Looking for a Form 1120 Templates? Download it for free!

entitled to vote or at least 80% of the total

makes this election, the amount of foreign

value of all classes of stock of each corporation

taxes it paid during the tax year may not be

Schedule M-1

in the group (except the parent) must be

taken as a credit or a deduction on Form

owned by one or more of the other

1120-RIC, but may be claimed on Form

Reconciliation of Income (Loss)

corporations in the group and

1120-RIC, Schedule A, line 5, as an addition to

per Books With Income per Return

2. The common parent must own at least

the dividends paid deduction.

80% of the total combined voting power of all

Eligibility. To qualify to make the election,

classes of stock entitled to vote or at least 80%

the fund must meet the following requirements.

Line 5d –Travel and Entertainment

•

of the total value of all classes of stock of one

More than 50% of the value of the fund’s

Include on line 5d any of the following:

or more of the other corporations in the group.

total assets at the end of the tax year must

•

Meals and entertainment not deductible

Stock owned directly by other members of the

consist of stock or securities in foreign

under section 274(n).

group is not counted when computing the

corporations.

•

Expenses for the use of an entertainment

•

voting power or value.

The fund must meet the holding period

facility.

requirements of section 901(k) with respect to

•

See section 1563(d)(1) for the definition of

The part of business gifts over $25.

its common and preferred stock. If the fund

•

“stock” for purposes of determining stock

Expenses of an individual over $2,000,

fails to meet these holding period

ownership above.

which are allocable to conventions on cruise

requirements, the election that allows a fund to

ships.

Question 5

pass through to its shareholders the foreign tax

•

Employee achievement awards over $400.

credits for foreign taxes paid by the fund is

•

Check the “Yes” box if one foreign person

The cost of entertainment tickets over face

disallowed. Although the foreign taxes paid

owned at least 25% of (a) the total voting

value (also subject to the 50% limit under

may not be taken as a credit by either the fund

power of all classes of stock of the fund entitled

section 274(n)).

or the shareholder, they are still deductible at

•

to vote or (b) the total value of all classes of

The cost of skyboxes over the face value of

the fund level.

stock of the fund.

nonluxury box seat tickets.

To make a valid election, in addition to

•

The part of luxury water travel not deductible

The constructive ownership rules of section

timely filing Form 1120-RIC and checking the

318 apply in determining if a fund is foreign

under section 274(m).

box for line 10, the fund must file:

•

Expenses for travel as a form of education.

owned. See section 6038A(c)(5) and the

•

Form 1099-DIV and Form 1096, including

•

Other nondeductible travel and

related regulations.

the statement required by Regulations section

entertainment expenses.

Enter on line 5b(1) the percentage owned

1.853-4; and

For more information, see Pub. 542.

•

by the foreign person specified in question 5.

Form 1118, modified to become a statement

For line 5b(2), write the name of the owner’s

supporting the fund’s election.

Line 7 –Tax-Exempt Interest

country.

Notification. If the fund makes the

Include as interest on line 7 any

Note: If there is more than one 25%-or-more

election, it must furnish to its shareholders a

exempt-interest dividends received by the fund

foreign owner, complete lines 5b(1) and 5b(2)

written notice designating the shareholder’s

as a shareholder in a mutual fund or other RIC.

for the foreign person with the highest

share of foreign taxes paid to each country or

percentage of ownership.

possession and the share of the dividend that

Paperwork Reduction Act Notice. We ask

represents income derived from sources within

Foreign person. The term “foreign person”

for the information on this form to carry out the

each country or possession. The notice must

means:

•

Internal Revenue laws of the United States.

be mailed to the shareholders no later than 60

A foreign citizen or nonresident alien.

•

You are required to give us the information. We

days after the end of the fund’s tax year.

An individual who is a citizen of a U.S.

need it to ensure that you are complying with

possession (but who is not a U.S. citizen or

For further information, see Regulations

these laws and to allow us to figure and collect

resident).

section 1.853-4.

•

the right amount of tax.

A foreign partnership.

•

You are not required to provide the

A foreign corporation.

•

information requested on a form that is subject

Any foreign estate or trust within the

Schedule L

to the Paperwork Reduction Act unless the

meaning of section 7701(a)(31).

•

form displays a valid OMB control number.

A foreign government (or one of its agencies

Balance Sheets per Books

Books or records relating to a form or its

or instrumentalities) to the extent that it is

The balance sheet should agree with the fund’s

instructions must be retained as long as their

engaged in the conduct of a commercial

books and records. Include certificates of

contents may become material in the

activity as described in section 892.

deposit as cash on Schedule L, line 1.

administration of any Internal Revenue law.

Owner’s country. For individuals, the term

Generally, tax returns and return information

“owner’s country” means the country of

Line 4 – Tax-Exempt Securities

are confidential, as required by section 6103.

residence. For all others, it is the country

Include on this line:

The time needed to complete and file this

where incorporated, organized, created, or

1. State and local government obligations,

form will vary depending on individual

administered.

the interest on which is excludible from gross

circumstances. The estimated average time is:

Requirement to file Form 5472. If the fund

income under section 103(a) and

checked “Yes,” it may have to file Form 5472.

Recordkeeping . . . . . . .

57 hr., 9 min.

2. Stock in another mutual fund or other

Generally, a 25% foreign-owned corporation

RIC that distributed exempt-interest dividends

Learning about the law

that had a reportable transaction with a foreign

during the tax year of the fund.

or the form . . . . . . . . . . 20 hr., 37 min.

or domestic related party during the tax year

must file Form 5472.

Preparing the form . . . . 36 hr., 24 min.

Line 24 – Adjustments to

See Form 5472 for filing instructions and

Copying, assembling,

Shareholders’ Equity

penalties for failure to file.

and sending the form to

Some examples of adjustments to report on

the IRS . . . . . . . . . . . . .

4 hr., 1 min.

Item 8

this line include:

•

Show any tax-exempt interest received or

Unrealized gains and losses on securities

If you have comments concerning the

accrued. Include any exempt-interest dividends

held “available for sale.”

accuracy of these time estimates or

•

received as a shareholder in another mutual

Foreign currency translation adjustments.

suggestions for making this form simpler, we

•

fund or other regulated investment company.

The excess of additional pension liability

would be happy to hear from you. You can

over unrecognized prior service cost.

write to the Tax Forms Committee, Western

Item 10

•

Guarantees of employee stock (ESOP) debt.

Area Distribution Center, Rancho Cordova, CA

•

Election under section 853(a). A fund may

Compensation related to employee stock

95743-0001. Do not send the tax form to this

award plans.

make an irrevocable election under section

office. Instead, see Where To File on page 3.

If the total adjustment to be entered on line

853(a) to allow its shareholders to apply their

shares of the foreign taxes paid by the fund

24 is a negative amount, enter the amount in

parentheses.

either as a credit or a deduction. If the fund

-12-

Instructions For Form 1120-Ric - U.s. Income Tax Return For Regulated Investment Companies - 2002 Page 12

Related Articles

Related forms

Related Categories