PDF document

- 1 -

                           Userid: CPM                       Schema: instrx Leadpct: 100%        Pt. size: 9              Draft           Ok to Print
AH XSL/XML                 Fileid: … /i1120reit/2023/a/xml/cycle06/source                                            (Init. & Date) _______

Page 1 of 21                                                                                                         14:03 - 25-Jan-2024

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

                                                                                                                     Department of the Treasury
                                                                                                                     Internal Revenue Service
2023

Instructions for Form 

1120-REIT

U.S. Income Tax Return for Real Estate Investment Trusts

Section references are to the Internal Revenue Code unless                    Contents                                                                 Page
otherwise noted.                                                              Schedule A—Deduction for Dividends Paid                    . . . . . . .   16
Contents                                                               Page   Schedule J—Tax Computation             . . . . . . . . . . . . . . . . .   16
Photographs of Missing Children . . . . . . . . . . . . . . . .            1  Schedule K—Other Information . . . . . . . . . . . . . . . .               19
The Taxpayer Advocate Service . . . . . . . . . . . . . . . . .            1  Schedule L—Balance Sheets per Books                    . . . . . . . . .   20
How To Get Forms and Publications . . . . . . . . . . . . . .              2  Schedule M-1     . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
General Instructions   . . . . . . . . . . . . . . . . . . . . . . . . .   2
                                                                              Future Developments
Purpose of Form . . . . . . . . . . . . . . . . . . . . . . . . . . . .    2
                                                                              For the latest information about developments related to Form 
Who Must File  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   2  1120-REIT and its instructions, such as legislation enacted after 
General Requirements To Qualify as a REIT . . . . . . . .                  2  they were published, go to IRS.gov/Form1120REIT.
Other Requirements . . . . . . . . . . . . . . . . . . . . . . . . .       2
Termination of Election    . . . . . . . . . . . . . . . . . . . . . . .   2  What’s New
Taxable REIT Subsidiaries (TRS) . . . . . . . . . . . . . . . .            2  Increase in penalty for failure to file.       For tax returns required 
Where To File . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  3  to be filed in 2024, the minimum penalty for failure to file a return 
                                                                              that is over 60 days late has increased to the smaller of the tax 
When To File . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   3  due or $485. See Late filing of return, later.
Who Must Sign . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    4
                                                                              Deduction for certain energy efficient commercial building 
Paid Preparer Authorization . . . . . . . . . . . . . . . . . . . .        4  property.  For tax years beginning in 2023, REITs claiming the 
Assembling the Return      . . . . . . . . . . . . . . . . . . . . . . .   4  deduction for energy efficient commercial buildings should report 
Tax Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   4  the deduction on line 18 of Form 1120-REIT. See the instructions 
                                                                              for line 18, later.
Estimated Tax Payments . . . . . . . . . . . . . . . . . . . . . .         5
Interest and Penalties   . . . . . . . . . . . . . . . . . . . . . . . .   5  Expiration of 100% business meal expense deduction.                        The 
                                                                              temporary 100% business meal expense deduction for food and 
Accounting Methods . . . . . . . . . . . . . . . . . . . . . . . . .       5  beverages provided by a restaurant does not apply to amounts 
Accounting Period    . . . . . . . . . . . . . . . . . . . . . . . . . .   6  paid or incurred after 2022.
Rounding Off to Whole Dollars . . . . . . . . . . . . . . . . . .          6  Elective payment election.         Applicable entities and electing 
Recordkeeping . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    6  taxpayers can elect to treat certain credits as elective payments. 
Other Forms That May Be Required . . . . . . . . . . . . . .               6  Any resulting overpayment may result in refunds. See the 
                                                                              instructions for line 25h, later. Also, see the Instructions for Form 
Statements   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7  3800.
Specific Instructions  . . . . . . . . . . . . . . . . . . . . . . . . .   8
Period Covered   . . . . . . . . . . . . . . . . . . . . . . . . . . . .   8  Photographs of Missing Children
Name and Address . . . . . . . . . . . . . . . . . . . . . . . . . .       8  The Internal Revenue Service is a proud partner with the 
Item B. 100%-Owned Subsidiaries and Personal                                  National Center for Missing & Exploited Children® (NCMEC). 
                                                                              Photographs of missing children selected by the Center may 
Holding Companies            . . . . . . . . . . . . . . . . . . . . . .   8  appear in instructions on pages that would otherwise be blank. 
Item C. Employer Identification Number (EIN) . . . . . . .                 8  You can help bring these children home by looking at the 
Item D. Date REIT Established . . . . . . . . . . . . . . . . . .          8  photographs and calling 1-800-THE-LOST (1-800-843-5678) if 
Item E. Total Assets   . . . . . . . . . . . . . . . . . . . . . . . . .   8  you recognize a child.

Item F. Final Return, Name Change, Address                                    The Taxpayer Advocate Service
Change, or Amended Return . . . . . . . . . . . . . . . .                  8  The Taxpayer Advocate Service (TAS) is an independent 
Item G. Type of REIT . . . . . . . . . . . . . . . . . . . . . . . . .     9  organization within the IRS that helps taxpayers and protects 
Item H. PBA Code (Equity REITs Only) . . . . . . . . . . . .               9  taxpayer rights. TAS's job is to ensure that every taxpayer is 
Part I—Real Estate Investment Trust Taxable                                   treated fairly and knows and understands their rights under the 
Income       . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9  Taxpayer Bill of Rights.
Part II—Tax on Net Income From Foreclosure                                      As a taxpayer, the REIT has rights that the IRS must abide by 
Property     . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   15 in its dealings with the REIT. TAS can help the REIT if:
Part III—Tax for Failure To Meet Certain                                      • A problem is causing financial difficulty for the business;
                                                                              • The business is facing an immediate threat of adverse action; 
Source-of-Income Requirements . . . . . . . . . . . .                      15 or
Part IV—Tax on Net Income From Prohibited 
Transactions     . . . . . . . . . . . . . . . . . . . . . . . . . . .     15

Jan 25, 2024                                                           Cat. No. 64243J

- 2 -

Page 2 of 21 Fileid: … /i1120reit/2023/a/xml/cycle06/source 14:03 - 25-Jan-2024

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

• The REIT has tried repeatedly to contact the IRS but no one If a REIT meets the requirement for ascertaining actual
has responded, or the IRS hasn't responded by the date ownership (see Regulations section 1.857-8 for details), and did
promised. not know (after exercising reasonable diligence), or have reason
TAS has offices in every state, the District of Columbia, and to know, that it was closely held, it will be treated as meeting the
Puerto Rico. Local advocates' numbers are in their local requirement that it is not closely held.
directories and at TaxpayerAdvocate.IRS.gov. The REIT can
also call TAS at 877-777-4778. Other Requirements
The gross income and diversification of investment requirements
TAS also works to resolve large-scale or systemic problems of section 856(c) must be met and the organization must:
that affect many taxpayers. If the REIT knows of one of these • Have been treated as a REIT for all tax years beginning after
broad issues, please report it to TAS through the Systemic February 28, 1986, or
Advocacy Management System at IRS.gov/SAMS. • Had, at the end of the tax year, no accumulated earnings and
For more information, go to IRS.gov/Advocate. profits from any tax year that it was not a REIT.
For this purpose, distributions are treated as made from the
How To Get Forms and Publications earliest earnings and profits accumulated in any non-REIT tax
Internet. You can access the IRS website 24 hours a day, 7 year. See section 857(d)(3).
days a week, at IRS.gov to: • The organization must adopt a calendar tax year unless it first
• Download forms, instructions, and publications; qualified for REIT status before October 5, 1976.
• Order IRS products online; • The deduction for dividends paid (excluding net capital gain
• Research your tax questions online; dividends, if any) must equal or exceed:
• Search publications online by topic or keyword; 1. 90% of the REIT's taxable income (excluding the
• View Internal Revenue Bulletins (IRBs) published in recent deduction for dividends paid and any net capital gain), plus
years; and 2. 90% of the excess of the REIT's net income from
• Sign up to receive local and national tax news by email. foreclosure property over the tax imposed on that income by
Tax forms and publications. The REIT can view, download, or section 857(b)(4)(A); less
print all of the forms and publications it may need at IRS.gov/ 3. Any excess noncash income, as determined under
FormsPubs. section 857(e).
Otherwise, the REIT can go to IRS.gov/OrderForms to place See sections 856 and 857, and the related regulations for
an order and have forms mailed to it. details and exceptions.

Termination of Election
General Instructions
The election to be treated as a REIT remains in effect until
Purpose of Form terminated, revoked, or the REIT has failed to meet the
requirements of the statutory relief provisions. It terminates
Use Form 1120-REIT, U.S. Income Tax Return for Real Estate automatically for any tax year in which the corporation, trust, or
Investment Trusts, to report the income, gains, losses, association is not a qualified REIT.
deductions, credits, certain penalties; and to figure the income
tax liability of a REIT. The organization may revoke the election for any tax year
after the first tax year the election is effective by filing a
Who Must File statement with the service center where it files its income tax
A corporation, trust, or association that meets certain conditions return. The statement must be filed on or before the 90th day
(discussed below) must file Form 1120-REIT if it elects to be after the first day of the tax year for which the revocation is to be
treated as a REIT for the tax year (or has made that election for a effective. The statement must include the following.
prior tax year and the election has not been terminated or • The name, address, and employer identification number (EIN)
revoked). The election is made by figuring taxable income as a of the organization;
REIT on Form 1120-REIT. • The tax year for which the election was made;
• A statement that the organization (according to section 856(g)
Qualified opportunity funds. To certify as a qualified (2)) revokes its election under section 856(c)(1) to be a REIT;
opportunity fund (QOF), the corporation must file Form and
1120-REIT and attach Form 8996, even if the corporation had no • The signature of an official authorized to sign the income tax
income or expenses to report. See Schedule K, Question 12, return of the organization.
later. Also, see the Instructions for Form 8996.
The organization may not make a new election to be taxed as
General Requirements To Qualify as a a REIT during the 4 years following the first year for which the
termination or revocation is effective. See section 856(g)(4) for
REIT exceptions.
To qualify as a REIT, an organization:
• Must be a corporation, trust, or association. Taxable REIT Subsidiaries (TRS)
• Must be managed by one or more trustees or directors. A REIT may own up to 100% of the stock in one or more taxable
• Must have beneficial ownership (a) evidenced by transferable REIT subsidiaries (TRS). A TRS must be a corporation (other
shares, or by transferable certificates of beneficial interest; and than a REIT or a qualified REIT subsidiary) and may provide
(b) held by 100 or more persons. (The REIT does not have to services to the REIT's tenants without disqualifying the rent
meet this requirement until its 2nd tax year.) received by the REIT. See section 856(l) for details, including
• Would otherwise be taxed as a domestic corporation. certain restrictions on the type of business activities a TRS may
• Must be neither a financial institution (referred to in section perform. Also, not more than 20% of the fair market value (FMV)
582(c)(2)), nor a subchapter L insurance company. of a REIT's total assets (25% for tax years beginning after July
• Cannot be closely held, as defined in section 856(h). (The 30, 2008, and no later than December 31, 2017) may be
REIT does not have to meet this requirement until its second tax securities of one or more TRSs (see section 856(c)(4) for
year.) details).

- 3 -

Page 3 of 21           Fileid: … /i1120reit/2023/a/xml/cycle06/source                                    14:03 - 25-Jan-2024

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

  Transactions between a TRS and its associated REIT must               section 355 applied, the corporation will not be eligible to make a 
be at arm's length. A REIT may be subject to a 100% tax to the          REIT election for any tax year beginning before the end of the 
extent it improperly allocates income and deductions between            10-year period beginning on the date of such distribution.
the REIT and the TRS (see section 857(b)(7) for details).                  See sections 355(h) and 856(c)(8) for more details.
Additional limitations on transactions between a TRS and its 
associated REIT include:                                                When To File
• Limitations on income from a TRS that may be treated as               Generally, a REIT must file its income tax return by the 15th day 
rents from real property by the REIT (see section 856(d)(8)), and       of the 4th month after the end of its tax year. A new REIT filing a 
• Limitations on a TRS's deduction for interest paid to its             short-period return must generally file by the 15th day of the 4th 
associated REIT (see section 163(j)).                                   month after the short period ends. A REIT that has dissolved 
  To elect to have an eligible corporation treated as a TRS, the        must generally file by the 15th day of the 4th month after the date 
corporation and the REIT must jointly file Form 8875, Taxable           it dissolved.
REIT Subsidiary Election.                                                  However, a REIT with a fiscal tax year ending June 30 must 
                                                                        file by the 15th day of the 3rd month after the end of its tax year. 
Restrictions on tax-free spinoffs from REITs. For                       A REIT with a short tax year ending anytime in June will be 
distributions after December 6, 2015, a REIT is generally               treated as if the short year ended on June 30, and must file by 
ineligible to participate in a tax-free spinoff as either a             the 15th day of the 3rd month after the end of its tax year.
distributing or controlled corporation under section 355. This 
general rule does not apply if both the distributing corporation           If the due date falls on a Saturday, Sunday, or legal holiday, 
and the controlled corporation are REITs immediately after the          the REIT can file on the next business day.
distribution. Also, a REIT may spin off a TRS if the following 
apply.                                                                  Private Delivery Services
• The distributing corporation has been a REIT at all times             The REIT can use certain private delivery services (PDS) 
during the 3-year period ending on the date of distribution;            designated by the IRS to meet the “timely mailing as timely filing” 
• The controlled corporation has been a TRS of the REIT at all          rule for tax returns. Go to IRS.gov/PDS for the current list of 
times during such period; and                                           designated services.
• The REIT has had control (as defined in section 368(c)                   The PDS can tell you how to get written proof of the mailing 
applied by taking into account stock owned, directly and                date.
indirectly, including through partnerships, by the REIT) of the 
TRS at all times during such period.                                       For the IRS mailing address to use if you're using a PDS, go 
                                                                        to IRS.gov/PDSStreetAddresses.
  A controlled corporation is treated as meeting the control 
requirements if the stock of the corporation was distributed by a               Private delivery services can't deliver items to P.O. 
TRS in a transaction to which section 355 applies and the assets           !    boxes. You must use the U.S. Postal Service to mail any 
of the corporation consist solely of the stock or assets held by        CAUTION item to an IRS P.O. box address.
one or more TRSs of the distributing corporation meeting the 
control requirements described above.                                   Extension of Time To File
  If a corporation that is not a REIT was a distributing or             File Form 7004, Application for Automatic Extension of Time To 
controlled corporation with respect to any distribution to which        File Certain Business Income Tax, Information, and Other 

Where To File
File the REIT's return at the applicable IRS address listed below.

If the REIT's principal business, office, or  And the total assets at the end of the  Use the following address:
agency is located in:                         tax year are:
Connecticut, Delaware, District of Columbia,                                         Department of the Treasury
                                              Less than $10 million and Schedule M-3 
Georgia, Illinois, Indiana, Kentucky, Maine,                                         Internal Revenue Service
                                                            is not filed
Maryland, Massachusetts, Michigan, New                                               Kansas City, MO 64999-0012
Hampshire, New Jersey, New York, North 
                                                                                     Department of the Treasury
Carolina, Ohio, Pennsylvania, Rhode Island,   $10 million or more, or less than $10 
                                                                                     Internal Revenue Service
South Carolina, Tennessee, Vermont,           million and Schedule M-3 is filed
Virginia, West Virginia, Wisconsin                                                   Ogden, UT 84201-0012
Alabama, Alaska, Arizona, Arkansas, 
California, Colorado, Florida, Hawaii, Idaho, 
Iowa, Kansas, Louisiana, Minnesota,                                                  Department of the Treasury
Mississippi, Missouri, Montana, Nebraska,                   Any Amount               Internal Revenue Service
Nevada, New Mexico, North Dakota,                                                    Ogden, UT 84201-0012
Oklahoma, Oregon, South Dakota, Texas, 
Utah, Washington, Wyoming
                                                                                     Internal Revenue Service
A foreign country or U.S. territory                         Any Amount               P.O. Box 409101
                                                                                     Ogden, UT 84409

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

                                                                                                                                          3

- 4 -

Page 4 of 21           Fileid: … /i1120reit/2023/a/xml/cycle06/source                             14:03 - 25-Jan-2024

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

Returns, to request an extension of time to file. Generally, file     4. Form 8996.
Form 7004 by the regular due date of the REIT's income tax            5. Form 4136.
return. See the Instructions for Form 7004 for more information.
                                                                      6. Form 8978.
Who Must Sign                                                         7. Form 965-B.
The return must be signed and dated by:                               8. Form 8941.
• The president, vice president, treasurer, assistant treasurer,      9. Form 3800.
chief accounting officer; or
• Any other corporate officer (such as a tax officer) authorized      10.   Form 8997
to sign.                                                              11.   Additional schedules in alphabetical order.
  If a return is filed on behalf of a REIT by a receiver, trustee, or 12.   Additional forms in numerical order.
assignee, the fiduciary must sign the return, instead of the          13.   Supporting statements and attachments.
corporate officer. Returns and forms signed by a receiver or          Complete every applicable entry space on Form 1120-REIT. 
trustee in bankruptcy on behalf of a REIT must be accompanied         Do not enter “See attached” instead of completing the entry 
by a copy of the order or instructions of the court authorizing       spaces. If more space is needed on the forms or schedules, 
signing of the return or form.                                        attach separate sheets using the same size and format as the 
Paid Preparer Use Only section.    If an employee of the REIT         printed forms.
completes Form 1120-REIT, the paid preparer's section should 
remain blank. Anyone who prepares Form 1120-REIT but does             If there are supporting statements and attachments, arrange 
not charge the REIT should not complete that section. Generally,      them in the same order as the schedules or forms they support 
anyone who is paid to prepare the return must sign it and             and attach them last. Show the totals on the printed forms. Enter 
complete the section.                                                 the REIT's name and EIN on each supporting statement or 
                                                                      attachment.
  The paid preparer must complete the required preparer 
information and:                                                      Tax Payments
• Sign the return in the space provided for the preparer's            Generally, the REIT must pay the tax due in full no later than the 
signature,                                                            due date for filing its tax return (not including extensions). See 
• Include their Preparer Tax Identification Number (PTIN), and        the instructions for line 27, later. If the due date falls on a 
• Give a copy of the return to the REIT.                              Saturday, Sunday, or legal holiday, the payment is due on the 
         A paid preparer may sign the original or amended             next day that isn't a Saturday, Sunday, or legal holiday.
TIP      returns by rubber stamp, mechanical device, or 
         computer software program.                                   Electronic Deposit Requirement
                                                                      REITs must use electronic funds transfers to make all federal tax 
                                                                      deposits (such as deposits of employment, excise, and 
Paid Preparer Authorization                                           corporate income tax). Generally, electronic funds transfers are 
If the REIT wants to allow the IRS to discuss its 2023 tax return     made using the Electronic Federal Tax Payment System 
with the paid preparer who signed it, check the “Yes” box in the      (EFTPS). However, if the REIT does not want to use EFTPS, it 
signature area of the return. This authorization applies only to the  can arrange for its tax professional, financial institution, payroll 
individual whose signature appears in the “Paid Preparer Use          service, or other trusted third party to make deposits on its 
Only” section of the REIT's return. It does not apply to the firm, if behalf. Also, it may arrange for its financial institution to submit a 
any, shown in that section.                                           same-day wire payment (discussed below) on its behalf. EFTPS 
                                                                      is a free service provided by the Department of the Treasury. 
  If the “Yes” box is checked, the REIT is authorizing the IRS to 
                                                                      Services provided by a tax professional, financial institution, 
call the paid preparer to answer any questions that may arise 
                                                                      payroll service, or other third party may have a fee.
during the processing of its return. The REIT is also authorizing 
the paid preparer to:                                                 To get more information about EFTPS or to enroll in EFTPS, 
• Give the IRS any information that is missing from the return;       visit EFTPS.gov. To contact EFTPS using Telecommunications 
• Call the IRS for information about the processing of the return     Relay Services (TRS) for people who are deaf, hard of hearing, 
or the status of any related refund or payment(s); and                or have a speech disability, dial 711 and provide the TRS 
• Respond to certain IRS notices about math errors, offsets,          assistant the 800-555-4477 number above or 800-733-4829. 
and return preparation.                                               Additional information about EFTPS is also available in Pub. 966.
  The REIT is not authorizing the paid preparer to receive any        Depositing on time.  For any deposit made by EFTPS to be on 
refund check, bind the REIT to anything (including any additional     time, the REIT must submit the deposit by 8 p.m. Eastern time 
tax liability), or otherwise represent the REIT before the IRS.       the day before the date the deposit is due. If the REIT uses a 
                                                                      third party to make deposits on its behalf, they may have different 
  The authorization will automatically end no later than the due      cutoff times.
date (without regard to extensions) for filing the REIT's 2024 tax 
return. If the REIT wants to expand the paid preparer's               Same-day wire payment option.  If the REIT fails to submit a 
authorization, see Pub. 947, Practice Before the IRS and Power        deposit transaction on EFTPS by 8 p.m. Eastern time on the day 
of Attorney.                                                          before the date a deposit is due, it can still make its deposit on 
                                                                      time by using the Federal Tax Collection Service (FTCS). To use 
Assembling the Return                                                 the same-day payment method, the REIT will need to make 
To ensure that the REIT's tax return is correctly processed,          arrangements with its financial institution ahead of time 
attach all schedules and other forms after page 5 of Form             regarding availability, deadlines, and costs. Financial institutions 
1120-REIT, in the following order.                                    may charge a fee for payments made this way. To learn more 
                                                                      about the information the REIT will need to provide its financial 
  1. Schedule N (Form 1120).                                          institution to make a same-day wire payment, visit the IRS 
  2. Schedule D (Form 1120).                                          website at IRS.gov/SameDayWire.
  3. Form 8949.

4

- 5 -

Page 5 of 21 Fileid: … /i1120reit/2023/a/xml/cycle06/source 14:03 - 25-Jan-2024

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

collecting, accounting for, or paying over these taxes, and who
Estimated Tax Payments acted willfully in not doing so. The penalty is equal to the full
Generally, the following rules apply to the REIT's payments of amount of the unpaid trust fund tax. See the Instructions for
estimated tax. Form 720 or Pub. 15 (Circular E), Employer's Tax Guide, for
• The REIT must make installment payments of estimated tax if details, including the definition of responsible persons.
it expects its total tax for the year (less applicable credits) to be
$500 or more. Note. The trust fund recovery penalty will not apply to any
• The REIT must use electronic funds transfers to make amount of trust fund taxes an employer holds back in anticipation
installment payments of estimated tax. of the credit for qualified sick and family leave wages or the
• The installments are due by the 15th day of the 4th, 6th, 9th, employee retention credit that they are entitled to. See Pub. 15 or
and 12th months of the tax year. If any date falls on a Saturday, Pub. 51 for more information.
Sunday, or legal holiday, the installment is due on the next
regular business day. Failure to ascertain ownership. If the REIT fails to comply
• If, after the REIT figures and deposits estimated tax, it finds with Regulations section 1.857-8 for ascertaining ownership and
that its tax liability for the year will be more or less than originally maintaining factual ownership records for a tax year, it must pay
estimated, it may have to refigure its required installments. If a $25,000 penalty ($50,000 for intentional disregard) upon
earlier installments were underpaid, the REIT may owe a penalty. notice and demand by the IRS. If the REIT can show that the
See the instructions for line 26, later. failure was due to reasonable cause, the penalty may not be
• If the REIT overpaid its estimated tax, it may be able to get a imposed. For more information, see section 857(f).
quick refund by filing Form 4466, Corporation Application for Failure to satisfy certain REIT qualification provisions. If
Quick Refund of Overpayment of Estimated Tax. The the REIT is required to pay the $50,000 penalty under section
overpayment must be at least 10% of the REIT's expected 856(g)(5)(C) for each failure to satisfy a REIT qualification
income tax liability and at least $500. provision of sections 856–859 (other than section 856(c)(2),
856(c)(3), or 856(c)(4)) due to reasonable cause and not willful
See section 6655 and Pub. 542, Corporations, for more neglect, see the instructions for Schedule J, line 2f, later.
information on how to figure estimated taxes.
Other penalties. Other penalties can be imposed for
Interest and Penalties negligence, substantial understatement of tax, reportable
transaction understatements, and fraud. See sections 6662,
If the corporation receives a notice about penalties after 6662A, and 6663.
! it files its return, send the IRS an explanation and we will
CAUTION determine if the corporation meets the reasonable-cause Accounting Methods
criteria. Do not attach an explanation when the corporation’s Figure taxable income using the method of accounting regularly
return is filed. used in keeping the REIT's books and records. In all cases, the
method used must clearly show taxable income.
Interest. Interest is charged on taxes paid late even if an
extension of time to file is granted. Interest is also charged on Generally, permissible methods include:
penalties imposed for failure to file, negligence, fraud, substantial • Cash,
valuation misstatements, and substantial understatements of tax • Accrual, or
from the due date (including extensions) to the date of payment. • Any other method authorized by the Internal Revenue Code.
The interest charge is figured at a rate determined under section Accrual method. Generally, a REIT must use the accrual
6621. method of accounting if its average annual gross receipts for the
Late filing of return. A REIT that does not file its tax return by 3 prior tax years exceed $29 million. See section 448(c).
the due date, including extensions, may be penalized 5% of the For more information, see Pub. 538, Accounting Periods and
unpaid tax for each month or part of a month the return is late, up Methods.
to a maximum of 25% of the unpaid tax. The minimum penalty
for a tax return required to be filed in 2024 that is over 60 days Change in accounting method. Generally, the REIT must get
late is the smaller of the tax due or $485. The penalty will not be IRS consent to change either an overall method of accounting or
imposed if the REIT can show that the failure to file on time was the accounting treatment of any material item for income tax
due to reasonable cause. See Caution above. purposes. To obtain consent, the REIT must generally file Form
3115, Application for Change in Accounting Method. See the
Late payment of tax. A REIT that does not pay the tax when Instructions for Form 3115 and Pub. 538 for more information
due may generally be charged a penalty for the failure to pay tax. and exceptions. Also, see the Instructions for Form 3115 for
The amount of the penalty is / of 1% of the unpaid tax for each 1 2 procedures that may apply for obtaining automatic consent to
month or part of a month the tax is not paid, up to a maximum of change certain methods of accounting, non-automatic change
25% of the unpaid tax. The penalty will not be imposed if the procedures, and reduced Form 3115 filing requirements.
REIT can show that the failure to pay on time was due to Section 481(a) adjustment. If the REIT's taxable income for
reasonable cause. See Caution above. the current tax year is figured under a method of accounting
Trust fund recovery penalty. This penalty may apply if certain different from the method used in the preceding tax year, the
excise, income, social security, and Medicare taxes that must be REIT may have to make an adjustment under section 481(a) to
collected or withheld are not collected or withheld, or these taxes prevent amounts of income or expenses from being duplicated
are not paid. These taxes are generally reported on: or omitted. This is referred to as a “section 481(a) adjustment.”
• Form 720, Quarterly Federal Excise Tax Return; The section 481(a) adjustment period is generally 1 year for a
• Form 941, Employer's QUARTERLY Federal Tax Return; net negative adjustment and 4 years for a net positive
• Form 943, Employer Annual Federal Tax Return for adjustment. However, in some cases, a REIT can elect to modify
Agricultural Employees; the section 481(a) adjustment period. The REIT must complete
• Form 944, Employer's ANNUAL Federal Tax Return; or the appropriate lines of Form 3115 to make the election. See the
• Form 945, Annual Return of Withheld Federal Income Tax. Instructions for Form 3115 for more information and exceptions.
The trust fund recovery penalty may be imposed on all If the net section 481(a) adjustment is positive, report it on line 7
persons who are determined by the IRS to be responsible for

- 6 -

Page 6 of 21 Fileid: … /i1120reit/2023/a/xml/cycle06/source 14:03 - 25-Jan-2024

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

as other income. If the net section 481(a) adjustment is negative, Source Income Subject to Withholding; and Form 1042-T,
report it on line 19 as a deduction. Annual Summary and Transmittal of Forms 1042-S. Use these
forms to report and send withheld tax on payments or
Note. Include any net positive section 481(a) adjustment on distributions made to nonresident alien individuals, foreign
Part I, line 7. Report any negative adjustment on Part I, line 19. partnerships, or foreign corporations to the extent these
payments constitute gross income from sources within the
Accounting Period United States (see sections 861 through 865).
A REIT must figure its taxable income on the basis of a tax year. Also, see sections 1441 and 1442, and Pub. 515, Withholding
A tax year is the annual accounting period a REIT uses to keep of Tax on Nonresident Aliens and Foreign Entities.
its records and report its income and expenses. A REIT adopts a • Form 1099-DIV, Dividends and Distributions. Use this form to
tax year when it files its first income tax return. It must adopt a report certain dividends and distributions.
tax year by the due date (not including extensions) of its initial • Form 2438, Undistributed Capital Gains Tax Return, must be
income tax return. filed by the REIT if it designates undistributed net long-term
capital gains under section 857(b)(3)(C).
Note. A REIT must adopt a calendar year unless it first qualified • Form 2439, Notice to Shareholder of Undistributed
for REIT status before October 5, 1976. Long-Term Capital Gains, must be completed and a copy given
Change of tax year. A REIT may not change its tax year to any to each shareholder for whom the REIT paid tax on undistributed
tax year other than the calendar year. Generally, a REIT must net long-term capital gains under section 857(b)(3)(C).
receive consent from the IRS before changing its tax year by • Form 3520, Annual Return To Report Transactions With
filing Form 1128, Application To Adopt, Change, or Retain a Tax Foreign Trusts and Receipt of Certain Foreign Gifts, is required
Year. either if the REIT received a distribution from a foreign trust or if
However, upon electing to be taxed as a REIT, an entity that the REIT was a grantor of, transferor of, or transferor to a foreign
has not engaged in any active trade or business may change its trust that existed during the tax year. See Question 5 of
tax year to a calendar year without obtaining the consent. Schedule N (Form 1120).
• Form 5471, Information Return of U.S. Persons With Respect
See the Instructions for Form 1128 and Pub. 538 for more to Certain Foreign Corporations, is required if the REIT is a U.S.
information on accounting periods and tax years. shareholder of a controlled foreign corporation, a specified
foreign corporation, or otherwise subject to the reporting
Rounding Off to Whole Dollars requirements of section 6038 or 6046, and the related
The REIT may enter decimal points and cents when completing regulations.
its return. However, the REIT should round off cents to whole • Form 5472, Information Return of a 25% Foreign-Owned U.S.
dollars on its return, forms, and schedules to make completing Corporation or a Foreign Corporation Engaged in a U.S. Trade or
its return easier. The REIT must either round off all amounts on Business. This form is filed if the REIT is 25% or more foreign
its return to whole dollars, or use cents for all amounts. To round, owned. See the instructions for Schedule K, Question 5, later.
drop amounts under 50 cents and increase amounts from 50 to • Form 6198, At-Risk Limitations. Use this form if a REIT is
99 cents to the next dollar. For example, $8.40 rounds to $8 and closely held, as described in section 465(a)(1)(B), and (1)
$8.50 rounds to $9. directly or indirectly has any amounts not at risk that are invested
If two or more amounts must be added to figure the amount to in an at-risk activity that incurred a loss; or (2) engages in certain
enter on a line, include cents when adding the amounts and activities and has borrowed amounts not at risk. See section 465
round off only the total. and the Instructions for Form 6198.
• Form 7205, Energy Efficient Commercial Buildings
Recordkeeping Deduction. Use Form 7205 to calculate and claim the deduction
Keep the REIT's records for as long as they may be needed for under section 179D for qualifying energy efficient commercial
the administration of any provision of the Internal Revenue Code. buildings placed in service during the tax year.
Usually, records that support an item of income, deduction, or • Form 8275, Disclosure Statement, and Form 8275-R,
credit on the return must be kept for 3 years from the date the Regulation Disclosure Statement, are used to disclose items or
return is due or filed, whichever is later. Keep records that verify positions taken on a tax return that are not otherwise adequately
the REIT's basis in property for as long as they are needed to disclosed on a tax return or that are contrary to Treasury
figure the basis of the original or replacement property. regulations (to avoid parts of the accuracy-related penalty or
certain preparer penalties).
The REIT should also keep copies of all filed returns. They • Form 8300, Report of Cash Payments Over $10,000
help in preparing future and amended returns and in the Received in a Trade or Business. Use this form to report the
calculation of earnings and profits. receipt of more than $10,000 in cash or foreign currency in one
transaction or a series of related transactions.
Other Forms That May Be Required • Form 8612, Return of Excise Tax on Undistributed Income of
In addition to Form 1120-REIT, the REIT may have to file some of Real Estate Investment Trusts, is filed if the REIT is liable for the
the following forms. 4% excise tax on undistributed income imposed under section
• Form 926, Return by a U.S. Transferor of Property to a 4981.
Foreign Corporation, is filed to report certain transfers to foreign • Form 8621, Information Return by a Shareholder of a Passive
corporations under section 6038B. Foreign Investment Company or Qualified Electing Fund, is
• Form 966, Corporate Dissolution or Liquidation, is used to required if the REIT is a direct or indirect shareholder of a
report the adoption of a resolution or plan to dissolve the passive foreign investment company, as defined in section
corporation or liquidate any of its stock. 1297(a).
• Form 976, Claim for Deficiency Dividends Deductions by a • Form 8810, Corporate Passive Activity Loss and Credit
Personal Holding Company, Regulated Investment Company, or Limitations. Use this form if a REIT is closely held, as described
a Real Estate Investment Trust, is used to claim a deduction for in section 469(j)(1), and has losses or credits from passive
deficiency dividends. See section 860 and the related activities. See section 469, the related regulations, and the
regulations. Instructions for Form 8810.
• Form 1042, Annual Withholding Tax Return for U.S. Source
Income of Foreign Persons; Form 1042-S, Foreign Person's U.S.

- 7 -

Page 7 of 21 Fileid: … /i1120reit/2023/a/xml/cycle06/source 14:03 - 25-Jan-2024

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

• Form 8865, Return of U.S. Persons With Respect To Certain corporation's GILTI under section 951A and attach it to Form
Foreign Partnerships. A REIT may have to file Form 8865 if it: 1120-REIT.
1. Controlled a foreign partnership (that is, owned more than • Form 8996, Qualified Opportunity Fund. Use this form to
a 50% direct or indirect interest in the partnership). certify that the REIT organized as a qualified opportunity fund
(QOF) to invest in qualified opportunity zone property. In
2. Owned at least a 10% direct or indirect interest in a addition, a QOF REIT files Form 8996 annually to report that it
foreign partnership while U.S. persons controlled that meets the 90% investment standard of section 1400Z-2 or to
partnership. compute the penalty if it fails to meet the investment standard.
3. Had an acquisition, disposition, or change in proportional • Form 8997, Initial and Annual Statement of Qualified
interest in a foreign partnership that: Opportunity Fund (QOF) Investments. Use this form to report
• Increased its direct interest to at least 10% or reduced its investments in one or more QOFs. Report the amount of
direct interest of at least 10% to less than 10%. deferred gains invested in QOFs for the current tax year, which
• Changed its direct interest by at least a 10% interest. include capital gains deferred and invested in QOFs and
4. Contributed property to a foreign partnership in exchange disposal investments in QOFs, and the amount of deferred gains
for a partnership interest if: invested in QOFs at the end of the current tax year.
• Immediately after the contribution, the REIT owned, directly or
indirectly, at least a 10% interest in the foreign partnership; or Statements
• The FMV of the property the REIT contributed to the foreign Reportable transaction disclosure statement. Disclose
partnership in exchange for a partnership interest, when added information for each reportable transaction in which the REIT
to other contributions of property made to the foreign partnership participated. Form 8886, Reportable Transaction Disclosure
during the preceding 12-month period, exceeds $100,000. Statement, must be filed for each tax year that the federal
Also, the REIT may have to file Form 8865 to report certain income tax liability of the REIT is affected by its participation in
dispositions by a foreign partnership of property it previously the transaction. The following are reportable transactions.
contributed to that foreign partnership if it was a partner at the 1. Any listed transaction, which is a transaction that is the
time of the disposition. For more details, including penalties for same as or substantially similar to one of the types of
failing to file Form 8865, see Form 8865 and its separate transactions that the IRS has determined to be a tax avoidance
instructions. transaction and identified by notice, regulation, or other
• Form 8875, Taxable REIT Subsidiary Election, is filed jointly published guidance as a listed transaction.
by a corporation and a REIT to have the corporation treated as a 2. Any transaction offered under conditions of confidentiality
taxable REIT subsidiary. for which the REIT (or a related party) paid an advisor a fee of at
• Form 8927, Determination Under Section 860(e)(4) by a least $250,000.
Qualified Investment Entity. Use Form 8927 to make a 3. Certain transactions for which the REIT (or a related
determination under section 860(e)(4) and to establish the date party) has contractual protection against disallowance of the tax
of determination for purposes of making a deficiency dividend benefits.
distribution.
• Form 8937, Report of Organizational Actions Affecting Basis 4. Certain transactions resulting in a loss of at least $10
of Securities. Use this form when any organizational action million in any single year or $20 million in any combination of
affects the basis of holders of either a security or a class of the years.
security. For example, a REIT may use this form in connection 5. Any transaction identified by the IRS by notice, regulation,
with transactions such as a nontaxable cash or stock distribution or other published guidance as a “transaction of interest.” See
to shareholders, or a conversion rate adjustment on a convertible Notice 2009-55, 2009-31 I.R.B. 170.
debt instrument that results in a distribution under section
305(c). However, a REIT that reports undistributed capital gains For more information, see Regulations section 1.6011-4.
to shareholders on Form 2439 can satisfy the organizational Also, see the Instructions for Form 8886.
action reporting requirements for those undistributed gains if the Penalties. The REIT may have to pay a penalty if it is required
REIT timely files and gives Form 2439 to all proper parties for the to disclose a reportable transaction under section 6011 and fails
organizational action. For more information, see the Instructions to properly complete and file Form 8886. Penalties may also
for Form 8937. apply under section 6707A if the REIT fails to file Form 8886 with
• Form 8975, Country-by-Country Report. Certain U.S. its Form 1120-REIT, fails to provide a copy of Form 8886 to the
persons that are the ultimate parent entity of a U.S. multinational Office of Tax Shelter Analysis (OTSA), or files a form that fails to
enterprise group with annual revenue for the preceding reporting include all the information required (or includes incorrect
period of $850 million or more are required to file Form 8975. information). Other penalties, such as an accuracy-related
Form 8975 and its Schedules A (Form 8975) must be filed with penalty under section 6662A, may also apply. See the
the income tax return of the ultimate parent entity of a U.S. Instructions for Form 8886 for details on these and other
multinational enterprise group for the tax year in or within which penalties.
the reporting period covered by Form 8975 ends. The first Reportable transactions by material advisors. Material
required reporting period for an ultimate parent entity is the advisors to any reportable transaction must disclose certain
12-month reporting period that begins on or after the first day of information about the reportable transaction by filing Form 8918,
a tax year of the ultimate parent entity that begins on or after Material Advisor Disclosure Statement, with the IRS. For details,
June 30, 2016. For more information, see Form 8975, see the Instructions for Form 8918.
Schedule A (Form 8975) and the Instructions for Form 8975 and
Schedule A (Form 8975). Transfers to a corporation controlled by the transferor.
• Form 8990, Limitation on Business Interest Expense Under Every significant transferor (as defined in Regulations section
Section 163(j). Use this form to calculate the amount of business 1.351-3(d)(1)) that receives stock of a corporation in exchange
interest expense you can deduct and the amount to carry for property in a nonrecognition event must include the
forward to the next year. statement required by Regulations section 1.351-3(a) on or with
• Form 8992, U.S. Shareholder Calculation of Global Intangible the transferor's tax to its return for the tax year of the exchange.
Low-Taxed Income (GILTI). Use this form to figure the domestic The transferee corporation must include the statement required
by Regulations section 1.351-3(b) on or with its return for the tax

- 8 -

Page 8 of 21     Fileid: … /i1120reit/2023/a/xml/cycle06/source                                      14:03 - 25-Jan-2024

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

year of the exchange, unless all the required information is         corporation's principal office is located in Little Rock, Arkansas, 
included in any statement(s) provided by a significant transferor    the corporation should enter the Little Rock address.
that is attached to the same return for the same section 351           If the REIT receives its mail in care of a third party (such as an 
exchange. If the transferor or transferee corporation is a           accountant or an attorney), enter on the street address line “C/O” 
controlled foreign corporation (CFC), each U.S. shareholder          followed by the third party's name and street address or P.O. box.
(within the meaning of section 951(b)) must include the required 
statement on or with its return.                                     Item B. 100%-Owned Subsidiaries 
Distributions under section 355.    Every REIT that makes a          and Personal Holding Companies
distribution of stock or securities of a controlled corporation, as 
described in section 355 (or so much of section 356 as it relates 
to section 355), must include the statement required by              REITs With 100%-Owned Subsidiaries
Regulations section 1.355-5(a) on or with its return for the year of Check this box if this return is filed for a REIT with 100%-owned 
the distribution. A significant distributee (as defined in           REIT subsidiaries under section 856(i). These subsidiaries are 
Regulations section 1.355-5(c)) that receives stock or securities    not treated as separate corporations.
of a controlled corporation must include the statement required        Do not check this box for a taxable REIT subsidiary. See the 
by Regulations section 1.355-5(b) on or with its return for the      instructions for Taxable REIT Subsidiaries, earlier.
year of receipt. If the distributing or distributee corporation is a 
CFC, each U.S. shareholder (within the meaning of section            Personal Holding Companies
951(b)) must include the statement on or with its return.            Personal holding companies must attach to Form 1120-REIT a 
Dual consolidated losses. If a domestic corporation incurs a         Schedule PH (Form 1120), U.S. Personal Holding Company 
dual consolidated loss (as defined in Regulations section            (PHC) Tax. See the Instructions for Schedule PH (Form 1120) for 
1.1503-2(c)(5)), the corporation (or consolidated group) may         details.
need to attach an elective relief agreement and/or an annual 
certification, as provided in Regulations section 1.1503-2(g)(2).    Item C. Employer Identification 
Election to reduce basis under section 362(e)(2)(C).       If        Number (EIN)
property is transferred to a corporation subject to section 362(e)   Enter the REIT's EIN. If the REIT does not have an EIN, it must 
(2), the transferor and the transferee corporation may elect under   apply for one. An EIN may be applied for:
section 362(e)(2)(C) to reduce the transferor's basis in the stock   • Online by visiting IRS.gov/EIN. The EIN is issued immediately 
received instead of reducing the transferee corporation's basis in   once the application information is validated.
the property transferred. Once made, the election is irrevocable.    • By faxing or mailing Form SS-4, Application for Employer 
For more information, see section 362(e)(2) and Regulations          Identification Number.
section 1.362-4. If an election is made, a statement must be filed 
in accordance with Regulations section 1.362-4(d)(3).                  If the REIT has not received its EIN by the time the return is 
                                                                     due, enter “Applied for” in the space for the EIN. For more 
Other forms and statements.         See Pub. 542 for a list of other details, see the Instructions for Form SS-4.
forms and statements a REIT may need to file in addition to the 
forms and statements discussed throughout these instructions.        Note. REITs located in the United States or U.S. territories can 
                                                                     use the online application process.

Specific Instructions                                                Item D. Date REIT Established
                                                                     If the REIT is a corporation under state or local law, enter the 
Period Covered                                                       date incorporated. If it is a trust or association, enter the date 
File the 2023 return for calendar year 2023 and fiscal years that    organized.
begin in 2023 and end in 2024. For a fiscal year return, fill in the 
tax year in the space at the top of the form.                        Item E. Total Assets
                                                                     Enter the REIT's total assets (as determined by the accounting 
Note. The 2023 Form 1120-REIT can also be used if:                   method regularly used in keeping its books and records) at the 
                                                                     end of the tax year. If there are no assets at the end of the tax 
• The REIT has a tax year of less than 12 months that begins         year, enter -0-.
and ends in 2024, and
• The 2024 Form 1120-REIT is not available at the time the           Item F. Final Return, Name Change, 
REIT is required to file its return.
                                                                     Address Change, or Amended Return
  The REIT must show its 2024 tax year on the 2023 Form              • If this is the REIT's final return, and it will no longer exist, 
1120-REIT and take into account any tax law changes that are         check the “Final return” box. See the instructions for Termination 
effective for tax years beginning after December 31, 2023.           of Election, earlier.
                                                                     • If the REIT has changed its name since it last filed a return, 
Name and Address                                                     check the box for “Name change.” Generally, a REIT must also 
Enter the REIT's true name (as set forth in the charter or other     have amended its articles of incorporation and filed the 
legal document creating it), address, and EIN on the appropriate     amendment with the state in which it was incorporated.
lines. Include the suite, room, or other unit number after the       • If the REIT has changed its address since it last filed a return 
street address. Enter the address of the REIT's principal office or  (including a change to an “in care of” address), check the box for 
place of business. If the post office does not deliver mail to the   “Address change.”
street address and the REIT has a P.O. box, show the box             Note. If a change in address or responsible party occurs after 
number instead.                                                      the return is filed, use Form 8822-B, Change of Address or 
                                                                     Responsible Party—Business, to notify the IRS of the new 
Note. Do not use the address of the registered agent for the         address. See the instructions for Form 8822-B for details.
state in which the corporation is incorporated. For example, if a    • If the REIT is amending its return, check the box for “Amended 
business is incorporated in Delaware or Nevada and the               Return,” complete the entire return, correct the appropriate lines 

8

- 9 -

Page 9 of 21 Fileid: … /i1120reit/2023/a/xml/cycle06/source 14:03 - 25-Jan-2024

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

with the new information, and refigure the REIT's tax liability. • Rent from a taxable REIT subsidiary (TRS) either (a) if at least
Attach a statement that explains the reasons for the 90% of the leased space of the property is leased to persons
amendments and identifies the lines being changed on the other than TRSs of the REIT and other than persons described
amended return. in section 856(d)(2)(B) at rents comparable to the rent paid by
the other tenants of the REIT for comparable space; or (b) for
Item G. Type of REIT certain lodging facilities or health care property operated by an
Check the appropriate box to indicate whether you are filing a eligible independent contractor. For more information, including
return for a “Mortgage REIT” or an “Equity REIT.” If the primary definitions and additional requirements, see sections 856(d)(8)
source of gross receipts is derived from mortgage interest and and 856(d)(9). Also, see Rev. Proc. 2003-66, 2003-33 I.R.B. 364,
fees, check the “Mortgage” box. Otherwise, check the “Equity” for the special rules on rents paid to a REIT by certain joint
box. ventures that include a TRS.
See section 856(d)(2) for amounts excluded from “rents from
Item H. PBA Code (Equity REITs Only) real property.”
Enter only one code that best reflects the principal business Line 4. Other gross rents. Enter the gross amount received for
activity of an equity REIT from the selection below. renting property not included on line 3.
• 531110– Lessors of Residential Buildings & Dwellings.
• 531120– Lessors of Nonresidential Buildings (except Line 5. Capital gain net income. Every sale or exchange of a
Miniwarehouses). capital asset must be reported on Schedule D (Form 1120),
• 531130– Lessors of Miniwarehouses & Self-Storage Units. Capital Gains and Losses, even if there is no gain or loss.
• 531190– Lessors of Other Real Estate Property. Line 7. Other income. Enter any other taxable income not
reported on lines 1 through 6, except amounts that must be
Part I—Real Estate Investment Trust reported in Part II or IV.
Enter amounts included in income under the section 951A
Taxable Income GILTI provisions. See Form 8992, Part II, line 5, and the
Include in Part I the REIT's share of gross income from Instructions for Form 8992. Also, consider the applicability of
partnerships in which the REIT is a partner, and the deductions section 951A with respect to controlled foreign corporations
attributable to the gross income items. See Regulations section owned by domestic partnerships in which the REIT has an
1.856-3(g). interest. If the REIT also has a Form 5471 reporting requirement,
Real estate investment trust taxable income does not include attach the form.
the following. List the type and amount of income on an attached schedule.
• Gross income, gains, losses, and deductions from foreclosure If the REIT has only one item of other income, describe it in
property (defined in section 856(e)). If the aggregate of such parentheses on line 7. Examples of other income to report on
amounts results in net income, report these amounts in Part II. line 7 include the following.
• Income or deductions from any prohibited transaction (defined • Amounts received or accrued as consideration for entering
in section 857(b)(6)) resulting in a gain. Report these amounts in into agreements to make real property loans or to purchase or
Part IV. lease real property.
• Recoveries of bad debts deducted in prior years under the
Income specific charge-off method.
• Refunds of taxes deducted in prior years if they reduced
Line 1. Dividends. Enter the total amount of dividends received income subject to tax in the year deducted (see section 111). Do
during the tax year. not offset current year taxes against tax refunds.
Line 2. Interest. Enter taxable interest on U.S. obligations and • Any deduction previously taken under section 179A that is
on loans, notes, mortgages, bonds, bank deposits, corporate subject to recapture. The REIT must recapture the benefit of any
bonds, tax refunds, etc. Do not offset interest expense against allowable deduction for clean-fuel vehicle property (or clean-fuel
interest income. Special rules apply to interest income from vehicle refueling property), if the property later ceases to qualify.
certain below-market-rate loans. See section 7872 for details. See Regulations section 1.179A-1 for details.
• Ordinary income from trade or business activities of a
Note. Report tax-exempt interest income on Form 1120-REIT, partnership (from Schedule K-1 (Form 1065)). Do not offset
Schedule K, line 8. Do not include tax-exempt interest on line 2. ordinary losses against ordinary income. Instead, include the
Also, if required, include the same amount on Schedule M-1, losses on line 19 of Form 1120-REIT. Show the partnership's
line 7. name, address, and EIN on a separate statement attached to
Include interest income from tax credit bonds on line 2. this return. If the amount entered is from more than one
partnership, identify the amount from each partnership.
Line 3. Gross rents. Include the following. • Any net positive section 481(a) adjustment. See Section
• Charges for customary services that may qualify as rents from 481(a) adjustment, earlier.
real property are described in Regulations section 1.856-4(b)(1). • Income from cancellation of debt (COD) from the repurchase
Services customarily furnished to tenants of a REIT include of a debt instrument for less than its adjusted issue price.
parking facilities. See Rev. Rul. 2004-24, 2004-10 I.R.B. 550, for • If the REIT elected to take section 965(a) inclusions and
guidance to determine whether amounts received by a REIT that corresponding section 965(c) deductions into account over 8
provides parking facilities at its rental real properties qualify as years in accordance with section 965(m), include the
rents from real property. current-year net section 965 inclusion (the section 965(a)
• Rent from personal property leased under or with a lease of inclusion less the corresponding section 965(c) deduction) on
real property (but only if the rent from the personal property does this line 7. You must also complete and attach Form 965-B,
not exceed 15% of the total rent for the tax year charged for both Corporate and Real Estate Investment Trust (REIT) Report of
the real and personal property under such lease). Figure the Net 965 Tax Liability and Electing REIT Report of 965 Amounts.
percentage of rents from personal property by comparing the • Form 965-B must be completed by an electing REIT for every
FMV of the personal rental property to the FMV of the total rental tax year for which the REIT has any section 965 amounts taken
property. See section 856(d)(1) for details. into account in accordance with section 965(m) or not fully taken

- 10 -

Page 10 of 21 Fileid: … /i1120reit/2023/a/xml/cycle06/source 14:03 - 25-Jan-2024

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

into account at any point during the tax year. For more For more details, see the Instructions for Form 4562,
information, see Form 965-B and the related instructions. Depreciation and Amortization.
• Any payroll tax credit taken by an employer on its 2023 If the REIT timely filed its return for the year without making an
employment tax returns (Forms 941, 943, and 944) for qualified election, it can still make an election by filing an amended return
paid sick and qualified paid family leave under the FFCRA and within 6 months of the due date of the return (excluding
the ARP (both the nonrefundable and refundable portions). The extensions). Clearly indicate the election on the amended return
REIT must include the full amount of the credit for qualified sick and write “Filed pursuant to section 301.9100-2” at the top of the
and family leave wages in gross income for the tax year that amended return. File the amended return at the same address
includes the last day of any calendar quarter in which the credit the REIT filed its original return. The election applies when
is allowed. figuring taxable income for the current tax year and all
Note. A credit is available only if the leave was taken after March subsequent years.
31, 2020, and before October 1, 2021, and only after the
qualified leave wages were paid, which might under certain Note. The REIT can choose to forgo the elections above by
circumstances not occur until a quarter after September 30, clearly electing to capitalize its start-up or organizational costs
2021, including quarters in 2023. on an income tax return filed by the due date (including
extensions) for the tax year in which the active trade or business
Deductions begins.
Limitations on Deductions Report the deductible amount of such costs and any
amortization on line 19. For amortization that begins during the
Section 263A uniform capitalization rules. The uniform current tax year, complete and attach Form 4562.
capitalization rules of section 263A generally require REITs to Passive activity and at-risk limitations. Loss and credit
capitalize certain costs to inventory or other property. limitations under sections 465 and 469 apply to REITs that are
REITs subject to the section 263A uniform capitalization rules closely held, as described in sections 465(a)(1)(B) and 469(j)(1).
are required to capitalize: REITs subject to sections 465 and 469 must complete Forms
1. Direct costs of assets produced or acquired for resale, 6198 and 8810 to compute allowable losses or credits. Before
and completing Form 8810, see Temporary Regulations section
1.163-8T for rules on allocating interest expense among
2. Certain indirect costs (including taxes) that are properly activities.
allocable to property produced or property acquired for resale.
Reducing certain expenses for which credits are allowable.
A REIT cannot deduct the costs required to be capitalized For each credit listed below, the REIT must reduce the otherwise
under section 263A until it sells, uses, or otherwise disposes of allowable deductions for expenses used to figure the credit by
the property (to which the costs relate). The REIT recovers these the amount of the current-year credit. Do not reduce the amount
costs through depreciation, amortization, or costs of goods sold. of the allowable deduction for any portion of the credit that was
For more details, including exemptions to the uniform passed through to the REIT from a pass-through entity on
capitalization rules, see Pub. 538. See section 263A(i) for Schedule K-1.
exemption for certain small businesses. For non-small business • Employment credits. See the instructions for line 10, later.
taxpayers, see Regulations sections 1.263A-1 through 1.263A-3. • Disabled access credit (Form 8826).
See section 263A(d), Regulations section 1.263A-4, and Pub. • Credit for employer social security and Medicare taxes paid
225 for rules for property produced in a farming business. on certain employee tips (Form 8846).
Transactions between related taxpayers. Generally, an • Credit for small employer pension plan start-up costs (Form
accrual basis taxpayer may only deduct business expenses and 8881).
interest owed to a related party in the year the payment is • Credit for employer-provided childcare facilities and services
included in the income of the related party. See sections 163(e) (Form 8882).
(3) and 267 for limitations on deductions for unpaid interest and If the REIT is eligible to claim any of these credits, figure each
expenses. current-year credit before figuring the deduction for expenses on
which the credit is based. If the REIT capitalized any costs on
Limitations on business interest expense. Business interest which it figured the credit, reduce the amount capitalized by the
expense may be limited. See section 163(j) and Form 8990. credit attributable to these costs.
Also, see Limitation on deduction in the instructions for line 15
and Schedule K, Question 11, later. See the instructions for the form used to figure the applicable
credit.
Golden parachute payments. A portion of the payments made
by a REIT to key personnel that exceeds their usual Line 9. Compensation of officers. Enter the deductible
compensation may not be deductible. This occurs when the officers’ compensation on line 9. Do not include compensation
REIT has an agreement (golden parachute) with these key deductible elsewhere on the return, such as elective
employees to pay them these excessive amounts if control of the contributions to a section 401(k) cash or deferred arrangement,
REIT changes. See section 280G and Regulations section or amounts contributed under a salary reduction SEP agreement
1.280G-1. Also, see the instructions for line 9, later. or a SIMPLE IRA plan.
If the REIT's total receipts are $500,000 or more, complete
Business start-up and organizational costs. A REIT can and attach Form 1125-E. Total receipts are figured by adding:
elect to deduct a limited amount of start-up and organizational Part I, line 8;
costs it paid or incurred. Any remaining costs must generally be •
amortized over a 180-month period. See sections 195 and 248 • Net capital gain from Part III, line 10; and
and the related regulations. • Form 2438, line 9a.
Time for making an election. The REIT generally elects to Enter on line 9 the amount from Form 1125-E, line 4.
deduct start-up or organizational costs by claiming the deduction Line 10. Salaries and wages. Enter the total salaries and
on its income tax return filed by the due date (including wages paid for the tax year, reduced by the amount claimed on:
extensions) for the tax year in which the active trade or business • Form 5884, Work Opportunity Credit;
begins. • Form 8844, Empowerment Zone Employment Credit;

- 11 -

Page 11 of 21 Fileid: … /i1120reit/2023/a/xml/cycle06/source 14:03 - 25-Jan-2024

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

• Form 8932, Credit for Employer Differential Wage Payments; terms beginning in 2024 will be published in the Internal
and Revenue Bulletin in early 2024.
• Form 8994, Employer Credit for Paid Family and Medical
Line 14. Taxes and licenses. Enter taxes paid or incurred
Leave.
during the tax year, but do not include the following.
See the instructions for these forms for more information. • Federal income taxes (except for the tax imposed on net
Do not include salaries and wages deductible elsewhere on recognized built-in gain allocable to ordinary income).
the return, such as amounts included in officers compensation, • Foreign or U.S. territory income taxes if a tax credit is claimed
elective contributions to a section 401(k) cash or deferred (however, see the Instructions for Form 5735 for special rules for
arrangement, or amounts contributed under a salary reduction territory income taxes).
SEP agreement or a SIMPLE IRA plan. • Taxes not imposed on the REIT.
• Taxes, including state or local sales taxes, that are paid or
If the REIT provided taxable fringe benefits to its incurred in connection with an acquisition or disposition of
! employees, such as personal use of a car, do not deduct property (these taxes must be treated as a part of the cost of the
CAUTION as wages the amounts allocated for depreciation and
acquired property or, in the case of a disposition, as a reduction
other expenses claimed on lines 16 and 19. in the amount realized on the disposition).
If the REIT claims a credit for any wages paid or • Taxes assessed against local benefits that increase the value
of the property assessed (such as for paving, etc.).
! incurred, it may need to reduce any corresponding • Taxes deducted elsewhere on the return.
CAUTION deduction for officers’ compensation and salaries and
wages. See the instructions for the form used to figure the • Excise taxes imposed under section 4981 on undistributed
REIT income.
applicable credit for more details.
See section 164(d) for information on apportionment of taxes
Line 11. Repairs and maintenance. Enter the cost of repairs on real property between the seller and the purchaser.
and maintenance not claimed elsewhere on the return, such as Do not reduce the REIT’s deduction for social security
labor and supplies, that are not payments to produce or improve ! and Medicare taxes by the nonrefundable and
tangible or real property. See Regulations section 1.263(a)-1. CAUTION refundable portions of any FFCRA and ARP credits for
For example, amounts are paid for improvements if they are for qualified sick and family leave wages claimed on its employment
betterments to the property, restorations of the property (such as tax returns. Instead, report this amount as income on line 7.
replacements of major components or substantial structural
parts), or if they adapt the property to a new or different use. Line 15. Interest. The deduction for interest is limited when the
Amounts paid to produce or improve property must be REIT is a policyholder or beneficiary with respect to a life
capitalized. See Regulations sections 1.263(a)-2 and -3. The insurance, endowment, or annuity contract issued after June 8,
REIT can deduct repair and maintenance expenses only to the 1997. For details, see section 264(f). Attach a statement
extent they relate to a trade or business activity. See Regulations showing the computation of the deduction.
section 1.162-4. The REIT may elect to capitalize certain repair
and maintenance costs consistent with its books and records. The REIT must make an interest allocation if the proceeds of
See Regulations section 1.263(a)-3(n) for information on how to a loan were used for more than one purpose. For example, the
make the election. loan proceeds were used to purchase a financial investment and
acquire an interest in a passive activity. See Temporary
Line 12. Bad debts. Enter the total debts that became Regulations section 1.163-8T for the interest allocation rules.
worthless in whole or in part during the tax year. A cash basis The following interest is not deductible.
taxpayer may not claim a bad debt deduction unless the amount • Interest on indebtedness incurred or continued to purchase or
was previously included in income. carry obligations if the interest is wholly exempt from income tax.
Line 13. Rents. If the REIT rented or leased a vehicle, enter the See section 265(b) for special rules and exceptions for financial
total annual rent or lease expense paid or incurred during the institutions. Also, see section 265(b)(7) for a temporary de
year. Also, complete Part V of Form 4562. If the REIT leased a minimis safe-harbor exception for certain financial institutions for
vehicle for a term of 30 days or more, the deduction for the tax-exempt bonds issued in 2009 and 2010.
vehicle lease expense may have to be reduced by an amount • For cash basis taxpayers, prepaid interest allocable to years
called the inclusion amount. following the current tax year (for example, a cash basis calendar
The REIT may have an inclusion amount if: year taxpayer who in 2023 prepaid interest allocable to any
And the vehicle's FMV on the first day of the period after 2023 can deduct only the amount allocable to 2023).
The lease term began: lease exceeded: • Interest and carrying charges on straddles. Generally, these
Cars (excluding trucks and vans): amounts must be capitalized. See section 263(g).
• Interest paid or incurred on any portion of an underpayment of
After 12/31/22 but before 1/1/24 . . $60,000 tax that is attributable to an understatement arising from an
After 12/31/21 but before 1/1/23. . . $56,000 undisclosed listed transaction or an undisclosed reportable
After 12/31/20 but before 1/1/22. . . $51,000 avoidance transaction (other than a listed transaction) entered
After 12/31/17 but before 1/1/21. . . $50,000 into in tax years beginning after October 22, 2004.
After 12/31/12 but before 1/1/18. . . $19,000 Limitation on deduction. Under section 163(j), business
Trucks and vans: interest expense is generally limited to the sum of business
After 12/31/22 but before 1/1/24. . . $60,000 interest income, 30% of the adjusted taxable income, and floor
After 12/31/21 but before 1/1/23. . . $56,000 plan financing interest. Business interest expense includes any
After 12/31/20 but before 1/1/22. . . $51,000 interest paid or accrued on indebtedness properly allocable to a
After 12/31/17 but before 1/1/21. . . $50,000 trade or business.
After 12/31/13 but before 1/1/18. . . $19,500 A taxpayer, other than a tax shelter, that meets the gross
After 12/31/09 but before 1/1/14. . . $19,000 receipts test is not required to limit business interest expense
under section 163(j). A taxpayer meets the gross receipts test if
the taxpayer has average annual gross receipts of $29 million or
See Pub. 463, Travel, Gift, and Car Expenses, for instructions less for the 3 prior tax years. Gross receipts generally include the
on figuring the inclusion amount. The inclusion amount for lease

- 12 -

Page 12 of 21 Fileid: … /i1120reit/2023/a/xml/cycle06/source 14:03 - 25-Jan-2024

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

aggregate gross receipts from all persons treated as a single after December 21, 2017. See section 162(f), as amended by
employer such as a controlled group of corporations, commonly P.L. 115-97, section 13306 (discussed later).
controlled partnerships or proprietorships, and affiliated service • Lobbying expenses. However, see exceptions (discussed
groups. later).
If the corporation fails to meet the gross receipts test, Form • Amounts paid or incurred after December 22, 2017, for any
8990 is generally required. An electing real property trade or settlement, payout, or attorney fees related to sexual harassment
business is excepted from the interest expense limitation of or sexual abuse, if such payments are subject to a nondisclosure
section 163(j). See section 163(j)(7), Form 8990, and the related agreement. See new section 162(q).
instructions. Also, see the questions on Schedule K, line 10, for Charitable contributions. Enter contributions or gifts actually
business interest expense elections, and on Schedule K, line 11, paid within the tax year to or for the use of charitable and
regarding conditions for filing Form 8990. governmental organizations described in section 170(c) and any
Special rules apply to: unused contributions carried over from prior years.
• Foregone interest on certain below-market-rate loans (see REITs reporting taxable income on the accrual method may
section 7872). elect to treat as paid during the tax year any deductible
• Original issue discount (OID) on certain high-yield discount contributions paid by the due date of the REIT’s tax return (not
obligations. See section 163(e)(5) to determine the amount of including extensions) if the contributions were authorized by the
the deduction for OID that is deferred and the amount that is board of directors during the tax year. Attach a declaration to the
disallowed on a high-yield discount obligation. The rules under return stating that the resolution authorizing the contributions
section 163(e)(5) do not apply to certain high-yield discount was adopted by the board of directors during the tax year. The
obligations issued after August 31, 2008, and before January 1, declaration must include the date the resolution was adopted.
2011. See section 163(e)(5)(F). Also, see Notice 2010-11, See Regulations section 1.170(a)(2)(B).
2010-4 I.R.B. 326. Limitation on deduction. Generally, the total amount
Interest expense cannot be used to offset interest claimed may not be more than 10% of taxable income (the sum
of Part I, line 23; Part II, line 5; Part IV, line 3; and Form 2438,
CAUTION
! income. line 11) computed without regard to the following.
• Any deduction for contributions.
Line 16. Depreciation. Include on line 16 depreciation and the • The limitation under section 249 on the deduction for bond
cost of certain property that the REIT elected to expense under premium.
section 179. See Form 4562 and the related instructions to figure • Any net operating loss (NOL) carryback to the tax year under
the amount to enter on this line. section 172.
Line 18. Energy efficient commercial buildings deduction. • Any capital loss carryback to the tax year under section
Complete and attach Form 7205 if claiming the energy efficient 1212(a)(1).
building deduction. See the Instructions for Form 7205 for more Carryover. Charitable contributions that exceed the 10%
information. Also, see section 179D. limitation cannot be deducted for the tax year but may be carried
over to the next 5 tax years.
Line 19. Other deductions. Attach a statement listing, by type
and amount, all allowable deductions that are not deductible Special rules apply if the REIT has an NOL carryover to the
elsewhere on the return. Enter the total on line 19. Include tax year. In figuring the charitable contributions deduction for the
amortization and organization expenses. Generally, a deduction tax year, the 10% limit is applied using the taxable income after
may not be taken for any amount that is allocable to a class of taking into account any deduction for the NOL.
exempt income. See section 265(b) for exceptions. To figure the amount of any remaining NOL carryover to later
Examples of other deductions include the following. years, taxable income must be modified (see section 172(b)). To
• Amortization (see Form 4562). the extent that contributions are used to reduce taxable income
• Certain business start-up and organizational costs that the for this purpose and increase an NOL carryover, a contributions
REIT elects to deduct. carryover is not allowed. See section 170(d)(2)(B).
• Depletion. Attach Form T (Timber), Forest Activities Schedule, Cash contributions. For contributions of cash, check, or
if a deduction for depletion of timber is taken. other monetary gifts (regardless of the amount), the REIT must
• Reforestation costs. The REIT can elect to deduct up to maintain a bank record, or a receipt, letter, or other written
$10,000 of qualified reforestation expenses for each qualifying communication from the donee organization indicating the name
timber property. The REIT can elect to amortize over 84 months of the organization, the date of the contribution, and the amount
any amount not deducted. of the contribution.
• Insurance premiums. Contributions of $250 or more. A REIT can deduct a
• Legal and professional fees. contribution of $250 or more only if the REIT receives a written
• Supplies used and consumed in the business. acknowledgment from the donee organization that shows the
• Utilities. amount of cash contributed, describes any property contributed,
• Ordinary losses from trade or business activities of a and gives a description and a good faith estimate of the value of
partnership (from Schedule K-1 (Form 1065)). Do not offset any goods or services provided in return for the contribution, or
ordinary income against ordinary losses. Instead, include the states that no goods or services were provided in return for the
income on line 7. Show the partnership's name, address, and contribution. The acknowledgment must be obtained by the due
EIN on a separate statement attached to this return. If the date (including extensions) of the REIT's return, or, if earlier, the
amount is from more than one partnership, identify the amount date the return is filed. Do not attach the acknowledgment to the
from each partnership. tax return, but keep it with the REIT's records.
• Any net negative section 481(a) adjustment. See Section For more information on charitable contributions, including
481(a) adjustment, earlier. substantiation and recordkeeping requirements, see section 170
Do not deduct expenses such as the following. and the related regulations, and Pub. 526, Charitable
• Fines or penalties paid to a government for violating any law. Contributions. For special rules that apply to corporations, see
However, exceptions apply for certain amounts paid or incurred Pub. 542.

- 13 -

Page 13 of 21 Fileid: … /i1120reit/2023/a/xml/cycle06/source 14:03 - 25-Jan-2024

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

Pension, profit-sharing, etc., plans. Include the deduction for However, no deduction is allowed if a principal purpose of the
contributions to qualified pension, profit-sharing, or other funded organization is to entertain or provide entertainment facilities to
deferred compensation plans. Employers who maintain such a members or their guests. In addition, REITs cannot deduct
plan must generally file one of the forms listed below unless membership dues to any club organized for business, pleasure,
exempt from filing under regulations or other applicable recreation, or other social purpose. This includes country clubs,
guidance, even if the plan is not a qualified plan under the golf and athletic clubs, airline and hotel clubs, and clubs
Internal Revenue Code. The filing requirement applies even if the operated to provide meals under conditions favorable to
REIT does not claim a deduction for the current tax year. There business discussion.
are penalties for failure to file these forms on time and for Entertainment facilities. Generally, the REIT cannot deduct
overstating the pension plan deduction. See sections 6652(e) an expense paid or incurred for a facility (such as a yacht or
and 6662(f). Also, see the instructions for the applicable forms. hunting lodge) used for an activity usually considered
• Form 5500, Annual Return/Report of Employee Benefit Plan. entertainment, amusement, or recreation.
• Form 5500-SF, Short Form Annual Return/Report of Small Amounts treated as compensation. Generally, the REIT
Employee Benefit Plan, instead of Form 5500, generally if under may be able to deduct otherwise nondeductible meals, travel,
100 participants at the beginning of the plan year. and entertainment expenses if the amounts are treated as
compensation to the recipient and reported on Form W-2 for an
Note. Form 5500 and Form 5500-SF must be filed electronically employee or on Form 1099-NEC for an independent contractor.
under the computerized ERISA Filing Acceptance System However, if the recipient is an officer, director, beneficial
(EFAST2). For more information, see the EFAST2 website at owner (directly or indirectly), or other “specified individual” (as
EFAST.dol.gov. defined in section 274(e)(2)(B) and Regulations section
• Form 5500-EZ, Annual Return of One-Participant (Owners/ 1.274-9(b)), special rules apply.
Partners and Their Spouses) Retirement Plan or a Foreign Plan.
File this form for a plan that only covers the owner (or the owner Fines or similar penalties. Generally, no deduction is allowed
and spouse) or a foreign plan that is required to file an annual for fines or similar penalties paid or incurred to, or at the direction
return and does not file the annual return electronically on Form of a government or governmental entity for violating any law, or
5500-SF. See the Instructions for Form 5500-EZ. for the investigation or inquiry into the potential violation of a law,
except:
Travel, meals, and entertainment. Subject to limitations and • Amounts that constitute restitution;
restrictions discussed below, a REIT can deduct ordinary and • Amounts paid to come into compliance with the law;
necessary travel, meals, and non-entertainment expenses paid • Amounts paid or incurred as the result of orders or
or incurred in its trade or business. Generally, entertainment agreements in which no government or governmental entity is a
expenses, membership dues, and facilities used in connection party; and
with these activities cannot be deducted. In addition, no • Amounts paid or incurred for taxes due.
deduction is generally allowed for qualified transportation fringe
benefits. Also, special rules apply to deductions for gifts, luxury No deduction is allowed unless the amounts are specifically
water travel, and convention expenses. See section 274 and identified in the order or agreement and the REIT establishes
Pub. 463, for more details. that the amounts were paid for that purpose. Also, any amount
paid or incurred as reimbursement to the government for the
Travel. A REIT cannot deduct travel expenses of any
costs of any investigation or litigation are not eligible for the
individual accompanying a corporate officer or employee,
exceptions and are nondeductible. See section 162(f).
including a spouse or dependent of the officer or employee,
unless: Lobbying expenses. Generally, lobbying expenses are not
• That individual is an employee of the REIT, and deductible. These expenses include:
• That individual’s travel is for a bona fide business purpose and • Amounts paid or incurred in connection with influencing
would otherwise be deductible by that individual. federal, state, or local legislation; or
Meals. Generally, the REIT can deduct only 50% of the • Amounts paid or incurred in connection with any
amount otherwise allowable for non-entertainment related meal communication with certain federal executive branch officials in
expenses paid or incurred in its trade or business. an attempt to influence the official actions or positions of the
Meals not separately stated from entertainment are generally officials. See Regulations section 1.162-29 for the definition of
not deductible. In addition (subject to exceptions under section “influencing legislation.”
274(k)(2)): Dues and other similar amounts paid to certain tax-exempt
• Meals must not be lavish or extravagant, and organizations may not be deductible. If certain in-house lobbying
• An employee of the REIT must be present at the meal. expenditures do not exceed $2,000, they are deductible.
See section 274(n)(3) for a special rule that applies to Line 21. Taxable income before NOL deduction, total de-
expenses for meals consumed by individuals subject to the duction for dividends paid, and section 857(b)(2)(E) de-
hours of service limits of the Department of Transportation. duction. Generally, special at-risk rules under section 465 apply
Qualified transportation fringes (QTFs). Generally, no to closely held corporations engaged in any activity as a trade or
deduction is allowed under section 274(a)(4) for QTFs provided business or for the production of income. Those REITs that are
by employers to their employees. QTFs are defined in section closely held may have to adjust the amount on line 21.
132(f)(1) and include: The at-risk rules do not apply to:
• Transportation in a commuter highway vehicle between the • Holding real property placed in service by the taxpayer before
employee’s residence and place of employment, 1987;
• Any transit pass, and • Equipment leasing under sections 465(c)(4), (5), and (6); or
• Qualified parking. • Any qualifying business of a qualified REIT under section
See section 274 and Pub. 15-B for details. 465(c)(7).
Membership dues. The REIT can deduct amounts paid or However, the at-risk rules do apply to the holding of mineral
incurred for membership dues in civic or public service property.
organizations, professional organizations (such as bar and
medical associations), business leagues, trade associations, If the at-risk rules apply, adjust the amount on this line for any
chambers of commerce, boards of trade, and real estate boards. section 465(d) losses. These losses are limited to the amount for

- 14 -

Page 14 of 21 Fileid: … /i1120reit/2023/a/xml/cycle06/source 14:03 - 25-Jan-2024

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

which the REIT is at risk for each separate activity at the close of that may offset recognized built-in gains is limited (see section
the tax year. If the REIT is involved in one or more activities, any 384).
of which incurs a loss for the year, report the losses for each • A REIT may elect under section 965(n) to reduce the amount
activity separately. Attach Form 6198, At-Risk Limitations, of the NOL for a tax year determined under section 172 and the
showing the amount at risk and gross income and deductions for amount of taxable income reduced by NOL carryovers to such
the activities with the losses. tax year. The reduction amount is equal to the amount of the
If the REIT sells or otherwise disposes of an asset or its section 965(a) inclusion (net of the section 965(c) deduction)
interest (either total or partial) in an activity to which the at-risk plus, in the case of a domestic corporation that claims a credit for
rules apply, determine the net profit or loss from the activity by deemed paid foreign taxes, the section 78 gross-up with respect
combining the gain or loss on the sale or disposition with the to the foreign taxes deemed paid with respect to the section
profit or loss from the activity. If the REIT has a net loss, it may be 965(a) inclusion. If, as a result of an election under section
limited because of the at-risk rules. 965(n), the amount of the NOL for the tax year is reduced, the
reduction amount is included in other income on line 7. If, as a
Treat any loss from an activity not allowed for the tax year as a result of an election under section 965(n), the taxable income
deduction allocable to the activity in the next tax year. reduced by NOL carryovers is reduced, the NOL deduction on
Line 22a. Net operating loss deduction. A REIT can use the line 22a is reduced by the reduction amount. See section 965(n)
net operating loss (NOL) incurred in one tax year to reduce its for more information.
taxable income in another tax year.
Generally, a REIT may carry an NOL over indefinitely to tax Tax and Payments
years following the year of loss. REITs are not permitted to carry Line 25b. Estimated tax payments. Enter any estimated tax
back an NOL to any year preceding the year of the loss. payments the REIT made for the current tax year.
Enter the total NOL carryovers from other tax years, but do Line 25f. Credit from Form 2439. Enter the credit (from Form
not enter more than the REIT's taxable income. The REIT's 2439) for the REIT's share of the tax paid by a Regulated
taxable income for purposes of the NOL deduction is taxable Investment Company (RIC) or another REIT on undistributed
income (line 21) reduced by the dividends paid deduction long-term capital gains included in the REIT's income. Attach
(line 22b) and the section 857(b)(2)(E) deduction (line 22c). If Form 2439 to Form 1120-REIT.
this amount is less than zero, an NOL deduction cannot be taken
for the tax year. Attach a statement showing the computation of Line 25g. Credit for federal tax on fuels. Enter the credit from
the NOL deduction. Also, complete item 9 on Schedule K. Form 4136, Credit for Federal Tax Paid on Fuels, if the REIT
If capital gain dividends are paid during any tax year, the qualifies to claim this credit. Attach Form 4136 to Form
amount of the net capital gain for such tax year (to the extent of 1120-REIT.
the capital gain dividends) is excluded in determining: Line 25h. Elective payment election amount from Form
1. The NOL for the tax year, and 3800. Enter on line 25h the total net elective payment election
amount from Form 3800, General Business Credit, Part III, line 6,
2. The amount of the NOL of any prior tax year that may be column (i). See the Instructions for Form 3800.
carried over to any succeeding tax year.
Line 25i. Total payments and credits. Add the amounts on
Carryover rules. The NOL for the current year is computed lines 25d through 25h and enter the total on line 25i.
using the REIT's taxable income before it is reduced by the
dividends paid deduction. After the REIT applies the NOL to the Backup withholding. If the REIT had income tax withheld from
first tax year to which it may be carried, the taxable income of any payments it received because, for example, it failed to give
that year must be modified (as described by section 172(b) and the payer its correct EIN, include the amount withheld in the total
the modified rules for REITs in section 172(d)(6)) to determine for line 25i. Enter the amount withheld and the words “Backup
how much of the remaining loss may be carried to other years. Withholding” in the blank space above line 25i.
Although the current-year NOL is computed without regard to the Line 26. Estimated tax penalty. A REIT that does not make
dividends paid deduction, an NOL carryover from a prior year is estimated tax payments when due may be subject to an
applied to the current year using taxable income after it is underpayment penalty for the period of underpayment.
reduced by the dividends paid deduction. The NOL amounts Generally, a REIT is subject to the penalty if its tax liability is
carried forward by the REIT are not reduced by subsequent year $500 or more and it did not timely pay the smaller of:
dividends paid deductions. See Example 1 in Regulations • Its total tax for the current tax year, or
section 1.172-5(a)(4). • Its prior year's tax.
Note. Generally, NOL deductions arising in tax years beginning Use Form 2220, Underpayment of Estimated Tax by
after 2017 are limited to 80% of taxable income (determined Corporations, to determine whether the REIT owes a penalty and
without regard to the NOL). However, NOLs arising in taxable to figure the amount of the penalty. Generally, the REIT does not
years prior to January 1, 2018, and carried over to the current have to file this form because the IRS can figure the amount of
taxable year are not subject to this limitation. any penalty and bill the REIT for it. However, even if it does not
owe the penalty, the REIT must complete and attach Form 2220
Special NOL rules apply when: if the annualized income or adjusted seasonal installment
• An ownership change (described in section 382(g)) occurs, method is used, or the REIT is a large corporation computing its
the amount of the taxable income of a loss REIT that may be first required installment based on the prior year's tax. See the
offset by the pre-change NOL carryovers is limited (see section Instructions for Form 2220 for the definition of a “large
382 and the related regulations). A loss REIT must file an corporation.”
information statement with its income tax return for each tax year If Form 2220 is attached, check the box on this line and enter
that certain ownership shifts occur (see Temporary Regulations the amount of any penalty.
section 1.382-2T(a)(2)(ii) for details). See Regulations section
1.382-6(b) for details on how to make the closing-of-the-books Line 27. Tax due. If the REIT cannot pay the full amount of tax
election. owed, it can apply for an installment agreement online. The REIT
• When a REIT acquires control of another REIT (or acquires its can apply for an installment agreement online if:
assets in a reorganization), the amount of pre-acquisition losses • It cannot pay the full amount shown on line 27;

- 15 -

Page 15 of 21           Fileid: … /i1120reit/2023/a/xml/cycle06/source                     14:03 - 25-Jan-2024

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

• The total amount owed is $25,000 or less (including tax, 
penalties, and interest); and                                          Part III—Tax for Failure To Meet 
• The REIT can pay the liability in full in 24 months.
.                                                                      Certain Source-of-Income 
  To apply using the Online Payment Agreement Application,             Requirements
go to IRS.gov/OPA.
                                                                       Section 856(c)(6) provides REITs with a relief provision if they 
  Under an installment agreement, the REIT can pay what it             have failed to satisfy the source-of-income requirements of 
owes in monthly installments. There are certain conditions that        sections 856(c)(2) and 856(c)(3). If section 856(c)(6) applies to a 
must be met to enter into and maintain an installment                  REIT for any tax year, a tax is imposed on the REIT under 
agreement, such as paying the liability within 72 months and           section 857(b)(5).
making all required deposits and timely filing tax returns during 
the length of the agreement.                                           All REITs must complete lines 1a through 8 of Part III to 
                                                                       determine whether they are subject to the tax imposed under 
  If the installment agreement is accepted, the REIT will be           section 857(b)(5). If line 8 is zero, the tax does not apply, and the 
charged a fee and it will be subject to penalties and interest on      REIT does not have to complete the rest of Part III. However, if 
the amount of tax not paid by the due date of the return.              line 8 is greater than zero, the REIT is subject to this tax, and 
                                                                       must complete the rest of Part III to determine the amount of tax.
Part II—Tax on Net Income From                                         If a REIT reports passive foreign exchange gain on line 2b or 
                                                                       real estate foreign exchange gain on line 5b, and any part of 
Foreclosure Property                                                   such gain is characterized as such by a determination of the 
Complete Part II only if the gross income, gains, losses, and          Secretary under section 856(n)(3)(C) or 856(n)(2)(C), the REIT 
deductions from foreclosure property (defined in section 856(e))       must attach a copy of this determination to its return. Similarly, if 
result in net income. If an overall net loss results, report the gross a REIT reports income that is excluded from section 856(c)(2) 
income, gains, losses, and deductions from foreclosure property        pursuant to a determination of the Secretary under section 
on the appropriate lines of Part I.                                    856(c)(5)(J)(i) on line 2c or excluded from section 856(c)(3) 
  Property may be treated as foreclosure property only if it           pursuant to a determination of the Secretary under section 
meets the requirements of section 856(e) and the REIT elects to        856(c)(5)(J)(i) on line 5c, the REIT must attach a copy of this 
treat the property as foreclosure property in the year it was          determination allowing for such exclusion to its return. 
acquired. The property continues to be foreclosure property until      Additionally, if a REIT reports income on line 7 in Part I that is 
the close of the 3rd tax year following the tax year in which the      excluded from sections 856(c)(2) and 856(c)(3) pursuant to 
REIT acquired it. For more information, see section 856(e).            section 965(m)(1), report that amount on lines 2d and 5d of Part 
                                                                       III. The REIT must attach Forms 965 and 965-B, as applicable, to 
  However, if the foreclosure property is qualified health care        its return.
property, it will cease to be foreclosure property as of the close of 
the 2nd year following the tax year the REIT acquired it (although     A REIT that has failed the source-of-income requirements of 
the REIT may request one or more extensions to this 2-year             sections 856(c)(2) and 856(c)(3) may avoid loss of its REIT 
grace period not to extend beyond the 6th year). See section           status as a result of the failure if, following identification of its 
856(e)(6) for details.                                                 failure to meet the source-of-income requirements, the REIT sets 
                                                                       forth a description of each item of its gross income described in 
  This election must be made by the due date for filing Form           sections 856(c)(2) and 856(c)(3) on an attached schedule. In 
1120-REIT (including extensions). To make the election, attach a       addition, its failure to meet the source-of-income requirements 
statement that:                                                        must be due to reasonable cause and not due to willful neglect.
• Indicates that the election under section 856(e) is being 
made;                                                                  For information on the relief provisions under sections 856(c)
• Identifies the property to which the election applies;               (7) and 856(g)(5), see the instructions for Schedule J, lines 2f 
• Includes the name, address, and EIN of the REIT, the date the        and 2g.
property was acquired, and a brief description of how the 
property was acquired (including the name of the person from 
                                                                       Part IV—Tax on Net Income From 
whom the property was acquired); and
• Gives a description of the lease or debt with respect to which       Prohibited Transactions
default occurred or was imminent.                                      Section 857(b)(6) imposes a tax equal to 100% of the net 
  The REIT can revoke the election by filing a revocation on or        income derived from prohibited transactions. The 100% tax is 
before the due date (including extensions) for filing Form             imposed to prevent a REIT from retaining any profit from ordinary 
1120-REIT. See section 856(e) for more details.                        retailing activities such as sales to customers of condominium 
Line 2. Gross income from foreclosure property.       Do not           units or subdivided lots in a development tract.
include income that qualifies under the REIT's 75% gross               Line 1. Gain from sale or other disposition of property. 
income test under section 856(c)(3)(A), (B), (C), (D), (E), or (G).    Include only gain from the sale or other disposition of property 
These amounts must be reported in Part I.                              described in section 1221(a)(1) that is not foreclosure property 
Line 4. Deductions.    Deduct only those expenses that have a          and that does not qualify as an exception. See section 857(b)(6)
proximate and primary relationship to earning the income shown         (C) for information on certain sales that do not qualify as 
on line 3. This includes:                                              prohibited transactions. See section 856(j) for a special rule 
• Depreciation on foreclosure property;                                regarding a shared appreciation mortgage. Exceptions apply for 
• Interest paid or accrued on debt of the REIT that is attributable    certain sales of timber property by a timber REIT. See section 
to the carrying of the property;                                       857(b)(6)(D).
• Real estate taxes; and                                               Do not net losses from prohibited transactions against gains 
• Fees charged by an independent contractor to manage such             in determining the amount to enter on line 1. Enter losses from 
property.                                                              prohibited transactions on the appropriate line in Part I.
  Do not deduct general overhead and administrative expenses           Line 2. Deductions. Deduct only those expenses that have a 
in Part II.                                                            proximate and primary relationship to the earning of the income 

                                                                                                                                             15

- 16 -

Page 16 of 21            Fileid: … /i1120reit/2023/a/xml/cycle06/source                                  14:03 - 25-Jan-2024

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

shown on line 1. Do not deduct general overhead and                       the REIT instead of being reported by the TRS (see section 
administrative expenses in Part IV.                                       857(b)(7)(B));
                                                                          • Deductions that are improperly allocated between the REIT 
                                                                          and its TRS (see section 857(b)(7)(C));
Schedule A—Deduction for Dividends                                        • Interest deductions of a TRS to the extent that interest 
Paid                                                                      payments to its REIT are in excess of a rate that is commercially 
                                                                          reasonable (see section 857(b)(7)(D)); and
Lines 1 through 5.  Section 561 (taking into account sections             • Gross income of a TRS of a REIT attributable to services 
857(b)(9), 857(d)(3)(B), and 858(a)) determines the deduction             provided to, or on behalf of, the REIT (less the deductions 
for dividends paid.                                                       properly allocable thereto) that is improperly allocated between 
Line 3. Dividends declared in October, November, or December              the REIT and the TRS (see section 857(d)(7)(E)).
and payable to shareholders of record in October, November, or              See section 857(b)(7) for details and exceptions.
December are treated by the REIT as paid on December 31 of 
that calendar year. The REIT is then eligible for the deduction for       Line 2f—Tax Imposed Under Section 856(c)(7)
dividends paid for the year the dividends are declared even               Enter the tax imposed for relief provisions under section 856(c)
though they are not actually paid until January of the following          (7) relating to failures to meet the requirements of the asset test 
calendar year.                                                            of section 856(c)(4). See section 856(c)(7) for detailed 
  If the REIT declared dividends in any of those months and               information on the requirements for this relief provision.
actually paid them in January, as discussed above, enter on                 If a tax is imposed under section 856(c)(7), attach a 
line 3 those dividends not already included on lines 1, 2, and 4 of       statement providing an explanation of why the REIT failed to 
Schedule A.                                                               meet the requirements of the asset test and a description of why 
Line 7. If, for any tax year the REIT has net income from                 such failure is due to reasonable cause and not willful neglect.
foreclosure property (as defined in section 857(b)(4)(B)), the            Failure to meet the asset test requirements of section 
deduction for dividends paid to be entered on line 6 (and on Part         856(c)(4) (other than de minimis failures).    Under section 
I, line 22b) is determined by multiplying the amount on line 5 by         856(c)(7)(A), a REIT may avoid loss of its REIT status as a result 
the following fraction.                                                   of certain failures to meet the asset test requirements of section 
  REIT taxable income (determined without regard to the deduction for     856(c)(4) if, following identification of the failure, each of the 
                        dividends paid)                                   following requirements are met.
  REIT taxable income (determined without regard to the deduction for     • The REIT sets forth a description of each asset that causes 
                        dividends paid) +                                 the REIT to fail to satisfy the requirements of the asset test at the 
   (Net income from foreclosure property minus the tax on net income from close of a quarter in a statement for the quarter attached to its 
                        foreclosure property)                             timely filed Form 1120-REIT;
                                                                          • The failure must be due to reasonable cause and not due to 
                                                                          willful neglect; and
                                                                          • The REIT either (a) disposes of the assets shown on the 
                                                                          specified statement within 6 months after the last day of the 
Schedule J—Tax Computation                                                quarter in which the REIT's identification of the failure occurred 
                                                                          (or such other time and in the manner prescribed by regulations); 
Line 1                                                                    or (b) the requirements of the asset test of section 856(c)(4) are 
A member of a controlled group must check the box on line 1               otherwise met within the specified time period.
and complete and attach Schedule O (Form 1120). See                         In addition, if section 856(c)(7)(A) applies to a REIT for any 
Schedule O (Form 1120) and its instructions for more                      tax year, the REIT must pay a tax that is the greater of:
information.                                                              • $50,000, or
                                                                          • The amount determined (as prescribed by regulations to be 
Line 2a—Tax on REIT Taxable Income                                        promulgated by the Secretary) by multiplying the net income 
Most REITs figure their tax by multiplying taxable income by              generated by the assets described in the specified schedule for 
21%. A member of a controlled group must use Schedule O                   the quarter in which the failure occurred by 21%.
(Form 1120) to figure its tax.
                                                                          Note. There is no tax imposed and you are not required to 
Line 2c                                                                   attach a schedule of assets to Form 1120-REIT for the de 
Taxes are imposed for the failure to meet the requirements of the         minimis relief provision under section 856(c)(7)(B).
asset test and/or gross income test. To qualify for relief from the         Under section 856(c)(7)(B), a REIT may avoid loss of its REIT 
failure to meet these requirements, attach an explanation of why          status as a result of certain failures to meet the asset test 
the REIT failed to meet the asset test and/or gross income test.          requirements of section 856(c)(4)(B)(iv) if:
Attach supporting schedules and a statement showing the                   • Following its identification of the failure, the REIT disposes of 
computation of the amount of tax. Also, include a reason why the          assets within 6 months after the last day of the quarter in which 
failure was due to reasonable cause and not willful neglect. See          the REIT's identification of the failure occurred (or such time 
sections 856(c)(2), 856(c)(3), and 856(c)(4).                             period prescribed by the Secretary and in the manner prescribed 
                                                                          by the Secretary); or
  The statement for reasonable cause should be attached to                  The requirements of the asset test of section 856(c)(4)(B)(iv) 
Form 1120-REIT at the time it is filed.                                   •
                                                                          are otherwise met within the specified time period.

Line 2e                                                                   Line 2g—Tax Imposed Under Section 856(g)(5)
Enter the amount of the 100% REIT tax imposed on the                      Enter the tax imposed for relief provisions under section 856(g)
following.                                                                (5) relating to failures to meet certain requirements under 
• Income of a REIT for services provided to the REIT's tenants            sections 856 through 859 (other than sections 856(c)(2), 856(c)
that is improperly included in rents from real property reported by       (3), and 856(c)(4)). See section 856(g)(5) for detailed 
                                                                          information on the requirements for this relief provision.

16

- 17 -

Page 17 of 21 Fileid: … /i1120reit/2023/a/xml/cycle06/source 14:03 - 25-Jan-2024

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

If a tax is imposed for section 856(g)(5), attach a statement Bond credits from Form 8912. Enter the allowable credits
providing an explanation of why the REIT failed to meet the other from Form 8912, Credit to Holders of Tax Credit Bonds, line 12.
qualification requirements under sections 856–859, and a
description of why such failure is due to reasonable cause and Decrease attributable to partner’s audit liability under sec-
not willful neglect. tion 6226. If the REIT is filing Form 8978 to report adjustments
shown on Form 8986 they received from partnerships that have
Certain REIT qualification failures of sections 856–859 been audited and have elected to push out imputed
(other than sections 856(c)(2), 856(c)(3), and 856(c)(4)). underpayments to their partners, include any decrease in taxes
Under section 856(g)(5), a REIT that fails to meet the REIT due (negative amount) from Form 8978, line 14, in the total for
qualification requirements under sections 856–859, except for Form 1120-REIT, Schedule J, line 3d. Attach Form 8978. If Form
section 856(c)(2), 856(c)(3), and 856(c)(4), may avoid loss of its 8978, line 14, shows an increase in tax, see the instructions for
REIT status if the failure is due to reasonable cause and not due Schedule J, line 2h.
to willful neglect. In addition, the REIT must pay (as prescribed
by regulations and in the same manner as tax) a penalty of Line 5—Personal Holding Company Tax
$50,000 for each failure to satisfy a provision of sections 856–
859. See section 856(g)(5). A REIT is taxed as a personal holding company under section
542 if:
Line 2h—Income Tax • At least 60% of its adjusted ordinary gross income for the tax
year is personal holding company income, and
Deferred tax under section 1291. If the REIT was a • At any time during the last half of the tax year more than 50%
shareholder in a passive foreign investment company (PFIC) and in value of its outstanding stock is owned, directly or indirectly, by
received an excess distribution or disposed of its investment in five or fewer individuals.
the PFIC during the year, it must include the increase in taxes
due under section 1291(c)(2) in the total for line 2h. On the See Schedule PH (Form 1120), U.S. Personal Holding
dotted line to the left of line 2h, enter “Section 1291” and the Company (PHC) Tax, for definitions and details on how to figure
amount. the tax.
Do not include on line 2h any interest due under section
1291(c)(3). Instead, include the amount of interest owed on Line 6—Interest on Deferred Tax Liability Under
Schedule J, line 10, Other taxes. Section 453A(c)
For more information on reporting the deferred tax and Include any interest on deferred tax attributable to certain
interest, see the Instructions for Form 8621. nondealer installment obligations (section 453A(c)).

Additional tax under section 197(f). A REIT that elects to Line 7—Interest on Deferred Tax Liability Under
recognize gain and pay tax on the sale of a section 197
intangible under the related person exception to the Section 453(l)
anti-churning rules should include any additional tax due in the Include any interest on deferred tax attributable to certain dealer
total for line 2h. On the dotted line next to line 2h, enter “Section installment obligations under section 453(l).
197” and the amount. See section 197(f)(9)(B)(ii).
Line 8 —Recapture of Investment Credit
Increase in tax attributable to partner’s audit liability under
section 6226. If the REIT is filing Form 8978, Partner’s If the REIT disposed of investment credit property or changed its
Additional Reporting Year Tax, to report adjustments shown on use before the end of the 5-year recapture period under section
Form 8986, Push Out to Partners Under IRC 6226(a)(2), they 50(a), enter the increase in tax from Form 4255, Recapture of
received from partnerships that have been audited and have Investment Credit. See the Instructions for Form 4255.
elected to push out imputed underpayments to their partners,
include any increase in taxes due (positive amount) from Form Line 9—Recapture of Low-income Housing
8978, line 14, in the total for Form 1120-REIT, Schedule J, Credit
line 2h. On the dotted line next to line 2h, enter “Section 6226” If the REIT disposed of property (or there was a reduction in the
and the amount. Attach Form 8978. If Form 8978, line 14, shows qualified basis of the property) for which it took the low-income
a decrease in tax, see the instructions for Schedule J, line 3d. housing credit, and the REIT did not follow the procedures that
would have prevented recapture of the credit, it may owe a tax.
Line 3a—Foreign Tax Credit See Form 8611, Recapture of Low-Income Housing Credit.
To find out when a REIT can claim the foreign tax credit for
payment of income tax to a foreign country or U.S. territory, see Line 10—Other Taxes
Form 1118, Foreign Tax Credit—Corporations. Include on line 10 additional taxes and interest such as the
following. Attach a statement showing the computation of each
Line 3b—Credit From Form 8834 item included in the total for line 10 and identify the applicable
Enter any qualified electric vehicle passive activity credits from Code section and the type of tax or interest.
prior years allowed for the current tax year from Form 8834, • Recapture of Indian employment credit. Generally, if an
Qualified Electric Vehicle Credit, line 7. employer terminates the employment of a qualified employee
less than 1 year after the date of initial employment, any Indian
Line 3c—General Business Credit employment credit allowed for a prior tax year because of wages
Use Form 3800 to claim any general business credits. Enter on paid or incurred to that employee must be recaptured. For
line 3c the allowable credit from Form 3800, Part II, line 38. See details, see Form 8845 and section 45A.
the Instructions for Form 3800. • Recapture of new markets credit (see Form 8874 and Form
8874-B.
Line 3d—Other Credits • Recapture of employer-provided childcare facilities and
services credit (see Form 8882).
Minimum tax credit. Enter any allowable credit from Form • Interest due on deferred gain (section 1260(b)).
8827, Credit for Prior Year Minimum Tax—Corporations. • Interest due under section 1291(c)(3). See Form 8621 and the
Complete and attach Form 8827. Instructions for Form 8621.

- 18 -

Page 18 of 21 Fileid: … /i1120reit/2023/a/xml/cycle06/source 14:03 - 25-Jan-2024

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

Interest due under the look-back methods. If the REIT used Line a. Enter the amount that would be the taxable income of
the look-back method under section 460(b)(2) for certain the REIT for the tax year if only recognized built-in gain,
long-term contracts, use Form 8697, Interest Computation Under recognized built-in loss, and recognized built-in gain carryover
the Look-Back Method for Completed Long-Term Contracts, to were taken into account, reduced by any portion of the REIT's
figure the interest the REIT may have to include. See the recognized built-in gain from:
Instructions for Form 8697. • Net income from foreclosure property,
The REIT may also have to include interest due under the • Amounts subject to tax for failure to meet certain
look-back method for property depreciated under the income source-of-income requirements under section 857(b)(5)
forecast method. Use Form 8866, Interest Computation Under computed in accordance with Regulations section 1.337(d)-6(c)
the Look-Back Method for Property Depreciated Under the (2),
Income Forecast Method, to figure any interest due or to be • Net income from prohibited transactions under section 857(b)
refunded. See the Instructions Form 8866. (6), and
• Amounts subject to tax under section 857(b)(7).
Include the interest due under the look-back methods on
line 10. Line b. Add the amounts shown on:
• Form 1120-REIT, Part l, line 21;
Built-in Gains Tax and Worksheet • Form 1120-REIT, Part II, line 5; and
• Form 2438, line 11.
Built-in Gains Tax
Subtract from the total the amount on Form 1120-REIT,
If, on or after January 2, 2002, property of a C corporation line 22c. Enter the result on line b of the Built-in Gains Tax
becomes property of a REIT by either (a) the qualification of the Worksheet.
C corporation as a REIT, or (b) the transfer of such property to a Line c. The REIT's net unrealized built-in gain is the amount, if
REIT, then the REIT will be subject to the built-in gains tax under any, by which the fair market value of the assets of the REIT at
section 1374 unless the C corporation elects deemed sale the beginning of its first REIT year (or as of the date the assets
treatment on the transferred property. Generally, if the C were acquired, for any asset with a basis determined by
corporation does not make this election for tax years beginning reference to its basis (or the basis of any other property) in the
in 2020, the REIT must pay tax on the net recognized built-in hands of a C corporation) exceeds the aggregate adjusted basis
gain during the 5-year period beginning on its first day as a REIT of such assets at that time.
or the day it acquired the property. Special rules apply to Enter on line c the REIT's net unrealized built-in gain reduced
conversion transactions on or after June 7, 2019, as well as by the net recognized built-in gain for prior years. See sections
conversion transactions with a related section 355 distribution. 1374(c)(2) and (d)(1).
See Regulations section 1.337(d)-7 for details.
Line d. If the amount on line b exceeds the amount on line a,
A REIT’s recognition period for conversion transactions that the excess is treated as a recognized built-in gain in the
occur on or after August 8, 2016, and on or before February 17, succeeding tax year.
2017, is the 10-year period beginning on its first day as a REIT or Line e. Enter the section 1374(b)(2) deduction. Generally, this is
the day the REIT acquired the property, as described in any NOL carryforward or capital loss carryforward (to the extent
Temporary Regulations section 1.337(d)-7T(b)(2)(iii), as in effect of the net capital gain included in recognized built-in gain for the
on August 8, 2016. However, under the provisions of final tax year) arising in tax years for which the REIT was a C
Regulations section 1.337(d)-7(g)(2)(iii), a REIT may choose to corporation. These loss carryforwards must be used to reduce
apply a 5-year recognition period to conversion transactions that recognized built-in gain for the tax year to the greatest extent
occur on or after August 8, 2016, and on or before February 17, possible before they can be used to reduce the REIT's taxable
2017. See final Regulations section 1.337(d)-7 and Temporary income.
Regulations section 1.337(d)-7T for details.
Line g. A REIT reporting built-in gain for a tax year ending
Recognized built-in gains and losses generally retain their before 2023 will enter 21% of line f.
character (for example, ordinary income or capital gain) and are Line h. Credit carryforwards arising in tax years for which the
treated the same as other gains or losses of the REIT. The REIT was a C corporation must be used to reduce the tax on net
REIT's tax on net recognized built-in gain is treated as a loss built-in gain for the tax year to the greatest extent possible before
incurred by the REIT during the same tax year (see the the credit carryforwards can be used to reduce the tax on the
instructions for line i of the Built-in Gains Tax Worksheet, later). REIT's taxable income.
See Regulations section 1.337(d)-7 for details.
Line i. The REIT's tax on net recognized built-in gain is treated
Different rules apply to elections to be a REIT and transfers of as a loss sustained by the REIT during the same tax year.
property in a carryover basis transaction that occurred prior to Deduct the tax attributable to:
January 2, 2002. For REIT elections and property transfers • Ordinary gain as a deduction for taxes on Form 1120-REIT,
before this date, the C corporation is subject to deemed sale line 14.
treatment on the transferred property unless the REIT elects • Short-term capital gain as a short-term capital loss in Part I of
section 1374 treatment. See Regulations section 1.337(d)-6 for Form 8949.
information on how to make the election and figure the tax for • Long-term capital gain as a long-term capital loss in Part II of
REIT elections and property transfers before this date. The REIT Form 8949.
may also rely on Regulations section 1.337(d)-5 for REIT
elections and property transfers that occurred before January 2, Line 11—Total Tax
2002. Include any deferred tax on the termination of a section 1294
election applicable to shareholders in a qualified electing fund in
Built-in Gains Tax Worksheet Instructions the amount entered on line 11. See Form 8621 and How To
Report below.
Complete the Built-in Gains Tax Worksheet to figure the built-in
gains tax under Regulations section 1.337(d)-7 or 1.337(d)-6.

- 19 -

Page 19 of 21            Fileid: … /i1120reit/2023/a/xml/cycle06/source                                  14:03 - 25-Jan-2024

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

Built-in Gains Tax Worksheet                                                                             Keep for Your Records
a.   Excess of recognized built-in gains over recognized built-in losses . . . . . . . . . . . . . . . . . . . . . . . . . . .                                       a.  
b.   Taxable income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          b.  
c.   Enter the net unrealized built-in gain reduced by any net recognized built-in gain for all prior 
     years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c.  
d.   Net recognized built-in gain (enter the smallest of line a, b, or c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                  d.  
e.   Section 1374(b)(2) deduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                  e.  
f.   Subtract line e from line d. If zero, enter -0- here and on line i . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                f.  
g.   Enter 21% (0.21) of line f . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            g.  
h.   Business credit and minimum tax credit carryforwards under section 1374(b)(3) from C corporation 
     years (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            h.  
i.   Tax. Subtract line h from line g (if zero or less, enter -0-). Enter here and include on line 10 of 
     Schedule J. See instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                i.  

Subtract from the total for line 11 the deferred tax on the               The constructive ownership rules of section 318 apply in 
REIT's share of the undistributed earnings of a qualified electing      determining if a REIT is foreign owned. See section 6038A(c)(5) 
fund (see Form 8621).                                                   and the related regulations.
How To Report                                                             Enter on line 5a the percentage owned by the foreign person 
                                                                        specified on line 5. On line 5b, enter the name of the owner's 
Attach a statement showing the computation of each item                 country.
included in, or subtracted from the total for line 11. On the dotted 
line next to line 11, enter the amount of tax or interest, identify it  Note.   If there is more than one 25%-or-more foreign owner, 
as tax or interest, and specify the Code section that applies.          complete lines 5a and 5b for the foreign person with the highest 
                                                                        percentage of ownership.
Schedule K—Other Information                                            Foreign person. The term “foreign person” means:
Be sure to answer all the lines that apply to the REIT.                 • A foreign citizen or nonresident alien.
                                                                        • An individual who is a citizen or resident of a U.S. territory (but 
Question 3                                                              who is not a U.S. citizen or resident).
Check the “Yes” box if the REIT is a subsidiary in a                    • A foreign partnership.
parent-subsidiary controlled group (defined below), even if the         • A foreign corporation.
REIT is a subsidiary member of one group and the parent                 • Any foreign estate or trust within the meaning of section 
corporation of another.                                                 7701(a)(31).
                                                                        • A foreign government (or one of its agencies or 
Note. If the REIT is an “excluded member” of a controlled group         instrumentalities) if it is engaged in the conduct of a commercial 
(see section 1563(b)(2)), it is still considered a member of a          activity as described in section 892.
controlled group for this purpose.                                      Owner's country. For individuals, the term “owner's country” 
Parent-subsidiary controlled group. The term                            means the country of residence. For all others, it is the country 
“parent-subsidiary controlled group” means one or more chains           where incorporated, organized, created, or administered.
of corporations connected through stock ownership (section              Requirement to file Form 5472.                                                               If the REIT checked “Yes” on 
1563(a)(1)). Both of the following requirements must be met.            line 5, it may have to file Form 5472. Generally, a 25% 
1. At least 80% of the total combined voting power of all               foreign-owned corporation that had a reportable transaction with 
classes of voting stock entitled to vote or at least 80% of the total   a foreign or domestic related party during the tax year must file 
value of all classes of stock of each corporation in the group          Form 5472.
(except the parent) must be owned by one or more of the other             See Form 5472 for filing instructions and penalties for failure 
corporations in the group, and                                          to file.
2. The common parent must own at least 80% of the total 
combined voting power of all classes of stock entitled to vote or       Item 8
at least 80% of the total value of all classes of stock of one or       Tax-exempt interest. Show any tax-exempt interest received or 
more of the other corporations in the group. Stock owned directly       accrued. Include any exempt-interest dividends received as a 
by other members of the group is not counted when computing             shareholder in a mutual fund or other RIC.
the voting power or value.
See section 1563(d)(1) for the definition of “stock” for                Item 9
purposes of determining stock ownership above.                          Enter the amount of the net operating loss (NOL) carryforward to 
                                                                        the tax year from prior years, even if some of the loss is used to 
Question 5                                                              offset income on this return. The amount to enter is the total of all 
Check the “Yes” box if one foreign person owned at least 25% of         NOLs generated in prior years but not used to offset income in a 
(a) the total voting power of all classes of stock of the REIT          tax year prior to 2023. Do not reduce the amount by any NOL 
entitled to vote, or (b) the total value of all classes of stock of the deduction reported on line 22a.
REIT.

                                                                                                                                                                         19

- 20 -

Page 20 of 21 Fileid: … /i1120reit/2023/a/xml/cycle06/source 14:03 - 25-Jan-2024

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

Question 10 Question 12
Business Interest Expense Election To certify as a QOF, the REIT must file Form 1120-REIT and
attach Form 8996, even if the REIT had no income or expenses
The limitation on business interest expense applies to every to report. If the REIT is attaching Form 8996, check the “Yes” box
taxpayer with a trade or business, unless the taxpayer meets for Question 12. On the line following the dollar sign, enter the
certain specified exceptions. A taxpayer may elect out of the amount from Form 8996, line 15.
limitation for certain businesses otherwise subject to the
business interest expense limitation. Schedule L—Balance Sheets per
Certain real property trades or businesses and farming Books
businesses qualify to make an election not to limit business The balance sheets should agree with the REIT's books and
interest expense. This is an irrevocable election. If you make this records.
election, you are required to use the alternative depreciation
system to depreciate any property with a recovery period of 10 Line 1. Cash. Include certificates of deposits as cash on line 1.
years or more. Also, you are not entitled to the special Line 4. Tax-exempt securities. Include on this line:
depreciation allowance for that property. For a taxpayer with • State and local government obligations, the interest on which
more than one qualifying business, the election is made with is excludable from gross income under section 103(a), and
respect to each business. • Stock in a mutual fund or other RIC that distributed
exempt-interest dividends during the tax year of the REIT.
Check “Yes” if the taxpayer has an election in effect to
exclude a real property trade or business or a farming business Line 24. Adjustments to shareholders' equity. Examples of
from section 163(j). For more information, see section 163(j) and adjustments to report on this line include:
the Instructions for Form 8990. • Unrealized gains and losses on securities held “available for
sale.”
Question 11 • Foreign currency translation adjustments.
• The excess of additional pension liability over unrecognized
Conditions for Filing Form 8990 prior service cost.
Generally, a REIT with a trade or business must file Form 8990 to • Guarantees of employee stock (ESOP) debt.
claim a deduction for business interest. In addition, Form 8990 • Compensation related to employee stock award plans.
must be filed by any REIT that owns an interest in a partnership If the total adjustment to be entered on line 24 is a negative
with current or prior-year carryover from excess business interest number, enter the amount in parentheses.
expense allocated from the partnership.
Exclusions from filing. A REIT is not required to file Form Schedule M-1
8990 if the REIT is a small business taxpayer and does not have
excess business interest expense from a partnership. A REIT is Reconciliation of Income (Loss) per Books With
also not required to file Form 8990 if the REIT only has business Income per Return
interest expense from the following excepted trades or
businesses. Line 5c. Travel and entertainment. Include any of the
• An electing real property trade or business, following.
• An electing farming business, or • Entertainment not deductible under section 274(a).
• Certain utility businesses. • Entertainment-related meal expenses.
• Non-entertainment meal expenses not deductible under
Small business taxpayer. For 2023, a small business taxpayer section 274(n).
is not subject to the business interest expense limitation and is • Expenses for the use of an entertainment facility.
not required to file Form 8990. • The part of business gifts over $25.
A small business taxpayer is a taxpayer that (a) is not a tax • Expenses of an individual over $2,000, that are allocable to
shelter (as defined in section 448(d)(3)); and (b) meets the gross conventions on cruise ships.
receipts test of section 448(c), discussed next. • Employee achievement awards of nontangible or tangible
Gross receipts test. For 2023, a taxpayer meets the gross property over $400 ($1,600 if part of a qualified plan).
receipts test if the taxpayer has average annual gross receipts of • The cost of skyboxes.
$29 million or less for the 3 prior tax years. A taxpayer's average • Nondeductible club dues.
annual gross receipts for the 3 prior tax years is determined by • The part of luxury water travel not deductible under section
adding the gross receipts for the 3 prior tax years and dividing 274(m).
the total by 3. • Expenses for travel as a form of education.
Gross receipts include the aggregate gross receipts from all • Other nondeductible travel and entertainment expenses.
persons treated as a single employer, such as a controlled group Line 7. Tax-exempt interest. Include as interest any
of corporations, commonly controlled partnerships, or exempt-interest dividends received by the REIT as a shareholder
proprietorships, and affiliated service groups. See section 448(c) in a mutual fund or other RIC.
and the Instructions for Form 8990 for additional information.

Paperwork Reduction Act Notice. We ask for the information on these forms to carry out the Internal Revenue laws of the United
States. You are required to give us the information. We need it to ensure that you are complying with these laws and to allow us to
figure and collect the right amount of tax.
You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the form
displays a valid OMB control number. Books or records relating to a form or its instructions must be retained as long as their contents
may become material in the administration of any Internal Revenue law. Generally, tax returns and return information are confidential,
as required by section 6103.

- 21 -

Page 21 of 21 Fileid: … /i1120reit/2023/a/xml/cycle06/source 14:03 - 25-Jan-2024

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

Estimates of Taxpayer Burden. The following tables show burden estimates based on current statutory requirements as of
December 2023 for taxpayers filing 2023 Forms 1065, 1066, 1120, 1120-C, 1120-F, 1120-H, 1120-ND, 1120-S, 1120-SF, 1120-FSC,
1120-L, 1120-PC, 1120-REIT, 1120-RIC, 1120-POL, and related attachments. Time spent and out-of-pocket costs are presented
separately. Time burden is broken out by taxpayer activity, with reporting representing the largest component. Out-of-pocket costs
include any expenses incurred by taxpayers to prepare and submit their tax returns. Examples include tax return preparation and
submission fees, postage and photocopying costs, and tax preparation software costs. While these estimates don’t include burden
associated with post-filing activities, IRS operational data indicate that electronically prepared and filed returns have fewer arithmetic
errors, implying lower post-filing burden.
Reported time and cost burdens are national averages and don’t necessarily reflect a “typical” case. Most taxpayers experience
lower than average burden, with taxpayer burden varying considerably by taxpayer type.
The average burden for partnerships filing Forms 1065 and related attachments is about 60 hours and $5,000; the average burden
for corporations filing Form 1120 and associated forms is about 105 hours and $6,700; and the average burden for Forms 1066,
1120-REIT, 1120-RIC, 1120-S, and all related attachments is 65 hours and $4,400. Within each of these estimates there is significant
variation in taxpayer activity. Tax preparation fees and other out-of-pocket costs vary extensively depending on the tax situation of the
taxpayer, the type of software or professional preparer used, and the geographic location. Third-party burden hours are not included in
these estimates.

Table 1 – Taxpayer Burden for Entities Taxed as Partnerships
Forms 1065, 1066, and all attachments
Primary Form Filed or Type of Total Number of Returns Average Time (hours) Average Cost ($) Average Monetized
Taxpayer (millions) Burden ($)
All Partnerships 5.3 60 5,000 8,700
Small 4.9 50 3,200 5,200
Large* 0.4 200 27,800 50,800
* A large business is defined as one having end-of-year assets greater than $10 million. A large business is defined the same way for partnerships, taxable corporations, and
pass-through corporations. A small business is any business that doesn’t meet the definition of a large business.

Table 2 – Taxpayer Burden for Entities Taxed as Taxable Corporations
Forms 1120, 1120-C, 1120-F, 1120-H, 1120-ND, 1120-SF, 1120-FSC, 1120-L, 1120-PC, 1120-POL, and all attachments
Primary Form Filed or Type of Total Number of Returns Average Time (hours) Average Cost ($) Average Monetized
Taxpayer (millions) Burden ($)
All Taxable Corporations 2.1 105 6,700 14,900
Small 2.0 55 3,600 6,200
Large* 0.1 830 53,800 149,000
*A large business is defined as one having end-of-year assets greater than $10 million. A large business is defined the same way for partnerships, taxable corporations, and
pass-through corporations. A small business is any business that doesn’t meet the definition of a large business.

Table 3 – Taxpayer Burden for Entities Taxed as Pass-Through Corporations
Forms 1120-REIT, 1120-RIC, 1120-S, and all attachments
Primary Form Filed or Type of Total Number of Returns Average Time (hours) Average Cost ($) Average Monetized
Taxpayer (millions) Burden ($)
All Pass-Through Corporations 5.8 65 4,400 7,500
Small 5.7 60 3,800 6,400
Large* 0.1 295 37,700 71,800
*A large business is defined as one having end-of-year assets greater than $10 million. A large business is defined the same way for partnerships, taxable corporations, and
pass-through corporations. A small business is any business that doesn’t meet the definition of a large business.

Comments. If you have comments concerning the accuracy of these time estimates or suggestions for making these forms simpler,
we would be happy to hear from you. You can send us comments from IRS.gov/FormComments. Or you can write to the Internal
Revenue Service, Tax Forms and Publications, 1111 Constitution Ave. NW, IR-6526, Washington, DC 20224. Do not send the tax form
to this address. Instead, see Where To File, near the beginning of the instructions.

PDF file checksum: 1559791353

(Plugin #1/9.12/13.0)