Caution: DRAFT-NOT FOR FILING - This is an early release draft of an IRS tax form, instructions

 
 
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2018                                                                                                                          Department of the Treasury
                                                                                                                              Internal Revenue Service

Instructions for Form
1120-REIT

   DRAFT AS OF
U.S. Income Tax Return for Real Estate Investment Trusts
Section references are to the Internal Revenue                 Contents                                   Page     corporations (as defined under section
Code unless otherwise noted.                                                                                       965(e), as amended by P.L. 115-97) may
                                                               Schedule A—Deduction for
Contents                                    Page                  Dividends Paid . . . . . . . . .      . . . 16   have an inclusion under section 965
                                                               Schedule J—Tax Computation . .           . . . 16   based on the post-1986 deferred foreign
Photographs of Missing Children            .... 1




  November 7, 2018
                                                               Schedule K—Other Information .           . . . 18   income of the specified foreign
The Taxpayer Advocate Service .            .... 1                                                                  corporations determined as of November
How To Get Forms and                                           Schedule L—Balance Sheets per
                                                                  Books . . . . . . . . . . . . . . .   . . . 20   2, 2017, or December 31, 2017. The U.S.
     Publications . . . . . . . . . . .    .   .   .   .   2                                                       shareholders may elect to pay the liability
General Instructions . . . . . . . . .     .   .   .   .   2   Schedule M-1 . . . . . . . . . . . . .   . . . 20
                                                                                                                   under section 965 on the post-1986
Purpose of Form . . . . . . . . . . .      .   .   .   .   2                                                       deferred foreign income in eight
Who Must File . . . . . . . . . . . .      .   .   .   .   2   Future Developments                                 installments. See section 965, as
General Requirements To Qualify                                For the latest information about                    amended. Also, for further guidance, see
     as a REIT . . . . . . . . . . . .     .   .   .   .   2   developments related to Form 1120-REIT              Pub. 5292.
Other Requirements . . . . . . . .         .   .   .   .   2   and its instructions, such as legislation
                                                               enacted after they were published, go to            Special rules for eligible gains inves-
Termination of Election . . . . . . .      .   .   .   .   2
                                                               IRS.gov/Form1120REIT.                               ted in Qualified Opportunity Funds.
Taxable REIT Subsidiaries (TRS)            .   .   .   .   2
                                                                                                                   Effective December 22, 2017, section
Where To File . . . . . . . . . . . . .    .   .   .   .   3
When To File . . . . . . . . . . . . .     .   .   .   .   4   What's New                                          1400Z-2 provides shareholders investing
                                                                                                                   eligible gains in Qualified Opportunity
Who Must Sign . . . . . . . . . . . .      .   .   .   .   4   Tax rates. P.L. 115-97 replaced the                 Funds (QOF) tax-favored investments. If
Paid Preparer Authorization . . . .        .   .   .   .   4   graduated corporate tax structure with a            the REIT is operating as a QOF, Form
Assembling the Return . . . . . . .        .   .   .   .   4   flat 21% corporate tax rate, and repealed           8996, Qualified Opportunity Fund, may be
Tax Payments . . . . . . . . . . . .       .   .   .   .   4   the corporate alternative minimum tax               required. See Form 8996 and the related
Estimated Tax Payments . . . . .           .   .   .   .   5   (AMT), effective for tax years beginning            instructions. Also, see Form 1120-REIT,
Interest and Penalties . . . . . . . .     .   .   .   .   5   after 2017.                                         Schedule K, Question 12.
Accounting Methods . . . . . . . .         .   .   .   .   5   Address change for filling returns. The                 For additional information, please see
Accounting Period . . . . . . . . . .      .   .   .   .   6   filling address for REITs located in certain        IRS.gov/newsroom/opportunity-zones-
Rounding Off to Whole Dollars . .          .   .   .   .   6   areas will change for returns filed after           frequently-asked-questions.
Recordkeeping . . . . . . . . . . . .      .   .   .   .   6   June 17, 2019. See Where To File, later.                     At the time these instructions went
Other Forms That May Be                                                                                                     to print, several credits and
     Required . . . . . . . . . . . . .    .   .   .   .   6
                                                               Business interest expense limitation.                 !
                                                                                                                    CAUTION deductions available to
                                                               For tax years beginning in 2018, every
Statements . . . . . . . . . . . . . .     .   .   .   .   7                                                       corporations expired on December 31,
                                                               taxpayer who deducts business interest is
Specific Instructions . . . . . . . . .    .   .   .   .   8   required to file Form 8990, Limitation on           2017. To find out if legislation extended
Period Covered . . . . . . . . . . .       .   .   .   .   8   Business Interest Expense Under Section             the credits and deductions and made
Name and Address . . . . . . . . .         .   .   .   .   8   163(j), unless an exception for filing is           them available for 2018, go to IRS.gov/
Item B. 100%-owned Subsidiaries                                met. See Schedule K, Questions 10 and               Extenders.
     and Personal Holding                                      11, in the instructions. For more
     Companies . . . . . . . . . . .       .... 8
Item C. Employer Identification
                                                               information, see Form 8990 and the
                                                               related instructions.
                                                                                                                   Photographs of Missing
     Number (EIN) . . . . . . . . . .      .... 8                                                                  Children
Item D. Date REIT Established . .          .... 8              Inclusion of Global Intangible
                                                                                                                   The Internal Revenue Service is a proud
Item E. Total Assets . . . . . . . . .     .... 8              Low-Taxed Income (GILTI). P.L. 115-97
                                                                                                                   partner with the National Center for
Item F. Final Return, Name                                     enacted new section 951A, which requires
                                                                                                                   Missing & Exploited Children® (NCMEC).
     Change, Address Change, or                                U.S. shareholders of controlled foreign
                                                                                                                   Photographs of missing children selected
     Amended Return . . . . . . . .        .... 8              corporations to determine and include
                                                                                                                   by the Center may appear in instructions
Item G. Type of REIT . . . . . . . .       .... 9              their GILTI in taxable income every year.
                                                                                                                   on pages that would otherwise be blank.
Item H. PBA Code (Equity REITs                                 Section 951A is effective for tax years of
                                                                                                                   You can help bring these children home
     Only) . . . . . . . . . . . . . . .   .... 9              foreign corporations beginning after 2017,
                                                                                                                   by looking at the photographs and calling
Part I—Real Estate Investment                                  and to tax years of U.S. shareholders in
                                                                                                                   1-800-THE-LOST (1-800-843-5678) if you
     Trust Taxable Income . . . .          .... 9              which or with which such tax years of
                                                                                                                   recognize a child.
Part II—Tax on Net Income From                                 foreign corporations end. Use Form 8992
     Foreclosure Property . . . . .        . . . 15            to figure the domestic corporation's GILTI
Part III—Tax for Failure To Meet                               and attach it to Form 1120-REIT. See                The Taxpayer Advocate
     Certain Source-of-Income                                  section 951A for more information.                  Service
     Requirements . . . . . . . . . .      . . . 15                                                                The Taxpayer Advocate Service (TAS) is
                                                               Treatment of deferred foreign income
Part IV—Tax on Net Income From                                                                                     an independent organization within the
     Prohibited Transactions . . .         . . . 15            upon transition to participation ex-
                                                               emption system of taxation. U.S.                    IRS that helps taxpayers and protects
                                                               shareholders of specified foreign                   taxpayer rights. TAS's job is to ensure that


Nov 07, 2018                                                                  Cat. No. 64243J
every taxpayer is treated fairly and knows      Who Must File                                 tax imposed on that income by section
and understands their rights under the                                                        857(b)(4)(A); less
                                                A corporation, trust, or association that
Taxpayer Bill of Rights.                                                                         3. Any excess noncash income as
                                                meets certain conditions (discussed
    As a taxpayer, the REIT has rights that     below) must file Form 1120-REIT if it         determined under section 857(e).
the IRS must abide by in its dealings with      elects to be treated as a REIT for the tax
                                                                                                 See sections 856 and 857, and the
the REIT. TAS can help the REIT if:             year (or has made that election for a prior
                                                                                              related regulations for details and
• A problem is causing financial difficulty     tax year and the election has not been
                                                                                              exceptions.
for the business.                               terminated or revoked). The election is




   DRAFT AS OF
• The business is facing an immediate           made by figuring taxable income as a
threat of adverse action.                       REIT on Form 1120-REIT.                       Termination of Election
• The REIT has tried repeatedly to                                                            The election to be treated as a REIT
contact the IRS but no one has                  General Requirements To                       remains in effect until terminated, revoked,
                                                                                              or the REIT has failed to meet the
responded, or the IRS hasn't responded
by the date promised.
                                                Qualify as a REIT                             requirements of the statutory relief
                                                To qualify as a REIT, an organization:        provisions. It terminates automatically for




  November 7, 2018
   The TAS tax toolkit at                        • Must be a corporation, trust, or           any tax year in which the corporation,
www.taxpayeradvocate.irs.gov can help           association.                                  trust, or association is not a qualified
the REIT understand these rights.                • Must be managed by one or more             REIT.
                                                trustees or directors.
   TAS has offices in every state, the           • Must have beneficial ownership (a)             The organization may revoke the
District of Columbia, and Puerto Rico.          evidenced by transferable shares, or by       election for any tax year after the 1st tax
Local advocates' numbers are in their           transferable certificates of beneficial       year the election is effective by filing a
local directories and at                        interest; and (b) held by 100 or more         statement with the service center where it
www.taxpayeradvocate.irs.gov. The REIT          persons. (The REIT does not have to meet      files its income tax return. The statement
also can call TAS at 1-877-777-4778.            this requirement until its 2nd tax year.)     must be filed on or before the 90th day
                                                 • Would otherwise be taxed as a              after the 1st day of the tax year for which
   TAS also works to resolve large-scale
                                                domestic corporation.                         the revocation is to be effective. The
or systemic problems that affect many
                                                 • Must be neither a financial institution    statement must include the following:
taxpayers. If the REIT knows of one of
these broad issues, please report it to TAS     (referred to in section 582(c)(2)), nor a      • The name, address, and employer
                                                subchapter L insurance company.               identification number of the organization;
through the Systemic Advocacy
Management System at IRS.gov/SAMS.               • Cannot be closely held, as defined in       • The tax year for which the election was
                                                section 856(h). (The REIT does not have       made;
  For more information, go to IRS.gov/          to meet this requirement until its 2nd tax     • A statement that the organization
Advocate.                                       year.)                                        (according to section 856(g)(2)) revokes
                                                                                              its election under section 856(c)(1) to be a
                                                    If a REIT meets the requirement for
How To Get Forms                                ascertaining actual ownership (see
                                                                                              REIT; and
                                                                                               • The signature of an official authorized
and Publications                                Regulations section 1.857-8 for details),
                                                                                              to sign the income tax return of the
                                                and did not know (after exercising
Internet. You can access the IRS website                                                      organization.
                                                reasonable diligence), or have reason to
24 hours a day, 7 days a week, at IRS.gov       know, that it was closely held, it will be       The organization may not make a new
to:                                             treated as meeting the requirement that it    election to be taxed as a REIT during the 4
• Download forms, instructions, and             is not closely held.                          years following the 1st year for which the
publications;                                                                                 termination or revocation is effective. See
• Order IRS products online;                    Other Requirements                            section 856(g)(4) for exceptions.
• Research your tax questions online;           The gross income and diversification of
• Search publications online by topic or        investment requirements of section 856(c)     Taxable REIT Subsidiaries
keyword;
• View Internal Revenue Bulletins (IRBs)        must be met and the organization must:        (TRS)
published in recent years; and                   • Have been treated as a REIT for all tax
                                                years beginning after February 28, 1986,      A REIT may own up to 100% of the stock
• Sign up to receive local and national tax     or                                            in one or more taxable REIT subsidiaries
news by email.                                                                                (TRS). A TRS must be a corporation
                                                 • Had, at the end of the tax year, no
Tax forms and publications. The REIT            accumulated earnings and profits from         (other than a REIT or a qualified REIT
can download or print all of the forms and      any tax year that it was not a REIT.          subsidiary) and may provide services to
publications it may need at IRS.gov/                                                          the REIT's tenants without disqualifying
                                                   For this purpose, distributions are        the rent received by the REIT. See section
FormsPubs.                                      treated as made from the earliest earnings    856(l) for details, including certain
   Otherwise, the REIT can go to IRS.gov/       and profits accumulated in any non-REIT       restrictions on the type of business
OrderForms to place an order and have           tax year. See section 857(d)(3).              activities a TRS may perform. Also, not
forms mailed to it. The REIT should              • The organization must adopt a calendar     more than 20% of the fair market value
receive its order within 10 business days.      tax year unless it first qualified for REIT   (FMV) of a REIT's total assets (25% for tax
                                                status before October 5, 1976.                years beginning after July 30, 2008 and no
General Instructions                             • The deduction for dividends paid
                                                (excluding net capital gain dividends, if
                                                                                              later than December 31, 2017) may be
                                                                                              securities of one or more TRSs (see
                                                any) must equal or exceed:                    section 856(c)(4) for details).
Purpose of Form                                    1. 90% of the REIT's taxable income
Use Form 1120-REIT, U.S. Income Tax             (excluding the deduction for dividends           Transactions between a TRS and its
Return for Real Estate Investment Trusts,       paid and any net capital gain); plus          associated REIT must be at arm's length.
to report the income, gains, losses,                                                          A REIT may be subject to a 100% tax to
deductions, credits, certain penalties, and        2. 90% of the excess of the REIT's net     the extent it improperly allocates income
to figure the income tax liability of a REIT.   income from foreclosure property over the     and deductions between the REIT and the

                                                                    -2-
File the REIT's return at the applicable IRS address listed below.

                                                 If the REIT's principal     And the total assets at           Use the following address:
TRS (see section 857(b)(7) for details).         business, office, or agency the end of the tax year
Additional limitations on transactions           is located in:              are:
between a TRS and its associated REIT
include:                                                                     For Returns Filed (1/1/19 Through 6/17/19)
 • Limitations on income from a TRS that         Connecticut, Delaware,                                        Department of the Treasury
may be treated as rents from real property       District of Columbia, Florida,     Less than $10 million      Internal Revenue Service Center
by the REIT (see section 856(d)(8)).             Indiana, Maine, Maryland,                                     Cincinnati, OH 45999-0012
 • Limitations on a TRS's deduction for          Massachusetts, New
interest paid to its associated REIT (see        Hampshire, New Jersey,




   DRAFT AS OF
section 163(j)).                                 New York, North Carolina,                                     Department of the Treasury
                                                 Ohio, Pennsylvania, Rhode           $10 million or more       Internal Revenue Service Center
   To elect to have an eligible corporation      Island, South Carolina,                                       Ogden, UT 84201-0012
treated as a TRS, the corporation and the        Vermont, Virginia, West
REIT must jointly file Form 8875, Taxable        Virginia
REIT Subsidiary Election.
                                                 Georgia, Illinois, Kentucky,                                  Department of the Treasury




  November 7, 2018
Restrictions on tax-free spinoffs from                                            Less than $10 million and
                                                 Michigan, Tennessee,                                          Internal Revenue Service Center
REITs. For distributions after December                                            Schedule M-3 is not filed
                                                 Wisconsin                                                     Kansas City, MO 64999-0012
6, 2015, a REIT is generally ineligible to
participate in a tax-free spinoff as either a                                        $10 million or more, or   Department of the Treasury
distributing or controlled corporation under                                       less than $10 million and   Internal Revenue Service Center
section 355. This general rule does not                                               Schedule M-3 is filed    Ogden, UT 84201-0012
apply if both the distributing corporation       Alabama, Alaska, Arizona,
and the controlled corporation are REITs         Arkansas, California,
immediately after the distribution. Also, a      Colorado, Hawaii, Idaho,
REIT may spin off a TRS if the following         Iowa, Kansas, Louisiana,
apply.                                           Minnesota, Mississippi,                                       Department of the Treasury
 • The distributing corporation has been a       Missouri, Montana,                      Any amount            Internal Revenue Service Center
REIT at all times during the 3-year period       Nebraska, Nevada, New                                         Ogden, UT 84201-0012
ending on the date of distribution;              Mexico, North Dakota,
 • The controlled corporation has been a         Oklahoma, Oregon, South
TRS of the REIT at all times during such         Dakota, Texas, Utah,
period; and                                      Washington, Wyoming
 • The REIT has had control (as defined in                                                                     Internal Revenue Service Center
section 368(c) applied by taking into            A foreign country or U.S.
                                                                                         Any amount            P.O. Box 409101
account stock owned directly and                 possession
                                                                                                               Ogden, UT 84409
indirectly, including through partnerships,
by the REIT) of the TRS at all times during                                       For Returns Filed After 6/17/19
such period.                                     Connecticut, Delaware,                                        Department of the Treasury
                                                                                Less than $10 million and
    A controlled corporation is treated as       District of Columbia, Georgia,                                Internal Revenue Service
                                                                                 Schedule M-3 is not filed
meeting the control requirements if the          Illinois, Indiana, Kentucky,                                  Kansas City, MO 64999-0012
stock of the corporation was distributed by      Maine, Maryland,
a TRS in a transaction to which section          Massachusetts, Michigan,
355 applies and the assets of the                New Hampshire, New
corporation consist solely of the stock or       Jersey, New York, North                                       Department of the Treasury
                                                 Carolina, Ohio,                  $10 million or more or
assets held by one or more TRSs of the                                            Schedule M-3 is filed
                                                                                                               Internal Revenue Service
distributing corporation meeting the             Pennsylvania, Rhode Island,                                   Ogden, UT 84201-0012
control requirements described above.            South Carolina, Tennessee,
                                                 Vermont, Virginia, West
    If a corporation that is not a REIT was a    Virginia, Wisconsin
distributing or controlled corporation with
respect to any distribution to which section     Alabama, Alaska, Arizona,
355 applied, the corporation will not be         Arkansas, California,
eligible to make a REIT election for any tax     Colorado, Florida, Hawaii,
year beginning before the end of the             Idaho, Iowa, Kansas,
10-year period beginning on the date of          Louisiana, Minnesota,                                         Department of the Treasury
such distribution.                               Mississippi, Missouri,                  Any Amount            Internal Revenue Service
                                                 Montana, Nebraska, Nevada,                                    Ogden, UT 84201-0012
    See sections 355(h) and 856(c)(8) for        New Mexico, North Dakota,
more details.                                    Oklahoma, Oregon, South
                                                 Dakota, Texas, Utah,
Note. These rules do not apply to any            Washington, Wyoming
distribution pursuant to a transaction
described in a ruling request initially                                                                        Internal Revenue Service
                                                 A foreign country or U.S.
submitted to the IRS on or before such                                                   Any Amount            P.O. Box 409101
                                                 possession
date, which request has not been                                                                               Ogden, UT 84409
withdrawn and with respect to a ruling has
not been issued or denied in its entirety as
of such date.                                   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.

                                                                       -3-
When To File                                        If an employee of the REIT completes            4. Form 4136.
                                                 Form 1120-REIT, the paid preparer's                5. Additional schedules in
Generally, a REIT must file its income tax
                                                 space should remain blank. Anyone who           alphabetical order.
return by the 15th day of the 4th month
                                                 prepares Form 1120-REIT but does not
after the end of its tax year. A new REIT                                                           6. Additional forms in numerical order.
                                                 charge the REIT should not complete that
filing a short period return must generally                                                         7. Supporting statements and
                                                 section. Generally, anyone who is paid to
file by the 15th day of the 4th month after                                                      attachments.
                                                 prepare the return must sign it and fill in
the short period ends. A REIT that has
                                                 the “Paid Preparer Use Only” section.
dissolved must generally file by the 15th                                                           Complete every applicable entry space




   DRAFT AS OF
day of the 4th month after the date it               The paid preparer must complete the         on Form 1120-REIT. Do not enter “See
dissolved.                                       required preparer information and:              attached” instead of completing the entry
                                                 • Sign the return in the space provided         spaces. If more space is needed on the
    However, a REIT with a fiscal tax year       for the preparer's signature; and               forms or schedules, attach separate
ending June 30 must file by the 15th day         • Give a copy of the return to the              sheets using the same size and format as
of the 3rd month after the end of its tax        taxpayer.                                       the printed forms.
year. A REIT with a short tax year ending




  November 7, 2018
anytime in June will be treated as if the                A paid preparer may sign the               If there are supporting statements and
short year ended on June 30, and must file        TIP original or amended returns by             attachments, arrange them in the same
by the 15th day of the 3rd month after the              rubber stamp, mechanical device,         order as the schedules or forms they
end of its tax year.                             or computer software program.                   support and attach them last. Show the
                                                                                                 totals on the printed forms. Enter the
   If the due date falls on a Saturday,                                                          REIT's name and EIN on each supporting
Sunday, or legal holiday, the REIT can file      Paid Preparer                                   statement or attachment.
on the next business day.                        Authorization
Private Delivery Services                        If the REIT wants to allow the IRS to           Tax Payments
                                                 discuss its 2018 tax return with the paid       Generally, the REIT must pay the tax due
REIT can use certain private delivery            preparer who signed it, check the “Yes”
services (PDS) designated by the IRS to                                                          in full no later than the due date for filing its
                                                 box in the signature area of the return.        tax return (not including extensions). See
meet the “timely mailing as timely filing”       This authorization applies only to the
rule for tax returns. Go to IRS.gov/PDS for                                                      the instructions for line 27, later. If the due
                                                 individual whose signature appears in the       date falls on a Saturday, Sunday, or legal
the current list of designated services.         “Paid Preparer Use Only” section of the         holiday, the payment is due on the next
   The PDS can tell you how to get written       REIT's return. It does not apply to the firm,   day that isn't a Saturday, Sunday, or legal
proof of the mailing date.                       if any, shown in that section.                  holiday.

   For the IRS mailing address to use if            If the “Yes” box is checked, the REIT is     Electronic Deposit
                                                 authorizing the IRS to call the paid
you're using PDS, go to IRS.gov/
                                                 preparer to answer any questions that
                                                                                                 Requirement
PDSStreetAddresses.                                                                              REITs must use electronic funds transfer
                                                 may arise during the processing of its
         Private delivery services can't         return. The REIT also is authorizing the        to make all federal tax deposits (such as
  !      deliver items to P.O. boxes. You        paid preparer to:                               deposits of employment, excise, and
 CAUTION must use the U.S. Postal Service        • Give the IRS any information that is          corporate income tax). Generally,
to mail any item to an IRS P.O. box              missing from the return,                        electronic funds transfers are made using
address.                                         • Call the IRS for information about the        the Electronic Federal Tax Payment
                                                 processing of the return or the status of       System (EFTPS). However, if the REIT
Extension of Time To File                        any related refund or payment(s), and           does not want to use EFTPS, it can
                                                 • Respond to certain IRS notices about          arrange for its tax professional, financial
File Form 7004, Application for Automatic
                                                 math errors, offsets, and return                institution, payroll service, or other trusted
Extension of Time To File Certain
                                                 preparation.                                    third party to make deposits on its behalf.
Business Income Tax, Information, and
                                                                                                 Also, it may arrange for its financial
Other Returns, to request an extension of           The REIT is not authorizing the paid         institution to submit a same-day tax wire
time to file. Generally, file Form 7004 by       preparer to receive any refund check, bind      payment (discussed below) on its behalf.
the regular due date of the REIT's income        the REIT to anything (including any             EFTPS is a free service provided by the
tax return. See the Instructions for Form        additional tax liability), or otherwise         Department of the Treasury. Services
7004 for more information.                       represent the corporation before the IRS.       provided by a tax professional, financial
                                                                                                 institution, payroll service, or other third
Who Must Sign                                       The authorization will automatically end
                                                                                                 party may have a fee.
                                                 no later than the due date (without regard
The return must be signed and dated by:
                                                 to extensions) for filing the REIT's 2019           To get more information about EFTPS
• The president, vice president, treasurer,      tax return. If the REIT wants to expand the
assistant treasurer, chief accounting                                                            or to enroll in EFTPS, visit EFTPS.gov, or
                                                 paid preparer's authorization, see Pub.         call 1-800-555-4477 (TTY/TDD
officer; or
                                                 947, Practice Before the IRS and Power of       1-800-733-4829).
• Any other corporate officer (such as a         Attorney.
tax officer) authorized to sign.                                                                 Depositing on time. For any deposit
   If a return is filed on behalf of a REIT by   Assembling the Return                           made by EFTPS to be on time, the REIT
                                                                                                 must submit the deposit by 8 p.m. Eastern
a receiver, trustee, or assignee, the            To ensure that the REIT's tax return is         time the day before the date the deposit is
fiduciary must sign the return, instead of       correctly processed, attach all schedules       due. If the REIT uses a third party to make
the corporate officer. Returns and forms         and other forms after page 4 of Form            deposits on its behalf, they may have
signed by a receiver or trustee in               1120-REIT, in the following order.              different cutoff times.
bankruptcy on behalf of a REIT must be              1. Schedule N (Form 1120).
accompanied by a copy of the order or                                                            Same-day wire payment option. If the
instructions of the court authorizing               2. Schedule D (Form 1120).                   REIT fails to submit a deposit transaction
signing of the return or form.                      3. Schedule O (Form 1120).                   on EFTPS by 8 p.m. Eastern time on the

                                                                      -4-
day before the date a deposit is due, it can     Late payment of tax. A REIT that does           Other penalties. Other penalties can be
still make its deposit on time by using the      not pay the tax when due generally may          imposed for negligence, substantial
Federal Tax Collection Service (FTCS).           be charged a penalty for the failure to pay     understatement of tax, reportable
To use the same-day payment method,              tax. The amount of the penalty is 1/2 of 1%     transaction understatements, and fraud.
the REIT will need to make arrangements          of the unpaid tax for each month or part of     See sections 6662, 6662A, and 6663.
with its financial institution ahead of time     a month the tax is not paid, up to a
regarding availability, deadlines, and
costs. Financial institutions may charge a
                                                 maximum of 25% of the unpaid tax. The           Accounting Methods
                                                 penalty will not be imposed if the REIT can     Figure taxable income using the method of
fee for payments made this way. To learn




   DRAFT AS OF
                                                 show that the failure to pay on time was        accounting regularly used in keeping the
more about the information the REIT will         due to reasonable cause.
need to provide its financial institution to                                                     REIT's books and records. In all cases,
make a same-day wire payment, visit the          Reasonable cause determinations. If             the method used must clearly show
IRS website at IRS.gov/SameDayWire.              the REIT receives a notice about penalties      taxable income.
                                                 after it files its return, send the IRS an
                                                                                                    Generally, permissible methods
Estimated Tax Payments                           explanation and we will determine if the
                                                                                                 include:




  November 7, 2018
                                                 REIT meets the reasonable cause criteria.
Generally, the following rules apply to the      Do not attach an explanation when the
                                                                                                  • Cash,
REIT's payments of estimated tax.                REIT's return is filed.
                                                                                                  • Accrual, or
 • The REIT must make installment                                                                 • Any other method authorized by the
payments of estimated tax if it expects its      Trust fund recovery penalty. This               Internal Revenue Code.
total tax for the year (less applicable          penalty may apply if certain excise,
                                                                                                 Accrual method. Generally, a REIT must
credits) to be $500 or more.                     income, social security, and Medicare
                                                                                                 use the accrual method of accounting if its
 • The REIT must use electronic funds            taxes that must be collected or withheld
                                                                                                 average annual gross receipts for the 3
transfer to make installment payments of         are not collected or withheld, or these
                                                                                                 prior tax years exceed $25 million. See
estimated tax.                                   taxes are not paid. These taxes are
                                                                                                 section 448(c).
 • The installments are due by the 15th          generally reported on:
day of the 4th, 6th, 9th, and 12th months         • Form 720, Quarterly Federal Excise              For more information, see Pub. 538,
of the tax year. If any date falls on a          Tax Return;                                     Accounting Periods and Methods.
Saturday, Sunday, or legal holiday, the           • Form 941, Employer's QUARTERLY               Change in accounting method.
installment is due on the next regular           Federal Tax Return;                             Generally, the REIT must get IRS consent
business day.                                     • Form 943, Employer Annual Federal            to change either an overall method of
 • Use Form 1120-W, Estimated Tax for            Tax Return for Agricultural Employees;          accounting or the accounting treatment of
Corporations, as a worksheet to compute           • Form 944, Employer's ANNUAL                  any material item. To do so, the REIT
estimated tax. See the Instructions for          Federal Tax Return; or                          generally must file Form 3115, Application
Form 1120-W.                                      • Form 945, Annual Return of Withheld          for Change in Accounting Method. See the
 • If the REIT overpaid its estimated tax, it    Federal Income Tax.                             Instructions for Form 3115 and Pub. 538
may be able to get a quick refund by filing          The trust fund recovery penalty may be      for more information and exceptions. Also
Form 4466, Corporation Application for           imposed on all persons who are                  see Rev. Proc. 2018-31, 2018-22 I.R.B.
Quick Refund of Overpayment of                   determined by the IRS to be responsible         637 (or any successor).
Estimated Tax. The overpayment must be           for collecting, accounting for, or paying
at least 10% of the REIT's expected                                                                  Section 481(a) adjustment. If the
                                                 over these taxes, and who acted willfully in
income tax liability and at least $500.                                                          REIT's taxable income for the current tax
                                                 not doing so. The penalty is equal to the
                                                                                                 year is figured under a method of
    For more information, including              full amount of the unpaid trust fund tax.
                                                                                                 accounting different from the method used
penalties, see the instructions for line 26,     See the Instructions for Form 720 or Pub.
                                                                                                 in the preceding tax year, the REIT may
later.                                           15 (Circular E), Employer's Tax Guide, for
                                                                                                 have to make an adjustment under section
                                                 details, including the definition of
                                                                                                 481(a) to prevent amounts of income or
                                                 responsible persons.
Interest and Penalties                                                                           expenses from being duplicated or
                                                 Failure to ascertain ownership. If the          omitted. This is referred to as a “section
Interest. Interest is charged on taxes           REIT fails to comply with Regulations           481(a) adjustment.” The section 481(a)
paid late even if an extension of time to file   section 1.857-8 for ascertaining ownership      adjustment period is generally 1 year for a
is granted. Interest also is charged on          and maintaining factual ownership records       net negative adjustment and 4 years for a
penalties imposed for failure to file,           for a tax year, it must pay a $25,000           net positive adjustment. However, in some
negligence, fraud, substantial valuation         penalty ($50,000 for intentional disregard)     cases, a REIT can elect to modify the
misstatements, and substantial                   upon notice and demand by the IRS. If the       section 481(a) adjustment period. The
understatements of tax from the due date         REIT can show that the failure was due to       REIT must complete the appropriate lines
(including extensions) to the date of            reasonable cause, the penalty may not be        of Form 3115 to make the election. See
payment. The interest charge is figured at       imposed. For more information, see              the Instructions for Form 3115 for more
a rate determined under section 6621.            section 857(f).                                 information and exceptions. If the net
Late filing of return. A REIT that does                                                          section 481(a) adjustment is positive,
                                                 Failure to satisfy certain REIT qualifi-
not file its tax return by the due date,                                                         report it on line 7 as other income. If the
                                                 cation provisions. If the REIT is required
including extensions, may be penalized                                                           net section 481(a) adjustment is negative,
                                                 to pay the $50,000 penalty under section
5% of the unpaid tax for each month or                                                           report it on line 18 as a deduction.
                                                 856(g)(5)(C) for each failure to satisfy a
part of a month the return is late, up to a      REIT qualification provision of sections
maximum of 25% of the unpaid tax. The                                                            Note. Include any net positive section
                                                 856–859 (other than section 856(c)(2),          481(a) adjustment on page 1, line 7.
minimum penalty for a return that is over        856(c)(3), or section 856(c)(4)) due to
60 days late is the smaller of the tax due                                                       Report any negative adjustment on
                                                 reasonable cause and not willful neglect,       page 1, line 18.
or $210. The penalty will not be imposed if      see the instructions for Schedule J, line 2f,
the REIT can show that the failure to file       later.
on time was due to reasonable cause.


                                                                      -5-
Accounting Period                               forms. Also see Pub. 542, Corporations,         distribution from a foreign trust or if the
                                                for an expanded list of forms the REIT may      REIT was a grantor of, transferor of, or
A REIT must figure its taxable income on
                                                be required to file.                            transferor to a foreign trust that existed
the basis of a tax year. A tax year is the
                                                                                                during the tax year. See Question 5 of
annual accounting period a REIT uses to         Form 926, Return by a U.S. Transferor of
                                                                                                Schedule N (Form 1120).
keep its records and report its income and      Property to a Foreign Corporation, is filed
expenses. A REIT adopts a tax year when         to report certain transfers to foreign          Form 5471, Information Return of U.S.
it files its first income tax return. It must   corporations under section 6038B.               Persons With Respect to Certain Foreign
adopt a tax year by the due date (not                                                           Corporations, is required if the REIT
                                                Form 965, Inclusion of Deferred Foreign




   DRAFT AS OF
including extensions) of its initial income                                                     controls a foreign corporation; acquires,
                                                Income Upon Transition to Participation
tax return.                                                                                     disposes of, or owns 10% or more in value
                                                Exemption System. Use Form 965 to
                                                                                                or vote of the outstanding stock of a
Note. A REIT must adopt a calendar year         report income, deductions, and elections
                                                                                                foreign corporation; or had control of a
unless it first qualified for REIT status       under section 965.
                                                                                                foreign corporation for an uninterrupted
before October 5, 1976.                         Form 965-B, Corporate Report of Net             period of at least 30 days during the
                                                965 Tax Liability and Real Estate               annual accounting period of the foreign




  November 7, 2018
Change of tax year. A REIT may not
change its tax year to any tax year other       Investment Trust Report of Net 965              corporation. See Question 4 of
than the calendar year. Generally, a REIT       Inclusion. Use Form 965-B to report             Schedule N (Form 1120).
must receive consent from the IRS before        includable and deferred net section 965
                                                                                                Form 5472, Information Return of a 25%
changing its tax year by filing Form 1128,      inclusions for taxable years beginning with
                                                                                                Foreign-Owned U.S. Corporation or a
Application To Adopt, Change, or Retain a       the tax year ended 2017.
                                                                                                Foreign Corporation Engaged in a U.S.
Tax Year.                                       Form 966, Corporate Dissolution or              Trade or Business. This form is filed if the
    However, upon electing to be taxed as       Liquidation, is used to report the adoption     REIT is 25% or more foreign owned. See
a REIT, an entity that has not engaged in       of a resolution or plan to dissolve the         the instructions for Question 5,
any active trade or business may change         corporation or liquidate any of its stock.      Schedule K, later.
its tax year to a calendar year without         Form 976, Claim for Deficiency                  Form 6198, At-Risk Limitations. Use this
obtaining the consent.                          Dividends Deductions by a Personal              form if a REIT is closely held as described
    See the Instructions for Form 1128 and      Holding Company, Regulated Investment           in section 465(a)(1)(B), and (1) directly or
Pub. 538 for more information on                Company, or a Real Estate Investment            indirectly has any amounts not at risk that
accounting periods and tax years.               Trust, is used to claim a deduction for         are invested in an at-risk activity that
                                                deficiency dividends. See section 860 and       incurred a loss; or (2) engages in certain
Rounding Off to                                 the related regulations.                        activities and has borrowed amounts not
                                                                                                at risk. See section 465 and the
Whole Dollars                                   Forms 1042, Annual Withholding Tax
                                                                                                Instructions for Form 6198.
The REIT can round off cents to whole           Return for U.S. Source Income of Foreign
dollars on its returns and schedules. If the    Persons, Form 1042-S, Foreign Person's          Form 8275, Disclosure Statement, and
REIT does round to whole dollars, it must       U.S. Source Income Subject to                   Form 8275-R, Regulation Disclosure
round all amounts. To round, drop               Withholding, and Form 1042-T, Annual            Statement, are used to disclose items or
amounts under 50 cents and increase             Summary and Transmittal of Forms                positions taken on a tax return that are not
amounts from 50 to 99 cents to the next         1042-S. Use these forms to report and           otherwise adequately disclosed on a tax
dollar (for example, $1.39 becomes $1           send withheld tax on payments or                return or that are contrary to Treasury
and $2.50 becomes $3).                          distributions made to nonresident alien         Regulations (to avoid parts of the
                                                individuals, foreign partnerships, or foreign   accuracy-related penalty or certain
    If two or more amounts must be added        corporations to the extent these payments       preparer penalties).
to figure the amount to enter on a line,        constitute gross income from sources
include cents when adding the amounts                                                           Form 8300, Report of Cash Payments
                                                within the United States (see sections 861
and round off only the total.                                                                   Over $10,000 Received in a Trade or
                                                through 865).
                                                                                                Business. Use this form to report the
                                                   Also, see sections 1441 and 1442, and
Recordkeeping                                   Pub. 515, Withholding of Tax on
                                                                                                receipt of more than $10,000 in cash or
                                                                                                foreign currency in one transaction or a
Keep the REIT's records for as long as          Nonresident Aliens and Foreign Entities.        series of related transactions.
they may be needed for the administration
of any provision of the Internal Revenue        Form 1099-DIV, Dividends and                    Form 8612, Return of Excise Tax on
Code. Usually, records that support an          Distributions. Use this form to report          Undistributed Income of Real Estate
item of income, deduction, or credit on the     certain dividends and distributions.            Investment Trusts, is filed if the REIT is
return must be kept for 3 years from the        Form 2438, Undistributed Capital Gains          liable for the 4% excise tax on
date the return is due or filed, whichever is   Tax Return, must be filed by the REIT if it     undistributed income imposed under
later. Keep records that verify the REIT's      designates undistributed net long-term          section 4981.
basis in property for as long as they are       capital gains under section 857(b)(3)(C).       Form 8621, Information Return by a
needed to figure the basis of the original or
                                                Form 2439, Notice to Shareholder of             Shareholder of a Passive Foreign
replacement property.
                                                Undistributed Long-Term Capital Gains,          Investment Company or Qualified Electing
    The REIT also should keep copies of         must be completed and a copy given to           Fund. Use this form to make certain
all filed returns. They help in preparing       each shareholder for whom the REIT paid         elections by shareholders in a passive
future and amended returns and in the           tax on undistributed net long-term capital      foreign investment company and to figure
calculation of earnings and profits.            gains under section 857(b)(3)(C).               certain deferred taxes.
                                                                                                Form 8810, Corporate Passive Activity
Other Forms That May Be                         Form 3520, Annual Return To Report
                                                                                                Loss and Credit Limitations. Use this form
                                                Transactions With Foreign Trusts and
Required                                        Receipt of Certain Foreign Gifts, is            if a REIT is closely held as described in
In addition to Form 1120-REIT, the REIT         required either if the REIT received a          section 469(j)(1), and has losses or credits
may have to file some of the following                                                          from passive activities. See section 469,

                                                                     -6-
the related regulations, and the                 the organizational action reporting                  2. Any transaction offered under
Instructions for Form 8810.                      requirements for those undistributed gains       conditions of confidentiality for which the
                                                 if the REIT timely files and gives Form          REIT (or a related party) paid an advisor a
Form 8865, Return of U.S. Persons With
                                                 2439 to all proper parties for the               fee of at least $250,000.
Respect To Certain Foreign Partnerships.
                                                 organizational action. For more                      3. Certain transactions for which the
A REIT may have to file Form 8865 if it:
                                                 information, see the Instructions for Form       REIT (or a related party) has contractual
    1. Controlled a foreign partnership          8937.                                            protection against disallowance of the tax
(i.e., owned more than a 50% direct or
                                                 Form 8975, Certain United States                 benefits.
indirect interest in the partnership).




   DRAFT AS OF
                                                 persons that are the ultimate parent entity          4. Certain transactions resulting in a
    2. Owned at least a 10% direct or            of a United States multinational enterprise      loss of at least $10 million in any single
indirect interest in a foreign partnership       group with annual revenue for the                year or $20 million in any combination of
while U.S. persons controlled that               preceding reporting period of $850 million       years.
partnership.                                     or more are required to file Form 8975.              5. Any transaction identified by the
    3. Had an acquisition, disposition, or       Form 8975 and its Schedules A (Form              IRS by notice, regulation, or other
change in proportional interest in a foreign     8975) must be filed with the income tax




  November 7, 2018
                                                                                                  published guidance as a “transaction of
partnership that:                                return of the ultimate parent entity of a        interest.” See Notice 2009-55, 2009-31
 • Increased its direct interest to at least     U.S. multinational enterprise group for the      I.R.B. 170.
10% or reduced its direct interest of at         tax year in or within which the reporting
least 10% to less than 10%.                      period covered by Form 8975 ends. The                For more information, see Regulations
 • Changed its direct interest by at least a     first required reporting period for an           section 1.6011-4. Also see the Instructions
10% interest.                                    ultimate parent entity is the 12-month           for Form 8886.
    4. Contributed property to a foreign         reporting period that begins on or after the
                                                 first day of a tax year of the ultimate parent       Penalties. The REIT may have to pay
partnership in exchange for a partnership                                                         a penalty if it is required to disclose a
interest if:                                     entity that begins on or after June 30,
                                                 2016. For more information, see Form             reportable transaction under section 6011
 • Immediately after the contribution, the                                                        and fails to properly complete and file
REIT owned, directly or indirectly, at least     8975, Schedule A (Form 8975) and the
                                                 Instructions for Form 8975 and                   Form 8886. Penalties also may apply
a 10% interest in the foreign partnership;                                                        under section 6707A if the REIT fails to file
or                                               Schedule A (Form 8975).
                                                                                                  Form 8886 with its Form 1120-REIT, fails
 • The FMV of the property the REIT              Form 8990, Limitation on Business                to provide a copy of Form 8886 to the
contributed to the foreign partnership in        Interest Expense Under Section 163(j).           Office of Tax Shelter Analysis (OTSA), or
exchange for a partnership interest, when        Use Form 8990 to calculate the amount of         files a form that fails to include all the
added to other contributions of property         business interest expense you can deduct         information required (or includes incorrect
made to the foreign partnership during the       and the amount to carry forward to the           information). Other penalties, such as an
preceding 12-month period, exceeds               next year.                                       accuracy-related penalty under section
$100,000.                                                                                         6662A, also may apply. See the
                                                 Form 8992, U.S. Shareholder Calculation
    Also, the REIT may have to file Form                                                          Instructions for Form 8886 for details on
                                                 of Global Intangible Low-Taxed Income
8865 to report certain dispositions by a                                                          these and other penalties.
                                                 (GILTI). Use Form 8992 to figure the
foreign partnership of property it
                                                 domestic corporation's GILTI under               Reportable transactions by material
previously contributed to that foreign
                                                 section 951A and attach it to Form               advisors. Material advisors to any
partnership if it was a partner at the time of
                                                 1120-REIT.                                       reportable transaction must disclose
the disposition. For more details, including
penalties for failing to file Form 8865, see     Form 8996, Qualified Opportunity Fund.           certain information about the reportable
Form 8865 and its separate instructions.         If the REIT is operating a Qualified             transaction by filing Form 8918, Material
                                                 Opportunity Fund (QOF), the REIT must            Advisor Disclosure Statement, with the
Form 8875, Taxable REIT Subsidiary               annually attach Form 8996, self-certifying       IRS. For details, see the Instructions for
Election, is filed jointly by a corporation      as a QOF. In addition, the REIT must             Form 8918.
and a REIT to have the corporation treated       complete Question 12 of Schedule K. For          Transfers to a corporation controlled
as a taxable REIT subsidiary.                    more information, see the Instructions for       by the transferor. Every significant
Form 8927, Determination Under 860(e)            Form 8996.                                       transferor (as defined in Regulations
(4) by a Qualified Investment Entity. Use                                                         section 1.351-3(d)) that receives stock of
Form 8927 to make a determination under          Statements                                       a corporation in exchange for property in a
Section 860(e)(4) and to establish the                                                            nonrecognition event must include the
                                                 Reportable transaction disclosure                statement required by Regulations section
date of determination for purposes of            statement. Disclose information for each
making a deficiency dividend distribution.                                                        1.351-3(a) on or with the transferor's tax to
                                                 reportable transaction in which the REIT         its return for the tax year of the exchange.
Form 8937, Report of Organizational              participated. Form 8886, Reportable              The transferee corporation must include
Action Affecting Basis of Securities. Use        Transaction Disclosure Statement, must           the statement required by Regulations
this form when any organizational action         be filed for each tax year that the federal      section 1.351-3(b) on or with its return for
affects the basis of holders of either a         income tax liability of the REIT is affected     the tax year of the exchange, unless all the
security or a class of the security. For         by its participation in the transaction. The     required information is included in any
example, a REIT may use this form in             following are reportable transactions.           statement(s) provided by a significant
connection with transactions such as a               1. Any listed transaction, which is a        transferor that is attached to the same
nontaxable cash or stock distribution to         transaction that is the same as or               return for the same section 351 exchange.
shareholders, or a conversion rate               substantially similar to one of the types of     If the transferor or transferee corporation
adjustment on a convertible debt                 transactions that the IRS has determined         is a controlled foreign corporation, each
instrument that results in a distribution        to be a tax avoidance transaction and            U.S. shareholder (within the meaning of
under section 305(c). However, a REIT            identified by notice, regulation, or other       section 951(b)) must include the required
that reports undistributed capital gains to      published guidance as a listed                   statement on or with its return.
shareholders on Form 2439 can satisfy            transaction.

                                                                      -7-
1120), U.S. Personal Holding Company
Distributions under section 355. Every
REIT that makes a distribution of stock or       Specific Instructions                            (PHC) Tax. See the Instructions for
securities of a controlled corporation, as                                                        Schedule PH (Form 1120) for details.
described in section 355 (or so much of          Period Covered
section 356 as it relates to section 355),       File the 2018 return for calendar year 2018      Item C. Employer
must include the statement required by           and fiscal years that begin in 2018 and          Identification Number
Regulations section 1.355-5(a) on or with        end in 2019. For a fiscal year return, fill in
its return for the year of the distribution. A   the tax year in the space at the top of the
                                                                                                  (EIN)
                                                                                                  Enter the REIT's EIN. If the REIT does not




   DRAFT AS OF
significant distributee (as defined in           form.
Regulations section 1.355-5(c)) that                                                              have an EIN, it must apply for one. An EIN
receives stock or securities of a controlled     Note. The 2018 Form 1120-REIT also               may be applied for:
corporation must include the statement           can be used if:                                   • Online by visiting IRS.gov/EIN. The EIN
required by Regulations section                                                                   is issued immediately once the application
1.355-5(b) on or with its return for the year    • The REIT has a tax year of less than 12        information is validated.
of receipt. If the distributing or distributee   months that begins and ends in 2019; and          • By faxing or mailing Form SS-4,



  November 7, 2018
corporation is a controlled foreign              • The 2019 Form 1120-REIT is not                 Application for Employer Identification
corporation, each U.S. shareholder (within       available at the time the REIT is required       Number.
the meaning of section 951(b)) must              to file its return.
                                                                                                      If the REIT has not received its EIN by
include the statement on or with its return.         The REIT must show its 2019 tax year         the time the return is due, enter “Applied
Dual consolidated losses. If a domestic          on the 2018 Form 1120-REIT and take              for” in the space for the EIN. For more
corporation incurs a dual consolidated           into account any tax law changes that are        details, see the Instructions for Form
loss (as defined in Regulations section          effective for tax years beginning after          SS-4.
1.1503-2(c)(5)), the corporation (or             December 31, 2018.
consolidated group) may need to attach                                                            Note. REITs located in the United States
an elective relief agreement and/or an           Name and Address                                 or U.S. possessions can use the online
annual certification as provided in              Enter the REIT's true name (as set forth in      application process.
Regulations section 1.1503-2(g)(2).              the charter or other legal document
Election to reduce basis under section           creating it), address, and EIN on the            Item D. Date REIT
362(e)(2)(C). If property is transferred to      appropriate lines. Include the suite, room,      Established
a corporation subject to section 362(e)(2),      or other unit number after the street            If the REIT is a corporation under state or
the transferor and the acquiring                 address. Enter the address of the REIT's         local law, enter the date incorporated. If it
corporation may elect under section              principal office or place of business. If the    is a trust or association, enter the date
362(e)(2)(C) to reduce the transferor's          Post Office does not deliver mail to the         organized.
basis in the stock received instead of           street address and the REIT has a P.O.
                                                 box, show the box number instead.
reducing the acquiring corporation's basis                                                        Item E. Total Assets
in the property transferred. Once made the                                                        Enter the REIT's total assets (as
                                                 Note. Do not use the address of the
election is irrevocable. For more                                                                 determined by the accounting method
                                                 registered agent for the state in which the
information, see section 362(e)(2) and                                                            regularly used in keeping its books and
                                                 corporation is incorporated. For example,
Regulations section 1.362-4. If an election                                                       records) at the end of the tax year. If there
                                                 if a business is incorporated in Delaware
is made, a statement must be filed in                                                             are no assets at the end of the tax year,
                                                 or Nevada and the corporation's principal
accordance with Regulations section                                                               enter -0-.
                                                 office is located in Little Rock, AR, the
1.362-4(d)(3).
                                                 corporation should enter the Little Rock
Annual information statement for elec-           address.                                         Item F. Final Return, Name
tions under section 108(i). If the
corporation made an election under                   If the REIT receives its mail in care of a   Change, Address Change,
section 108(i) to defer income from              third party (such as an accountant or an         or Amended Return
cancellation of debt (COD) for applicable        attorney), enter on the street address line       • If this is the REIT's final return, and it
debt instruments, the corporation must           “C/O” followed by the third party's name         will no longer exist, check the “Final
attach a statement to its return beginning       and street address or P.O. box.                  return” box. See the instructions for
with the tax year following the tax year for                                                      Termination of Election, earlier.
which the corporation made the election,         Item B. 100%-owned                                • If the REIT has changed its name since
and ending the first tax year all income         Subsidiaries and Personal                        it last filed a return, check the box for
deferred has been included in income.                                                             “Name change.” Generally, a REIT also
                                                 Holding Companies                                must have amended its articles of
    In addition, the REIT must annually
include a copy of the election statement it      REITs With 100%-owned                            incorporation and filed the amendment
                                                                                                  with the state in which it was incorporated.
filed to make the election to defer              Subsidiaries                                      • If the REIT has changed its address
cancellation of debt. For more information
                                                 Check this box if this return is filed for a     since it last filed a return (including a
on making the election, see the
                                                 REIT with 100%-owned REIT subsidiaries           change to an “in care of” address), check
instructions for line 15, later. For more
                                                 under section 856(i). These subsidiaries         the box for “Address change.”
information regarding the annual
                                                 are not treated as separate corporations.        Note. If a change in address or
information, see Rev. Proc. 2009-37,
2009-36 I.R.B. 309.                                                                               responsible party occurs after the return is
                                                   Do not check this box for a taxable
                                                                                                  filed, use Form 8822-B, Change of
Other forms and statements. See Pub.             REIT subsidiary. See the instructions for
                                                                                                  Address or Responsible Party—Business,
542 for a list of other forms and                Taxable REIT Subsidiaries, earlier.
                                                                                                  to notify the IRS of the new address. See
statements a corporation may need to file        Personal Holding Companies                       the Instructions for Form 8822-B for
in addition to the forms and statements                                                           details.
                                                 Personal holding companies must attach
discussed throughout these instructions.
                                                 to Form 1120-REIT a Schedule PH (Form

                                                                      -8-
• If the REIT is amending its return, check   Note. Report tax-exempt interest income        respect to controlled foreign corporations
the box for “Amended Return,” complete         on Form 1120-REIT, Schedule K, item 8.         owned by domestic partnerships in which
the entire return, correct the appropriate     Do not include tax-exempt interest on          the REIT has an interest. If the REIT also
lines with the new information, and            line 2. Also, if required, include the same    has a Form 5471 reporting requirement,
refigure the REIT's tax liability. Attach a    amount on Schedule M-1, line 7.                attach the form.
statement that explains the reason for the         Include interest income from tax credit        List the type and amount of income on
amendments and identifies the lines being      bonds on line 2.                               an attached schedule. If the REIT has only
changed on the amended return.                                                                one item of other income, describe it in
                                               Line 3. Gross rents. Include the




   DRAFT AS OF
                                                                                              parentheses on line 7. Examples of other
Item G. Type of REIT                           following.
                                                                                              income to report on line 7 are:
Check the appropriate box to indicate
                                                • Charges for customary services that          • Amounts received or accrued as
                                               may qualify as rents from real property are
whether you are filing a return for a                                                         consideration for entering into agreements
                                               described in Regulations section
“Mortgage REIT” or an “Equity REIT.” If                                                       to make real property loans or to purchase
                                               1.856-4(b)(1). Services customarily
the primary source of gross receipts is                                                       or lease real property.
                                               furnished to tenants of a REIT include
derived from mortgage interest and fees,                                                       • Recoveries of bad debts deducted in



  November 7, 2018
                                               parking facilities. See Rev. Rul. 2004-24,
check the “Mortgage” box. Otherwise,                                                          prior years under the specific charge-off
                                               2004-10 I.R.B. 550, for guidance to
check the “Equity” box.                                                                       method.
                                               determine whether amounts received by a
                                               REIT that provides parking facilities at its
                                                                                               • Refunds of taxes deducted in prior
Item H. PBA Code (Equity                       rental real properties qualify as rents from
                                                                                              years if they reduced income subject to
                                                                                              tax in the year deducted (see section 111).
REITs Only)                                    real property.
                                                                                              Do not offset current year taxes against
Enter only one code that best reflects the      • Rent from personal property leased          tax refunds.
principal business activity of an equity       under or with a lease of real property (but
                                               only if the rent from the personal property
                                                                                               • Any deduction previously taken under
REIT from the selection below.                                                                section 179A that is subject to recapture.
• 531110– Lessors of Residential               does not exceed 15% of the total rent for
                                                                                              The REIT must recapture the benefit of
Buildings & Dwellings                          the tax year charged for both the real and
                                                                                              any allowable deduction for clean-fuel
• 531120– Lessors of Nonresidential            personal property under such lease).
                                                                                              vehicle property (or clean-fuel vehicle
Buildings (except Miniwarehouses)              Figure the percentage of rents from
                                                                                              refueling property), if the property later
• 531130– Lessors of Miniwarehouses &          personal property by comparing the FMV
                                                                                              ceases to qualify. See Regulations section
Self-Storage Units                             of the personal rental property to the FMV
                                                                                              1.179A-1 for details.
• 531190– Lessors of Other Real Estate         of the total rental property. See section
                                               856(d)(1) for details.
                                                                                               • Ordinary income from trade or business
Property                                                                                      activities of a partnership (from
                                                • Rent from a taxable REIT subsidiary         Schedule K-1 (Form 1065)). Do not offset
                                               (TRS) either (a) if at least 90% of the
                                                                                              ordinary losses against ordinary income.
Part I—Real Estate                             leased space of the property is leased to
                                                                                              Instead, include the losses on line 18,
                                               persons other than TRSs of the REIT and
Investment Trust Taxable                       other than persons described in section
                                                                                              Form 1120-REIT. Show the partnership's
Income                                         856(d)(2)(B) at rents comparable to the
                                                                                              name, address, and EIN on a separate
                                                                                              statement attached to this return. If the
Include in Part I the REIT's share of gross    rent paid by the other tenants of the REIT
                                                                                              amount entered is from more than one
income from partnerships in which the          for comparable space; or (b) for certain
                                                                                              partnership, identify the amount from each
REIT is a partner, and the deductions          lodging facilities or health care property
                                                                                              partnership.
attributable to the gross income items.        operated by an eligible independent
See Regulations section 1.856-3(g).            contractor. For more information, including
                                                                                               • Any net positive section 481(a)
                                                                                              adjustment. See Section 481(a)
                                               definitions and additional requirements,
    Real estate investment trust taxable                                                      adjustment, earlier.
                                               see sections 856(d)(8) and 856(d)(9).
income does not include the following.         Also, see Rev. Proc. 2003-66, 2003-33
                                                                                               • Income from cancellation of debt (COD)
 • Gross income, gains, losses, and            I.R.B. 364 for the special rules on rents
                                                                                              from the repurchase of a debt instrument
deductions from foreclosure property                                                          for less than its adjusted issue price.
                                               paid to a REIT by certain joint ventures
(defined in section 856(e)). If the            that include a TRS.
                                                                                               • Any COD income deferred from 2009 or
aggregate of such amounts results in net                                                      2010 that is includible in income in 2018.
income, report these amounts in Part II.           See section 856(d)(2) for amounts          See section 108(i) and Rev. Proc.
 • Income or deductions from any               excluded from “rents from real property.”      2009-37.
prohibited transaction (defined in section     Line 4. Other gross rents. Enter the            • If you have a section 965(a) inclusion
857(b)(6)) resulting in a gain. Report these   gross amount received for renting property     for the tax year, enter the net amount (the
amounts in Part IV.                            not included on line 3.                        section 965(a) inclusion less the
                                                                                              corresponding section 965(c) deduction)
Income                                         Line 5. Capital gain net income. Every         on this line 7. You also must complete and
                                               sale or exchange of a capital asset must       attach Form 965, Inclusion of Deferred
Line 1. Dividends. Enter the total             be reported on Schedule D (Form 1120),
amount of dividends received during the                                                       Foreign Income Upon Transition to
                                               Capital Gains and Losses, even if there is     Participation Exemption System,
tax year.                                      no gain or loss.                               applicable schedules, and Form 965-B.
Line 2. Interest. Enter taxable interest on    Line 7. Other income. Enter any other           • An election can be made to take
U.S. obligations and on loans, notes,          taxable income not reported on lines 1         section 965(a) inclusions and
mortgages, bonds, bank deposits,               through 6, except amounts that must be         corresponding section 965(c) deductions
corporate bonds, tax refunds, etc. Do not      reported in Part II or IV.                     into account over 8 years. See Pub. 5292,
offset interest expense against interest                                                      How to Calculate Section 965 Amounts
income. Special rules apply to interest           Enter amounts included in income
                                                                                              and Elections Available to Taxpayers for
income from certain below-market-rate          under the section 951A GILTI provisions.
                                                                                              more information.
loans. See section 7872 for details.           See Form 8992, Part II, line 3, and the
                                               Instructions for Form 8992. Also, consider
                                               the applicability of section 951A with

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