Table of Contents
- Period Covered
- Name and Address
- Item B. 100%-owned Subsidiaries and Personal Holding Companies
- Item C. Employer Identification Number (EIN)
- Item D. Date REIT Established
- Item E. Total Assets
- Item F. Final Return, Name Change, Address Change, or Amended Return
- Item G. Type of REIT
- Item H. PBA Code (Equity REITs Only)
- Part I—Real Estate Investment Trust Taxable Income
- Part II—Tax on Net Income From Foreclosure Property
- Part III—Tax for Failure To Meet Certain Source-of-Income Requirements
- Part IV—Tax on Net Income From Prohibited Transactions
- Schedule A—Deduction for Dividends Paid
- Schedule J—Tax Computation
- Line 1
- Line 2a-Tax on REIT Taxable Income
- Line 2e
- Line 2f-Taxes Imposed Under Section 856(c)(7) and Section 856(g)(5)
- Line 2g-Alternative Minimum Tax (AMT)
- Line 2h-Income Tax
- Line 3a-Foreign Tax Credit
- Line 3b-Qualifed Electric Vehicle Credit
- Line 3c-General Business Credit
- Line 3d-Other credits
- Line 5-Personal Holding Company Tax
- Line 6-Other Taxes
- Line 7-Total Tax
- Schedule K—Other Information
- Schedule L-Balance Sheets per Books
- Schedule M-1
File the 2007 return for calendar year 2007 and fiscal years that begin in 2007 and end in 2008. For a fiscal year return, fill in the tax year space at the top of the form.
Note.
The 2007 Form 1120-REIT can also be used if:
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The REIT has a tax year of less than 12 months that begins and ends in 2008; and
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The 2008 Form 1120-REIT is not available at the time the REIT is required to file its return.
The REIT must show its 2008 tax year on the 2007 Form 1120-REIT and take into account any tax law changes that are effective for tax years beginning after December 31, 2007.
Type or print the REIT's true name (as set forth in the charter or other legal document creating it) and address on the appropriate lines. 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 REIT has a P.O. box, show the box number instead.
Note.
Do not use the address of the registered agent for the state in which the corporation is incorporated. For example, if a business is incorporated in Delaware or Nevada and the corporation's principal office is located in Little Rock, AR, the corporation should enter the Little Rock address.
If the REIT receives its mail in care of a third party (such as an accountant or an attorney), enter on the street address line “C/O” followed by the third party's name and street address or P.O. box.
Check this box if this return is filed for a REIT with 100%-owned REIT subsidiaries under section 856(i). These subsidiaries are not treated as separate corporations.
Do not check this box for a taxable REIT subsidiary. See the instructions for Taxable REIT Subsidiaries.
Enter the REIT's EIN. If the REIT does not have an EIN, it must apply for one. An EIN may be applied for:
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Online—Click on the EIN link at www.irs.gov/businesses/small. The EIN is issued immediately once the application information is validated.
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By telephone at 1-800-829-4933 from 7:00 a.m. to 10:00 p.m. Monday through Friday in the REIT's local time zone.
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By mailing or faxing Form SS-4, Application for Employer Identification Number.
If the REIT has not received its EIN by the time the return is due, enter “Applied for” in the space for the EIN. See Pub. 583 for details.
Note.
The online application process is not yet available for REITs with addresses in foreign countries or Puerto Rico.
If the REIT is a corporation under state or local law, enter the date incorporated. If it is a trust or association, enter the date organized.
Enter the REIT's total assets (as determined by the accounting method regularly used in keeping its books and records) at the end of the tax year. If there are no assets at the end of the tax year, enter -0-.
Note.
If a change in address occurs after the return is filed, use Form 8822, Change of Address, to notify the IRS of the new address.
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If this is the REIT's final return, and it will no longer exist, check the “Final return” box. See the instructions for Termination of Election.
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If the REIT has changed its name since it last filed a return, check the box for “Name change.” Generally, a REIT also must have amended its articles of incorporation and filed the amendment with the state in which it was incorporated.
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If the REIT has changed its address since it last filed a return (including a change to an “in care of” address), check the box for “Address change.”
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If the REIT 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 REIT's tax liability. Attach a statement that explains the reason for the amendments and identifies the lines being changed on the amended return.
Check the appropriate box to indicate whether you are filing a return for a “Mortgage REIT” or an “Equity REIT.” If the primary source of gross receipts is derived from mortgage interest and fees, check the “Mortgage” box. Otherwise, check the “Equity” box.
Enter only one code that best reflects the principal business activity of an equity REIT from the selection below:
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531110- Lessors of Residential Buildings & Dwellings
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531114- Cooperative Housing
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531120- Lessors of Nonresidential Buildings (except Miniwarehouses)
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531130- Lessors of Miniwarehouses & Self-Storage Units
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531190- Lessors of Other Real Estate Property
Include in Part I the REIT's share of gross income from partnerships in which the REIT is a partner, and the deductions attributable to the gross income items. See Regulations section 1.856-3(g).
Real estate investment trust taxable income does not include the following:
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Gross income, gains, losses, and deductions from foreclosure property (defined in section 856(e)). If the aggregate of such amounts results in net income, report these amounts in Part II.
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Income or deductions from any prohibited transaction (defined in section 857(b)(6)) resulting in a gain. Report these amounts in Part IV.
Note.
Report tax-exempt interest income on Form 1120-REIT, Schedule K, item 8. Also, if required, include the same amount on Schedule M-1, line 7.
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Charges for customary services that may qualify as rents from real property are described in Regulations section 1.856-4(b)(1). For tax years beginning after October 22, 2004, the customary services exception under section 857(b)(7)(B)(ii) was eliminated and replaced with an existing “safe harbor.” Services customarily furnished to tenants of a REIT include parking facilities. See Rev. Rul. 2004-24, which is on page 550 of I.R.B. 2004-10, for guidance to determine whether amounts received by a REIT that provides parking facilities at its rental real properties qualify as rents from real property.
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Rent from personal property leased under or with a lease of real property (but only if the rent from the personal property does not exceed 15% of the total rent for the tax year charged for both the real and personal property under such lease). Figure the percentage of rents from personal property by comparing the FMV of the personal rental property to the FMV of the total rental property. See section 856(d)(1) for details.
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Rent from a taxable REIT subsidiary (TRS) either: (a) where at least 90% of the space at issue is leased to third parties at rents comparable to the rent paid by the other tenants of the REIT for comparable space; or (b) for certain lodging facilities operated by an eligible independent contractor. For more information, including definitions and additional requirements, see sections 856(d)(8) and 856(d)(9). Also, see Rev. Proc. 2003-66 for the special rules on rents paid to a REIT by certain joint ventures that include a TRS.
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Amounts received or accrued as consideration for entering into agreements to make real property loans or to purchase or lease real property.
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Recoveries of bad debts deducted in prior years under the specific charge-off method.
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Refunds of taxes deducted in prior years if they reduced income subject to tax in the year deducted (see section 111). Do not offset current year taxes against tax refunds.
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Any deduction previously taken under section 179A that is subject to recapture. The REIT must recapture the benefit of any allowable deduction for clean-fuel vehicle property (or clean-fuel vehicle refueling property), if the property later ceases to qualify. See Regulations section 1.179A-1 for details.
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Ordinary income from trade or business activities of a partnership (from Schedule K-1 (Form 1065 or 1065-B)). Do not offset ordinary losses against ordinary income. Instead, include the losses on line 18, Form 1120-REIT). Show the partnership's name, address, and EIN on a separate statement attached to this return. If the amount entered is from more than one partnership, identify the amount from each partnership.
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The REIT can elect to deduct up to $5,000 of such costs for the year the REIT begins business operations.
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The $5,000 deduction is reduced (but not below zero) by the amount the total costs exceed $50,000. If the total costs are $55,000 or more, the deduction is reduced to zero.
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If the election is made, any costs that are not deductible must be amortized ratably over a 180-month period beginning with the month the REIT begins business operations.
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Employment credits. See the instructions for line 10.
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Disabled access credit.
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Employer credit for social security and Medicare taxes paid on certain employee tips.
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Credit for small employer pension plan startup costs.
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Credit for employer-provided childcare facilities and services.
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The chief executive officer of the REIT (or an individual acting in that capacity) as of the end of the tax year; or
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An employee whose total compensation must be reported to shareholders under the Securities Exchange Act of 1934 because the employee is among the four highest compensated officers for that tax year (other than the chief executive officer).
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Income from certain employee trusts, annuity plans, or pensions and
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Any benefit paid to an employee that is excluded from the employee's income.
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Commissions based on individual performance,
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Qualified performance-based compensation, and
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Income payable under a written, binding contract in effect on February 17, 1993.
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Form 5884, Work Opportunity Credit (line 2);
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Form 8844, Empowerment Zone and Renewal Community Employment Credit (line 2);
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Form 8845, Indian Employment Credit (line 4); and
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Form 8861, Welfare-to-Work Credit (line 2).
The lease term began: | And the vehicle's
FMV on the first day of the lease exceeded: |
|
After 12/31/06 but before 1/1/08 | $15,500 | |
After 12/31/04 but before 1/1/07 | $15,200 | |
After 12/31/03 but before 1/1/05 | $17,500 | |
After 12/31/02 but before 1/1/04 | $18,000 | |
If the lease term began before January 1, 2003, see Pub. 463, Travel, Entertainment, Gift, and Car Expenses, to find out if the REIT has an inclusion amount. The inclusion amount for lease terms beginning in 2008 will be published in the Internal Revenue Bulletin in early 2008. |
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Federal income taxes (except for the tax imposed on net recognized built-in gain allocable to ordinary income).
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Foreign or U.S. possession income taxes if a tax credit is claimed (however, see the Instructions for Form 5735 for special rules for possession income taxes).
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Taxes not imposed on the REIT.
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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).
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Taxes assessed against local benefits that increase the value of the property assessed (such as for paving, etc.).
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Taxes deducted elsewhere on the return.
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Excise taxes imposed under section 4981 on undistributed REIT income.
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Interest on indebtedness incurred or continued to purchase or carry obligations if the interest is wholly exempt from income tax. For exceptions, see section 265(b).
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For cash basis taxpayers, prepaid interest allocable to years following the current tax year (for example, a cash basis calendar year taxpayer who in 2007 prepaid interest allocable to any period after 2007 can deduct only the amount allocable to 2007).
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Interest and carrying charges on straddles. Generally, these amounts must be capitalized. See section 263(g).
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Interest paid or incurred on any portion of an underpayment of tax that is attributable to an understatement arising from an undisclosed listed transaction or an undisclosed reportable avoidance transaction (other than a listed transaction) entered into in tax years beginning after October 22, 2004.
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Interest on which no tax is imposed (see section 163(j));
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Foregone interest on certain below-market-rate loans (see section 7872); and
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Original issue discount on certain high-yield discount obligations. (See section 163(e) to figure the disqualified portion.)
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Amortization (see Form 4562).
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Certain business start-up and organizational costs that the REIT elects to deduct.
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Depletion. Attach Form T (Timber), Forest Activities Schedule, if a deduction for depletion of timber is taken.
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Reforestation costs. The REIT can elect to deduct up to $10,000 of qualified reforestation expenses paid or incurred after October 22, 2004, for each qualifying timber property. The REIT can elect to amortize over 84 months any amount not deducted.
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Insurance premiums.
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Legal and professional fees.
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Supplies used and consumed in the business.
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Utilities.
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Ordinary losses from trade or business activities of a partnership (from Schedule K-1 (Form 1065 or 1065-B)). Do not offset ordinary income against ordinary losses. Instead, include the income on line 7. Show the partnership's name, address, and EIN on a separate statement attached to this return. If the amount is from more than one partnership, identify the amount from each partnership.
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Deduction for certain energy efficient commercial building property. See section 179D.
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Go Zone clean-up cost. The REIT may deduct fifty percent of any qualified Go Zone clean-up cost paid or incurred on or after August 28, 2005, and before January 1, 2008. See section 1400N(f).
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Any deduction for contributions.
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The special deductions on line 21b, relating to dividends paid.
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The deduction allowed under section 249, relating to any premium paid or incurred upon the repurchase of a convertible bond.
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Any net operating loss (NOL) carryback to the tax year under section 172.
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Any capital loss carryback to the tax year under section 1212(a)(1).
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Contributions to organizations conducting lobbying activities. See section 170(f)(9).
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Contributions of property other than cash. See Form 8283.
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Contributions of computer technology and equipment for educational purposes. See section 170(e)(6).
Note.
For contributions of cash, check, or other monetary gifts (regardless of the amount), made in tax years beginning after August 17, 2006, the REIT must maintain a bank record, or a receipt, letter, or other written communication from the donee organization indicating the name of the organization, the date of the contribution, and the amount of the contribution.
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That individual is an employee of the REIT, and
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His or her travel is for a bona fide business purpose and would otherwise be deductible by that individual.
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Meals must not be lavish or extravagant;
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A bona fide business discussion must occur during, immediately before, or immediately after the meal; and
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An employee of the REIT must be present at the meal.
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Amounts paid or incurred in connection with influencing federal or state legislation (but not local legislation); or
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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.”
Generally, special at-risk rules under section 465 apply to closely held corporations engaged in any activity as a trade or business or for the production of income. Those REITs that are closely held may have to adjust the amount on line 20. The at-risk rules do not apply to:
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Holding real property placed in service by the taxpayer before 1987;
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Equipment leasing under sections 465(c)(4), (5), and (6); or
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Any qualifying business of a qualified REIT under section 465(c)(7).
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The NOL for the tax year; and
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The amount of the NOL of any prior tax year that may be carried over to any succeeding tax year.
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An ownership change occurs, the amount of the taxable income of a loss REIT that may be offset by the pre-change NOL carryovers is limited (see section 382 and the related regulations). A loss REIT must file an information statement with its income tax return for each tax year that certain ownership shifts occur (see Temporary Regulations section 1.382-2T(a)(2)(ii) for details). See Regulations section 1.382-6(b) for details on how to make the closing-of-the-books election.
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A REIT acquires control of another REIT (or acquires its assets in a reorganization), the amount of pre-acquisition losses that may offset recognized built-in gains is limited (see section 384).
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Its alternative minimum tax minus the credit for federal tax paid on fuels for 2007 as shown on the return or
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Its prior year's tax (computed in the same manner). See section 6655 for details and exceptions, including special rules for large corporations.
Complete Part II only if the gross income, gains, losses, and deductions from foreclosure property (defined in section 856(e)) result in net income. If an overall net loss results, report the gross income, gains, losses, and deductions from foreclosure property on the appropriate lines of Part I.
Property may be treated as foreclosure property only if it meets the requirements of section 856(e) and the REIT elects to treat the property as foreclosure property in the year it was acquired. The property continues to be foreclosure property until the close of the 3rd tax year following the tax year in which the REIT acquired it. For more information, see section 856(e).
However, if the foreclosure property is qualified health care property, it will cease to be foreclosure property as of the close of the 2nd year following the tax year the REIT acquired it (although the REIT may request one or more extensions to this 2-year grace period not to extend beyond the 6th year). See section 856(e)(6) for details.
This election must be made by the due date for filing Form 1120-REIT (including extensions). To make the election, attach a statement that:
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Indicates that the election under section 856(e) is being made;
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Identifies the property to which the election applies;
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Includes the name, address, and EIN of the REIT, the date the property was acquired, and a brief description of how the property was acquired (including the name of the person from whom the property was acquired); and
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Gives a description of the lease or debt with respect to which default occurred or was imminent.
The REIT can revoke the election by filing a revocation on or before the due date (including extensions) for filing Form 1120-REIT. See section 856(e) for more details.
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Depreciation on foreclosure property;
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Interest paid or accrued on debt of the REIT that is attributable to the carrying of the property;
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Real estate taxes; and
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Fees charged by an independent contractor to manage such property.
Section 856(c)(6) provides REITs with a relief provision if they have failed to satisfy the source-of-income requirements of sections 856(c)(2) and 856(c)(3). If section 856(c)(6) applies to a REIT for any taxable year, a tax is imposed on the REIT under section 857(b)(5).
All REITs must complete lines 1a through 8 of Part III to determine whether they are subject to the tax imposed under section 857(b)(5). If line 8 is zero, the tax does not apply, and the REIT does not have to complete the rest of Part III. However, if line 8 is greater than zero, the REIT is subject to this tax, and must complete the rest of Part III to determine the amount of tax.
A REIT that has failed the source-of-income requirements of sections 856(c)(2) and 856(c)(3) may avoid loss of its REIT status as a result of the failure if, following identification of its failure to meet the source-of-income requirements, the REIT sets forth a description of each item of its gross income described in sections 856(c)(2) and 856(c)(3) in an attached schedule. In addition, its failure to meet the source-of-income requirements must be due to reasonable cause and not due to willful neglect.
For information on the relief provisions under sections 856(c)(7) and 856(g)(5), see the Instructions for Schedule J, line 2f.
Section 857(b)(6) imposes a tax equal to 100% of the net income derived from prohibited transactions. The 100% tax is imposed to prevent a REIT from retaining any profit from ordinary retailing activities such as sales to customers of condominium units or subdivided lots in a development tract.
A member of a controlled group must check the box on line 1 and complete and attach Schedule O (Form 1120). See Schedule O (Form 1120) and its instructions for more information.
Most REITs figure their tax by using the Tax Rate Schedule below. A member of a controlled group must use Schedule O (Form 1120) to figure its tax.
If taxable income (line 22, page 1) is: | |||
Over— | But not over— | Tax is: | Of the amount over— |
$0 | $50,000 | 15% | $0 |
50,000 | 75,000 | $ 7,500 + 25% | 50,000 |
75,000 | 100,000 | 13,750 + 34% | 75,000 |
100,000 | 335,000 | 22,250 + 39% | 100,000 |
335,000 | 10,000,000 | 113,900 + 34% | 335,000 |
10,000,000 | 15,000,000 | 3,400,000 + 35% | 10,000,000 |
15,000,000 | 18,333,333 | 5,150,000 + 38% | 15,000,000 |
18,333,333 | - - - - - | 35% | 0 |
Enter the amount of the 100% REIT tax imposed on the following:
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Income of a REIT for services provided to the REIT's tenants that is improperly included in rents from real property reported by the REIT instead of being reported by the TRS;
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Deductions that are improperly allocated between the REIT to its TRS; and
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Interest deductions of a TRS to the extent that interest payments to its REIT are in excess of a rate that is commercially reasonable.
See section 857(b)(7) for details and exceptions.
Enter the taxes imposed for the following relief provisions:
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Section 856(c)(7) relating to failures to meet the requirements of the asset test of section 856(c)(4); and
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Section 856(g)(5) relating to failures to meet certain requirements under sections 856 through 859 (other than sections 856(c)(2), 856(c)(3), and 856(c)(4)).
See section 856(c)(7) and 856(g)(5) for detailed information on the requirements for these relief provisions and check the appropriate box(es) for the tax(es) imposed under them.
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The REIT sets forth a description of each asset that causes the REIT to fail to satisfy the requirements of the asset test at the close of a quarter in a schedule for the quarter attached to its timely filed Form 1120-REIT;
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The failure must be due to reasonable cause and not due to willful neglect; and
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The REIT either: (a) disposes of the assets shown on the specified schedule within 6 months after the last day of the quarter in which the REIT's identification of the failure occurred (or such other time and in the manner prescribed by regulations); or (b) the requirements of the asset test of section 856(c)(4) are otherwise met within the specified time period.
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$50,000 or
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the amount determined (as prescribed by regulations to be promulgated by the Secretary) by multiplying the net income generated by the assets described in the specified schedule for the quarter in which the failure occurred by 35% (the highest corporate tax rate).
Note.
There is no tax imposed and you are not required to attach a schedule of assets to Form 1120-REIT for the de minimus relief provision under section 856(c)(7)(B).
Under section 856(c)(7)(B), a REIT may avoid loss of its REIT status as a result of certain failures to meet the asset test requirements of section 856(c)(4)(B)(iii) if:
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Following its identification of the failure, the REIT disposes of assets within 6 months after the last day of the quarter in which the REIT's identification of the failure occurred (or such time period prescribed by the Secretary and in the manner prescribed by the Secretary, or
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The requirements of the asset test of section 856(c)(4) are otherwise met within the specified time period.
Unless the REIT is treated as a small corporation exempt from the AMT, it may owe the AMT if it has any of the adjustments and tax preference items listed on Form 4626, Alternative Minimum Tax-Corporations. The REIT must file Form 4626 if its taxable income (loss) combined with these adjustments and tax preference items is more than the smaller of:
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$40,000 or
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The REIT's allowable exemption amount (from Form 4626).
For this purpose, taxable income does not include the NOL deduction. See Form 4626 for details.
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It was treated as a small corporation exempt from the AMT for all prior tax years beginning after 1997 and
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Its average annual gross receipts for the 3-year tax period (or portion thereof during which the REIT was in existence) ending before its tax year beginning in 2007 did not exceed $7.5 million ($5 million if the REIT had only 1 prior tax year).
To find out when a REIT can claim the foreign tax credit for payment of income tax to a foreign country or U.S. possession, see Form 1118, Foreign Tax Credit-Corporations.
Use Form 8834, Qualified Electric Vehicle Credit, to claim a credit for the purchase of a new qualified electric vehicle.
Enter the REIT's total general business credit.
If the REIT is filing Form 8844, Empowerment Zone and Renewal Community Employment Credit, check the “Form(s)” box, enter the form number in the space provided, and include the allowable credit on line 3c.
If the REIT is required to file Form 3800, General Business Credit, check the “Form 3800” box and include the allowable credit on line 3c. If the REIT is not required to file Form 3800, check the “Form(s)” box, enter the form number in the space provided, and include on line 3c the allowable credit from the applicable form listed below.
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Investment Credit (Form 3468).
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Work Opportunity Credit (Form 5884).
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Welfare-to-Work Credit (Form 8861).
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Low-Income Housing Credit (Form 8586).
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Disabled Access Credit (Form 8826).
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Indian Employment Credit (Form 8845).
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Credit for Small Employer Pension Plan Startup Costs (Form 8881).
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Credit for Employer-Provided Child Care Facilities and Services (Form 8882).
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General credits from an electing large partnership (Schedule K-1 (Form 1065-B))
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Alternative Motor Vehicle Credit (Form 8910).
Also, see Form 3800 for a complete listing of general business credits.
Include any allowable credits not reported above, such as the Credit for Prior Year Minimum Tax-Corporations (Form 8827). Attach a statement that identifies the type and amount for each credit. Attach the applicable credit form to the return.
A REIT is taxed as a personal holding company under section 542 if:
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At least 60% of its adjusted ordinary gross income for the tax year is personal holding company income, and
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At any time during the last half of the tax year more than 50% in value of its outstanding stock is owned, directly or indirectly, by five or fewer individuals.
See Schedule PH (Form 1120), U.S. Personal Holding Company (PHC) Tax, for definitions and details on how to figure the tax.
Include any of the following taxes and interest in the total on line 7. Check the appropriate box(es) for the form, if any, used to compute the total.
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Recapture of qualified electric vehicle (QEV) credit. The REIT must recapture part of the QEV credit it claimed in a prior year if, within 3 years of the date the vehicle was placed in service, it ceases to qualify for the credit. See Regulations section 1.30-1 for details on how to figure the recapture.
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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.
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Recapture of new markets credit (see Form 8874).
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Recapture of employer-provided childcare facilities and services credit (see Form 8882).
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Interest due on deferred tax attributable to (a) installment sales of certain timeshares and residential lots (section 453(l)(3)) and (b) certain nondealer installment obligations (section 453A(c))
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Interest due on deferred gain (section 1260(b)).
If, on or after January 2, 2002, property of a C corporation becomes property of a REIT by either: (a) the qualification of the C corporation as a REIT; or (b) the transfer of such property to a REIT, then the REIT will be subject to the built-in gain tax under section 1374 unless the C corporation elects deemed sale treatment on the transferred property. If the C corporation does not make this election, the REIT must pay tax on the net recognized built-in gain during the 10-year period beginning on its first day as a REIT or the day it acquired the property. Recognized built-in gains and losses generally retain their character (for example, ordinary income or capital gain) and are treated the same as other gains or losses of the REIT. The REIT's tax on net recognized built-in gain is treated as a loss incurred by the REIT during the same tax year (see the instructions for line i of the Built-in Gains Tax Worksheet on page 12. See Regulations section 1.337(d)-7 for details.
Different rules apply to elections to be a REIT and transfers of property in a carryover basis transaction that occurred prior to January 2, 2002. For REIT elections and property transfers before this date, the C corporation is subject to deemed sale treatment on the transferred property unless the REIT elects section 1374 treatment. See Regulations section 1.337(d)-6 for information on how to make the election and figure the tax for REIT elections and property transfers before this date. The REIT may also rely on Regulations section 1.337(d)-5 for REIT elections and property transfers that occurred before January 2, 2002.
Complete the worksheet on this page to figure the built-in gains tax under Regulations section 1.337(d)-7 or 1.337(d)-6.
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Net income from foreclosure property,
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Amounts subject to tax for failure to meet certain source-of-income requirements under section 857(b)(5) computed in accordance with Regulations section 1.337(d)-6(c)(2),
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Net income from prohibited transactions under section 857(b)(6), and
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Amounts subject to tax under section 857(b)(7).
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Form 1120-REIT, page 1, line 20;
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Form 1120-REIT, Part II, line 5; and
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Form 2438, line 11.
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Ordinary gain as a deduction for taxes on Form 1120-REIT, line 14.
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Short-term capital gain as a short-term capital loss on Schedule D (Form 1120), line 1.
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Long-term capital gain as a long-term capital loss on Schedule D (Form 1120), line 6.
Built-in Gains Tax Worksheet(keep for your records)
a. | Excess of recognized built-in gains over recognized built-in losses | a. | |
b. | Taxable income | b. | |
c. | Enter the net unrealized built-in gain reduced by any net recognized built-in gain for all prior years | c. | |
d. | Net recognized built-in gain (enter the smallest of lines a, b, or c) | d. | |
e. | Section 1374(b)(2) deduction | e. | |
f. | Subtract line e from line d. If zero, enter -0- here and on line i | f. | |
g. | Enter 35% of line f | g. | |
h. | Business credit and minimum tax credit carryforwards under section 1374(b)(3) from C corporation years | h. | |
i. | Tax. Subtract line h from line g ( if zero or less, enter -0-). Enter here and include on line 6 of Schedule J (see instructions) | i. |
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 7. See Form 8621, Part V, and How to report, below.
Subtract from the total for line 7 the deferred tax on the REIT's share of the undistributed earnings of a qualified electing fund (see Form 8621, Part II).
Be sure to answer all the lines that apply to the REIT.
Check the “Yes” box if the REIT is a subsidiary in a parent-subsidiary controlled group (defined below), even if the REIT is a subsidiary member of one group and the parent corporation of another.
Note.
If the REIT is an “excluded member” of a controlled group (see section 1563(b)(2)), it is still considered a member of a controlled group for this purpose.
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At least 80% of the total combined voting power of all classes of voting stock entitled to vote or at least 80% of the total value of all classes of stock of each corporation in the group (except the parent) must be owned by one or more of the other corporations in the group and
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The common parent must own at least 80% of the total combined voting power of all classes of stock entitled to vote or at least 80% of the total value of all classes of stock of one or more of the other corporations in the group. Stock owned directly by other members of the group is not counted when computing the voting power or value.
Check the “Yes” box if one foreign person owned at least 25% of (a) the total voting power of all classes of stock of the REIT entitled to vote, or (b) the total value of all classes of stock of the REIT.
The constructive ownership rules of section 318 apply in determining if a REIT is foreign owned. See section 6038A(c)(5) and the related regulations.
Enter on line 5a the percentage owned by the foreign person specified in line 5. On line 5b, enter the name of the owner's country.
Note.
If there is more than one 25%-or-more foreign owner, complete lines 5a and 5b for the foreign person with the highest percentage of ownership.
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A foreign citizen or nonresident alien.
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An individual who is a citizen of a U.S. possession (but who is not a U.S. citizen or resident).
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A foreign partnership.
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A foreign corporation.
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Any foreign estate or trust within the meaning of section 7701(a)(31).
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A foreign government (or one of its agencies or instrumentalities) if it is engaged in the conduct of a commercial activity as described in section 892.
Enter the amount of the net operating loss (NOL) carryover to the tax year from prior years, even if some of the loss is used to offset income on this return. The amount to enter is the total of all NOLs generated in prior years but not used to offset income in a tax year prior to 2007. Do not reduce the amount by any NOL deduction reported on line 21a.
The balance sheets should agree with the REIT's books and records.
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State and local government obligations, the interest on which is excludable from gross income under section 103(a), and
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Stock in a mutual fund or other RIC that distributed exempt-interest dividends during the tax year of the REIT.
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Unrealized gains and losses on securities held “available for sale.”
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Foreign currency translation adjustments.
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The excess of additional pension liability over unrecognized prior service cost.
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Guarantees of employee stock (ESOP) debt.
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Compensation related to employee stock award plans.
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Meals and entertainment not deductible under section 274(n).
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Expenses for the use of an entertainment facility.
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The part of business gifts over $25.
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Expenses of an individual over $2,000, which are allocable to conventions on cruise ships.
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Employee achievement awards over $400.
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The cost of entertainment tickets over face value (also subject to 50% limit under section 274(n)).
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The cost of skyboxes over the face value of nonluxury box seat tickets.
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The part of luxury water travel not deductible under section 274(m).
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Expenses for travel as a form of education.
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Other nondeductible travel and entertainment expenses.
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