2023

Instructions for Form 

1120-RIC

U.S. Income Tax Return for Regulated Investment Companies

Department of the Treasury

Internal Revenue Service

Section references are to the Internal Revenue Code 

unless otherwise noted.

Contents Page

Photographs of Missing Children ................ 1

The Taxpayer Advocate Service ................. 1

How To Get Forms and Publications .............. 2

General Instructions ......................... 2

Purpose of Form ............................ 2

Who Must File ............................. 2

General Requirements To Qualify as a RIC ......... 2

Other Requirements ......................... 2

Definition of a Fund .......................... 3

Where To File .............................. 3

When To File .............................. 3

Who Must Sign ............................. 4

Paid Preparer Authorization .................... 4

Assembling the Return ....................... 4

Tax Payments .............................. 5

Estimated Tax Payments ...................... 5

Interest and Penalties ........................ 5

Accounting Methods ......................... 6

Accounting Periods .......................... 6

Rounding Off to Whole Dollars .................. 6

Recordkeeping ............................. 6

Other Forms That May Be Required .............. 6

Statements ............................... 7

Specific Instructions ......................... 9

Period Covered ............................ 9

Name and Address .......................... 9

Item B. Date RIC Was Established ............... 9

Item C. Employer Identification Number (EIN) ....... 9

Item D. Total Assets ......................... 9

Item E. Final Return, Name Change, Address 

Change, or Amended Return ................ 9

Part I—Investment Company Taxable Income ....... 9

Part II—Tax on Undistributed Net Capital Gain Not 

Designated Under Section 852(b)(3)(D) ....... 15

Schedule A—Deduction for Dividends Paid ....... 15

Schedule B—Income From Tax-Exempt 

Obligations ............................ 15

Schedule J—Tax Computation ................. 15

Schedule K—Other Information ................ 17

Schedule L—Balance Sheets per Books ......... 19

Schedule M-1 ............................. 20

Future Developments

For the latest information about developments related to 

Form 1120-RIC and its instructions, such as legislation 

enacted after this form and instructions were published, 

go to IRS.gov/Form1120RIC.

What’s New

Increase in penalty for failure to file. For tax returns 

required 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 due or $485. See Late 

filing of return, later.

Expiration of 100% business meal expense deduction. The temporary 100% business meal expenses 

deduction for food and beverages provided by a 

restaurant does not apply to amounts paid or incurred 

after 2022.

Elective payment election. Applicable entities and 

electing taxpayers can elect to treat certain credits as 

elective payments. Any resulting overpayment may result 

in refunds. See the instructions for line 28h. Also, see the 

Instructions for Form 3800.

Photographs of Missing Children

The Internal Revenue Service is a proud partner with the 

National Center for Missing & Exploited Children® 

(NCMEC). Photographs of missing children selected by 

the Center may appear in instructions on pages that would 

otherwise be blank. You can help bring these children 

home by looking at the photographs and calling 

1-800-THE-LOST (1-800-843-5678) if you recognize a 

child.

The Taxpayer Advocate Service

The Taxpayer Advocate Service (TAS) is an independent 

organization within the IRS that helps taxpayers and 

protects taxpayer rights. TAS's job is to ensure that every 

taxpayer is treated fairly and knows and understands their 

rights under the Taxpayer Bill of Rights.

As a taxpayer, the RIC has rights that the IRS must 

abide by in its dealings with the RIC. TAS can help the RIC 

if:

• A problem is causing financial difficulty for the business;

• The business is facing an immediate threat of adverse 

action; or

• The RIC has tried repeatedly to contact the IRS but no 

one has responded, or the IRS hasn't responded by the 

date promised.

TAS has offices in every state, the District of Columbia, 

and Puerto Rico. Local advocates' numbers are in their 

Jan 25, 2024 Cat. No. 64251J
local directories and at TaxpayerAdvocate.IRS.gov. The 

RIC can also call TAS at 877-777-4778.

TAS also works to resolve large-scale or systemic 

problems that affect many taxpayers. If the RIC knows of 

one of these broad issues, please report it to TAS through 

the Systemic Advocacy Management System at

IRS.gov/SAMS.

For more information, go to IRS.gov/Advocate.

How To Get Forms

and Publications

Internet. You can access the IRS website 24 hours a day, 

7 days a week, at IRS.gov to:

• Download forms, instructions, and publications;

• Order IRS products online;

• Research your tax questions online;

• Search publications online by topic or keyword;

• View Internal Revenue Bulletins (IRBs) published in 

recent years; and

• Sign up to receive local and national tax news by email.

Tax forms and publications. The RIC can view, 

download, or print all of the forms and publications it may 

need at IRS.gov/FormsPubs.

Otherwise, the RIC can go to IRS.gov/OrderForms to 

place an order and have forms mailed to it.

General Instructions

Purpose of Form

Use Form 1120-RIC, U.S. Income Tax Return for 

Regulated Investment Companies, to report the income, 

gains, losses, deductions, credits, and to figure the 

income tax liability of a regulated investment company 

(RIC) as defined in section 851.

Who Must File

A domestic corporation that meets certain conditions 

(discussed below) must file Form 1120-RIC if it elects to 

be treated as a RIC for the tax year (or has made an 

election for a prior tax year and the election has not been 

terminated or revoked). The election is made by 

computing taxable income as a RIC on Form 1120-RIC.

Qualified opportunity funds. To certify as a qualified 

opportunity fund (QOF), the RIC must file Form 1120-RIC 

and attach Form 8996, even if the RIC had no income or 

expenses to report. See Schedule K, Question 15. Also, 

see the Instructions for Form 8996.

General Requirements To Qualify as a 

RIC

The term “regulated investment company” applies to any 

domestic corporation that:

• Is registered throughout the tax year as a management 

company or unit investment trust under the Investment 

Company Act of 1940 (ICA),

• Has an election in effect under the ICA to be treated as 

a business development company, or

• Is a common trust fund or similar fund that is neither an 

investment company under section 3(c)(3) of the ICA nor 

a common trust fund as defined under section 584(a).

Other Requirements

In addition, the RIC must meet the (1) income test, (2) 

asset test, and (3) distribution requirements explained 

below.

The income test: At least 90% of its gross income must 

be derived from the following items:

• Dividends;

• Interest (including tax-exempt interest income);

• Payments with respect to securities loans (as defined in 

section 512(a)(5));

• Gains from the sale or other disposition of stock or 

securities (as defined in ICA section 2(a)(36)) or foreign 

currencies;

• Other income (including gains from options, futures, or 

forward contracts) derived from the RIC's business of 

investing in such stock, securities, or currencies; and

• Net income derived from an interest in a qualified 

publicly traded partnership (as defined in section 851(h)).

Income from a partnership (other than a qualified 

publicly traded partnership) or trust qualifies under the 

90% test to the extent the RIC's distributive share of such 

income is from items described above as realized by the 

partnership or trust.

Income that a RIC receives in the normal course of 

business as a reimbursement from its investment advisor 

is qualifying income for purposes of the 90% test if the 

reimbursement is includible in the RIC's gross income.

A RIC that fails to meet the requirements of section 

851(b)(2) may still be considered to have satisfied the 

requirements of this test if:

• Following the RIC's identification of the failure, a 

description of each item of its gross income described in 

section 851(b)(2) is set forth in a statement for the tax 

year; and

• Failure to meet the requirements of this test is due to 

reasonable cause and not due to willful neglect.

The asset test: 

1. At the end of each quarter of the RIC's tax year, at 

least 50% of the value of its assets must be invested in the 

following items:

• Cash and cash items (including receivables);

• Government securities;

• Securities of other RICs; and

• Securities of other issuers, except that the investment in 

a single issuer of securities may not exceed 5% of the 

value of the RIC's assets or 10% of the outstanding voting 

securities of the issuer (except as provided in section 

851(e)).

2. At the end of each quarter of the RIC's tax year, no 

more than 25% of the value of the RIC's assets may be 

invested in the securities of:

• A single issuer (excluding government securities or 

securities of other RICs);

• Two or more issuers controlled by the RIC and engaged 

in the same or related trades or businesses; or

• One or more qualified publicly traded partnerships as 

defined in section 851(h).

See sections 851(b)(3) and 851(c) for further details.

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3. A RIC that fails to meet the requirements of section 

851(b)(3) for a quarter may be considered to have 

satisfied the requirements of this test if:

• After the RIC identifies the failure, the RIC provides a 

statement with a description of each asset that causes the 

RIC to fail to satisfy the requirements at the close of the 

quarter;

• The failure is due to reasonable cause and not due to 

willful neglect; and

• The RIC disposes of the assets set forth on the 

statement (or the requirements of section 851(b)(3) are 

otherwise met) within 6 months after the last day of the 

quarter in which the RIC identified the failure.

4. De minimis failures. A RIC that fails to meet the 

requirements of section 851(b)(3) for a quarter may be 

considered to have satisfied the requirements of this test 

if:

• Such failure is due to ownership of assets, the total 

value of which does not exceed the lesser of:

a. 1% of the total value of the RIC's assets at the end 

of the quarter for which the measurement is done, or

b. $10 million; and

• The RIC disposes of the assets following the 

identification of the failure (or the requirements of section 

851(b)(3) are otherwise met) within 6 months after the last 

day of the quarter in which the RIC identified the failure.

Note. For special rules regarding failure to meet the 

requirements of the income and asset tests, see sections 

851(d)(2) and 851(i).

Distribution requirements. The RIC's deduction for 

dividends paid for the tax year (as defined in section 561, 

but without regard to capital gain dividends) equals or 

exceeds the sum of:

• 90% of its investment company taxable income 

determined without regard to section 852(b)(2)(D); and

• 90% of the excess of the RIC's interest income 

excludable from gross income under section 103(a) over 

its deductions disallowed under sections 265 and 171(a)

(2).

A RIC that does not satisfy the distribution 

requirements will be subject to taxation as a C 

corporation.

Earnings and profits. The RIC must either have been 

a RIC for all tax years ending after November 7, 1983, or, 

at the end of the current tax year, have had no 

accumulated earnings and profits from any non-RIC tax 

year.

Note. For this purpose, current year distributions are 

treated as made from the earliest earnings and profits 

accumulated in any non-RIC tax year. See section 852(c)

(3). Also, see section 852(e) for procedures that may allow 

the RIC to avoid disqualification for the initial year if the 

RIC did not meet this requirement.

Definition of a Fund

The term “fund” refers to a separate portfolio of assets, 

whose beneficial interests are owned by the holders of a 

class or series of stock of the RIC that is preferred over all 

other classes or series for that portfolio of assets.

When To File

Generally, a RIC must file its income tax return by the 15th 

day of the 4th month after the end of its tax year. A new 

RIC filing a short period return must generally file by the 

15th day of the 4th month after the short period ends. A 

RIC that has dissolved must generally file by the 15th day 

of the 4th month after the date of dissolution.

However, a RIC 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. A RIC with a short tax year ending anytime in 

June will be treated as if the short year ended on June 30, 

CAUTION

!

Where To File

File the RIC's return at the applicable IRS address listed below.

If the RIC's principal business, office, or 

agency is located in:

And the total assets at the end of the 

tax year are: Use the following address:

Connecticut, Delaware, District of Columbia, 

Georgia, Illinois, Indiana, Kentucky, Maine, 

Maryland, Massachusetts, Michigan, New 

Hampshire, New Jersey, New York, North 

Carolina, Ohio, Pennsylvania, Rhode Island, 

South Carolina, Tennessee, Vermont, Virginia, 

West Virginia, Wisconsin

Less than $10 million and Schedule M-3 

is not filed

Department of the Treasury

Internal Revenue Service

Kansas City, MO

64999-0012 

$10 million or more or Schedule M-3 is 

filed

Department of the Treasury

Internal Revenue Service

Ogden, UT 

84201-0012

Alabama, Alaska, Arizona, Arkansas, California, 

Colorado, Florida, Hawaii, Idaho, Iowa, Kansas, 

Louisiana, Minnesota, Mississippi, Missouri, 

Montana, Nebraska, Nevada, New Mexico, 

North Dakota, Oklahoma, Oregon, South 

Dakota, Texas, Utah, Washington, Wyoming

Any amount

Department of the Treasury

Internal Revenue Service

Ogden, UT 

84201-0012

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, file the tax returns with the service center for the 

area in which the principal office of the managing corporation is located.

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and must file by the 15th day of the 3rd month after the 

end of its tax year.

If the due date falls on a Saturday, Sunday, or legal 

holiday, the RIC may file its return on the next business 

day.

Private Delivery Services

RICs can use certain private delivery services (PDS) 

designated by the IRS to meet the “timely mailing as 

timely filing” rule for tax returns. Go to IRS.gov/PDS for the 

current list of designated services.

The PDS can tell you how to get written proof of the 

mailing date.

For the IRS mailing address to use if you're using PDS, 

go to IRS.gov/PDSstreetAddresses.

Private delivery services can't deliver items to P.O. 

boxes. You must use the U.S. Postal Service to 

mail any item to an IRS P.O. box address.

Extension of Time To File

File Form 7004, Application for Automatic Extension of 

Time To File Certain Business Income Tax, Information, 

and Other Returns, to request an extension of time to file. 

Generally, the RIC must file Form 7004 by the regular due 

date of the return.

Who Must Sign

The return must be signed and dated by:

• The president, vice president, treasurer, assistant 

treasurer, chief accounting officer; or

• Any other corporate officer (such as a tax officer) 

authorized to sign.

If a return is filed on behalf of a RIC by a receiver, 

trustee, or assignee, the fiduciary must sign the return, 

instead of the corporate officer. Returns and forms signed 

by a receiver or trustee in bankruptcy on behalf of a RIC 

must be accompanied by a copy of the order or 

instructions of the court authorizing signing of the return or 

form.

Note. If this return is being filed for a series fund (as 

defined in section 851(g)(2)), the return may be signed by 

any officer authorized to sign for the corporation in which 

the fund is a series.

Paid Preparer Use Only section. If an employee of the 

RIC completes Form 1120-RIC, the paid preparer's 

section should remain blank. Anyone who prepares Form 

1120-RIC but does not charge the RIC should not 

complete that section. Generally, anyone who is paid to 

prepare the return must sign it and complete the section.

The paid preparer must complete the required preparer 

information and:

• Sign the return in the space provided for the preparer's 

signature,

• Include their Preparer Tax Identification Number (PTIN), 

and

• Give a copy of the return to the RIC.

CAUTION

!

A paid preparer may sign original or amended 

returns by rubber stamp, mechanical device, or 

computer software program.

Paid Preparer Authorization

If the RIC wants to allow the IRS to discuss its 2023 tax 

return with the paid preparer who signed the return, check 

the “Yes” box in the signature area of the return. This 

authorization applies only to the individual whose 

signature appears in the “Paid Preparer Use Only” section 

of the RIC's return. It does not apply to the firm, if any, 

shown in that section.

If the “Yes” box is checked, the RIC is authorizing the 

IRS to call the paid preparer to answer any questions that 

may arise during the processing of its return. The RIC is 

also authorizing the paid preparer to:

• Give the IRS any information that is missing from the 

return;

• Call the IRS for information about the processing of the 

return or the status of any related refund or payment(s); 

and

• Respond to certain IRS notices about math errors, 

offsets, and return preparation.

The RIC is not authorizing the paid preparer to receive 

any refund check, bind the RIC to anything (including any 

additional tax liability), or otherwise represent the RIC 

before the IRS.

The authorization will automatically end no later than 

the due date (excluding extensions) for filing the RIC's 

2024 tax return. If the RIC wants to expand the paid 

preparer's authorization or revoke the authorization before 

it ends, see Pub. 947, Practice Before the IRS and Power 

of Attorney.

Assembling the Return

To ensure that the RIC's tax return is correctly processed, 

attach all schedules, statements, and other forms after 

page 4, Form 1120-RIC, in the following order.

1. Schedule N (Form 1120).

2. Schedule D (Form 1120).

3. Form 8949.

4. Form 4136.

5. Form 8948.

6. Form 965-B.

7. Form 8941.

8. Form 3800.

9. Form 8997.

10. Additional schedules in alphabetical order.

11. Additional forms in numerical order.

12. Supporting statements and attachments.

Complete every applicable entry space on Form 

1120-RIC. Do not enter “See attached” instead of 

completing the entry spaces. If more space is needed on 

the forms or schedules, attach separate sheets using the 

same size and format as the printed forms.

If there are supporting statements and attachments, 

arrange them in the same order as the schedules or forms 

they support and attach them last. Show the totals on the 

TIP

4
printed forms. Enter the RIC's name and EIN on each 

supporting statement or attachment.

Tax Payments

Generally, the RIC must pay the tax due in full no later 

than the due date for filing its tax return (not including 

extensions). See the instructions for line 31. If the due 

date falls on a Saturday, Sunday, or legal holiday, the 

payment is due on the next day that isn't a Saturday, 

Sunday, or legal holiday.

Electronic Deposit Requirement

RICs must use electronic funds transfer to make all federal 

tax deposits (such as deposits of employment, excise, 

and corporate income tax). Generally, electronic funds 

transfers are made using the Electronic Federal Tax 

Payment System (EFTPS). However, if the RIC does not 

want to use EFTPS, it can arrange for its tax professional, 

financial institution, payroll service, or other trusted third 

party to make deposits on its behalf. Also, it may arrange 

for its financial institution to submit a same-day tax wire 

payment (discussed below) on its behalf. EFTPS is a free 

service provided by the Department of the Treasury. 

Services provided by a tax professional, financial 

institution, payroll service, or other third party may have a 

fee.

To get more information about EFTPS or to enroll in 

EFTPS, visit EFTPS.gov, or call 800-555-4477. To contact 

EFTPS using Telecommunications Relay Services (TRS) 

for people who are deaf, hard of hearing, or have a speech 

disability, dial 711 and provide the TRS assistant the 

800-555-4477 number above or 800-733-4829.

Depositing on time. For any deposit made by EFTPS to 

be on time, the RIC must submit the deposit by 8 p.m. 

Eastern time the day before the date the deposit is due. If 

the RIC uses a third party to make deposits on its behalf, 

they may have different cutoff times.

Same-day wire payment option. If the RIC fails to 

submit a deposit transaction on EFTPS by 8 p.m. Eastern 

time on the day before the date a deposit is due, it can still 

make its deposit on time by using the Federal Tax 

Collection Service (FTCS). To use the same-day wire 

payment method, the RIC will need to make arrangements 

with its financial institution ahead of time regarding 

availability, deadlines, and costs. Financial institutions 

may charge a fee for payments made this way. To learn 

more about the information the RIC will need to provide its 

financial institution to make a same-day wire payment, go 

to IRS.gov/SameDayWire.

Estimated Tax Payments

Generally, the following rules apply to the RIC's payments 

of estimated tax.

• The RIC must make installment payments of estimated 

tax if it expects its total tax for the year (less applicable 

credits) to be $500 or more.

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

9th, and 12th months of the tax year. If any date falls on a 

Saturday, Sunday, or legal holiday, the installment is due 

on the next regular business day.

• The RIC must use electronic funds transfer to make 

installment payments of estimated tax.

• If, after the RIC figures and deposits estimated tax, it 

finds that its tax liability for the year will be more or less 

than originally estimated, it may have to refigure its 

required installments. If earlier installments were 

underpaid, the RIC may owe a penalty. See the 

instructions for line 30, later.

• If the RIC overpaid its estimated tax, it may be able to 

get a quick refund by filing Form 4466, Corporation 

Application for Quick Refund of Overpayment of 

Estimated Tax. The overpayment must be at least 10% of 

the RIC's expected income tax liability and at least $500.

See section 6655 and Pub. 542, Corporations, for more 

information on how to figure estimated taxes.

Interest and Penalties

Interest. Interest is charged on taxes paid late even if an 

extension of time to file is granted. Interest is also charged 

on penalties imposed for failure to file, negligence, fraud, 

substantial valuation misstatements, substantial 

understatements of tax, and reportable transaction 

understatements from the due date (including extensions) 

to the date of payment. The interest charge is figured at a 

rate determined under section 6621.

Late filing of return. A RIC that does not file its tax 

return by the due date, including extensions, may be 

penalized 5% of the unpaid tax for each month or part of a 

month the return is late, up to a maximum of 25% of the 

unpaid tax. The minimum penalty for a tax return required 

to be filed in 2024 that is over 60 days late is the smaller of 

the tax due or $485. The penalty will not be imposed if the 

RIC can show that the failure to file on time was due to 

reasonable cause.

Late payment of tax. A RIC that does not pay the tax 

when due may generally be penalized 1/2 of 1% of the 

unpaid tax for each month or part of a month the tax is not 

paid, up to a maximum of 25% of the unpaid tax. The 

penalty will not be imposed if the RIC can show that the 

failure to pay on time was due to reasonable cause.

Reasonable cause determinations. If the RIC receives 

a notice about a penalty after it files its return, send the 

IRS an explanation and we will determine if the RIC meets 

the reasonable cause criteria. Do not attach an 

explanation when the RIC's return is filed.

Trust fund recovery penalty. This penalty may apply if 

certain excise, income, social security, and Medicare 

taxes that must be collected or withheld are not collected 

or withheld, or these taxes are not paid. These taxes are 

generally reported on:

• Form 720, Quarterly Federal Excise Tax Return;

• Form 941, Employer's QUARTERLY Federal Tax 

Return;

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

• Form 945, Annual Return of Withheld Federal Income 

Tax.

The trust fund recovery penalty may be imposed on all 

persons who are determined by the IRS to be responsible 

for collecting, accounting for, or paying over these taxes, 

and who acted willfully in not doing so. The penalty is 

equal to the full amount of the unpaid trust fund tax. See 

the Instructions for Form 720 or Pub. 15 (Circular E), for 

details, including the definition of responsible persons.

5
Note. The trust fund recovery penalty will not apply to any 

amount of trust fund taxes an employer holds back in 

anticipation of the credit for qualified sick and family leave 

wages or the employee retention credit that they are 

entitled to. See Pub. 15 or Pub. 51 for more information.

Other penalties. Other penalties can be imposed for 

negligence, substantial understatement of tax, reportable 

transaction understatements, and fraud. See sections 

6662, 6662A, and 6663.

Accounting Methods

Figure taxable income using the method of accounting 

regularly used in keeping the RIC's books and records. In 

all cases, the method used must clearly reflect taxable 

income.

Generally, permissible methods include:

• Cash,

• Accrual, or

• Any other method authorized by the Internal Revenue 

Code.

For more information, see Pub. 538, Accounting 

Periods and Methods.

Accrual method. Generally, a RIC must use the accrual 

method of accounting if its average annual gross receipts 

for the prior 3 years exceed $29 million. See section 

448(c).

Mark-to-market accounting method. Generally, 

dealers in securities must use the mark-to-market 

accounting method described in section 475. Under this 

method, any security that is inventory to the dealer must 

be held at its fair market value (FMV).

Any security held by a dealer that is not inventory and 

held at the close of the tax year is treated as sold at its 

FMV on the last business day of the tax year. Any resulting 

gain or loss must be taken into account that year in 

determining gross income. The gain or loss taken into 

account is generally treated as ordinary gain or loss.

For details, including exceptions, see section 475, the 

related regulations, and Rev. Rul. 97-39, 1997-39 I.R.B. 4.

Dealers in commodities and traders in securities and 

commodities may elect, with some exceptions, to use the 

mark-to-market accounting method. To make the election, 

the RIC must file a statement describing the election, the 

first tax year the election is to be effective, and in the case 

of an election for traders in securities or commodities, the 

trade or business for which the election is made. Except 

for new taxpayers, the statement must be filed by the due 

date (not including extensions) of the income tax return for 

the tax year immediately preceding the election year and 

attached to that return, or if applicable, to a request for an 

extension of time to file that return. For more details, see 

Rev. Proc. 99-17, 1999-7 I.R.B. 52, and sections 475(e) 

and (f).

Change in accounting method. Generally, the RIC 

must get IRS consent to change either an overall method 

of accounting or the accounting treatment of any material 

item for income tax purposes. To obtain consent, the RIC 

must file Form 3115, Application for Change in Accounting 

Method, during the tax year for which the change is 

requested. See the Instructions for Form 3115 and Pub. 

538 for more information and exceptions. Also, see the 

Instructions for Form 3115 for procedures that may apply 

for obtaining automatic consent to change certain 

methods of accounting, non-automatic change 

procedures, and reduced Form 3115 filing requirements.

Accounting Periods

A RIC must figure its taxable income on the basis of a tax 

year. A tax year is the annual accounting period a RIC 

uses to keep its records and report its income and 

expenses. RICs can use a calendar year or a fiscal year. 

For more information about accounting periods, see 

Regulations sections 1.441-1 and 1.441-2.

Change of tax year. Generally, a RIC must receive 

consent from the IRS before changing its tax year. To 

obtain the consent, file Form 1128, Application To Adopt, 

Change, or Retain a Tax Year. However, under certain 

conditions, a RIC may change its tax year without 

obtaining the consent.

See the Instructions for Form 1128 and Pub. 538 for 

more information on accounting periods and tax years.

Rounding Off to

Whole Dollars

The RIC may enter decimal points and cents when 

completing its return. However, the RIC should round off 

cents to whole dollars on its return, forms, and schedules 

to make completing its return easier. The RIC must either 

round off all amounts on its return to whole dollars, or use 

cents for all amounts. To round, drop amounts under 50 

cents and increase amounts from 50 to 99 cents to the 

next dollar. For example, $8.40 rounds to $8 and $8.50 

rounds to $9.

If two or more amounts must be added to figure the 

amount to enter on a line, include cents when adding the 

amounts and round off only the total.

Recordkeeping

Keep the RIC's records for as long as they may be needed 

for administration of any provision of the Internal Revenue 

Code. Usually, records that support an item of income, 

deduction, or credit on the return must be kept for 3 years 

from the date the return is due or filed, whichever is later. 

Keep records that verify the RIC's basis in property for as 

long as they are needed to figure the basis of the original 

or replacement property.

The RIC should keep copies of all filed returns. They 

help in preparing future and amended returns and in the 

calculation of earnings and profits.

Other Forms That May Be Required

In addition to Form 1120-RIC, the RIC may have to file 

some of the following forms.

Form 976, Claim for Deficiency Dividends Deductions by 

a Personal Holding Company, Regulated Investment 

Company, or Real Estate Investment Trust. Use this form 

to claim a deficiency dividend deduction under section 

860.

Form 1096, Annual Summary and Transmittal of U.S. 

Information Returns. Use Form 1096 to transmit Forms 

1099 and 5498 to the Internal Revenue Service.

6
Form 1099-DIV, Dividends and Distributions. Report 

certain dividends and distributions.

Form 1099-INT, Interest Income. Report interest income.

Form 2438, Undistributed Capital Gains Tax Return, 

must be filed by the RIC if it designates undistributed net 

long-term capital gains under section 852(b)(3)(D).

Form 2439, Notice to Shareholder of Undistributed 

Long-Term Capital Gains, must be completed and a copy 

given to each shareholder for whom the RIC paid tax on 

undistributed net long-term capital gains under section 

852(b)(3)(D).

Form 3520, Annual Return To Report Transactions With 

Foreign Trusts and Receipt of Certain Foreign Gifts, may 

be required if the RIC received a distribution from, was a 

grantor of, or transferor to a foreign trust during the tax 

year. See Question 5 of Schedule N (Form 1120).

Form 5471, Information Return of U.S. Persons With 

Respect To Certain Foreign Corporations. Use Form 5471 

if the RIC is a U.S. shareholder of a controlled foreign 

corporation, a specified foreign corporation, or otherwise 

subject to the reporting requirements of section 6038 or 

6046, and the related regulations.

Form 7205, Energy Efficient Commercial Buildings 

Deduction. Use Form 7205 to calculate and claim the 

deduction under section 179D for qualifying energy 

efficient commercial buildings placed in service during the 

tax year.

Form 8613, Return of Excise Tax on Undistributed 

Income of Regulated Investment Companies. If the RIC is 

liable for the 4% excise tax on undistributed income under 

section 4982 or makes an election under section 4982(e)

(4), it must file this return for the calendar year.

Form 8621, Information Return by a Shareholder of a 

Passive Foreign Investment Company or Qualified 

Electing Fund. Use Form 8621 if the RIC is a direct or 

indirect shareholder of a passive foreign investment 

company, as defined in section 1297(a).

Form 8927, Determination Under Section 860(e)(4) by a 

Qualified Investment Entity. Use Form 8927 to make a 

determination under section 860(e)(4) for purposes of 

paying deficiency dividends.

Form 8975, Country-by-Country Report. Certain U.S. 

persons that are the ultimate parent entity of a U.S. 

multinational enterprise group with annual revenue for the 

preceding reporting period of $850 million or more are 

required to file Form 8975. Form 8975 and Schedule A 

(Form 8975) must be filed with the income tax return of the 

ultimate parent entity of a U.S. multinational enterprise 

group for the tax year in or within which the reporting 

period covered by Form 8975 ends. For more information, 

see Form 8975, Schedule A (Form 8975) and the 

Instructions for Form 8975 and Schedule A (Form 8975).

Form 8990, Limitation on Business Interest Expense 

Under Section 163(j). Use Form 8990 to calculate the 

amount of business interest expense the RIC can deduct 

and the amount to carry forward to the next year.

Form 8992, U.S. Shareholder Calculation of Global 

Intangible Low-Taxed Income (GILTI). Use Form 8992 to 

figure the domestic corporation's GILTI under section 

951A and attach it to Form 1120-RIC.

Form 8996, Qualified Opportunity Fund. Use Form 8996 

to certify that the RIC is organized as a qualified 

opportunity fund (QOF) to invest in qualified opportunity 

zone property. In addition, a QOF RIC files Form 8996 

annually to report that it meets the 90% investment 

standard of section 1400Z-2 or to compute the penalty if it 

fails to meet the investment standard.

Form 8997, Initial and Annual Statement of Qualified 

Opportunity Fund (QOF) Investments. Use Form 8997 to 

report investments in one or more QOFs. Report the 

amount of deferred gains invested in QOFs at the 

beginning of the current tax year, transactions related to 

investments in QOFs for the current tax year, which 

include capital gains deferred and invested in QOFs and 

dispositions of investments in QOFs, and the amount of 

deferred gains invested in QOFs at the end of the current 

tax year.

Statements

Reportable transaction disclosure statement. 

Disclose information for each reportable transaction in 

which the RIC participated. Form 8886, Reportable 

Transaction Disclosure Statement, must be filed for each 

tax year that the federal income tax liability of the RIC is 

affected by its participation in the transaction. The 

following are reportable transactions.

1. Any listed transaction, which is a transaction that is 

the same as or substantially similar to one of the types of 

transactions that the IRS has determined to be a tax 

avoidance transaction and identified by notice, regulation, 

or other published guidance as a listed transaction.

2. Any transaction offered under conditions of 

confidentiality for which the RIC (or a related party) paid 

an advisor a fee of at least $250,000.

3. Certain transactions for which the RIC (or a related 

party) has contractual protection against disallowance of 

the tax benefits.

4. Certain transactions resulting in a loss of at least 

$10 million in any single year or $20 million in any 

combination of years.

5. Any transaction identified by the IRS by notice, 

regulation, or other published guidance as a “transaction 

of interest.” See Notice 2009-55, 2009-31 I.R.B. 170.

For more information, see Regulations section 

1.6011-4. Also, see the Instructions for Form 8886.

Penalties. The RIC may have to pay a penalty if it is 

required to disclose a reportable transaction under section 

6011 and fails to properly complete and file Form 8886. 

Penalties may also apply under section 6707A if the RIC 

fails to file Form 8886 with its Form 1120-RIC, fails to 

provide a copy of Form 8886 to the Office of Tax Shelter 

Analysis (OTSA), or files a form that fails to include all the 

information required (or includes incorrect information). 

Other penalties, such as an accuracy-related penalty 

under section 6662A, may also apply. See the Instructions 

for Form 8886 for details on these and other penalties.

Reportable transactions by material advisors. 

Material advisors to any reportable transaction must 

7
disclose certain information about the reportable 

transaction by filing Form 8918, Material Advisor 

Disclosure Statement, with the IRS. For details, see the 

Instructions for Form 8918.

Safe harbor under Temporary Regulations section 

1.67-2T(j)(2). Generally, shareholders in a nonpublicly 

offered fund that are individuals or pass-through entities 

are treated as having received a dividend in an amount 

equal to the shareholder's allocable share of affected RIC 

expenses for the calendar year. They are also treated as 

having paid or incurred an expense described in section 

212 in the same amount for the calendar year.

Election. A nonpublicly offered fund may elect to treat 

its affected RIC expenses for a calendar year as equal to 

40% of the amount determined under Temporary 

Regulations section 1.67-2T(j)(1)(i) for that calendar year.

To make this election, attach to Form 1120-RIC for the 

tax year that includes the last day of the calendar year for 

which the fund makes the election a statement that it is 

making an election under Temporary Regulations section 

1.67-2T(j)(2). Once made, the election remains in effect 

for all subsequent calendar years and may not be revoked 

without IRS consent. See Temporary Regulations section 

1.67-2T for definitions and other details.

Transfers to a corporation controlled by the transferor. Every significant transferor (as defined in Regulations 

section 1.351-3(d)(1)) that receives stock of a corporation 

in exchange for property in a nonrecognition event must 

include the statement required by Regulations section 

1.351-3(a) on or with the transferor's tax return for the tax 

year of the exchange. The transferee corporation must 

include the statement required by Regulations section 

1.351-3(b) on or with its return for the tax year of the 

exchange, unless all the required information is included 

in any statement(s) provided by a significant transferor 

that is attached to the same return for the same section 

351 exchange. If the transferor or transferee corporation is 

a controlled foreign corporation (CFC), each U.S. 

shareholder (within the meaning of section 951(b)) must 

include the required statement on or with its return.

Distributions under section 355. Every RIC that makes 

a distribution of stock or securities of a controlled 

corporation, as described in section 355 (or so much of 

section 356 as it relates to section 355), must attach the 

statement required by Regulations section 1.355-5(a) to 

its return for the year of the distribution. A significant 

distributee (as defined in Regulations section 1.355-5(c)

(1)) that receives stock or securities of a controlled 

corporation must include the statement required by 

Regulations section 1.355-5(b) on or with its return for the 

year of receipt. If the distributing or distributee corporation 

is a CFC, each U.S. shareholder (within the meaning of 

section 951(b)) must include the statement on or with its 

return.

Dual consolidated losses. If a domestic corporation 

incurs a dual consolidated loss (as defined in Regulations 

section 1.1503-2(c)(5)), the corporation (or consolidated 

group) may need to attach an elective relief agreement 

and/or an annual certification, as provided in Regulations 

section 1.1503-2(g)(2).

Certain dividends. A dividend received from a RIC is 

taken into account in computing (a) the deduction under 

section 243, or (b) qualified dividend income, only to the 

extent reported by the RIC as eligible for such deduction 

or such treatment in written statements furnished to its 

shareholders. A RIC must determine the reportable 

amounts under section 854(b). For purposes of the 

dividends-received deduction, a capital gain dividend 

received from a RIC is not treated as a dividend. The 

capital gain dividend is treated as a long-term capital gain 

by the shareholder.

Consent to partnership election to close its books 

monthly. Certain money market funds that obtain an 

interest in an eligible partnership that invests in assets 

exempt from taxation under section 103 may be qualified 

to pay exempt-interest dividends to their shareholders. To 

qualify for payment of exempt-interest dividends, a RIC 

must meet the quarterly net asset value (NAV) 

requirements under section 852(b)(5). To maintain the 

required NAV at the end of each quarter, the RIC may take 

into account on a monthly basis its distributive share of 

partnership items if the eligible partnership makes a 

proper election to close its books at the end of each 

month. See Rev. Proc. 2003-84, 2003-48 I.R.B. 1159, as 

modified by Notice 2008-80, for details.

Eligibility. A RIC is entitled to take into account its 

distributive share of partnership items on a monthly basis 

if:

• The RIC is entitled to hold itself out as a money market 

fund, or an equivalent of a money market fund;

• The RIC provides a statement to the partnership that it 

consents to the partnership's election to close its books 

monthly and that the RIC will include in its taxable income 

its distributive share of partnership items in a manner 

consistent with the election. See Rev. Proc. 2003-84 for 

the required contents of the statement of consent;

• The RIC provides the statement of consent to the 

custodian or manager of the partnership by the last day of 

the second month after the month in which the RIC 

acquires the partnership interest; and

• The partnership is eligible under Rev. Proc. 2003-84 to 

make the monthly closing election and the election is 

effective by the second month after the month in which the 

RIC acquires the partnership interest.

Statement of consent. The consent to a partnership's 

monthly closing election is effective for the month in which 

the RIC acquires the partnership interest, unless the RIC 

requests that the consent be effective for either of the two 

immediately following calendar months. In addition to 

timely providing the partnership with the statement of 

consent, the statement should be filed with Form 

1120-RIC for the first tax year in which the consent is 

effective. The monthly closing consent (and the 

partnership's election) may be revoked only with the 

consent of the Commissioner. However, the RIC's consent 

becomes ineffective on any day when the RIC ceases to 

be an eligible partner and the partnership's monthly 

closing election is terminated as of the first day of any 

month the partnership is no longer eligible for the election 

under Rev. Proc. 2003-84. For more details, see the 

revenue procedure.

8
Other forms and statements. See Pub. 542, 

Corporations, for a list of other forms and statements a 

RIC may need to file in addition to the forms and 

statements discussed throughout these instructions.

Specific Instructions

Period Covered

File the 2023 return for calendar year 2023 and fiscal 

years that 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.

The 2023 Form 1120-RIC may also be used if:

• The RIC has a tax year of less than 12 months that 

begins and ends in 2024; and

• The 2024 Form 1120-RIC is not available at the time the 

RIC is required to file its return.

The RIC must show its 2024 tax year information on the 

2023 Form 1120-RIC and take into account any tax law 

changes that are effective for tax years beginning after 

December 31, 2023.

Name and Address

Enter the RIC's true name (as set forth in the charter or 

other legal document creating it), address, and EIN on the 

appropriate lines. Enter the address of the RIC's principal 

office or place of business. Include the suite, room, or 

other unit number after the street address. If the post 

office does not deliver mail to the street address and the 

RIC has a P.O. box, show the box number instead.

Note. Do not use the address of the registered agent for 

the state in which the RIC is incorporated. For example, if 

a business is incorporated in Delaware or Nevada and the 

RIC's principal office is located in Little Rock, AR, the RIC 

should enter the Little Rock address.

If the RIC receives its mail in care of a third party (such 

as an accountant or an attorney), enter on the street 

address line “C/O” followed by the third party's name and 

street address or P.O. box.

Item B. Date RIC Was Established

If this return is being filed for a series fund (as described in 

section 851(g)(2)), enter the date the fund was created. 

Otherwise, enter the date the RIC was incorporated or 

organized.

Item C. Employer

Identification Number (EIN)

Enter the RIC's EIN. If the RIC does not have an EIN, it 

must apply for one. An EIN may be applied for:

• Online by visiting IRS.gov/EIN. The EIN is issued 

immediately once the application information is validated; 

or

• By mailing or faxing Form SS-4, Application for 

Employer Identification Number.

If the RIC has not received its EIN by the time the return 

is due, write “Applied for” and the date you applied in the 

space for the EIN. See the Instructions for Form SS-4 for 

details.

Item D. Total Assets

Enter the RIC's total assets (as determined by the 

accounting method regularly used in keeping the fund's 

books and records) at the end of the tax year. If there are 

no assets at the end of the tax year, enter -0-.

Item E. Final Return, Name Change, 

Address Change, or Amended Return

• If this is the RIC's final return and it will no longer exist, 

check the “Final return” box.

• If the RIC has changed its name since it last filed a 

return, check the “Name change” box. Generally, a RIC 

must also have amended its articles of incorporation and 

filed the amendment with the state in which it was 

incorporated.

• If the RIC has changed its address since it last filed a 

return (including a change to an “in care of” address), 

check the “Address change” box.

Note. If a change in address or responsible party occurs 

after the return is filed, use Form 8822-B, Change of 

Address or Responsible Party—Business, to notify the 

IRS of the new address. See the instructions for Form 

8822-B for details.

Amended return. If the RIC is amending its return, check 

the box for “Amended return,” complete the entire return, 

correct the appropriate lines with the new information, and 

refigure the RIC's tax liability. Attach a statement that 

explains the reason for the amendments and identifies the 

lines being changed on the amended return.

Part I—Investment

Company Taxable Income

Income

Line 1. Dividends. A RIC that is the holder of record of 

any share of stock on the record date for a dividend 

payable on that stock must include the dividend in gross 

income by the later of the date the share became 

ex-dividend, or the date the RIC acquired the share.

Line 2. Interest. Enter taxable interest on U.S. 

obligations and on loans, notes, mortgages, bonds, bank 

deposits, corporate bonds, tax refunds, etc.

Do not offset interest expense against interest income. 

Special rules apply to interest income from certain 

below-market-rate loans. See section 7872 for more 

information on the tax treatment of loans on which 

inadequate or no interest is charged.

Note. Report tax-exempt interest income on Schedule K, 

item 8. Do not include tax-exempt interest on line 2. Also, 

if required, include the same amount on Schedule M-1, 

line 7.

Include interest income from tax credit bonds on line 2. 

If the RIC elects to pass through the credits to 

shareholders, see the instructions for Part II, Schedule A, 

line 7.

Line 3. Net foreign currency gain or (loss) from section 988 transactions. Enter the net foreign currency 

9
gain (loss) from section 988 transactions treated as 

ordinary income or loss under section 988(a)(1)(A). Attach 

a statement detailing each separate transaction.

Line 4. Payments with respect to securities loans. 

Enter the amount received or accrued from a broker as 

compensation for securities loaned by the RIC to the 

broker for use in completing market transactions. The 

payments must meet the requirements of section 512(a)

(5).

Line 5. Excess of net short-term capital gain over net 

long-term capital loss. Enter the amount from 

Schedule D (Form 1120), line 16. Every sale or exchange 

of a capital asset must be reported even if no gain or loss 

is indicated.

If a RIC has a net capital loss for any tax year, the 

excess of the net short-term capital loss over the net 

long-term capital gain shall be a short-term capital loss 

arising on the first day of the next tax year. The excess of 

the net long-term capital loss over the net short-term 

capital gain shall be a long-term capital loss arising on the 

first day of the next tax year. Also, there is no limit on the 

number of tax years that a RIC is allowed to carry over a 

net capital loss. See section 1212(a)(3) for more 

information.

Line 7. Other income. Enter any other taxable income 

(loss) not reported on lines 1 through 6, except net capital 

gain reported in Part II.

If the RIC owns any controlled foreign corporations or 

qualified electing funds, enter the amount included in 

gross income under section 951(a)(1)(A), plus the amount 

of global intangible low-taxed income determined under 

section 951A (which is treated as an amount included 

under section 951(a)(1)(A)), and any amount included in 

gross income under section 1293(a). See Regulations 

section 1.851-2(b)(2)(iii). Do not include in this line any 

amounts that are treated as dividends and reported on 

line 1. See Regulations section 1.851-2(b)(2)(i). Refer to 

Form 5471, Form 8621, and Form 8992, and their 

instructions, to determine the amount included in gross 

income under section 951(a)(1)(A) (including the amount 

of global intangible low-taxed income) and section 

1293(a). Also, consider the applicability of section 951A 

with respect to controlled foreign corporations owned by 

domestic partnerships in which the RIC has an interest.

List the type and amount of income on an attached 

statement. If the RIC has only one item of other income, 

describe it in parentheses on line 7. Examples of other 

income to report on line 7 include:

• Gross rents;

• Recoveries of fees or expenses in settlement or 

litigation;

• Amounts received or accrued as consideration for 

entering into agreements to make real property loans or to 

purchase or lease real property;

• Recoveries of bad debts deducted in prior years under 

the specific charge-off method;

• Refunds of taxes deducted in prior years to the extent 

they reduced income subject to tax in the year deducted 

(see section 111). Do not offset current year taxes against 

prior year tax refunds;

• The recapture amount under section 280F if the 

business use of listed property drops to 50% or less. To 

figure the recapture amount, complete Part IV of Form 

4797;

• Ordinary income from trade or business activities of a 

partnership (from Schedule K-1 (Form 1065)). Do not 

offset ordinary losses against ordinary income. Instead, 

include the losses on line 22. Show the partnership's 

name, address, and EIN on a separate statement 

attached to this return. If the amount entered is from more 

than one partnership, identify the amount from each 

partnership;

• Any net positive section 481 income adjustment due to 

a change in method of accounting. See Form 3115 and its 

instructions for more information;

• Part or all of the proceeds received from certain 

corporate-owned life insurance contracts issued after 

August 17, 2006. Corporations that own one or more 

employer-owned life insurance contracts issued after this 

date must file Form 8925, Report of Employer-Owned Life 

Insurance Contracts. See section 101(j) for details;

• Income from cancellation of debt (COD) from the 

repurchase of a debt instrument for less than its adjusted 

issue price;

• The RIC's share of the following income from Form 

8621, Information Return by a Shareholder of a Passive 

Foreign Investment Company or Qualified Electing Fund.

1. Ordinary earnings of a qualified electing fund 

(QEF).

2. Gain or loss from marking passive foreign 

investment company income (PFIC) stock to market.

3. Gain or loss from sale or other disposition of 

Section 1296 stock.

4. The amount of excess distributions from a Section 

1291 fund that is treated as ordinary income.

See Form 8621 and the Instructions for Form 8621 for 

details; and

• Any payroll tax credit taken by an employer on its 2023 

employment tax returns (Forms 941, 943, and 944) for 

qualified paid sick and qualified paid family leave under 

FFCRA and ARP (both the nonrefundable and refundable 

portions). The RIC must include the full amount of the 

credit for qualified sick and family leave wages in gross 

income for the tax year that includes the last day of any 

calendar quarter in which the credit is allowed.

Note. A credit is available only if the leave was taken after 

March 31, 2020, and before October 1, 2021, and only 

after the qualified leave wages were paid, which might, 

under certain circumstances, not occur until a quarter 

after September 30, 2021, including quarters in 2023.

Deductions

Limitations on Deductions

Transactions between related taxpayers. Generally, 

an accrual basis taxpayer may only deduct business 

expenses and interest owed to a related party in the year 

the payment is includible in the income of the related 

party. See section 267 for limitations on deductions for 

interest and expenses paid to a related party.

10
Limitations on business interest expense. Business 

interest expense may be limited. See section 163(j), Form 

8990, and the related instructions. Also, see Limitation on 

deduction in the instructions for line 13 and Schedule K, 

Question 14, later.

Golden parachute payments. A portion of the 

payments made by a RIC to key personnel that exceeds 

their usual compensation may not be deductible. This 

occurs when the RIC has an agreement (golden 

parachute) with key employees to pay them an amount 

substantially in excess of their base amount if control of 

the RIC changes. See section 280G and Regulations 

section 1.280G-1 for more information. Also, see the 

instructions for line 9.

Business start-up and organizational costs. A RIC 

can elect to deduct a limited amount of start-up and 

organizational costs it paid or incurred. Any remaining 

costs must generally be amortized over a 180-month 

period. See sections 195 and 248 and the related 

regulations.

Time for making an election. The RIC generally 

elects to deduct start-up or organizational costs by 

claiming the deduction on its income tax return filed by the 

due date (including extensions) for the tax year in which 

the active trade or business begins. However, for start-up 

or organizational costs paid or incurred before September 

9, 2008, the RIC may be required to attach a statement to 

its return to elect to deduct such costs. See Regulations 

sections 1.195-1 and 1.248-1 for details.

For more details, including special rules for costs paid 

or incurred before September 9, 2008, see the 

Instructions for Form 4562.

If the RIC timely filed its return for the year without 

making an election, it can still make an election by filing an 

amended return within 6 months of the due date of the 

return (excluding extensions). Clearly indicate the election 

on the amended return and write "Filed pursuant to 

section 301.9100-2" at the top of the amended return. File 

the amended return at the same address the RIC filed its 

original return. The election applies when figuring taxable 

income for the current tax year and all subsequent years.

Note. The RIC can choose to forgo the elections above 

by clearly electing to capitalize its start-up or 

organizational costs on an income tax return filed by the 

due date (including extensions) for the tax year in which 

the active trade or business begins.

Report the deductible amount of such costs and any 

amortization on line 22. For amortization that begins 

during the current tax year, complete and attach Form 

4562.

Section 265(a)(3) limitation. If the RIC paid 

exempt-interest dividends during the tax year (including 

those dividends deemed paid under section 855), no 

deduction is allowed for that portion of otherwise 

deductible expenses allocable to tax-exempt income. The 

excluded amount is determined by the amount tax-exempt 

income bears to total gross income (including tax-exempt 

income but excluding capital gain net income).

Net operating loss deduction. The net operating loss 

deduction is not allowed.

Passive activity limitations. Limitations on passive 

activity losses and credits under section 469 apply to 

RICs that are closely held (as defined in section 469(j)(1)). 

RICs subject to the passive activity limitations must 

complete Form 8810, Corporate Passive Activity Loss and 

Credit Limitations, to compute their allowable passive 

activity loss and credit. Before completing Form 8810, see 

Temporary Regulations section 1.163-8T for rules on 

allocating interest expense among activities.

Closely held corporation. A RIC is closely held if at 

any time during the last half of the tax year more than 50% 

in value of its outstanding stock is directly or indirectly 

owned by or for not more than five individuals and it is not 

a personal service corporation.

Line 9. Compensation of officers. Enter the deductible 

officer's compensation on line 9. The RIC determines who 

is an officer under the laws of the state where 

incorporated. Do not include compensation deductible 

elsewhere on the return, such as elective contributions to 

a section 401(k) cash or deferred arrangement, or 

amounts contributed under a salary reduction SEP 

agreement or a SIMPLE IRA plan.

If the RIC's total receipts are $500,000 or more, 

complete and attach Form 1125-E. Total receipts are 

figured by adding:

1. Line 8, Part I;

2. Net capital gain from line 1, Part II; and

3. Line 9a, Form 2438.

Enter on line 9 the amount from Form 1125-E, line 4.

Line 10. Salaries and wages. Enter the salaries and 

wages paid for the tax year reduced by the amount 

claimed on:

• Form 5884, Work Opportunity Credit;

• Form 8844, Empowerment Zone Employment Credit;

• Form 8932, Credit for Employer Differential Wage 

Payments; and

• Form 8994, Employer Credit for Paid Family and 

Medical Leave.

See the instructions for these forms for more 

information.

Do not include salaries and wages deductible 

elsewhere on the return, such as amounts included in 

officer's compensation, elective contributions to a section 

401(k) cash or deferred arrangement, or amounts 

contributed under a salary reduction SEP agreement or a 

SIMPLE IRA plan.

If the RIC provided taxable fringe benefits to its 

employees, such as personal use of a car, do not 

deduct as wages any amounts deducted 

elsewhere.

If the RIC claims a credit for any wages paid or 

incurred, it may need to reduce any corresponding 

deduction for officers' compensation and salaries 

and wages. See the instructions for the form used to figure 

the applicable credit for more details.

Line 11. Rents. If the RIC rented or leased a vehicle, 

enter the total annual rent or lease expense paid or 

incurred during the year. Also, complete Part V of Form 

CAUTION

!

CAUTION

!

11
4562, Depreciation and Amortization. If the RIC leased a 

vehicle for a term of 30 days or more, the deduction for the 

vehicle lease expense may have to be reduced by an 

amount called the inclusion amount.

The RIC may have an inclusion amount if:

The lease term began: And the vehicle's FMV on 

the first day of the lease 

exceeded:

Cars (excluding trucks and vans)

After 12/31/22 but before 1/1/24 .......... $60,000

After 12/31/21 but before 1/1/23 .......... $56,000

After 12/31/20 but before 1/1/22 .......... $51,000

After 12/31/17 but before 1/1/21 .......... $50,000

After 12/31/12 but before 1/1/18 .......... $19,000

Trucks and Vans

After 12/31/22 but before 1/1/24 .......... $60,000

After 12/31/21 but before 1/1/23 .......... $56,000

After 12/31/20 but before 1/1/22 .......... $51,000

After 12/31/17 but before 1/1/21 .......... $50,000

After 12/31/13 but before 1/1/18 .......... $19,500

After 12/31/09 but before 1/1/14 .......... $19,000

See Pub. 463, Travel, Gift, and Car Expenses, for instructions on figuring the inclusion amount. 

The inclusion amount for lease terms beginning in 2024 will be published in the Internal 

Revenue Bulletin in early 2024.

Line 12. Taxes and licenses. Enter taxes paid or 

accrued during the tax year, but do not include the 

following.

• Federal income taxes (except for the tax imposed on 

net recognized built-in gain allocable to ordinary income).

• Foreign or U.S. territory income taxes if a foreign tax 

credit is claimed, or if the RIC made an election under 

section 853.

• Excise taxes imposed under section 4982 on 

undistributed RIC income.

• Taxes not imposed on the RIC.

• Taxes, including state or local sales taxes, that are paid 

or incurred in connection with an acquisition or disposition 

of property (these taxes must be treated as a part of the 

cost of the acquired property or, in the case of a 

disposition, as a reduction in the amount realized on the 

disposition).

• Taxes assessed against local benefits that increase the 

value of the property assessed (such as for paving, etc.).

• Taxes deducted elsewhere on the return.

See section 164(d) for information on apportionment of 

taxes on real property between seller and purchaser.

Do not reduce the RIC's deduction for social 

security and Medicare taxes by the nonrefundable 

and refundable portions of any FFCRA and ARP 

credits for qualified sick and family leave wages claimed 

on its employment tax returns. Instead, report this amount 

as income on line 7.

Line 13. Interest. The RIC must make an interest 

allocation if the proceeds of a loan were used for more 

than one purpose (for example, to purchase a portfolio 

investment and to acquire an interest in a passive activity). 

See Temporary Regulations section 1.163-8T for the 

interest allocation rules.

The following interest is not deductible.

• Interest on indebtedness incurred or continued to 

purchase or carry obligations if the interest is wholly 

exempt from income tax. See section 265(b) for special 

CAUTION

!

rules and exceptions for financial institutions. Also, see 

section 265(b)(7) for a temporary de minimis exception for 

financial institutions for certain tax exempt bonds issued in 

2009 and 2010.

• For cash basis taxpayers, prepaid interest allocable to 

years following the current tax year. For example, a cash 

basis calendar year taxpayer who in 2023 prepaid interest 

allocable to any period after 2023 can deduct only the 

amount allocable to 2023.

• Interest and carrying charges on straddles. Generally, 

these amounts must be capitalized. See section 263(g).

Special rules apply to:

• Original issue discount (OID) on certain high-yield 

discount obligations. See section 163(e)(5) to determine 

the amount of the deduction for OID that is deferred and 

the amount that is disallowed on a high-yield discount 

obligation. The rules under section 163(e)(5) do not apply 

to certain high-yield discount obligations issued after 

August 31, 2008, and before January 1, 2011. See section 

163(e)(5)(F). Also, see Notice 2010-11, 2010-4 I.R.B. 326.

• The deduction for interest when the RIC is a 

policyholder or beneficiary with respect to a life insurance, 

endowment, or annuity contract issued after June 8, 1997. 

For details, see section 264(f). Attach a statement 

showing the computation of the deduction.

Limitation on deduction. Under section 163(j), 

business interest expense is generally limited to the sum 

of business interest income, 30% of the adjusted taxable 

income, and floor plan financing interest. Business 

interest expense includes any interest paid or accrued 

properly allocable to a trade or business (other than 

certain excepted trades or businesses). A small business 

taxpayer that is not a tax shelter (as defined in section 

448(d)(3)), and that meets the gross 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 not more 

than $29 million for the 3 prior tax years under the gross 

receipts test of section 448(c). Gross receipts include the 

aggregate gross receipts from all persons treated as a 

single employer such as a controlled group of 

corporations, commonly controlled partnerships or 

proprietorships, and affiliated service groups. If the 

corporation fails to meet the gross receipts test, Form 

8990 is generally required. See the Instructions for Form 

8990. Also, see Schedule K, Questions 13 and 14 for 

conditions for filing Form 8990.

Interest expense cannot be used to offset interest 

income.

Line 14. Depreciation. Include on line 14 depreciation 

and the cost of certain property that the RIC elected to 

expense under section 179. See Form 4562 and the 

related instructions to figure the amount of depreciation to 

enter on this line.

Line 22. Other deductions. Attach a statement listing by 

type and amount all allowable deductions that are not 

specifically deductible elsewhere on Form 1120-RIC. 

Generally, a deduction may not be taken for any amount 

that is allocable to tax-exempt income. See section 265(b) 

for exceptions.

CAUTION

!

12
Examples of other deductions include:

• Amortization. See Form 4562;

• Any applicable deduction under section 179D for costs 

of energy efficient commercial building property placed in 

service during the tax year. Complete and attach new 

Form 7205;

• Certain business start-up and organizational costs the 

RIC elects to amortize or deduct;

• Supplies used and consumed in the business;

• Utilities;

• Ordinary losses from trade or business activities of a 

partnership (from Schedule K-1 (Form 1065)). Do not 

offset ordinary income against ordinary losses. Instead, 

include the income on line 7. Show the partnership's 

name, address, and EIN on a separate statement 

attached to this return. If the amount is from more than 

one partnership, identify separately the amount from each 

partnership;

• Any extraterritorial income exclusion (from Form 8873, 

line 52); and

• Any net negative section 481(a) adjustment.

Do not deduct expenses such as the following.

• Fines or penalties paid to a government for violating any 

law. However, other limitations apply for certain amounts 

paid or incurred after December 21, 2017. See section 

162(f), and Fines and penalties, later.

• Lobbying expenses. However, see Lobbying expenses, 

later.

• Amounts paid or incurred after December 22, 2017, for 

any settlement or payment related to sexual harassment 

or sexual abuse, if such settlement or payment is subject 

to a nondisclosure agreement or for related attorney's 

fees. See new section 162(q).

Charitable contributions. Enter contributions or gifts 

actually paid within the tax year to or for the use of 

charitable and governmental organizations described in 

section 170(c) and any unused contribution carryovers.

RICs reporting taxable income on the accrual method 

may elect to treat as paid during the tax year any 

contributions paid by the due date of the RIC’s tax return 

(not including extensions) if the contributions were 

authorized by the board of directors during the tax year. 

Attach a declaration to the return stating that the 

resolution authorizing the contributions was adopted by 

the board of directors during the tax year. The declaration 

must include the date the resolution was adopted. See 

section 170(a)(2)(B).

Limitation on deduction. Generally, the total amount 

claimed cannot be more than 10% of taxable income (the 

sum of Part I, line 26; Part ll, line 3; and Form 2438, 

line 11) computed without regard to the following:

• Any deduction for contributions; or

• The deduction allowed under section 249, related to 

any premium paid or incurred upon the repurchase of a 

convertible bond.

Carryover. Charitable contributions over the 10% 

limitation cannot be deducted for the tax year but may be 

carried over to the next 5 tax years subject to certain 

limitations.

For more information on charitable contributions, 

including substantiation and recordkeeping requirements, 

see the regulations under section 170 and Pub. 526, 

Charitable Contributions.

Contributions to organizations conducting 

lobbying activities. Contributions made to an 

organization that conducts lobbying activities are not 

deductible if:

• The lobbying activities relate to matters of direct 

financial interest to the donor's trade or business, and

• The principal purpose of the contribution was to avoid 

federal income tax by obtaining a deduction for activities 

that would have been nondeductible under the lobbying 

expense rules if conducted directly by the donor.

For information on contributions to charitable 

organizations that conduct lobbying activities, see section 

170(f)(9).

Pension, profit-sharing, etc., plans. Enter contributions 

to qualified pension, profit-sharing, or other 

funded-deferred compensation plans. Employers who 

maintain such a plan must generally file Form 5500, 

Annual Return/Report of Employee Benefit Plan, even if 

the plan is not a qualified plan under the Internal Revenue 

Code. The filing requirement applies even if the RIC does 

not claim a deduction for the current tax year. There are 

penalties for failure to file these forms on time and for 

overstating the pension plan deduction. See sections 

6652(e) and 6662(f).

Note. Form 5500 must be filed electronically under the 

computerized ERISA Filing Acceptance System 

(EFAST2). For more information, see the EFAST2 website 

at www.EFAST.dol.gov.

Travel, meals, and entertainment. Subject to certain 

limitations and restrictions, the RIC can deduct ordinary 

and necessary travel, meal, and non-entertainment 

expenses paid or incurred in its trade or business.

Generally, entertainment expenses, membership dues, 

and facilities used in connection with these activities 

cannot be deducted. In addition, no deduction is generally 

allowed for qualified transportation fringe benefits. Also, 

special rules apply to deductions for gifts, luxury water 

travel, and convention expenses. See section 274 and 

Pub. 463 for more details.

Travel. The RIC cannot deduct travel expenses of any 

individual accompanying a corporate officer or employee 

unless:

• That individual is an employee of the RIC, and

• That individual’s travel is for a bona fide business 

purpose that would otherwise be deductible by that 

individual.

Meals. Generally, the RIC can deduct only 50% of the 

amount otherwise allowable for non-entertainment related 

meal expenses paid or incurred in its trade or business.

Meals not separately stated from entertainment are 

generally not deductible. In addition (subject to exceptions 

under section 274(k)(2)):

• Meals must not be lavish or extravagant, and

• An employee of the RIC must be present at the meal.

See section 274(n)(3) for a special rule that applies to 

expenses for meals consumed by individuals subject to 

the hours of service limits of the Department of 

Transportation.

13
Qualified transportation fringes (QTFs). Generally, 

no deduction is allowed under section 274(a)(4) for QTFs 

provided by employers to their employees. QTFs are 

defined in section 132(f)(1) and include:

• Transportation in a commuter highway vehicle between 

the employee's residence and place of employment,

• Any transit pass, and

• Qualified parking.

See section 274 and Pub. 15-B for details.

Membership dues. The RIC can deduct amounts paid 

or incurred for membership dues in civic or public service 

organizations, professional organizations (such as bar or 

medical associations), business leagues, trade 

associations, chambers of commerce, boards of trade, 

and real estate boards. However, no deduction is allowed 

if a principal purpose of the organization is to entertain or 

provide entertainment facilities to members or their 

guests. In addition, RICs cannot deduct membership dues 

in any club organized for business, pleasure, recreation, or 

other social purpose. This includes country clubs, golf and 

athletic clubs, airline and hotel clubs, and clubs operated 

to provide meals under conditions favorable to business.

Entertainment facilities. Generally, the RIC cannot 

deduct an expense paid or incurred for a facility (such as a 

yacht or hunting lodge) used for an activity usually 

considered entertainment, amusement, or recreation.

Amounts treated as compensation. Generally, the 

RIC may be able to deduct otherwise nondeductible 

entertainment, amusement, or recreation expenses if the 

amounts are treated as compensation to the recipient and 

reported on Form W-2 for an employee, or on Form 

1099-NEC for an independent contractor.

However, if the recipient is an officer, director, beneficial 

owner (directly or indirectly), or other “specified individual” 

(as defined in section 274(e)(2)(B) and Regulations 

section 1.274-9(b)), special rules apply.

See section 274 and Pub. 463 for a more extensive 

discussion of these topics.

Fines and penalties. Generally, no deduction is allowed 

for fines or similar penalties paid or incurred to, or at the 

direction of, a government or governmental entity for 

violating any law, or for the investigation or inquiry into the 

potential violation of a law, except:

• Amounts that constitute restitution,

• Amounts paid to come into compliance with the law,

• Amounts paid or incurred as the result of certain court 

orders or agreements in which no government or 

governmental entity is a party, and

• Amounts paid or incurred for taxes due.

No deduction is allowed unless the amounts are 

specifically identified in the order or agreement and the 

RIC establishes that the amounts were paid for that 

purpose. Also, any amount paid or incurred as 

reimbursement to the government for the costs of any 

investigation or litigation are not eligible for the exceptions 

and are nondeductible.

See section 162(f).

Lobbying expenses. Generally, lobbying expenses are 

not deductible. Examples of nondeductible expenses 

include:

• Amounts paid or incurred in connection with influencing 

federal, state, or local legislation; or

• Amounts paid or incurred in connection with any 

communication with certain federal executive branch 

officials in an attempt to influence the official actions or 

positions of the officials. See Regulations section 

1.162-29 for the definition of “influencing legislation.”

Dues and other similar amounts paid to certain 

tax-exempt organizations may not be deductible. Certain 

in-house lobbying expenditures that do not exceed $2,000 

are deductible.

Line 25a. Deduction for dividends paid. Enter the 

amount from Schedule A, line 8a.

Line 25b. Section 851(d)(2) and section 851(i) deductions. Enter the amount from Schedule J, lines 2c and 

2d.

Tax and Payments

Line 28b. Estimated tax payments. Enter any 

estimated tax payments the RIC made for the current tax 

year.

Line 28f. Credit from Form 2439. Enter the credit from 

Form 2439 for the RIC's share of the tax paid by another 

RIC or a Real Estate Investment Trust (REIT) on 

undistributed long-term capital gains included in the RIC's 

income. Attach Form 2439 to Form 1120-RIC.

Line 28g. Credit for federal tax on fuels. Complete 

and attach Form 4136, Credit for Federal Tax Paid on 

Fuels, if the RIC qualifies to take this credit.

Line 28h. Elective payment election amount from 

Form 3800. Enter on line 28h the total net elective 

payment election amount from Form 3800, General 

Business Credit, Part III, line 6, column (i). See the 

Instructions for Form 3800.

Line 29. Total payments and credits. Combine lines 

28d through 28h and enter the total on line 29.

Backup Withholding. If the RIC had income tax 

withheld from any payments it received, because, for 

example, it failed to give the payer its correct EIN, include 

the amount withheld in the total for line 29. Enter the 

amount withheld and the words “Backup Withholding” in 

the blank space above line 29.

Line 30. Estimated tax penalty. A RIC that does not 

make estimated tax payments when due may be subject 

to an underpayment penalty for the period of 

underpayment. Generally, a RIC is subject to the penalty if 

its tax liability is $500 or more and it did not timely pay at 

least the smaller of:

• Its tax liability for the current year, or

• Its prior year's tax.

Use Form 2220, Underpayment of Estimated Tax by 

Corporations, to see if the RIC owes a penalty and to 

figure the amount of the penalty. See the Instructions for 

Form 2220 for more information.

If Form 2220 is attached, check the box on this line and 

enter the amount of any penalty.

Line 31. Amount owed. If the RIC cannot pay the full 

amount of tax owed, it can apply for an installment 

14
agreement online. The RIC can apply for an installment 

agreement online if:

• It cannot pay the full amount shown on line 31,

• The total amount owed is $25,000 or less, and

• The RIC can pay the liability in full in 24 months.

To apply using the Online Payment Agreement 

Application, go to IRS.gov/OPA.

Under an installment agreement, the RIC can pay what 

it owes in monthly installments. There are certain 

conditions that must be met to enter into and maintain an 

installment agreement, such as paying the liability within 

24 months and making all required deposits and timely 

filing tax returns during the length of the agreement.

If the installment agreement is accepted, the RIC will be 

charged a fee and it will be subject to penalties and 

interest on the amount of tax not paid by the due date of 

the return.

Part II—Tax on Undistributed Net 

Capital Gain Not Designated Under 

Section 852(b)(3)(D)

Line 1. Enter the net capital gain from line 17 of 

Schedule D (Form 1120).

Line 2. Enter the capital gain dividends from Schedule A, 

line 8b.

Line 4. Capital gains tax. Multiply the amount on line 3 

by 21% (0.21). Enter the result here and on Schedule J, 

line 2b.

Schedule A—Deduction for Dividends 

Paid

Column (a) is used to determine the deduction for 

dividends paid resulting from income derived from 

ordinary dividends.

Column (b) is used to determine the deduction for 

dividends paid resulting from income derived from capital 

gain dividends.

Section 561 (taking into account sections 852(b)(7), 

852(c)(3)(B), and 855(a)) determines the deduction for 

dividends paid. Do not take into account exempt-interest 

dividends defined in section 852(b)(5) or any amount 

reported for the tax year on Form 2438, line 9b. See 

section 852(b)(8) for information on post-October capital 

losses and late year ordinary losses.

Line 3. Dividends, both ordinary and capital gain, 

declared and payable to shareholders of record in 

October, November, or December are treated as paid by 

the RIC and received by each shareholder on December 

31 of that calendar year provided that they are actually 

paid in January of the following calendar year. Enter on 

line 3 all such dividends not already included on line 1 or 

2.

Line 6. Enter the foreign tax paid deduction allowed as 

an addition to the dividends paid deduction under section 

853(b)(1)(B). See the instructions for Item 10 of 

Schedule K for information on the election available under 

section 853(a).

Line 7. If the RIC elects under section 853A to pass 

through credits from qualified tax credit bonds to 

shareholders, increase the dividends paid deduction by 

the amount of the credits distributed to shareholders. To 

make the election, see the instructions for Item 11 under 

Schedule K—Other Information.

Schedule B—Income From 

Tax-Exempt Obligations

If, at the close of each quarter of the tax year, at least 50% 

of the value of the fund's assets consisted of tax-exempt 

obligations under section 103(a), the RIC qualifies under 

section 852(b)(5) to pay exempt-interest dividends for the 

tax year. See section 852(b)(5)(A) for the definition of 

exempt-interest dividends and other details.

In the case of a qualified “fund of funds” structure, a 

RIC may pay exempt-interest dividends without regard to 

the requirement that at least 50% of the value of the fund’s 

assets consist of tax-exempt obligations. See section 

852(g) for more information.

If this applies, check the “Yes” box on line 1 and 

complete lines 2 through 5.

Schedule J—Tax Computation

Line 1

If the RIC is a member of a controlled group, check the 

box on line 1 and complete and attach Schedule O (Form 

1120), Consent Plan and Apportionment Schedule for a 

Controlled Group. See Schedule O (Form 1120) and its 

instructions for more information.

Line 2a—Tax on Investment Company Taxable 

Income

RICs figure their tax by multiplying investment company 

taxable income by 21%. Enter this amount on line 2a.

For a RIC that is a personal holding company (PHC). 

A RIC that is not in compliance with Regulations section 

1.852-6 is a PHC and is taxed at a flat rate of 21% on its 

investment company taxable income.

Line 2b—Capital Gains Tax

Enter the capital gains tax from line 4, Part II.

Line 2c—Tax Imposed Under Section 851(d)(2)

Enter the tax imposed under section 851(d)(2) relating to 

failures to meet certain requirements of the asset test of 

section 851(b)(3). See the instructions on page 2 for 

details on the requirements of the asset test. Also, see 

section 851(d)(2).

Attach a statement showing the computation of the tax 

and an explanation of why the RIC failed to meet the 

requirements of the asset test, and a description of why 

such failure is due to reasonable cause and not to willful 

neglect.

Line 2d—Tax Imposed Under Section 851(i)

Enter the tax imposed under section 851(i) relating to 

failures to meet certain requirements of the gross income 

test.

15
See the instructions on page 2 for details on the 

requirements of the gross income test. Also, see section 

851(i).

Attach a statement showing the computation of the tax 

and an explanation of why the RIC failed to meet the 

requirements of the gross income test, and a description 

of why such failure is due to reasonable cause and not to 

willful neglect.

Line 2e—Income Tax

Deferred tax under section 1291. If the RIC was a 

shareholder in a passive foreign investment company 

(PFIC), and received an excess distribution or disposed of 

its investment in the PFIC during the year, it must include 

the increase in taxes due under section 1291(c)(2) (from 

Form 8621) in the total for line 2e. On the dotted line to the 

left of line 2e, write “Section 1291” and the amount.

Do not include on line 2e any interest due under section 

1291(c)(3). Instead, include the amount owed on 

Schedule J, line 9, Other taxes.

For more information on reporting the deferred tax and 

interest, see the Instructions for Form 8621.

Additional tax under section 197(f). A RIC that elects 

to recognize gain and pay tax on the gain from the sale of 

a section 197 intangible under the related person 

exception to the anti-churning rules should include any 

additional tax due in the total for line 2e. On the dotted line 

to the left of line 2e, write “Section 197” and the amount. 

See section 197(f)(9)(B)(ii).

Line 3a—Foreign Tax Credit

To find out when a RIC can claim the credit for payment of 

income tax to a foreign country or U.S. territory, see Form 

1118, Foreign Tax Credit—Corporations. The RIC may not 

claim this credit if an election under section 853 was made 

for the tax year. See Election under section 853(a) under 

Schedule K, Item 10.

Line 3b—Credit from Form 8834

Enter any qualified electric vehicle passive activity credits 

from prior years allowed for the current tax year from Form 

8834, Qualified Electric Vehicle Credit, line 7, and attach 

Form 8834 to this return.

Line 3c—General Business Credit

Use Form 3800 to claim any general business credits. 

Enter on line 3c the allowable credit from Form 3800, Part 

II, line 38. See the Instructions for Form 3800.

Line 3d—Other Credits

Minimum tax credit. Enter any allowable credit from 

Form 8827, Credit for Prior Year Minimum 

Tax—Corporations. Complete and attach Form 8827.

Bond credits from Form 8912. Enter the allowable 

credits from Form 8912, Credit to Holders of Tax Credit 

Bonds, line 12. However, if the RIC elects to pass through 

credits from tax credit bonds to its shareholders, it cannot 

take the credit. See Item 11 under question 5, later, for 

more information.

Line 5—Personal Holding Company Tax

A RIC is taxed as a personal holding company under 

section 542 if:

• At least 60% of its adjusted ordinary gross income for 

the tax year is personal holding company income, and

• At any time during the last half of the tax year more than 

50% in value of its outstanding stock is owned, directly or 

indirectly, by five or fewer individuals.

See the Instructions for Schedule PH (Form 1120), U.S. 

Personal Holding Company (PHC) Tax, for definitions and 

details on how to figure the tax.

Line 6—Interest on Deferred Tax Liability for 

Installment Obligations Under Section 453A(c)

Enter any interest on deferred tax attributable to certain 

nondealer installment obligations (section 453A(c)).

Line 7—Interest on Deferred Tax Liability for 

Installment Obligations Under Section 453(l)(3)

Enter any interest on deferred tax attributable to certain 

dealer installment obligations under section 453(I).

Line 8—Recapture of Investment Credit

If the RIC disposed of investment credit property or 

changed its use before the end of the 5-year recapture 

period under section 50(a), enter the increase in tax from 

Form 4255, Recapture of Investment Credit. See the 

Instructions for Form 4255.

Line 9—Other Taxes

Include on line 9 additional taxes and interest such as the 

following. Attach a statement showing the computation of 

each item included in the total for line 9 and identify the 

applicable Code section and the type of tax or interest.

• Recapture of Indian employment credit. Generally, if an 

employer terminates the employment of a qualified 

employee less than 1 year after the date of initial 

employment, any Indian employment credit allowed for a 

prior tax year because of wages paid or incurred to that 

employee must be recaptured. For details, see Form 8845 

and section 45A.

• Recapture of new markets credit (see Form 8874 and 

Form 8874-B).

• Recapture of employer-provided childcare facilities and 

services credit (see Form 8882).

• Interest due on deferred gain recognition (section 

1260(b)).

• Interest due under section 1291(c)(3).

Recapture of low-income housing credit. If the RIC 

disposed of property (or there was a reduction in the 

qualified basis of the property) for which it took the 

low-income housing credit, and the RIC did not follow the 

procedures that would have prevented recapture of the 

credit, it may owe a tax. See Form 8611, Recapture of 

Low-Income Housing Credit, and section 42(j)(1) for more 

information.

Built-in Gains Tax

If, on or after January 2, 2002, property of a C corporation 

becomes property of a RIC by either (a) the qualification 

of the C corporation as a RIC; or (b) the transfer of such 

16
property to a RIC, then the RIC will be subject to the 

built-in gains tax under section 1374 unless the C 

corporation elects deemed sale treatment on the 

transferred property. Generally, if the C corporation does 

not make this election for tax years beginning in 2020, the 

RIC must pay tax on the net recognized built-in gain 

during the 5-year period beginning on its first day as a RIC 

or the day it acquired the property. Special rules apply to 

conversion transactions on or after June 7, 2019, as well 

as conversion transactions with a related section 355 

distribution. See Regulations section 1.337(d)-7 for 

details.

A RIC's recognition period for conversion transactions 

that occur on or after August 8, 2016, and on or before 

February 17, 2017, is the 10-year period beginning on its 

first day as a RIC or the day the RIC acquired the property, 

as described in Temporary Regulations section 

1.337(d)-7T(b)(2)(iii), as in effect on August 8, 2016. 

However, under the provisions of final Regulations section 

1.337(d)-7(g)(2)(iii), a RIC may choose to apply a 5-year 

recognition period to conversion transactions that occur 

on or after August 8, 2016, and on or before February 17, 

2017. See final Regulations section 1.337(d)-7 and 

Temporary Regulations section 1.337(d)-7T for details.

Recognized built-in gains and losses generally retain 

their character (for example, ordinary income or capital 

gain) and are treated the same as other gains or losses of 

the RIC. The RIC's tax on net recognized built-in gain is 

treated as a loss sustained by the RIC after October 31 of 

the same tax year (see the instructions for line i of the 

Built-in Gains Tax Worksheet, later). See Regulations 

section 1.337(d)-7 for details.

Different rules apply to elections to be a RIC and to 

transfers of property in a carryover basis transaction that 

occurred prior to January 2, 2002. For RIC elections and 

property transfers before this date, the C corporation is 

subject to deemed sale treatment on the transferred 

property unless the RIC elects section 1374 treatment. 

See Regulations section 1.337(d)-6 for information on how 

to make the election and figure the tax for RIC elections 

and property transfers before this date. The RIC may also 

generally rely on Regulations section 1.337(d)-5 for RIC 

elections and property transfers that occurred before 

January 2, 2002.

Built-in Gains Tax Worksheet Instructions

Complete the worksheet to figure the built-in gains tax 

under Regulations section 1.337(d)-6 or 1.337(d)-7.

Line a. Enter the amount that would be the taxable 

income of the RIC for the tax year if only recognized 

built-in gain, recognized built-in loss, and recognized 

built-in gain carryover were taken into account.

Line b. Add the amounts shown on:

• Form 1120-RIC, page 1, line 24;

• Form 1120-RIC, Part II, line 1; and

• Form 2438, line 11.

For this purpose, refigure line 24 on page 1 without regard 

to any election under section 852(b)(2)(F). Enter the result 

on line b of the Built-in Gains Tax Worksheet.

Line c. The RIC's net unrealized built-in gain is the 

amount, if any, by which the FMV of the assets of the RIC 

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

assets were acquired, for any asset with a basis 

determined by reference to its basis (or the basis of any 

other property) in the hands of a C corporation) exceeds 

the aggregate adjusted basis of such assets at that time.

Enter on line c the RIC's net unrealized built-in gain 

reduced by the net recognized built-in gain for prior years. 

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

Line d. If the amount on line b exceeds the amount on 

line a, the excess is treated as a recognized built-in gain in 

the succeeding tax year.

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

Generally, this is any net operating loss or capital loss 

carryforward (to the extent of net capital gain included in 

recognized built-in gain for the tax year) arising in tax 

years for which the RIC was a C corporation. A net loss 

carryforward must be used to reduce recognized built-in 

gain for the tax year to the greatest extent possible before 

it can be used to reduce the RIC's taxable income.

Line h. Credit carryforwards arising in tax years for which 

the RIC was a C corporation must be used to reduce the 

tax on net built-in gain for the tax year to the greatest 

extent possible before the credit carryforwards can be 

used to reduce the tax on the RIC's taxable income.

Line i. The RIC's tax on the net recognized built-in gain is 

treated as a loss sustained by the RIC after October 31 of 

the same tax year. Deduct the tax attributable to:

• Ordinary gain as a deduction for taxes on Form 

1120-RIC, line 12;

• Short-term capital gain as a short-term capital loss in 

Part I of Form 8949; and

• Long-term capital gain as a long-term capital loss in 

Part II of Form 8949.

Line 10—Total Tax

Include any deferred tax on the termination of a section 

1294 election applicable to shareholders in a qualified 

electing fund in the amount entered on line 10. See Form 

8621 and How To Report below.

Subtract from the total for line 10 the deferred tax on 

the RIC's share of the undistributed earnings of a qualified 

electing fund (see Form 8621).

How To Report

Attach a statement showing the computation of each item 

included in, or subtracted from, the total for line 10. On the 

dotted line next to line 10, enter the amount of tax or 

interest, identify it as tax or interest, and specify the Code 

section that applies.

Schedule K—Other Information

The following instructions apply to questions 1 through 15. 

Complete all items that apply.

Question 3

Check the “Yes” box if the RIC is a subsidiary in a 

parent-subsidiary controlled group. This applies even if 

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the RIC is a subsidiary member of one group and the 

parent corporation of another.

Note. If the RIC is an “excluded member” of a controlled 

group (see section 1563(b)(2)), it is still considered a 

member of a controlled group for this purpose.

Question 5

Check the “Yes” box if one foreign person owned at least 

25% of (a) the total voting power of all classes of stock of 

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

of stock of the RIC.

The constructive ownership rules of section 318 apply 

in determining if a RIC is foreign owned. See section 

6038A(c)(5) and the related regulations.

Enter on line 5b(1) the percentage owned by the 

foreign person specified in question 5. For line 5b(2), 

enter the name of the owner's country.

Note. If there is more than one 25%-or-more foreign 

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

person with the highest percentage of ownership.

Foreign person. The term “foreign person” includes:

• A foreign citizen or nonresident alien,

• An individual who is a citizen or resident of a U.S. 

territory (but who is not a U.S. citizen or resident),

• A foreign partnership,

• A foreign corporation,

• Any foreign estate or trust within the meaning of section 

7701(a)(31), and

• A foreign government (or one of its agencies or 

instrumentalities) to the extent that it is engaged in the 

conduct of a commercial activity, as described in section 

892.

Owner's country. For individuals, the term “owner's 

country” means the country of residence. For all others, it 

is the country where incorporated, organized, created, or 

administered.

Requirement to file Form 5472. If the RIC checked 

“Yes,” it may have to file Form 5472, Information Return of 

a 25% Foreign Owned U.S. Corporation or a Foreign 

Corporation Engaged in a U.S. Trade or Business. 

Generally, a 25% foreign-owned corporation that had a 

reportable transaction with a foreign or domestic related 

party during the tax year must file Form 5472. See Form 

5472 for filing instructions.

Item 8

Tax-exempt interest. Show any tax-exempt interest 

received or accrued. Include any exempt-interest 

dividends received as a shareholder in a mutual fund or 

other RIC.

Item 10

Election under section 853(a). A RIC may make an 

irrevocable election under section 853(a) to allow its 

shareholders to apply their share of the foreign taxes paid 

by the RIC either as a credit or a deduction. If the RIC 

makes this election, the amount of foreign taxes it paid 

during the tax year may not be taken as a credit or a 

deduction on Form 1120-RIC, but may be claimed on 

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

dividends-paid deduction.

Eligibility. To qualify to make the election, the RIC must 

meet the following requirements.

• More than 50% of the value of the RIC's total assets at 

the end of the tax year must consist of stock or securities 

in foreign corporations.

• The RIC must meet the holding period requirements of 

section 901(k) with respect to its common and preferred 

stock. If the RIC fails to meet these holding period 

requirements, the election that allows a RIC to pass 

through to its shareholders the foreign tax credits for 

foreign taxes paid by the RIC is disallowed. Although the 

foreign taxes paid may not be taken as a credit by either 

the RIC or the shareholder, they are still deductible at the 

fund level.

Election under section 852(g). In the case of a 

qualified “fund of funds” structure, a RIC may elect to allow 

shareholders the foreign tax credit without regard to the 

requirement that more than 50% of the value of its assets 

consist of stock or securities in foreign corporations. See 

section 852(g) for more information.

Reporting requirements. To make a valid election under 

section 853 or 852(g), in addition to timely filing Form 

1120-RIC and checking the box for Schedule K, item 10a 

or b, the RIC must file a statement of election, which 

includes the information listed under Regulations section 

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% of line f ....................................................... g.

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

(see instructions) ........................................................ h.

i. Tax. Subtract line h from line g (if zero or less, enter -0-). Enter here and include on line 9 of 

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

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1.853-4(c). The information must be provided on or with a 

Form 1118, Foreign Tax Credit, attached to the RIC's 

timely filed tax return.

For more information, see Regulations section 1.853-4.

Notification to shareholders. If the RIC makes the 

election, it must furnish to its shareholders a written 

statement reporting the shareholder's portion of (1) foreign 

taxes paid by the RIC to foreign countries and territories of 

the United States, and (2) the dividend that represents 

income derived from:

• Sources within countries described in section 901(j), 

and

• Other foreign-source income.

Item 11

Election under section 853A. A RIC can elect to pass 

through credits from tax credit bonds to its shareholders. If 

the RIC makes the election, include the interest income 

from the tax credit bonds on Part I, line 2. Also, increase 

the dividends paid deduction by the amount of the credits 

distributed to shareholders. If the RIC makes the election, 

it is not allowed to take any credits related to the qualified 

tax credit bonds.

For more information, see section 853A.

Notification to shareholders. If the RIC makes the 

election to apply section 853A, it must furnish to its 

shareholders a written statement reporting the 

shareholder's proportionate share of (1) credits from tax 

credit bonds, and (2) gross income in respect of such 

credits.

Question 13, Business Interest Expense 

Election

The limitation on business interest expense applies to 

every taxpayer with a trade or business, unless the 

taxpayer meets certain specified exceptions. A taxpayer 

may elect out of the limitation for certain businesses 

otherwise subject to the business interest expense 

limitation.

Certain real property trades or businesses and farming 

businesses qualify to make an election not to limit 

business interest expense. This is an irrevocable election. 

If you make this election, you are required to use the 

alternative depreciation system to depreciate any property 

with a recovery period of 10 years or more. Also, you are 

not entitled to the special depreciation allowance for that 

property. For a taxpayer with more than one qualifying 

business, the election is made with respect to each 

business.

Check "Yes" if the taxpayer has an election in effect to 

exclude a real property trade or business or a farming 

business from section 163(j). For more information, see 

section 163(j) and the Instructions for Form 8990.

Question 14, Conditions for Filing Form 8990

Generally, a RIC must file Form 8990 to claim a deduction 

for business interest. In addition, Form 8990 must be filed 

by any RIC that owns an interest in a partnership with 

current year, or prior year carryover, excess business 

interest expense allocated from the partnership. A RIC 

must also file a Form 8990 if the RIC paid section 163(j) 

interest dividends for the tax year.

Exclusions from filing. A RIC is not required to file Form 

8990 if the RIC is a small business taxpayer that does not 

have excess business interest expense from a partnership 

and did not pay section 163(j) interest dividends for the 

tax year. A RIC is also not required to file Form 8990 if the 

RIC only has business interest expense from these 

excepted trades or businesses:

• An electing real property trade or business,

• An electing farming business, or

• Certain utility businesses.

Small business taxpayer. A small business taxpayer is 

not subject to the business interest expense limitation and 

is not required to file Form 8990. A small business 

taxpayer is a taxpayer that (a) is not a tax shelter (as 

defined in section 448(d)(3)), and (b) meets the gross 

receipts test of section 448(c), discussed next.

Gross receipts test. For 2023, a taxpayer meets the 

gross receipts test if the taxpayer has average annual 

gross receipts of $29 million or less for the 3 prior tax 

years. A taxpayer's average annual gross receipts for the 

3 prior tax years is determined by adding the gross 

receipts for the 3 prior tax years and dividing the total by 3.

Gross receipts include the aggregate gross receipts 

from all persons treated as a single employer, such as a 

controlled group of corporations, commonly controlled 

partnerships, or proprietorships, and affiliated service 

groups. See section 448(c) and the Instructions for Form 

8990 for additional information.

Question 15

To certify as a QOF, the RIC must file Form 1120-RIC and 

attach Form 8996, even if the RIC had no income or 

expenses to report. If the RIC is attaching Form 8996, 

check the “Yes” box for question 15. On the line following 

the dollar sign, enter the amount from Form 8996, line 15.

The penalty reported on this line from Form 8996, 

line 15, is not due with the filing of this form. The IRS will 

separately send to you a notice setting forth the due date 

for the penalty payment and where that payment should 

be sent.

Schedule L—Balance Sheets per 

Books

The balance sheets should agree with the RIC's books 

and records.

Line 1. Cash. Include certificates of deposit as cash on 

line 1.

Line 4. Tax-exempt securities. Include on this line:

1. State and local government obligations, the interest 

on which is excludible from gross income under section 

103(a); and

2. Stock in another mutual fund or RIC that distributed 

exempt-interest dividends during the tax year of the RIC.

Line 24. Adjustments to shareholders' equity. 

Examples of adjustments to report on this line include:

• Unrealized gains and losses on securities held 

“available for sale”;

• Foreign currency translation adjustments;

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• The excess of additional pension liability over 

unrecognized prior service cost;

• Guarantees of employee stock (ESOP) debt; and

• Compensation related to employee stock award plans.

If the total adjustment to be entered on line 24 is a 

negative amount, enter the amount in parentheses.

Schedule M-1

Reconciliation of Income (Loss) per Books With 

Income per Return

Line 5d. Travel and entertainment. Include on line 5d 

any of the following:

• Entertainment expenses not deductible under section 

274(a);

• Entertainment related meal expenses;

• Non-entertainment related meals not deductible under 

section 274(n);

• Expenses for the use of an entertainment facility;

• The part of business gifts over $25;

• Expenses of an individual over $2,000, that are 

allocable to conventions on cruise ships;

• Employee achievement awards of nontangible property 

or tangible property over $400 ($1,600 if part of a qualified 

plan);

• The cost of skyboxes;

• The part of luxury water travel not deductible under 

section 274(m);

• Expenses for travel as a form of education; and

• Other nondeductible travel and entertainment 

expenses.

Line 7. Tax-exempt interest. Include as interest on 

line 7 any exempt-interest dividends received by the RIC 

as a shareholder in a mutual fund or other RIC.

Paperwork Reduction Act Notice. We ask for the information on this form 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.

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 

Taxpayer

Total Number of Returns 

(millions)

Average Time (hours) Average Cost ($) Average Monetized 

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. 

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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 

Taxpayer

Total Number of Returns 

(millions)

Average Time (hours) Average Cost ($) Average Monetized 

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 

Taxpayer

Total Number of Returns 

(millions)

Average Time (hours) Average Cost ($) Average Monetized 

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 through IRS.gov/FormComments. Or 

you can write to the Internal Revenue Service, Tax Forms and Publications Division, 1111 Constitution Ave. NW, IR-6526, 

Washington, DC 20224. Do not send the tax form to this office. Instead, see Where To File, earlier, near the beginning of 

the instructions.

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