line 9 the amount from Form 1125-E, line 4.
For more details, including special rules for costs paid
or incurred before September 9, 2008, see the
Instructions for Form 4562.
Line 10. Salaries and wages. Enter the salaries and
wages paid for the tax year reduced by the amount
claimed on:
If the RIC 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 RIC filed its
original return. The election applies when figuring taxable
income for the current tax year and all subsequent years.
Form 5884, Work Opportunity Credit;
•
•
•
Form 8844, Empowerment Zone Employment Credit;
Form 8932, Credit for Employer Differential Wage
Payments; and
Form 8994, Employer Credit for Paid Family and
•
Medical Leave.
See the instructions for these forms for more
information.
Do not include salaries and wages deductible
elsewhere on the return, such as amounts included in
officer's 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.
Note. The RIC 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 22. For amortization that begins
during the current tax year, complete and attach Form
4562.
If the RIC provided taxable fringe benefits to its
employees, such as personal use of a car, do not
!
CAUTION
deduct as wages any amounts deducted
elsewhere.
Section 265(a)(3) limitation. If the RIC paid
exempt-interest dividends during the tax year (including
those dividends deemed paid under section 855), no
deduction is allowed for that portion of otherwise
deductible expenses allocable to tax-exempt income. The
excluded amount is determined by the amount tax-exempt
income bears to total gross income (including tax-exempt
income but excluding capital gain net income).
If the RIC claims a credit for any wages paid or
incurred, it may need to reduce any corresponding
!
CAUTION
deduction for officers' compensation and salaries
and wages. See the instructions for the form used to figure
the applicable credit for more details.
Line 11. Rents. If the RIC 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
Net operating loss deduction. The net operating loss
deduction is not allowed.
11
4562, Depreciation and Amortization. If the RIC 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.
rules and exceptions for financial institutions. Also, see
section 265(b)(7) for a temporary de minimis exception for
financial institutions for certain tax exempt bonds issued in
2009 and 2010.
For cash basis taxpayers, prepaid interest allocable to
•
The RIC may have an inclusion amount if:
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 lease term began:
And the vehicle's FMV on
the first day of the lease
exceeded:
Cars (excluding trucks and vans)
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
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$60,000
$56,000
$51,000
$50,000
$19,000
Interest and carrying charges on straddles. Generally,
•
these amounts must be capitalized. See section 263(g).
Special rules apply to:
Original issue discount (OID) on certain high-yield
•
Trucks and Vans
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.
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
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$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 terms beginning in 2024 will be published in the Internal
Revenue Bulletin in early 2024.
The deduction for interest when the RIC 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.
Line 12. Taxes and licenses. Enter taxes paid or
accrued during the tax year, but do not include the
following.
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
properly allocable to a trade or business (other than
certain excepted trades or businesses). A small business
taxpayer that is not a tax shelter (as defined in section
448(d)(3)), and 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 not more
than $29 million for the 3 prior tax years under the gross
receipts test of section 448(c). Gross receipts include the
aggregate gross receipts from all persons treated as a
single employer such as a controlled group of
Federal income taxes (except for the tax imposed on
•
net recognized built-in gain allocable to ordinary income).
Foreign or U.S. territory income taxes if a foreign tax
•
credit is claimed, or if the RIC made an election under
section 853.
Excise taxes imposed under section 4982 on
•
undistributed RIC income.
Taxes not imposed on the RIC.
•
•
Taxes, including state or local sales taxes, that are paid
or 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).
Taxes assessed against local benefits that increase the
•
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. See the Instructions for Form
conditions for filing Form 8990.
value of the property assessed (such as for paving, etc.).
Taxes deducted elsewhere on the return.
•
See section 164(d) for information on apportionment of
taxes on real property between seller and purchaser.
Do not reduce the RIC's deduction for social
security and Medicare taxes by the nonrefundable
Interest expense cannot be used to offset interest
!
CAUTION
and refundable portions of any FFCRA and ARP
income.
!
credits for qualified sick and family leave wages claimed
on its employment tax returns. Instead, report this amount
as income on line 7.
CAUTION
Line 14. Depreciation. Include on line 14 depreciation
and the cost of certain property that the RIC elected to
expense under section 179. See Form 4562 and the
related instructions to figure the amount of depreciation to
enter on this line.
Line 22. Other deductions. Attach a statement listing by
type and amount all allowable deductions that are not
specifically deductible elsewhere on Form 1120-RIC.
Generally, a deduction may not be taken for any amount
that is allocable to tax-exempt income. See section 265(b)
for exceptions.
Line 13. Interest. The RIC must make an interest
allocation if the proceeds of a loan were used for more
than one purpose (for example, to purchase a portfolio
investment and to acquire an interest in a passive activity).
See Temporary 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
12
Examples of other deductions include:
Amortization. See Form 4562;
see the regulations under section 170 and Pub. 526,
Charitable Contributions.
Contributions to organizations conducting
lobbying activities. Contributions made to an
organization that conducts lobbying activities are not
deductible if:
•
•
Any applicable deduction under section 179D for costs
of energy efficient commercial building property placed in
service during the tax year. Complete and attach new
Form 7205;
Certain business start-up and organizational costs the
•
The lobbying activities relate to matters of direct
•
RIC elects to amortize or deduct;
financial interest to the donor's trade or business, and
Supplies used and consumed in the business;
Utilities;
•
•
•
The principal purpose of the contribution was to avoid
•
federal income tax by obtaining a deduction for activities
that would have been nondeductible under the lobbying
expense rules if conducted directly by the donor.
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 separately the amount from each
partnership;
For information on contributions to charitable
organizations that conduct lobbying activities, see section
170(f)(9).
Pension, profit-sharing, etc., plans. Enter contributions
to qualified pension, profit-sharing, or other
funded-deferred compensation plans. Employers who
maintain such a plan must generally file Form 5500,
Annual Return/Report of Employee Benefit Plan, even if
the plan is not a qualified plan under the Internal Revenue
Code. The filing requirement applies even if the RIC 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).
Any extraterritorial income exclusion (from Form 8873,
•
line 52); and
Any net negative section 481(a) adjustment.
•
Do not deduct expenses such as the following.
Fines or penalties paid to a government for violating any
•
law. However, other limitations apply for certain amounts
paid or incurred after December 21, 2017. See section
•
later.
Note. Form 5500 must be filed electronically under the
computerized ERISA Filing Acceptance System
(EFAST2). For more information, see the EFAST2 website
Travel, meals, and entertainment. Subject to certain
limitations and restrictions, the RIC can deduct ordinary
and necessary travel, meal, 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. The RIC cannot deduct travel expenses of any
individual accompanying a corporate officer or employee
unless:
Amounts paid or incurred after December 22, 2017, for
•
any settlement or payment related to sexual harassment
or sexual abuse, if such settlement or payment is subject
to a nondisclosure agreement or for related attorney's
fees. 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 contribution carryovers.
RICs reporting taxable income on the accrual method
may elect to treat as paid during the tax year any
contributions paid by the due date of the RIC’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
section 170(a)(2)(B).
That individual is an employee of the RIC, and
That individual’s travel is for a bona fide business
•
•
Limitation on deduction. Generally, the total amount
claimed cannot be more than 10% of taxable income (the
sum of Part I, line 26; Part ll, line 3; and Form 2438,
line 11) computed without regard to the following:
purpose that would otherwise be deductible by that
individual.
Meals. Generally, the RIC can deduct only 50% of the
amount otherwise allowable for non-entertainment related
meal expenses paid or incurred in its trade or business.
Any deduction for contributions; or
•
The deduction allowed under section 249, related to
•
Meals not separately stated from entertainment are
generally not deductible. In addition (subject to exceptions
under section 274(k)(2)):
any premium paid or incurred upon the repurchase of a
convertible bond.
Carryover. Charitable contributions over the 10%
limitation cannot be deducted for the tax year but may be
carried over to the next 5 tax years subject to certain
limitations.
Meals must not be lavish or extravagant, and
•
An employee of the RIC must be present at the meal.
•
See section 274(n)(3) for a special rule that applies to
expenses for meals consumed by individuals subject to
the hours of service limits of the Department of
Transportation.
For more information on charitable contributions,
including substantiation and recordkeeping requirements,
13
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:
Amounts paid or incurred in connection with influencing
•
federal, state, or local legislation; or
Amounts paid or incurred in connection with any
•
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.”
Transportation in a commuter highway vehicle between
•
the employee's residence and place of employment,
Any transit pass, and
Qualified parking.
•
•
Dues and other similar amounts paid to certain
tax-exempt organizations may not be deductible. Certain
in-house lobbying expenditures that do not exceed $2,000
are deductible.
See section 274 and Pub. 15-B for details.
Membership dues. The RIC can deduct amounts paid
or incurred for membership dues in civic or public service
organizations, professional organizations (such as bar or
medical associations), business leagues, trade
Line 25a. Deduction for dividends paid. Enter the
amount from Schedule A, line 8a.
associations, chambers of commerce, boards of trade,
and real estate boards. 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, RICs cannot deduct membership dues
in 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.
Entertainment facilities. Generally, the RIC 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
RIC may be able to deduct otherwise nondeductible
entertainment, amusement, or recreation 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.
Line 25b. Section 851(d)(2) and section 851(i) deduc-
tions. Enter the amount from Schedule J, lines 2c and
2d.
Tax and Payments
Line 28b. Estimated tax payments. Enter any
estimated tax payments the RIC made for the current tax
year.
Line 28f. Credit from Form 2439. Enter the credit from
Form 2439 for the RIC's share of the tax paid by another
RIC or a Real Estate Investment Trust (REIT) on
undistributed long-term capital gains included in the RIC's
income. Attach Form 2439 to Form 1120-RIC.
Line 28g. Credit for federal tax on fuels. Complete
and attach Form 4136, Credit for Federal Tax Paid on
Fuels, if the RIC qualifies to take this credit.
Line 28h. Elective payment election amount from
Form 3800. Enter on line 28h 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.
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.
See section 274 and Pub. 463 for a more extensive
Line 29. Total payments and credits. Combine lines
28d through 28h and enter the total on line 29.
Backup Withholding. If the RIC 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 29. Enter the
amount withheld and the words “Backup Withholding” in
the blank space above line 29.
Line 30. Estimated tax penalty. A RIC that does not
make estimated tax payments when due may be subject
to an underpayment penalty for the period of
underpayment. Generally, a RIC is subject to the penalty if
its tax liability is $500 or more and it did not timely pay at
least the smaller of:
discussion of these topics.
Fines and 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:
Amounts that constitute restitution,
•
•
•
Amounts paid to come into compliance with the law,
Amounts paid or incurred as the result of certain court
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
RIC 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.
Its tax liability for the current year, or
Its prior year's tax.
•
•
Use Form 2220, Underpayment of Estimated Tax by
Corporations, to see if the RIC owes a penalty and to
figure the amount of the penalty. See the Instructions for
Form 2220 for more information.
See section 162(f).
If Form 2220 is attached, check the box on this line and
enter the amount of any penalty.
Lobbying expenses. Generally, lobbying expenses are
not deductible. Examples of nondeductible expenses
include:
Line 31. Amount owed. If the RIC cannot pay the full
amount of tax owed, it can apply for an installment
14
agreement online. The RIC can apply for an installment
agreement online if:
Line 7. If the RIC elects under section 853A to pass
through credits from qualified tax credit bonds to
shareholders, increase the dividends paid deduction by
the amount of the credits distributed to shareholders. To
make the election, see the instructions for Item 11 under
Schedule K—Other Information.
It cannot pay the full amount shown on line 31,
The total amount owed is $25,000 or less, and
The RIC can pay the liability in full in 24 months.
•
•
•
To apply using the Online Payment Agreement
Under an installment agreement, the RIC can pay what
Schedule B—Income From
Tax-Exempt Obligations
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
24 months and making all required deposits and timely
filing tax returns during the length of the agreement.
If the installment agreement is accepted, the RIC 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.
If, at the close of each quarter of the tax year, at least 50%
of the value of the fund's assets consisted of tax-exempt
obligations under section 103(a), the RIC qualifies under
section 852(b)(5) to pay exempt-interest dividends for the
tax year. See section 852(b)(5)(A) for the definition of
exempt-interest dividends and other details.
In the case of a qualified “fund of funds” structure, a
RIC may pay exempt-interest dividends without regard to
the requirement that at least 50% of the value of the fund’s
assets consist of tax-exempt obligations. See section
852(g) for more information.
Part II—Tax on Undistributed Net
Capital Gain Not Designated Under
Section 852(b)(3)(D)
If this applies, check the “Yes” box on line 1 and
complete lines 2 through 5.
Line 1. Enter the net capital gain from line 17 of
Schedule D (Form 1120).
Schedule J—Tax Computation
Line 1
If the RIC is a member of a controlled group, check the
box on line 1 and complete and attach Schedule O (Form
1120), Consent Plan and Apportionment Schedule for a
Controlled Group. See Schedule O (Form 1120) and its
instructions for more information.
Line 2. Enter the capital gain dividends from Schedule A,
line 8b.
Line 4. Capital gains tax. Multiply the amount on line 3
by 21% (0.21). Enter the result here and on Schedule J,
line 2b.
Schedule A—Deduction for Dividends
Paid
Column (a) is used to determine the deduction for
dividends paid resulting from income derived from
ordinary dividends.
Line 2a—Tax on Investment Company Taxable
Income
RICs figure their tax by multiplying investment company
taxable income by 21%. Enter this amount on line 2a.
Column (b) is used to determine the deduction for
dividends paid resulting from income derived from capital
gain dividends.
Section 561 (taking into account sections 852(b)(7),
852(c)(3)(B), and 855(a)) determines the deduction for
dividends paid. Do not take into account exempt-interest
dividends defined in section 852(b)(5) or any amount
reported for the tax year on Form 2438, line 9b. See
section 852(b)(8) for information on post-October capital
losses and late year ordinary losses.
Line 3. Dividends, both ordinary and capital gain,
declared and payable to shareholders of record in
October, November, or December are treated as paid by
the RIC and received by each shareholder on December
31 of that calendar year provided that they are actually
paid in January of the following calendar year. Enter on
line 3 all such dividends not already included on line 1 or
2.
Line 6. Enter the foreign tax paid deduction allowed as
an addition to the dividends paid deduction under section
853(b)(1)(B). See the instructions for Item 10 of
Schedule K for information on the election available under
section 853(a).
For a RIC that is a personal holding company (PHC).
A RIC that is not in compliance with Regulations section
1.852-6 is a PHC and is taxed at a flat rate of 21% on its
investment company taxable income.
Line 2b—Capital Gains Tax
Enter the capital gains tax from line 4, Part II.
Line 2c—Tax Imposed Under Section 851(d)(2)
Enter the tax imposed under section 851(d)(2) relating to
failures to meet certain requirements of the asset test of
section 851(b)(3). See the instructions on page 2 for
details on the requirements of the asset test. Also, see
section 851(d)(2).
Attach a statement showing the computation of the tax
and an explanation of why the RIC failed to meet the
requirements of the asset test, and a description of why
such failure is due to reasonable cause and not to willful
neglect.
Line 2d—Tax Imposed Under Section 851(i)
Enter the tax imposed under section 851(i) relating to
failures to meet certain requirements of the gross income
test.
15
See the instructions on page 2 for details on the
requirements of the gross income test. Also, see section
851(i).
Line 5—Personal Holding Company Tax
A RIC is taxed as a personal holding company under
section 542 if:
At least 60% of its adjusted ordinary gross income for
•
Attach a statement showing the computation of the tax
and an explanation of why the RIC failed to meet the
requirements of the gross income test, and a description
of why such failure is due to reasonable cause and not to
willful neglect.
the tax year is personal holding company income, and
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 the Instructions for Schedule PH (Form 1120), U.S.
Personal Holding Company (PHC) Tax, for definitions and
details on how to figure the tax.
Line 2e—Income Tax
Deferred tax under section 1291. If the RIC 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) (from
Form 8621) in the total for line 2e. On the dotted line to the
left of line 2e, write “Section 1291” and the amount.
Do not include on line 2e any interest due under section
1291(c)(3). Instead, include the amount owed on
Schedule J, line 9, Other taxes.
Line 6—Interest on Deferred Tax Liability for
Installment Obligations Under Section 453A(c)
Enter any interest on deferred tax attributable to certain
nondealer installment obligations (section 453A(c)).
Line 7—Interest on Deferred Tax Liability for
Installment Obligations Under Section 453(l)(3)
Enter any interest on deferred tax attributable to certain
dealer installment obligations under section 453(I).
For more information on reporting the deferred tax and
interest, see the Instructions for Form 8621.
Line 8—Recapture of Investment Credit
Additional tax under section 197(f). A RIC that elects
to recognize gain and pay tax on the gain from the sale of
a section 197 intangible under the related person
exception to the anti-churning rules should include any
additional tax due in the total for line 2e. On the dotted line
to the left of line 2e, write “Section 197” and the amount.
See section 197(f)(9)(B)(ii).
If the RIC 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.
Line 9—Other Taxes
Include on line 9 additional taxes and interest such as the
following. Attach a statement showing the computation of
each item included in the total for line 9 and identify the
applicable Code section and the type of tax or interest.
Line 3a—Foreign Tax Credit
To find out when a RIC can claim the credit for payment of
income tax to a foreign country or U.S. territory, see Form
1118, Foreign Tax Credit—Corporations. The RIC may not
claim this credit if an election under section 853 was made
Schedule K, Item 10.
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 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, and attach
Form 8834 to this return.
Recapture of new markets credit (see Form 8874 and
•
Form 8874-B).
Recapture of employer-provided childcare facilities and
•
services credit (see Form 8882).
Interest due on deferred gain recognition (section
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.
•
1260(b)).
Interest due under section 1291(c)(3).
•
Recapture of low-income housing credit. If the RIC
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 RIC 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, and section 42(j)(1) for more
information.
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.
Bond credits from Form 8912. Enter the allowable
credits from Form 8912, Credit to Holders of Tax Credit
Bonds, line 12. However, if the RIC elects to pass through
credits from tax credit bonds to its shareholders, it cannot
more information.
Built-in Gains Tax
If, on or after January 2, 2002, property of a C corporation
becomes property of a RIC by either (a) the qualification
of the C corporation as a RIC; or (b) the transfer of such
16
property to a RIC, then the RIC 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
RIC must pay tax on the net recognized built-in gain
during the 5-year period beginning on its first day as a RIC
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 RIC's net unrealized built-in gain is the
amount, if any, by which the FMV of the assets of the RIC
at the beginning of its first RIC 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 RIC'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 RIC'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 RIC or the day the RIC acquired the property,
as described in Temporary Regulations section
Line e. Enter the section 1374(b)(2) deduction.
Generally, this is any net operating loss or capital loss
carryforward (to the extent of net capital gain included in
recognized built-in gain for the tax year) arising in tax
years for which the RIC was a C corporation. A net loss
carryforward must be used to reduce recognized built-in
gain for the tax year to the greatest extent possible before
it can be used to reduce the RIC's taxable income.
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 RIC 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 h. Credit carryforwards arising in tax years for which
the RIC 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 RIC's taxable income.
Line i. The RIC's tax on the net recognized built-in gain is
treated as a loss sustained by the RIC after October 31 of
the same tax year. Deduct the tax attributable to:
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 RIC. The RIC's tax on net recognized built-in gain is
treated as a loss sustained by the RIC after October 31 of
Built-in Gains Tax Worksheet, later). See Regulations
section 1.337(d)-7 for details.
Ordinary gain as a deduction for taxes on Form
•
1120-RIC, line 12;
Short-term capital gain as a short-term capital loss in
•
Part I of Form 8949; and
Different rules apply to elections to be a RIC and to
transfers of property in a carryover basis transaction that
occurred prior to January 2, 2002. For RIC elections and
property transfers before this date, the C corporation is
subject to deemed sale treatment on the transferred
property unless the RIC elects section 1374 treatment.
See Regulations section 1.337(d)-6 for information on how
to make the election and figure the tax for RIC elections
and property transfers before this date. The RIC may also
generally rely on Regulations section 1.337(d)-5 for RIC
elections and property transfers that occurred before
January 2, 2002.
Long-term capital gain as a long-term capital loss in
•
Part II of Form 8949.
Line 10—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 10. See Form
Subtract from the total for line 10 the deferred tax on
the RIC's share of the undistributed earnings of a qualified
electing fund (see Form 8621).
Built-in Gains Tax Worksheet Instructions
How To Report
Complete the worksheet to figure the built-in gains tax
under Regulations section 1.337(d)-6 or 1.337(d)-7.
Line a. Enter the amount that would be the taxable
income of the RIC for the tax year if only recognized
built-in gain, recognized built-in loss, and recognized
built-in gain carryover were taken into account.
Attach a statement showing the computation of each item
included in, or subtracted from, the total for line 10. On the
dotted line next to line 10, enter the amount of tax or
interest, identify it as tax or interest, and specify the Code
section that applies.
Schedule K—Other Information
Line b. Add the amounts shown on:
The following instructions apply to questions 1 through 15.
Complete all items that apply.
Form 1120-RIC, page 1, line 24;
Form 1120-RIC, Part II, line 1; and
Form 2438, line 11.
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•
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Question 3
For this purpose, refigure line 24 on page 1 without regard
to any election under section 852(b)(2)(F). Enter the result
Check the “Yes” box if the RIC is a subsidiary in a
parent-subsidiary controlled group. This applies even if
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Built-in Gains Tax Worksheet (keep for your records)
a. Excess of recognized built-in gains over recognized built-in losses . . . . . . . . . . . . . . . . . . . . . .
b. Taxable income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
a.
b.
c. Enter the net unrealized built-in gain reduced by any net recognized built-in gain for all prior
years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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% of line f . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
c.
d.
e.
f.
g.
h. Business credit and minimum tax credit carryforwards under section 1374(b)(3) from C corporation
(see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
i. Tax. Subtract line h from line g (if zero or less, enter -0-). Enter here and include on line 9 of
Schedule J (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
h.
i.
the RIC is a subsidiary member of one group and the
parent corporation of another.
party during the tax year must file Form 5472. See Form
5472 for filing instructions.
Note. If the RIC 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.
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.
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 RIC entitled to vote, or (b) the total value of all classes
of stock of the RIC.
Item 10
Election under section 853(a). A RIC may make an
irrevocable election under section 853(a) to allow its
shareholders to apply their share of the foreign taxes paid
by the RIC either as a credit or a deduction. If the RIC
makes this election, the amount of foreign taxes it paid
during the tax year may not be taken as a credit or a
deduction on Form 1120-RIC, but may be claimed on
Form 1120-RIC, Schedule A, line 5, as an addition to the
dividends-paid deduction.
The constructive ownership rules of section 318 apply
in determining if a RIC is foreign owned. See section
6038A(c)(5) and the related regulations.
Enter on line 5b(1) the percentage owned by the
foreign person specified in question 5. For line 5b(2),
enter the name of the owner's country.
Note. If there is more than one 25%-or-more foreign
owner, complete lines 5b(1) and 5b(2) for the foreign
person with the highest percentage of ownership.
Eligibility. To qualify to make the election, the RIC must
meet the following requirements.
More than 50% of the value of the RIC's total assets at
•
the end of the tax year must consist of stock or securities
in foreign corporations.
Foreign person. The term “foreign person” includes:
A foreign citizen or nonresident alien,
•
The RIC must meet the holding period requirements of
•
An individual who is a citizen or resident of a U.S.
•
section 901(k) with respect to its common and preferred
stock. If the RIC fails to meet these holding period
requirements, the election that allows a RIC to pass
through to its shareholders the foreign tax credits for
foreign taxes paid by the RIC is disallowed. Although the
foreign taxes paid may not be taken as a credit by either
the RIC or the shareholder, they are still deductible at the
fund level.
territory (but who is not a U.S. citizen or resident),
A foreign partnership,
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•
•
A foreign corporation,
Any foreign estate or trust within the meaning of section
7701(a)(31), and
A foreign government (or one of its agencies or
•
instrumentalities) to the extent that it is engaged in the
conduct of a commercial activity, as described in section
892.
Election under section 852(g). In the case of a
qualified “fund of funds” structure, a RIC may elect to allow
shareholders the foreign tax credit without regard to the
requirement that more than 50% of the value of its assets
consist of stock or securities in foreign corporations. See
section 852(g) for more information.
Reporting requirements. To make a valid election under
section 853 or 852(g), in addition to timely filing Form
1120-RIC and checking the box for Schedule K, item 10a
or b, the RIC must file a statement of election, which
includes the information listed under Regulations section
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.
Requirement to file Form 5472. If the RIC checked
“Yes,” it may have to file Form 5472, Information Return of
a 25% Foreign Owned U.S. Corporation or a Foreign
Corporation Engaged in a U.S. Trade or Business.
Generally, a 25% foreign-owned corporation that had a
reportable transaction with a foreign or domestic related
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1.853-4(c). The information must be provided on or with a
Form 1118, Foreign Tax Credit, attached to the RIC's
timely filed tax return.
Exclusions from filing. A RIC is not required to file Form
8990 if the RIC is a small business taxpayer that does not
have excess business interest expense from a partnership
and did not pay section 163(j) interest dividends for the
tax year. A RIC is also not required to file Form 8990 if the
RIC only has business interest expense from these
excepted trades or businesses:
For more information, see Regulations section 1.853-4.
Notification to shareholders. If the RIC makes the
election, it must furnish to its shareholders a written
statement reporting the shareholder's portion of (1) foreign
taxes paid by the RIC to foreign countries and territories of
the United States, and (2) the dividend that represents
income derived from:
An electing real property trade or business,
An electing farming business, or
Certain utility businesses.
•
•
•
Sources within countries described in section 901(j),
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Small business taxpayer. 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.
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 proprietorships, and affiliated service
groups. See section 448(c) and the Instructions for Form
8990 for additional information.
and
Other foreign-source income.
•
Item 11
Election under section 853A. A RIC can elect to pass
through credits from tax credit bonds to its shareholders. If
the RIC makes the election, include the interest income
from the tax credit bonds on Part I, line 2. Also, increase
the dividends paid deduction by the amount of the credits
distributed to shareholders. If the RIC makes the election,
it is not allowed to take any credits related to the qualified
tax credit bonds.
For more information, see section 853A.
Notification to shareholders. If the RIC makes the
election to apply section 853A, it must furnish to its
shareholders a written statement reporting the
shareholder's proportionate share of (1) credits from tax
credit bonds, and (2) gross income in respect of such
credits.
Question 15
To certify as a QOF, the RIC must file Form 1120-RIC and
attach Form 8996, even if the RIC had no income or
expenses to report. If the RIC is attaching Form 8996,
check the “Yes” box for question 15. On the line following
the dollar sign, enter the amount from Form 8996, line 15.
Question 13, Business Interest Expense
Election
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.
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.
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.
The penalty reported on this line from Form 8996,
line 15, is not due with the filing of this form. The IRS will
separately send to you a notice setting forth the due date
for the penalty payment and where that payment should
be sent.
Schedule L—Balance Sheets per
Books
The balance sheets should agree with the RIC's books
and records.
Line 1. Cash. Include certificates of deposit as cash on
line 1.
Line 4. Tax-exempt securities. Include on this line:
1. State and local government obligations, the interest
on which is excludible from gross income under section
103(a); and
2. Stock in another mutual fund or RIC that distributed
Question 14, Conditions for Filing Form 8990
exempt-interest dividends during the tax year of the RIC.
Generally, a RIC must file Form 8990 to claim a deduction
for business interest. In addition, Form 8990 must be filed
by any RIC that owns an interest in a partnership with
current year, or prior year carryover, excess business
interest expense allocated from the partnership. A RIC
must also file a Form 8990 if the RIC paid section 163(j)
interest dividends for the tax year.
Line 24. Adjustments to shareholders' equity.
Examples of adjustments to report on this line include:
Unrealized gains and losses on securities held
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“available for sale”;
Foreign currency translation adjustments;
•
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The excess of additional pension liability over
Expenses for the use of an entertainment facility;
The part of business gifts over $25;
•
•
•
•
unrecognized prior service cost;
Guarantees of employee stock (ESOP) debt; and
Expenses of an individual over $2,000, that are
•
•
Compensation related to employee stock award plans.
allocable to conventions on cruise ships;
Employee achievement awards of nontangible property
•
If the total adjustment to be entered on line 24 is a
or tangible property over $400 ($1,600 if part of a qualified
plan);
negative amount, enter the amount in parentheses.
The cost of skyboxes;
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Schedule M-1
Reconciliation of Income (Loss) per Books With
Income per Return
The part of luxury water travel not deductible under
•
section 274(m);
Expenses for travel as a form of education; and
Other nondeductible travel and entertainment
•
•
expenses.
Line 5d. Travel and entertainment. Include on line 5d
any of the following:
Line 7. Tax-exempt interest. Include as interest on
line 7 any exempt-interest dividends received by the RIC
as a shareholder in a mutual fund or other RIC.
Entertainment expenses not deductible under section
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274(a);
Entertainment related meal expenses;
•
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Non-entertainment related meals not deductible under
section 274(n);
Paperwork Reduction Act Notice. We ask for the information on this form 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.
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 $4,400. Within each
of these estimates there is significant variation in taxpayer activity. Tax preparation fees and other out-of-pocket costs
vary extensively depending on the tax situation of the taxpayer, the type of software or professional preparer used, and
the geographic location. Third-party burden hours are not included in these estimates.
Table 1 – Taxpayer Burden for Entities Taxed as Partnerships
Forms 1065, 1066, and all attachments
Primary Form Filed or Type of
Taxpayer
Total Number of Returns
Average Time (hours)
Average Cost ($)
Average Monetized
Burden ($)
(millions)
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 $10 million. A large business is defined the same way for partnerships, taxable
corporations, and pass-through corporations. A small business is any business that doesn’t meet the definition of a large business.
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Table 2 – Taxpayer Burden for Entities Taxed as Taxable Corporations
Forms 1120, 1120-C, 1120-F, 1120-H, 1120-ND, 1120-SF, 1120-FSC, 1120-L, 1120-PC, 1120-POL, and all
attachments
Primary Form Filed or Type of
Taxpayer
Total Number of Returns
Average Time (hours)
Average Cost ($)
Average Monetized
Burden ($)
(millions)
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 $10 million. A large business is defined the same way for partnerships, taxable
corporations, and pass-through corporations. A small business is any business that doesn’t meet the definition of a large business.
Table 3 – Taxpayer Burden for Entities Taxed as Pass-Through Corporations
Forms 1120-REIT, 1120-RIC, 1120-S, and all attachments
Primary Form Filed or Type of
Taxpayer
Total Number of Returns
Average Time (hours)
Average Cost ($)
Average Monetized
Burden ($)
(millions)
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 through IRS.gov/FormComments. Or
you can write to the Internal Revenue Service, Tax Forms and Publications Division, 1111 Constitution Ave. NW, IR-6526,
Washington, DC 20224. Do not send the tax form to this office. Instead, see Where To File, earlier, near the beginning of
the instructions.
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