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for which it took the low-income housing credit,

Regulations section 1.337(d)-6 for information

Short-term capital gain as a short-term

it may owe a tax. See Form 8611, Recapture

on how to make the election and figure the tax

capital loss on Schedule D (Form 1120), line 1.

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of Low-Income Housing Credit.

for RIC elections and property transfers before

Long-term capital gain as a long-term capital

this date. The fund may also rely on

loss on Schedule D (Form 1120), line 6.

Other

Regulations section 1.337(d)-5 for RIC

How to report. If the fund checked the “Other”

Additional taxes and interest amounts may be

elections and property transfers that occurred

box, attach a schedule showing the

included in the total entered on line 7. Check

before January 2, 2002.

computation of each item included in the total

the box for “Other” if the fund includes any of

for line 7, Schedule J; identify the applicable

Worksheet instructions. Complete the

the taxes and interest discussed below. See

Code section and the type of tax or interest.

worksheet on this page to figure the built-in

How to report, below, for details on reporting

gains tax under Regulations section 1.337(d)-7

these amounts on an attached schedule.

Line 8 –Total Tax

or 1.337(d)-6.

Recapture of qualified electric vehicle

Include any deferred tax on the termination of

Line a. Enter the amount that would be the

(QEV) credit. The fund must recapture part of

a section 1294 election applicable to

taxable income of the fund for the tax year if

the QEV credit it claimed in a prior year, if

shareholders in a qualified electing fund in the

only recognized built-in gain, recognized

within 3 years of the date the vehicle was

amount entered on line 8. See Form 8621, Part

built-in loss, and recognized built-in gain

placed in service, it ceases to qualify for the

V, and How to report, below.

carryover were taken into account.

credit. See Regulations section 1.30-1 for

Subtract. Amounts to subtract from the

Line b. Add the amounts shown on Form

details on how to figure the recapture.

total for line 8 are the deferred taxes on the

1120-RIC, page 1, line 24; Form 1120-RIC,

Recapture of Indian employment credit.

fund’s share of the undistributed earnings of a

Part II, line 1; and Form 2438, line 11. For this

Generally, if an employer terminates the

qualified electing fund (see Form 8621, Part II).

purpose, refigure line 24 on page 1 of Form

employment of a qualified employee less than

1120-RIC without regard to any election under

How to report. Attach a schedule showing the

1 year after the date of initial employment, any

computation of each item included in, or

section 852(b)(2)(F). Enter the result on line b

Indian employment credit allowed for a prior

subtracted from, the total for line 8. On the

of the worksheet on this page.

tax year because of wages paid or incurred to

dotted line next to line 8, enter the amount of

Line c. The fund’s net unrealized built-in

that employee must be recaptured. For details,

tax or interest, identify it as tax or interest, and

gain is the amount, if any, by which the fair

see Form 8845 and section 45A.

specify the Code section that applies.

market value of the assets of the fund at the

Recapture of New Markets Credit (see Form

beginning of its first RIC year (or as of the date

8874).

the assets were acquired, for any asset with a

Schedule K

Interest due on:

basis determined by reference to its basis (or

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Deferred tax attributable to (a) installment

the basis of any other property) in the hands of

sales of certain timeshares and residential lots

Other Information

a C corporation) exceeds the aggregate

(section 453(l)(3)) and (b) certain nondealer

adjusted basis of such assets at that time.

The following instructions apply to questions 1

installment obligations (section 453A(c)).

Enter on line c the fund net unrealized

through 11 on page 3, Form 1120-RIC.

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Deferred gain (section 1260(b)).

built-in gain reduced by the net recognized

Complete all the questions that apply to the

Built-in gains tax. If, on or after January 2,

built-in gain for prior years. See sections

fund.

2002, property of a C corporation becomes

1374(c)(2) and (d)(1).

Question 3

property of a RIC by either (a) the qualification

Line d. If the amount on line b exceeds the

of the C corporation as a RIC or (b) the

Check the “Yes” box for question 3 if the fund

amount on line a, the excess is treated as a

transfer of such property to a RIC, then the RIC

is a subsidiary in a parent-subsidiary controlled

recognized built-in gain in the succeeding tax

will be subject to the built-in gain tax under

group (defined below). This applies even if the

year.

section 1374 unless the C corporation elects

fund is a subsidiary member of one group and

Line e. Enter the section 1374(b)(2)

deemed sale treatment on the transferred

the parent corporation of another.

deduction. Generally, this is any net operating

property. If the C corporation does not make

loss carryforward or capital loss carryforward

Note: If the fund is an “excluded member”

this election, the RIC must pay tax on the net

of a controlled group (see section 1563(b)(2)),

(to the extent of net capital gain included in

recognized built-in gain during the 10-year

recognized built-in gain for the tax year) arising

it is still considered a member of a controlled

period beginning on its first day as a RIC or the

in tax years for which the fund was a C

group for this purpose.

day it acquired the property. Recognized

corporation. A capital loss carryforward must

built-in gains and losses on which a fund pays

Parent-subsidiary controlled group. The

be used to reduce recognized built-in gain for

tax generally retain their character (e.g.,

term “parent-subsidiary controlled group”

the tax year to the greatest extent possible

ordinary income or capital gain) and are

means one or more chains of corporations

before it can be used to reduce the investment

treated the same as other gains or losses of

connected through stock ownership (section

company taxable income.

the fund. The fund’s tax on net recognized

1563(a)(1)). Both of the following requirements

built-in gain is treated as a loss sustained by

Line h. Credit carryforwards arising in tax

must be met:

the fund after October 31 of the same tax year

years for which the fund was a C corporation

1. At least 80% of the total combined

(see the instructions for line i of the Built-in

must be used to reduce the tax on net built-in

voting power of all classes of voting stock

Gains Tax Worksheet on this page). See

gain for the tax year to the greatest extent

entitled to vote or at least 80% of the total

Regulations section 1.337(d)-7 for details.

possible before the credit carryforwards can be

value of all classes of stock of each corporation

used to reduce the tax on the investment

Different rules apply to elections to be a

in the group (except the parent) must be

company taxable income.

RIC and to transfers of property in a carryover

owned by one or more of the other

basis transaction that occurred prior to

Line i. The fund’s tax on the net

corporations in the group and

January 2, 2002. For RIC elections and

recognized built-in gain is treated as a loss

2. The common parent must own at least

property transfers before this date, the C

sustained by the RIC after October 31 of the

80% of the total combined voting power of all

corporation is subject to deemed sale

same tax year. Deduct the tax attributable to:

classes of stock entitled to vote or at least 80%

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treatment on the transferred property unless

Ordinary gain as a deduction for taxes on

of the total value of all classes of stock of one

the fund elects section 1374 treatment. See

Form 1120-RIC, line 12.

or more of the other corporations in the group.

Built-in Gains Tax Worksheet (keep for your records)

Excess of recognized built-in gains over recognized built-in losses . . . . . . . . . . . . . . . . . . . . . . . a.

b. Taxable income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b.

Enter the net unrealized built-in gain reduced by any net recognized built-in gain for all prior years c.

d. Net recognized built-in gain (enter the smallest of lines a, b, or c) . . . . . . . . . . . . . . . . . . . . . . . d.

Section 1374(b)(2) deduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e.

Subtract line e from line d. If zero, enter -0- here and on line i . . . . . . . . . . . . . . . . . . . . . . . . . . f.

g. Enter 35% of line f . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . g.

h. Business credit and minimum tax credit carryforwards under section 1374(b)(3) from C corporation h.

Tax. Subtract line h from line g (if zero or less, enter -0-). Enter here and include on line 7 of

Schedule J (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i.

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Instructions For Form 1120-Ric - U.s. Income Tax Return For Regulated Investment Companies - 2003 Page 11

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