General Instructions

Table of Contents

Purpose of Form

Use Form 1120-REIT, U.S. Income Tax Return for Real Estate Investment Trusts, to report the income, gains, losses, deductions, credits, certain penalties, and to figure the income tax liability of a REIT.

Who Must File

A corporation, trust, or association that meets certain conditions (discussed below) must file Form 1120-REIT if it elects to be treated as a REIT for the tax year (or has made that election for a prior tax year and the election has not been terminated or revoked). The election is made by figuring taxable income as a REIT on Form 1120-REIT.

General Requirements To Qualify as a REIT

To qualify as a REIT, an organization:

  • Must be a corporation, trust, or association.

  • Must be managed by one or more trustees or directors.

  • Must have beneficial ownership (a) evidenced by transferable shares, or by transferable certificates of beneficial interest; and (b) held by 100 or more persons. (The REIT does not have to meet this requirement until its 2nd tax year.)

  • Would otherwise be taxed as a domestic corporation.

  • Must be neither a financial institution (referred to in section 582(c)(2)), nor a subchapter L insurance company.

  • Cannot be closely held, as defined in section 856(h). (The REIT does not have to meet this requirement until its 2nd tax year.)

    If a REIT meets the requirement for ascertaining actual ownership (see Regulations section 1.857-8 for details), and did not know (after exercising reasonable diligence), or have reason to know, that it was closely held, it will be treated as meeting the requirement that it is not closely held.

Other Requirements

The gross income and diversification of investment requirements of section 856(c) must be met. The organization must:

  • Have been treated as a REIT for all tax years beginning after February 28, 1986, or

  • Had, at the end of the tax year, no accumulated earnings and profits from any tax year that it was not a REIT.

    For this purpose, distributions are treated as made from the earliest earnings and profits accumulated in any non-REIT tax year. See section 857(d)(3).

  • The organization must adopt a calendar tax year unless it first qualified for REIT status before October 5, 1976.

  • The deduction for dividends paid (excluding net capital gain dividends, if any) must equal or exceed:

    1. 90% of the REIT's taxable income (excluding the deduction for dividends paid and any net capital gain); plus

    2. 90% of the excess of the REIT's net income from foreclosure property over the tax imposed on that income by section 857(b)(4)(A); less

    3. Any excess noncash income as determined under section 857(e).

See sections 856 and 857, and the related regulations for details and exceptions.

Termination of Election

The election to be treated as a REIT remains in effect until terminated, revoked, or the REIT has failed to meet the requirements of the statutory relief provisions. It terminates automatically for any tax year in which the corporation, trust, or association is not a qualified REIT.

The organization may revoke the election for any tax year after the 1st tax year the election is effective by filing a statement with the service center where it files its income tax return. The statement must be filed on or before the 90th day after the 1st day of the tax year for which the revocation is to be effective. The statement must include the following:

  • The name, address, and employer identification number of the organization;

  • The tax year for which the election was made;

  • A statement that the organization (according to section 856(g)(2)) revokes its election under section 856(c)(1) to be a REIT; and

  • The signature of an official authorized to sign the income tax return of the organization.

The organization may not make a new election to be taxed as a REIT during the 4 years following the 1st year for which the termination or revocation is effective. See section 856(g)(4) for exceptions.

Taxable REIT Subsidiaries (TRS)

A REIT may own up to 100% of the stock in one or more taxable REIT subsidiaries (TRS). A TRS must be a corporation (other than a REIT or a qualified REIT subsidiary) and may provide services to the REIT's tenants without disqualifying the rent received by the REIT. See section 856(l) for details, including certain restrictions on the type of business activities a TRS may perform. Also, not more than 20% of the fair market value (FMV) of a REIT's total assets (25% for tax years beginning after July 30, 2008) may be securities of one or more TRSs (see section 856(c)(4) for details).

Transactions between a TRS and its associated REIT must be at arm's length. A REIT may be subject to a 100% tax to the extent it improperly allocates income and deductions between the REIT and the TRS (see section 857(b)(7) for details). Additional limitations on transactions between a TRS and its associated REIT include:

  • Limitations on income from a TRS that may be treated as rents from real property by the REIT (see section 856(d)(8)).

  • Limitations on a TRS's deduction for interest paid to its associated REIT (see section 163(j)).

To elect to have an eligible corporation treated as a TRS, the corporation and the REIT must jointly file Form 8875, Taxable REIT Subsidiary Election.

Where To File

File the REIT's return at the applicable IRS address listed below.
If the REIT'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:
Connecticut, Delaware, District of Columbia, Florida, 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 Department of the Treasury 
Internal Revenue Service Center 
Cincinnati, OH 45999-0012
$10 million or more  
Department of the Treasury 
Internal Revenue Service Center 
Ogden, UT 84201-0012
Alabama, Alaska, Arizona, Arkansas, California, Colorado, Hawaii, Idaho, Iowa, Kansas, Louisiana, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Mexico, North Dakota, Oklahoma, Oregon, South Dakota, Texas, Utah, Washington, Wyoming Any amount Department of the Treasury 
Internal Revenue Service Center 
Ogden, UT 84201-0012
A foreign country or U.S. possession Any amount Internal Revenue Service Center 
P.O. Box 409101 
Ogden, UT 84409

A group of corporations with members located in more than one service center area will often keep all the books and records at the principal office of the managing corporation. In this case, the tax returns of the corporations may be filed with the service center for the area in which the principal office of the managing corporation is located.

When To File

Generally, a REIT must file its income tax return by the 15th day of the 3rd month after the end of its tax year. A new REIT filing a short period return must generally file by the 15th day of the 3rd month after the short period ends. A REIT that has dissolved must generally file by the 15th day of the 3rd month after the date it dissolved.

If the due date falls on a Saturday, Sunday, or legal holiday, the REIT can file on the next business day.

Private delivery services

REITs can use certain private delivery services designated by the IRS to meet the “timely mailing as timely filing/paying” rule for tax returns and payments.

These private delivery services include only the following.

  • DHL Express (DHL): DHL Same Day Service.

  • Federal Express (FedEx): FedEx Priority Overnight, FedEx Standard Overnight, FedEx 2Day, FedEx International Priority, and FedEx International First.

  • United Parcel Service (UPS): UPS Next Day Air, UPS Next Day Air Saver, UPS 2nd Day Air, UPS 2nd Day Air A.M., UPS Worldwide Express Plus, and UPS Worldwide Express.

For the IRS mailing address to use if you are using a private delivery service, go to IRS.gov and enter “private delivery service” in the search box.

The private delivery service can tell you how to get written proof of the mailing date.

Private delivery services cannot deliver items to P.O. boxes. You must use the U.S. Postal Service to mail any item to an IRS P.O. box address.

Extension of Time To File

File Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns, to request a 6-month extension of time to file. Generally, file Form 7004 by the regular due date of the REIT's income tax return.

Who Must Sign

The return must be signed and dated by:

  • The president, vice president, treasurer, assistant treasurer, chief accounting officer; or

  • Any other corporate officer (such as a tax officer) authorized to sign.

If a return is filed on behalf of a REIT by a receiver, trustee, or assignee, the fiduciary must sign the return, instead of the corporate officer. Returns and forms signed by a receiver or trustee in bankruptcy on behalf of a REIT must be accompanied by a copy of the order or instructions of the court authorizing signing of the return or form.

If an employee of the REIT completes Form 1120-REIT, the paid preparer's space should remain blank. Anyone who prepares Form 1120-REIT but does not charge the REIT should not complete that section. Generally, anyone who is paid to prepare the return must sign it and fill in the “Paid Preparer Use Only” section.

The paid preparer must complete the required preparer information and:

  • Sign the return in the space provided for the preparer's signature; and

  • Give a copy of the return to the taxpayer.

Note.

A paid preparer may sign the original or amended returns by rubber stamp, mechanical device, or computer software program.

Paid Preparer Authorization

If the REIT wants to allow the IRS to discuss its 2012 tax return with the paid preparer who signed it, check the “Yes” box in the signature area of the return. This authorization applies only to the individual whose signature appears in the “Paid Preparer Use Only” section of the REIT's return. It does not apply to the firm, if any, shown in that section.

If the “Yes” box is checked, the REIT is authorizing the IRS to call the paid preparer to answer any questions that may arise during the processing of its return. The REIT is also authorizing the paid preparer to:

  • Give the IRS any information that is missing from the return,

  • Call the IRS for information about the processing of the return or the status of any related refund or payment(s), and

  • Respond to certain IRS notices about math errors, offsets, and return preparation.

The REIT is not authorizing the paid preparer to receive any refund check, bind the REIT to anything (including any additional tax liability), or otherwise represent the corporation before the IRS.

The authorization will automatically end no later than the due date (without regard to extensions) for filing the REIT's 2013 tax return. If the REIT wants to expand the paid preparer's authorization, see Pub. 947, Practice Before the IRS and Power of Attorney.

Assembling the Return

To ensure that the REIT's tax return is correctly processed, attach all schedules and other forms after page 4 of Form 1120-REIT, in the following order.

  1. Schedule N (Form 1120).

  2. Schedule D (Form 1120).

  3. Schedule O (Form 1120).

  4. Form 4626.

  5. Form 4136.

  6. Additional schedules in alphabetical order.

  7. Additional forms in numerical order.

  8. Supporting statements and attachments.

Complete every applicable entry space on Form 1120-REIT. Do not enter “See attached” instead of completing the entry spaces. If more space is needed on the forms or schedules, attach separate sheets using the same size and format as the printed forms.

If there are supporting statements and attachments, arrange them in the same order as the schedules or forms they support and attach them last. Show the totals on the printed forms. Enter the REIT's name and EIN on each supporting statement or attachment.

Tax Payments

The REIT must pay the tax due in full no later than the 15th day of the 3rd month after the end of the tax year.

Electronic Deposit Requirement

REITs 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 REIT does not want to use EFTPS, it can arrange for its tax professional, financial institution, payroll service, or other trusted third party to make deposits on its behalf. Also, it may arrange for its financial institution to initiate 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.

To get more information about EFTPS or to enroll in EFTPS, visit www.eftps.gov, or call 1-800-555-4477 (TYY/TDD 1-800-733-4829).

Depositing on time.   For deposits made by EFTPS to be on time, the REIT must initiate the deposit by 8 p.m. Eastern time the day before the date the deposit is due. If the REIT uses a third party to make deposits on its behalf, they may have different cutoff times.

Same-day payment option.   If the REIT fails to initiate 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 the deposit on time by using the Federal Tax Application (FTA). Before using the same-day payment option, the REIT will need to make arrangements with its financial institution ahead of time. Please check with the financial institution regarding availability, deadlines and costs. To learn more about making a same-day payment and download the Same-Day Payment Worksheet, visit www.eftps.gov.

Estimated Tax Payments

Generally, the following rules apply to the REIT's payments of estimated tax.

  • The REIT must make installment payments of estimated tax if it expects its total tax for the year (less applicable credits) to be $500 or more.

  • The REIT must use electronic funds transfer to make installment payments of estimated tax.

  • The installments are due by the 15th day of the 4th, 6th, 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.

  • Use Form 1120-W, Estimated Tax for Corporations, as a worksheet to compute estimated tax. See the Instructions for Form 1120-W.

  • If the REIT overpaid its estimated tax, it may be able to get a quick refund by filing Form 4466, Corporation Application for Quick Refund of Overpaid Estimated Tax. The overpayment must be at least 10% of the REIT's expected income tax liability and at least $500.

For more information, including penalties, see the Line 25. Estimated Tax Penalty instructions.

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, and substantial understatements of tax from the due date (including extensions) to the date of payment. The interest charge is figured at a rate determined under section 6621.

Late filing of return.   A REIT that does not file its tax return by the due date, including extensions, may be penalized 5% of the unpaid tax for each month or part of a month the return is late, up to a maximum of 25% of the unpaid tax. The minimum penalty for a return that is over 60 days late is the smaller of the tax due or $135. The penalty will not be imposed if the REIT can show that the failure to file on time was due to reasonable cause.

Late payment of tax.   A REIT that does not pay the tax when due generally may be charged a penalty for the failure to pay tax. The amount of the penalty is ½ of 1% of the unpaid tax for each month or part of a month the tax is not paid, up to a maximum of 25% of the unpaid tax. The penalty will not be imposed if the REIT can show that the failure to pay on time was due to reasonable cause.

Reasonable cause determinations.    If the REIT receives a notice about penalties after it files its return, send the IRS an explanation and we will determine if the REIT meets the reasonable cause criteria. Do not attach an explanation when the REIT'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 Return;

  • Form 943, Employer Annual Federal Tax Return for Agricultural Employees;

  • Form 944, Employer's ANNUAL Federal Tax Returns; or

  • Form 945, Annual Return of Withheld Federal Income Tax.

  The trust fund recovery penalty may be imposed on all persons who are determined by the IRS to be responsible for collecting, accounting for, and 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 Publication 15 (Circular E), Employer's Tax Guide, for details, including the definition of responsible persons.

Failure to ascertain ownership.   If the REIT fails to comply with Regulations section 1.857-8 for ascertaining ownership and maintaining factual ownership records for a tax year, it must pay a $25,000 penalty ($50,000 for intentional disregard) upon notice and demand by the IRS. If the REIT can show that the failure was due to reasonable cause, the penalty may not be imposed. For more information, see section 857(f).

Failures to satisfy certain REIT qualification provisions.   If the REIT is required to pay the $50,000 penalty under section 856(g)(5)(C) for each failure to satisfy a REIT qualification provision of sections 856–859 (other than section 856(c)(2), 856(c)(3), or section 856(c)(4)) due to reasonable cause and not willful neglect, see the instructions for Schedule J, line 2f, later.

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 Methods

Figure taxable income using the method of accounting regularly used in keeping the REIT's books and records. In all cases, the method used must clearly show taxable income.

Generally, permissible methods include:

  • Cash,

  • Accrual, or

  • Any other method authorized by the Internal Revenue Code.

Accrual method.   Generally, a REIT must use the accrual method of accounting if its average annual gross receipts exceed $5 million. See section 448(c).

  Under the accrual method, an amount is includible in income when:

  1. All the events have occurred that fix the right to receive the income, which is the earliest of the date:

    1. the required performance takes place,

    2. payment is due, or

    3. payment is received, and

  2. The amount can be determined with reasonable accuracy.

  See Regulations section 1.451-1(a) for details and Publication 538, Accounting Periods and Methods.

Change in accounting method.   Generally, the REIT must get IRS consent to change the method of accounting used to report taxable income (for income as a whole or for the treatment of any material item). To do so, the REIT generally must file Form 3115, Application for Change in Accounting Method. See Form 3115 and Pub. 538 for more information.

  There are some instances when the REIT can obtain automatic consent from the IRS to change to certain accounting methods. See Rev. Proc. 2011-14, 2011-4 I.R.B. 330, as modified and clarified by Rev. Proc. 2012-19, 2012-14 I.R.B. 689 and Rev. Proc. 2012-20, 2012-14 I.R.B. 700, or any successor. Also see the instructions for Form 3115.

Section 481(a) adjustment.

If the REIT's taxable income for the current tax year is figured under a method of accounting different from the method used in the preceding tax year, the REIT may have to make an adjustment under section 481(a) to prevent amounts of income or expenses from being duplicated or omitted. This is referred to as a “section 481(a) adjustment.” The section 481(a) adjustment period is generally 1 year for a net negative adjustment and 4 years for a net positive adjustment. However, in some cases, a REIT can elect to modify the section 481(a) adjustment period. The REIT must complete the appropriate lines of Form 3115 to make the election. See the instructions for Form 3115. If the net section 481(a) adjustment is positive, report it on line 7 as other income. If the net section 481(a) adjustment is negative, report it on line 18 as a deduction.

Note.

Include any net positive section 481(a) adjustment on page 1, line 7. Report any negative adjustment on page 1, line 18.

Accounting Period

A REIT must figure its taxable income on the basis of a tax year. A tax year is the annual accounting period a REIT uses to keep its records and report its income and expenses. A REIT adopts a tax year when it files its first income tax return. It must adopt a tax year by the due date (not including extensions) of its initial income tax return.

Note.

A REIT must adopt a calendar year unless it first qualified for REIT status before October 5, 1976.

Change of tax year.   A REIT may not change its tax year to any tax year other than the calendar year. Generally, a REIT must receive consent from the IRS before changing its tax year by filing Form 1128, Application To Adopt, Change, or Retain a Tax Year.

  However, upon electing to be taxed as a REIT, an entity that has not engaged in any active trade or business may change its tax year to a calendar year without obtaining the consent.

  See the Instructions for Form 1128 and Pub. 538 for more information on accounting periods and tax years.

Rounding Off to Whole Dollars

The REIT can round off cents to whole dollars on its returns and schedules. If the REIT does round to whole dollars, it must round all amounts. To round, drop amounts under 50 cents and increase amounts from 50 to 99 cents to the next dollar (for example, $1.39 becomes $1 and $2.50 becomes $3).

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 REIT's records for as long as they may be needed for the administration of any provision of the Internal Revenue Code. Usually, records that support an item of income, deduction, or credit on the return must be kept for 3 years from the date the return is due or filed, whichever is later. Keep records that verify the REIT's basis in property for as long as they are needed to figure the basis of the original or replacement property.

The REIT should also keep copies of all filed returns. They help in preparing future and amended returns and in the calculation of earnings and profits.

Other Forms That May Be Required

In addition to Form 1120-REIT, the REIT may have to file some of the following forms. Also see Pub. 542, Corporations, for an expanded list of forms the REIT may be required to file.

Form 926,    Return by a U.S. Transferor of Property to a Foreign Corporation, is filed to report certain transfers to foreign corporations under section 6038B.

Form 966,   Corporate Dissolution or Liquidation, is used to report the adoption of a resolution or plan to dissolve the corporation or liquidate any of its stock.

Form 976,   Claim for Deficiency Dividends Deductions by a Personal Holding Company, Regulated Investment Company, or a Real Estate Investment Trust, is used to claim a deduction for deficiency dividends. See section 860 and the related regulations.

Forms 1042,   Annual Withholding Tax Return for U.S. Source Income of Foreign Persons, Form 1042-S, Foreign Person's U.S. Source Income Subject to Withholding, and Form 1042-T, Annual Summary and Transmittal of Forms 1042-S. Use these forms to report and send withheld tax on payments or distributions made to nonresident alien individuals, foreign partnerships, or foreign corporations to the extent these payments constitute gross income from sources within the United States (see sections 861 through 865).

  Also, see sections 1441 and 1442, and Pub. 515, Withholding of Tax on Nonresident Aliens and Foreign Entities.

Form 1099-DIV,   Dividends and Distributions. Use this form to report certain dividends and distributions.

Form 2438,   Undistributed Capital Gains Tax Return, must be filed by the REIT if it designates undistributed net long-term capital gains under section 857(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 REIT paid tax on undistributed net long-term capital gains under section 857(b)(3)(D).

Form 3520,   Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts, is required either if the REIT received a distribution from a foreign trust or if the REIT was a grantor of, transferor of, or transferor to a foreign trust that existed during the tax year. See Question 5 of Schedule N (Form 1120).

Form 5471,   Information Return of U.S. Persons With Respect to Certain Foreign Corporations, is required if the REIT controls a foreign corporation; acquires, disposes of, or owns 10% or more in value or vote of the outstanding stock of a foreign corporation; or had control of a foreign corporation for an uninterrupted period of at least 30 days during the annual accounting period of the foreign corporation. See Question 4 of Schedule N (Form 1120).

Form 5472,   Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business. This form is filed if the REIT is 25% or more foreign owned. See the instructions for Question 5, Schedule K, later.

Form 8275,   Disclosure Statement, and Form 8275-R, Regulation Disclosure Statement, are used to disclose items or positions taken on a tax return that are not otherwise adequately disclosed on a tax return or that are contrary to Treasury regulations (to avoid parts of the accuracy-related penalty or certain preparer penalties).

Form 8300,   Report of Cash Payments Over $10,000 Received in a Trade or Business. Use this form to report the receipt of more than $10,000 in cash or foreign currency in one transaction or a series of related transactions.

Form 8612,   Return of Excise Tax on Undistributed Income of Real Estate Investment Trusts, is filed if the REIT is liable for the 4% excise tax on undistributed income imposed under section 4981.

Form 8621,   Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund. Use this form to make certain elections by shareholders in a passive foreign investment company and to figure certain deferred taxes.

Form 8865,   Return of U.S. Persons With Respect To Certain Foreign Partnerships. A REIT may have to file Form 8865 if it:

  1. Controlled a foreign partnership (i.e., owned more than a 50% direct or indirect interest in the partnership).

  2. Owned at least a 10% direct or indirect interest in a foreign partnership while U.S. persons controlled that partnership.

  3. Had an acquisition, disposition, or change in proportional interest in a foreign partnership that:

    • Increased its direct interest to at least 10% or reduced its direct interest of at least 10% to less than 10%.

    • Changed its direct interest by at least a 10% interest.

  4. Contributed property to a foreign partnership in exchange for a partnership interest if:

    • Immediately after the contribution, the REIT owned, directly or indirectly, at least a 10% interest in the foreign partnership; or

    • The FMV of the property the REIT contributed to the foreign partnership in exchange for a partnership interest, when added to other contributions of property made to the foreign partnership during the preceding 12-month period, exceeds $100,000.

    Also, the REIT may have to file Form 8865 to report certain dispositions by a foreign partnership of property it previously contributed to that foreign partnership if it was a partner at the time of the disposition. For more details, including penalties for failing to file Form 8865, see Form 8865 and its separate instructions.

Form 8875,   Taxable REIT Subsidiary Election, is filed jointly by a corporation and a REIT to have the corporation treated as a taxable REIT subsidiary.

Form 8927,   Determination Under 860(e)(4) by a Qualified Investment Entity. Use Form 8927 to make a determination under Section 860(e)(4) and to establish the date of determination for purposes of making a deficiency dividend distribution.

Statements

Reportable transaction disclosure statement.   Disclose information for each reportable transaction in which the REIT participated. Form 8886, Reportable Transaction Disclosure Statement, must be filed for each tax year that the federal income tax liability of the REIT is affected by its participation in the transaction. The following are reportable transactions.

  1. Any listed transaction, which is a transaction that is the same as or substantially similar to one of the types of transactions that the IRS has determined to be a tax avoidance transaction and identified by notice, regulation, or other published guidance as a listed transaction.

  2. Any transaction offered under conditions of confidentiality for which the REIT (or a related party) paid an advisor a fee of at least $250,000.

  3. Certain transactions for which the REIT (or a related party) has contractual protection against disallowance of the tax benefits.

  4. Certain transactions resulting in a loss of at least $10 million in any single year or $20 million in any combination of years.

  5. Any transaction identified by the IRS by notice, regulation, or other published guidance as a “transaction of interest.” See Notice 2009-55, 2009-31 I.R.B. 170.

  For more information, see Regulations section 1.6011-4. Also see the Instructions for Form 8886.

Penalties.

The REIT may have to pay a penalty if it is required to disclose a reportable transaction under section 6011 and fails to properly complete and file Form 8886. Penalties may also apply under section 6707A if the REIT fails to file Form 8886 with its Form 1120-REIT, fails to provide a copy of Form 8886 to the Office of Tax Shelter Analysis (OTSA), or files a form that fails to include all the information required (or includes incorrect information). Other penalties, such as an accuracy-related penalty under section 6662A, may also apply. See the Instructions for Form 8886 for details on these and other penalties.

Reportable transactions by material advisors.   Material advisors to any reportable transaction must disclose certain information about the reportable transaction by filing Form 8918, Material Advisor Disclosure Statement, with the IRS. For details, see the Instructions for Form 8918.

Transfers to a corporation controlled by the transferor.   Every significant transferor (as defined in Regulations section 1.351-3(d)) 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 to its return for the tax year of the exchange. The transferee corporation must include the statement required by Regulations section 1.351-3(b) on or with its return for the tax 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, each U.S. shareholder (within the meaning of section 951(b)) must include the required statement on or with its return.

Distributions under section 355.   Every REIT that makes a distribution of stock or securities of a controlled corporation, as described in section 355 (or so much of section 356 as it relates to section 355), must include the statement required by Regulations section 1.355-5 on or with its return for the year of the distribution. If the distributing corporation is a controlled foreign corporation, 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).

Election to reduce basis under section 362(e)(2)(C).   The transferor may make an election under section 362(e)(2)(C) to limit the transferor's basis in the stock received instead of the transferor's basis in the transferred property. The transferor may make the election by including the certification as provided in Notice 2005-70, 2005-2 C.B. 694 on or with its tax returns filed by the due date (including extensions) for the tax year in which the transaction occurred. If the transferor is a controlled foreign corporation, its controlling U.S. shareholder(s) can make the election. The common parent of a consolidated group can make the election for the group.

  If the election is made as described above, no election need be made by the transferee (or any controlling U.S. shareholder thereof). Once made, the election is irrevocable. See section 362(e)(2)(C) and Notice 2005-70.

Annual information statement for elections under section 108(i).   If the corporation made an election under section 108(i) to defer income from cancellation of debt (COD) for applicable debt instruments, the corporation must attach a statement to its return beginning with the tax year following the tax year for which the corporation made the election, and ending the first tax year all income deferred has been included in income. The statement must be labeled “Section 108(i) Information Statement” and must clearly identify, for each applicable debt instrument to which an election under section 108(i) applies, the following.

  1. Any deferred COD income that is included in income in the current tax year.

  2. Any deferred COD income that has been accelerated because of an event described in section 108(i)(5)(D) and must be included in income in the current tax year. Include a description and the date of the acceleration event.

  3. Any deferred COD income that has not been included in income in the current or prior tax years.

  4. Any deferred OID deduction allowed as a deduction in the current tax year.

  5. Any deferred OID deduction that is allowed as a deduction in the current tax year because of an accelerated event described in section 108(i)(5)(D).

  6. Any deferred OID deduction that has not been deducted in the current or prior tax years.

  In addition, annually include a copy of the election statement filed to make the election to defer cancellation of debt. For more information on making the election, see the instructions for line 15. For more information regarding the annual information, see Rev. Proc. 2009-37, 2009-36 I.R.B. 309.

Other forms and statements.   See Pub. 542 for a list of other forms and statements a corporation may need to file in addition to the forms and statements discussed throughout these instructions.

Prev  Up  Next
  Home  

More Online Instructions