Instructions for Form

2025

Instructions for Form

1120-REIT

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

Section references are to the Internal Revenue Code unless

otherwise noted.

line 24b. For more information, see the instructions for Line 24b

and Line 25h.

Future Developments

Photographs of Missing Children

For the latest information about developments related to Form

1120-REIT and its instructions, such as legislation enacted after

they were published, go to IRS.gov/Form1120REIT.

What’s New

Electronic filing. Beginning in mid-February 2026, real estate

investment trusts (REITs) will be able to file Form 1120-REIT

electronically. See Electronic Filing, later.

Increase in penalty for failure to file. For tax returns required

to be filed in 2026, 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 $525. See Late filing of return, later.

Electronic payments. If the REIT has access to U.S. banking

services or electronic payment systems, it should use direct

deposit for any refunds and pay electronically for any payments,

whenever possible.

Direct deposit. Direct deposit fields have been added onto

the form on lines 30c, 30d, and 30e. If there is an overpayment

on line 29, enter the amount the REIT wants refunded on

line 30b and complete the direct deposit information on lines

30c, 30d, and 30e. Instead of a direct deposit of the REIT’s

refund, it can still choose to have all or part of the overpayment

credited to the next year’s estimated tax by completing line 30a.

See Line 29. Overpayment, later, for more information.

Making a payment. If there is a balance due on line 28, go to

IRS.gov/Payments for information on how to make a payment.

See Tax Payments and the instructions for Line 28. Tax due, later

for more details.

Gain from the sale or exchange of qualified farmland property to qualified farmers. P.L. 119–21, commonly known as

the One Big Beautiful Bill Act, created new section 1062

regarding the gain from the sale or exchange of qualified

farmland property to qualified farmers. Section 1062 allows

taxpayers to elect to pay the net income tax attributable to the

gain from the sale or exchange of qualified farmland property to

qualified farmers in four equal annual installments. This election

is available for qualified sales and exchanges of qualified

farmland property to a qualified farmer in tax years beginning

after July 4, 2025. For more information, see section 1062 and

the new Form 1062, Deferral of Tax on Gain From the Sale or

Exchange of Qualified Farmland Property to Qualified Farmers,

when it is available.

To report the section 1062 applicable net tax liability and the

installment due in the first tax year, two lines were added on

Form 1120–REIT. Report the full amount of section 1062

applicable net tax liability on Form 1120–REIT, line 25h. Report

the first installment due in the tax year 2025 on Form 1120-REIT,

Jan 30, 2026

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 REIT has rights that the IRS must abide by

in its dealings with the REIT. TAS can help the REIT if:

• A problem is causing financial difficulty for the business;

• The business is facing an immediate threat of adverse action;

or

• The REIT 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 local

directories and at TaxpayerAdvocate.IRS.gov. The REIT can

also call TAS at 877-777-4778.

TAS also works to resolve large-scale or systemic problems

that affect many taxpayers. If the REIT 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. Access IRS.gov 24 hours a day, 7 days a week to:

• Download free 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 REIT can view, download, or

print all of the forms and publications it may need at IRS.gov/

Forms. Or, the REIT can go to IRS.gov/OrderForms to place an

order and have forms mailed to it.

Instructions for Form 1120-REIT (2025) Catalog Number 64243J

Department of the Treasury Internal Revenue Service www.irs.gov

General Instructions

Purpose of Form

Use Form 1120-REIT, U.S. Income Tax Return for Real Estate

Investment Trusts, to report the income, gains, losses,

deductions, credits, certain penalties, and to figure the income

tax liability of a REIT.

Who Must File

A corporation, trust, or association that meets certain conditions

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

treated as a REIT for the tax year (or has made that election for a

prior tax year and the election has not been terminated or

revoked). The election is made by figuring taxable income as a

REIT on Form 1120-REIT.

Qualified opportunity funds. If the REIT intends to self-certify

as a qualified opportunity fund (QOF), the REIT must file Form

1120-REIT and attach Form 8996, even if it had no income or

expenses to report. See Schedule K, Question 12, later. Also,

see the Instructions for Form 8996.

General Requirements To Qualify as a

REIT

To qualify as a REIT, an organization:

• Must be a corporation, trust, or association.

• Must be managed by one or more trustees or directors.

• Must have beneficial ownership (a) evidenced by transferable

shares, or by transferable certificates of beneficial interest; and

(b) held by 100 or more persons. (The REIT does not have to

meet this requirement until its 2nd tax year.)

• Would otherwise be taxed as a domestic corporation.

• Must be neither a financial institution (referred to in section

582(c)(2)), nor a subchapter L insurance company.

• Cannot be closely held, as defined in section 856(h). (The

REIT does not have to meet this requirement until its second tax

year.)

If a REIT meets the requirement for ascertaining actual

ownership (see Regulations section 1.857-8 for details), and did

not know (after exercising reasonable diligence), or have reason

to know, that it was closely held, it will be treated as meeting the

requirement that it is not closely held.

Other Requirements

The gross income and diversification of investment requirements

of section 856(c) must be met and the organization must:

• Have been treated as a REIT for all tax years beginning after

February 28, 1986, or

• Had, at the end of the tax year, no accumulated earnings and

profits from any tax year that it was not a REIT.

For this purpose, distributions are treated as made from the

earliest earnings and profits accumulated in any non-REIT tax

year. See section 857(d)(3).

• The organization must adopt a calendar tax year unless it first

qualified for REIT status before October 5, 1976.

• The deduction for dividends paid (excluding net capital gain

dividends, if any) must equal or exceed:

1. 90% of the REIT’s taxable income (excluding the

deduction for dividends paid and any net capital gain), plus

2. 90% of the excess of the REIT’s net income from

foreclosure property over the tax imposed on that income by

section 857(b)(4)(A); less

3. Any excess noncash income, as determined under

section 857(e).

See sections 856 and 857, and the related regulations for

details and exceptions.

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Termination of Election

The election to be treated as a REIT remains in effect until

terminated, revoked, or the REIT has failed to meet the

requirements of the statutory relief provisions. It terminates

automatically for any tax year in which the corporation, trust, or

association is not a qualified REIT.

The organization may revoke the election for any tax year

after the first tax year the election is effective by filing a

statement with the service center where it files its income tax

return. The statement must be filed on or before the 90th day

after the first day of the tax year for which the revocation is to be

effective. The statement must include the following.

• The name, address, and employer identification number (EIN)

of the organization;

• The tax year for which the election was made;

• A statement that the organization (according to section

856(g)(2)) revokes its election under section 856(c)(1) to be a

REIT; and

• The signature of an official authorized to sign the income tax

return of the organization.

The organization may not make a new election to be taxed as

a REIT during the 4 years following the first year for which the

termination or revocation is effective. See section 856(g)(4) for

exceptions.

Taxable REIT Subsidiaries (TRS)

A REIT may own up to 100% of the stock in one or more taxable

REIT subsidiaries (TRS). A TRS must be a corporation (other

than a REIT or a qualified REIT subsidiary) and may provide

services to the REIT’s tenants without disqualifying the rent

received by the REIT. See section 856(l) for details, including

certain restrictions on the type of business activities a TRS may

perform. Also, not more than 20% of the fair market value (FMV)

of a REIT’s total assets (25% for tax years beginning after July

30, 2008, and no later than December 31, 2017) may be

securities of one or more TRSs (see section 856(c)(4) for

details).

Transactions between a TRS and its associated REIT must

be at arm’s length. A REIT may be subject to a 100% tax to the

extent it improperly allocates income and deductions between

the REIT and the TRS (see section 857(b)(7) for details).

Additional limitations on transactions between a TRS and its

associated REIT include:

• Limitations on income from a TRS that may be treated as

rents from real property by the REIT (see section 856(d)(8)), and

• Limitations on a TRS’s deduction for interest paid to its

associated REIT (see section 163(j)).

To elect to have an eligible corporation treated as a TRS, the

corporation and the REIT must jointly file Form 8875, Taxable

REIT Subsidiary Election.

Restrictions on tax-free spinoffs from REITs. For

distributions after December 6, 2015, a REIT is generally

ineligible to participate in a tax-free spinoff as either a

distributing or controlled corporation under section 355. This

general rule does not apply if both the distributing corporation

and the controlled corporation are REITs immediately after the

distribution. Also, a REIT may spin off a TRS if the following

apply.

• The distributing corporation has been a REIT at all times

during the 3-year period ending on the date of distribution;

• The controlled corporation has been a TRS of the REIT at all

times during such period; and

• The REIT has had control (as defined in section 368(c)

applied by taking into account stock owned, directly and

indirectly, including through partnerships, by the REIT) of the

TRS at all times during such period.

Instructions for Form 1120-REIT (2025)

A controlled corporation is treated as meeting the control

requirements if the stock of the corporation was distributed by a

TRS in a transaction to which section 355 applies and the assets

of the corporation consist solely of the stock or assets held by

one or more TRSs of the distributing corporation meeting the

control requirements described above.

If a corporation that is not a REIT was a distributing or

controlled corporation with respect to any distribution to which

section 355 applied, the corporation will not be eligible to make a

REIT election for any tax year beginning before the end of the

10-year period beginning on the date of such distribution.

See sections 355(h) and 856(c)(8) for more details.

Electronic Filing

REITs can generally electronically file (e-file) Form 1120-REIT,

related forms, schedules, and attachments; Form 7004

(automatic extension of time to file); and Forms 940, 941, and

944 (employment tax returns). If there is a balance due, the REIT

can authorize an electronic funds withdrawal while e-filing. Form

1099 and other information returns can also be electronically

filed. The option to e-file does not, however, apply to certain

returns.

REITs are required to e-file Form 1120-REIT if the REIT files

10 or more returns of any type during the calendar year

(including income tax, employment tax, excise tax, and

information returns). See Regulations section 301.6011-5.

However, these REITs can request a waiver of electronic filing

requirements.

For more information on e-filing, see E-file for Business and

Self-employed Taxpayers on IRS.gov

When To File

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

of the 4th month after the end of its tax year. A new REIT filing a

short-period return must generally file by the 15th day of the 4th

month after the short period ends. A REIT that has dissolved

must generally file by the 15th day of the 4th month after the date

it dissolved.

However, a REIT with a fiscal tax year ending June 30 must

file by the 15th day of the 3rd month after the end of its tax year.

A REIT with a short tax year ending anytime in June will be

treated as if the short year ended on June 30, 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 REIT can file on the next business day.

Private Delivery Services

The REIT 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 a PDS, go

to IRS.gov/PDSStreetAddresses.

Note: 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, file

Form 7004 by the regular due date of the REIT’s income tax

return. See the Instructions for Form 7004 for more information.

Instructions for Form 1120-REIT (2025)

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 REIT 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 REIT must be accompanied

by a copy of the order or instructions of the court authorizing

signing of the return or form.

Paid Preparer Use Only section. If an employee of the REIT

completes Form 1120-REIT, the paid preparer’s section should

remain blank. Anyone who prepares Form 1120-REIT but does

not charge the REIT 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 REIT.

A paid preparer may sign the original or amended returns by

rubber stamp, mechanical device, or computer software

program.

Paid Preparer Authorization

If the REIT wants to allow the IRS to discuss its 2025 tax return

with the paid preparer who signed it, 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 REIT’s return. It does not apply to the firm, if

any, shown in that section.

If the “Yes” box is checked, the REIT is authorizing the IRS to

call the paid preparer to answer any questions that may arise

during the processing of its return. The REIT 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 REIT is not authorizing the paid preparer to receive any

refund check, bind the REIT to anything (including any additional

tax liability), or otherwise represent the REIT before the IRS.

The authorization will automatically end no later than the due

date (excluding extensions) for filing the REIT’s 2026 tax return.

If the REIT wants to expand the paid preparer’s authorization,

see Pub. 947, Practice Before the IRS and Power of Attorney.

Assembling the Return

To ensure that the REIT’s tax return is correctly processed,

attach all schedules and other forms after page 5 of Form

1120-REIT, in the following order.

1. Schedule N (Form 1120).

2. Schedule D (Form 1120).

3. Form 8949.

4. Form 8996.

5. Schedule O (Form 1120).

6. Form 4136.

3

Where To File

File the REIT’s return at the applicable IRS address listed below.

If the REIT’s principal business, office, or

agency is located in:

And the total assets at the end of the Use the following address:

tax year are:

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

Department of the Treasury

Less than $10 million and Schedule M-3

Internal Revenue Service

is not filed

Kansas City, MO 64999-0012

$10 million or more, or less than $10

million and 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 foreign country or U.S. territory

Any amount

Internal Revenue Service

P.O. Box 409101

Ogden, UT 84409

A group of corporations with members located in more than one service center area will often keep all the books and records at the principal office of

the managing corporation. In this case, the tax returns of the corporations may be filed with the service center for the area in which the principal

office of the managing corporation is located.

7. Form 8978.

8. Form 965-B.

9. Form 8941.

10. Form 3800.

11. Form 8997.

12. Form 4255.

13. Additional schedules in alphabetical order.

14. Additional forms in numerical order.

15. Supporting statements and attachments.

Complete every applicable entry space on Form 1120-REIT.

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 printed forms. Enter

the REIT’s name and EIN on each supporting statement or

attachment.

Tax Payments

Generally, the REIT 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 28, later. 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

REITs must use electronic funds transfer (EFT) to make all

federal tax deposits (such as deposits of employment, excise,

and corporate income tax). An EFT can be made using the

Electronic Federal Tax Payment System (EFTPS). However, if

the REIT 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

4

its financial institution to submit a same-day 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,

go to EFTPS.gov. 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 or 800-733-4829.

Depositing on time. EFTPS accepts same day payments of $1

million or less if the payment is submitted before 3:00 p.m.

Eastern time on a business day. If the REIT’s payment is more

than $1 million, the REIT must submit the deposit by 8:00 p.m.

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

REIT uses a third party to make deposits on its behalf, they may

have different cutoff times.

Same-day wire payment option. If the REIT fails to submit a

timely deposit transaction on EFTPS, it can still make its deposit

on time by using the Federal Tax Collection Service (FTCS). To

use the same-day payment method, the REIT 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 REIT will need to provide its financial

institution to make a same-day wire payment, visit the IRS

website at IRS.gov/SameDayWire.

Estimated Tax Payments

Generally, the following rules apply to the REIT’s payments of

estimated tax.

• The REIT 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 REIT must use electronic funds transfers to make

installment payments of estimated tax.

Instructions for Form 1120-REIT (2025)

• 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.

• If, after the REIT 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 REIT may owe a penalty.

See the instructions for line 26, later.

• If the REIT 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 REIT’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, and substantial understatements of tax

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 REIT 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 2026 that is over 60 days

late is the smaller of the tax due or $525. The penalty will not be

imposed if the REIT can show that the failure to file on time was

due to reasonable cause.

Late payment of tax. A REIT that does not pay the tax when

due may generally be charged a penalty for the failure to pay tax.

The amount of the penalty is 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

REIT can show that the failure to pay on time was due to

reasonable cause.

Reasonable cause determinations. If the REIT receives a

notice about penalties after it files its return, send the IRS an

explanation and we will determine if the REIT meets the

reasonable cause criteria. Do not attach an explanation when

the REIT’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 943, Employer Annual Federal Tax Return for

Agricultural Employees;

• 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), Employer’s Tax Guide, for

details, including the definition of responsible persons.

Failure to ascertain ownership. If the REIT fails to comply

with Regulations section 1.857-8 for ascertaining ownership and

maintaining factual ownership records for a tax year, it must pay

a $25,000 penalty ($50,000 for intentional disregard) upon

Instructions for Form 1120-REIT (2025)

notice and demand by the IRS. If the REIT can show that the

failure was due to reasonable cause, the penalty may not be

imposed. For more information, see section 857(f).

Failure to satisfy certain REIT qualification provisions. If

the REIT is required to pay the $50,000 penalty under section

856(g)(5)(C) for each failure to satisfy a REIT qualification

provision of sections 856–859 (other than section 856(c)(2),

856(c)(3), or 856(c)(4)) due to reasonable cause and not willful

neglect, see the instructions for Schedule J, Line 1f, later.

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 REIT’s books and records. In all cases, the

method used must clearly reflect income.

Generally, permissible methods include:

• Cash,

• Accrual, or

• Any other method authorized by the Internal Revenue Code.

Accrual method. Generally, a REIT must use the accrual

method of accounting if its average annual gross receipts for the

3 prior tax years exceed $31 million. See section 448(c).

For more information, see Pub. 538, Accounting Periods and

Methods.

Change in accounting method. Generally, the REIT 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 REIT must generally file Form

3115, Application for Change in Accounting Method. 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.

Section 481(a) adjustment. If the REIT’s taxable income for

the current tax year is figured under a method of accounting

different from the method used in the preceding tax year, the

REIT may have to make an adjustment under section 481(a) to

prevent amounts of income or expenses from being duplicated

or omitted. This is referred to as a “section 481(a) adjustment.”

The section 481(a) adjustment period is generally 1 year for a

net negative adjustment and 4 years for a net positive

adjustment. However, in some cases, a REIT can elect to modify

the section 481(a) adjustment period for a net positive

adjustment. The REIT must complete the appropriate lines of

Form 3115 to make the election. See the Instructions for Form

3115 for more information and exceptions. If the net section

481(a) adjustment is positive, report it on line 7 as other income.

If the net section 481(a) adjustment is negative, report it on

line 19 as a deduction.

Note: Include any net positive section 481(a) adjustment on

Part I, line 7. Report any negative adjustment on Part I, line 19.

Accounting Period

A REIT must figure its taxable income on the basis of a tax year.

A tax year is the annual accounting period a REIT uses to keep

its records and report its income and expenses. A REIT adopts a

tax year when it files its first income tax return. It must adopt a

tax year by the due date (not including extensions) of its initial

income tax return.

Note: A REIT must adopt a calendar year unless it first qualified

for REIT status before October 5, 1976.

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Change of tax year. A REIT may not change its tax year to any

tax year other than the calendar year. Generally, a REIT must

receive consent from the IRS before changing its tax year by

filing Form 1128, Application To Adopt, Change, or Retain a Tax

Year.

However, upon electing to be taxed as a REIT, an entity that

has not engaged in any active trade or business may change its

tax year to a calendar 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 REIT may enter decimal points and cents when completing

its return. However, the REIT should round off cents to whole

dollars on its return, forms, and schedules to make completing

its return easier. The REIT 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 REIT’s records for as long as they may be needed for

the 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 REIT’s basis in property for as long as they are needed to

figure the basis of the original or replacement property.

The REIT should also 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-REIT, the REIT may have to file some of

the following forms.

• Form 926, Return by a U.S. Transferor of Property to a

Foreign Corporation, is filed to report certain transfers to foreign

corporations under section 6038B.

• Form 966, Corporate Dissolution or Liquidation, is used to

report the adoption of a resolution or plan to dissolve the

corporation or liquidate any of its stock.

• Form 976, Claim for Deficiency Dividends Deductions by a

Personal Holding Company, Regulated Investment Company, or

a Real Estate Investment Trust, is used to claim a deduction for

deficiency dividends. See section 860 and the related

regulations.

• Form 1042, Annual Withholding Tax Return for U.S. Source

Income of Foreign Persons; Form 1042-S, Foreign Person’s U.S.

Source Income Subject to Withholding; and Form 1042-T,

Annual Summary and Transmittal of Forms 1042-S. Use these

forms to report and send withheld tax on payments or

distributions made to nonresident alien individuals, foreign

partnerships, or foreign corporations to the extent these

payments constitute gross income from sources within the

United States (see sections 861 through 865).

Also, see sections 1441 and 1442, and Pub. 515, Withholding

of Tax on Nonresident Aliens and Foreign Entities.

• Form 1099-DIV, Dividends and Distributions. Use this form to

report certain dividends and distributions.

• Form 2438, Undistributed Capital Gains Tax Return, must be

filed by the REIT if it designates undistributed net long-term

capital gains under section 857(b)(3)(C).

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• Form 2439, Notice to Shareholder of Undistributed

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

to each shareholder for whom the REIT paid tax on undistributed

net long-term capital gains under section 857(b)(3)(C).

• Form 3520, Annual Return To Report Transactions With

Foreign Trusts and Receipt of Certain Foreign Gifts, is required

either if the REIT received a distribution from a foreign trust or if

the REIT was a grantor of, transferor of, or transferor to a foreign

trust that existed 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, is required if the REIT 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 5472, Information Return of a 25% Foreign-Owned U.S.

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

Business. This form is filed if the REIT is 25% or more foreign

owned. See the instructions for Schedule K, Question 5, later.

• Form 6198, At-Risk Limitations. Use this form if a REIT is

closely held, as described in section 465(a)(1)(B), and (1)

directly or indirectly has any amounts not at risk that are invested

in an at-risk activity that incurred a loss; or (2) engages in certain

activities and has borrowed amounts not at risk. See section 465

and the Instructions for Form 6198.

• 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 8275, Disclosure Statement, and Form 8275-R,

Regulation Disclosure Statement, are used to disclose items or

positions taken on a tax return that are not otherwise adequately

disclosed on a tax return or that are contrary to Treasury

regulations (to avoid parts of the accuracy-related penalty or

certain preparer penalties).

• Form 8300, Report of Cash Payments Over $10,000

Received in a Trade or Business. Use this form to report the

receipt of more than $10,000 in cash or foreign currency in one

transaction or a series of related transactions.

• Form 8612, Return of Excise Tax on Undistributed Income of

Real Estate Investment Trusts, is filed if the REIT is liable for the

4% excise tax on undistributed income imposed under section

4981.

• Form 8621, Information Return by a Shareholder of a Passive

Foreign Investment Company or Qualified Electing Fund, is

required if the REIT is a direct or indirect shareholder of a

passive foreign investment company, as defined in section

1297(a).

• Form 8810, Corporate Passive Activity Loss and Credit

Limitations. Use this form if a REIT is closely held, as described

in section 469(j)(1), and has losses or credits from passive

activities. See section 469, the related regulations, and the

Instructions for Form 8810.

• Form 8865, Return of U.S. Persons With Respect To Certain

Foreign Partnerships. A REIT may have to file Form 8865 if it:

1. Controlled a foreign partnership (that is, owned more than

a 50% direct or indirect interest in the partnership).

2. Owned at least a 10% direct or indirect interest in a

foreign partnership while U.S. persons controlled that

partnership.

3. Had an acquisition, disposition, or change in proportional

interest in a foreign partnership that:

• Increased its direct interest to at least 10% or reduced its

direct interest of at least 10% to less than 10%.

• Changed its direct interest by at least a 10% interest.

4. Contributed property to a foreign partnership in exchange

for a partnership interest if:

Instructions for Form 1120-REIT (2025)

• Immediately after the contribution, the REIT owned, directly or

indirectly, at least a 10% interest in the foreign partnership; or

• The FMV of the property the REIT contributed to the foreign

partnership in exchange for a partnership interest, when added

to other contributions of property made to the foreign partnership

during the preceding 12-month period, exceeds $100,000.

Also, the REIT may have to file Form 8865 to report certain

dispositions by a foreign partnership of property it previously

contributed to that foreign partnership if it was a partner at the

time of the disposition. For more details, including penalties for

failing to file Form 8865, see Form 8865 and its separate

instructions.

• Form 8875, Taxable REIT Subsidiary Election, is filed jointly

by a corporation and a REIT to have the corporation treated as a

taxable REIT subsidiary.

• 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) and to establish the date

of determination for purposes of making a deficiency dividend

distribution.

• Form 8937, Report of Organizational Actions Affecting Basis

of Securities. Use this form when any organizational action

affects the basis of holders of either a security or a class of the

security. For example, a REIT may use this form in connection

with transactions such as a nontaxable cash or stock distribution

to shareholders, or a conversion rate adjustment on a convertible

debt instrument that results in a distribution under section

305(c). However, a REIT that reports undistributed capital gains

to shareholders on Form 2439 can satisfy the organizational

action reporting requirements for those undistributed gains if the

REIT timely files and gives Form 2439 to all proper parties for the

organizational action. For more information, see the Instructions

for Form 8937.

• 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 its Schedules 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. The first

required reporting period for an ultimate parent entity is the

12-month reporting period that begins on or after the first day of

a tax year of the ultimate parent entity that begins on or after

June 30, 2016. 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 this form to calculate the amount of business

interest expense you 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 this form to figure the domestic

corporation’s GILTI under section 951A and attach it to Form

1120-REIT.

• Form 8996, Qualified Opportunity Fund. Use this form to

certify that the REIT organized as a qualified opportunity fund

(QOF) to invest in qualified opportunity zone property. In

addition, a QOF REIT 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 this form to report

investments in one or more QOFs. Report the amount of

deferred gains invested in QOFs for the current tax year, which

include capital gains deferred and invested in QOFs and

disposal investments in QOFs, and the amount of deferred gains

invested in QOFs at the end of the current tax year.

Instructions for Form 1120-REIT (2025)

Statements

Reportable transaction disclosure statement. Disclose

information for each reportable transaction in which the REIT

participated. Form 8886, Reportable Transaction Disclosure

Statement, must be filed for each tax year that the federal

income tax liability of the REIT 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 REIT (or a related party) paid an advisor a fee of at

least $250,000.

3. Certain transactions for which the REIT (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.”

For more information, see Regulations section 1.6011-4.

Also, see the Instructions for Form 8886.

Penalties. The REIT 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 REIT fails to file Form 8886 with

its Form 1120-REIT, 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 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.

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 to its 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 REIT 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 include the statement required by

Regulations section 1.355-5(a) on or with its return for the year of

the distribution. A significant distributee (as defined in

Regulations section 1.355-5(c)) 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

7

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).

Election to reduce basis under section 362(e)(2)(C). If

property is transferred to a corporation subject to section

362(e)(2), the transferor and the transferee corporation may

elect under section 362(e)(2)(C) to reduce the transferor’s basis

in the stock received instead of reducing the transferee

corporation’s basis in the property transferred. Once made, the

election is irrevocable. For more information, see section 362(e)

(2) and Regulations section 1.362-4. If an election is made, a

statement must be filed in accordance with Regulations section

1.362-4(d)(3).

Other forms and statements. See Pub. 542 for a list of other

forms and statements a REIT may need to file in addition to the

forms and statements discussed throughout these instructions.

Specific Instructions

Period Covered

File the 2025 return for calendar year 2025 and fiscal years that

begin in 2025 and end in 2026. For a fiscal year return, fill in the

tax year in the space at the top of the form.

The 2025 Form 1120-REIT can also be used if:

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

and ends in 2026, and

• The 2026 Form 1120-REIT is not available at the time the

REIT is required to file its return.

The REIT must show its 2026 tax year on the 2025 Form

1120-REIT and take into account any tax law changes that are

effective for tax years beginning after December 31, 2025.

Name and Address

Enter the REIT’s true name (as set forth in the charter or other

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

lines. Include the suite, room, or other unit number after the

street address. Enter the address of the REIT’s principal office or

place of business. If the post office does not deliver mail to the

street address and the REIT has a P.O. box, show the box

number instead.

Do not use the address of the registered agent for the state in

which the corporation is incorporated. For example, if a business

is incorporated in Delaware or Nevada and the corporation’s

principal office is located in Little Rock, Arkansas, the

corporation should enter the Little Rock address.

If the REIT 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. 100%-Owned Subsidiaries

and Personal Holding Companies

REITs With 100%-Owned Subsidiaries

Check this box if this return is filed for a REIT with 100%-owned

REIT subsidiaries under section 856(i). These subsidiaries are

not treated as separate corporations.

Do not check this box for a taxable REIT subsidiary. See the

instructions for Taxable REIT Subsidiaries, earlier.

8

Personal Holding Companies

Personal holding companies must attach to Form 1120-REIT a

Schedule PH (Form 1120), U.S. Personal Holding Company

(PHC) Tax. See the Instructions for Schedule PH (Form 1120) for

details.

Item C. Employer Identification

Number (EIN)

Enter the REIT’s EIN. If the REIT does not have an EIN, it must

apply for one. An EIN can be applied for in the following ways.

• Online – Go to IRS.gov/EIN. The EIN is issued immediately

once the application information is validated.

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

Identification Number.

Note: REITs located in the United States or U.S. territories can

use the online application process.

EIN applied for but not received. If the REIT has not received

its EIN by the time the return is due, enter “Applied for” in the

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

Item D. Date Entity Established

If the REIT is a corporation under state or local law, enter the

date incorporated. If it is a trust or association, enter the date

organized.

Item E. Total Assets

Enter the REIT’s total assets (as determined by the accounting

method regularly used in keeping its books and records) at the

end of the tax year. If there are no assets at the end of the tax

year, enter -0-.

Item F. Final Return, Name Change,

Address Change, or Amended Return

• If this is the REIT’s final return, and it will no longer exist,

check the “Final return” box. See the instructions for Termination

of Election, earlier.

• If the REIT has changed its name since it last filed a return,

check the box for “Name change.” Generally, a REIT must also

have amended its articles of incorporation and filed the

amendment with the state in which it was incorporated.

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

(including a change to an “in care of” address), check the box for

“Address change.”

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.

• If the REIT 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 REIT’s tax liability.

Attach a statement that explains the reasons for the

amendments and identifies the lines being changed on the

amended return.

Item G. Type of REIT

Check the appropriate box to indicate whether you are filing a

return for a “Mortgage REIT” or an “Equity REIT.” If the primary

source of gross receipts is derived from mortgage interest and

fees, check the “Mortgage” box. Otherwise, check the “Equity”

box.

Item H. PBA Code (Equity REITs Only)

Enter only one code that best reflects the principal business

activity of an equity REIT from the selection below.

• 531110– Lessors of Residential Buildings & Dwellings.

Instructions for Form 1120-REIT (2025)

• 531120– Lessors of Nonresidential Buildings (except

Miniwarehouses).

• 531130– Lessors of Miniwarehouses & Self-Storage Units.

• 531190– Lessors of Other Real Estate Property.

Part I—Real Estate Investment Trust

Taxable Income

Include in Part I the REIT’s share of gross income from

partnerships in which the REIT is a partner, and the deductions

attributable to the gross income items. See Regulations section

1.856-3(g).

Real estate investment trust taxable income does not include

the following.

• Gross income, gains, losses, and deductions from foreclosure

property (defined in section 856(e)). If the aggregate of such

amounts results in net income, report these amounts in Part II.

• Income or deductions from any prohibited transaction (defined

in section 857(b)(6)) resulting in a gain. Report these amounts in

Part IV.

Income

Line 1. Dividends. Enter the total amount of dividends received

during the tax year.

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 details.

Report tax-exempt interest income on Form 1120-REIT,

Schedule K, line 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.

Line 3. Gross rents. Include the following.

• Charges for customary services that may qualify as rents from

real property are described in Regulations section 1.856-4(b)(1).

Services customarily furnished to tenants of a REIT include

parking facilities. See Rev. Rul. 2004-24, 2004-10 I.R.B. 550, for

guidance to determine whether amounts received by a REIT that

provides parking facilities at its rental real properties qualify as

rents from real property.

• Rent from personal property leased under or with a lease of

real property (but only if the rent from the personal property does

not exceed 15% of the total rent for the tax year charged for both

the real and personal property under such lease). Figure the

percentage of rents from personal property by comparing the

FMV of the personal rental property to the FMV of the total rental

property. See section 856(d)(1) for details.

• Rent from a taxable REIT subsidiary (TRS) either (a) if at least

90% of the leased space of the property is leased to persons

other than TRSs of the REIT and other than persons described

in section 856(d)(2)(B) at rents comparable to the rent paid by

the other tenants of the REIT for comparable space; or (b) for

certain lodging facilities or health care property operated by an

eligible independent contractor. For more information, including

definitions and additional requirements, see sections 856(d)(8)

and 856(d)(9). Also, see Rev. Proc. 2003-66, 2003-33 I.R.B. 364,

for the special rules on rents paid to a REIT by certain joint

ventures that include a TRS.

See section 856(d)(2) for amounts excluded from “rents from

real property.”

Line 4. Other gross rents. Enter the gross amount received for

renting property not included on line 3.

Instructions for Form 1120-REIT (2025)

Line 5. Capital gain net income. Every sale or exchange of a

capital asset must be reported on Schedule D (Form 1120),

Capital Gains and Losses, even if there is no gain or loss.

Line 7. Other income. Enter any other taxable income not

reported on lines 1 through 6, except amounts that must be

reported in Part II or IV.

Enter amounts included in income under the section 951A

GILTI provisions. See Form 8992, Part II, line 5, and the

Instructions for Form 8992. Also, consider the applicability of

section 951A with respect to controlled foreign corporations

owned by domestic partnerships in which the REIT has an

interest. If the REIT also has a Form 5471 reporting requirement,

attach the form.

List the type and amount of income on an attached schedule.

If the REIT has only one item of other income, describe it in

parentheses on line 7. Examples of other income to report on

line 7 include the following.

• 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 if they reduced

income subject to tax in the year deducted (see section 111). Do

not offset current-year taxes against tax refunds.

• Any deduction previously taken under section 179A that is

subject to recapture. The REIT must recapture the benefit of any

allowable deduction for clean-fuel vehicle property (or clean-fuel

vehicle refueling property), if the property later ceases to qualify.

See Regulations section 1.179A-1 for details.

• 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 19 of Form 1120-REIT. 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(a) adjustment. See Section

481(a) adjustment, earlier.

• Income from cancellation of debt (COD) from the repurchase

of a debt instrument for less than its adjusted issue price.

• If the REIT elected to take section 965(a) inclusions and

corresponding section 965(c) deductions into account over 8

years in accordance with section 965(m), include the

current-year net section 965 inclusion (the section 965(a)

inclusion less the corresponding section 965(c) deduction) on

this line 7. You must also complete and attach Form 965-B,

Corporate and Real Estate Investment Trust (REIT) Report of

Net 965 Tax Liability and Electing REIT Report of 965 Amounts.

• Form 965-B must be completed by an electing REIT for every

tax year for which the REIT has any section 965 amounts taken

into account in accordance with section 965(m) or not fully taken

into account at any point during the tax year. For more

information, see Form 965-B and the related instructions.

Deductions

Limitations on Deductions

Section 263A uniform capitalization rules. The uniform

capitalization rules of section 263A generally require REITs to

capitalize certain costs to inventory or other property.

REITs subject to the section 263A uniform capitalization rules

are required to capitalize:

1. Direct costs of assets produced or acquired for resale,

and

9

2. Certain indirect costs (including taxes) that are properly

allocable to property produced or property acquired for resale.

A REIT cannot deduct the costs required to be capitalized

under section 263A until it sells, uses, or otherwise disposes of

the property (to which the costs relate). The REIT recovers these

costs through depreciation, amortization, or costs of goods sold.

For more details, including exemptions to the uniform

capitalization rules, see Pub. 538. See section 263A(i) for

exemption for certain small businesses. For non-small business

taxpayers, see Regulations sections 1.263A-1 through 1.263A-3.

See section 263A(d), Regulations section 1.263A-4, and Pub.

225 for rules for property produced in a farming business.

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

included in the income of the related party. See sections 163(e)

(3) and 267 for limitations on deductions for unpaid interest and

expenses.

Limitations on business interest expense. Business interest

expense may be limited. See section 163(j) and Form 8990.

Also, see Limitation on deduction in the instructions for line 15

and Schedule K, Question 11, later.

Golden parachute payments. A portion of the payments made

by a REIT to key personnel that exceeds their usual

compensation may not be deductible. This occurs when the

REIT has an agreement (golden parachute) with these key

employees to pay them these excessive amounts if control of the

REIT changes. See section 280G and Regulations section

1.280G-1. Also, see the instructions for line 9, later.

Business start-up and organizational costs. A REIT 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 REIT 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.

For more details, see the Instructions for Form 4562,

Depreciation and Amortization.

If the REIT 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 REIT filed its original return. The election applies when

figuring taxable income for the current tax year and all

subsequent years.

The REIT 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.

The election to either amortize or capitalize start-up costs is

irrevocable and applies to all start-up costs that are related to the

trade or business.

Report the deductible amount of such costs and any

amortization on line 19. For amortization that begins during the

current tax year, complete and attach Form 4562.

Passive activity and at-risk limitations. Loss and credit

limitations under sections 465 and 469 apply to REITs that are

closely held, as described in sections 465(a)(1)(B) and 469(j)(1).

REITs subject to sections 465 and 469 must complete Forms

6198 and 8810 to compute allowable losses or credits. Before

10

completing Form 8810, see Temporary Regulations section

1.163-8T for rules on allocating interest expense among

activities.

Reducing certain expenses for which credits are allowable.

For each credit listed below, the REIT must reduce the otherwise

allowable deductions for expenses used to figure the credit by

the amount of the current-year credit. Do not reduce the amount

of the allowable deduction for any portion of the credit that was

passed through to the REIT from a pass-through entity on

Schedule K-1.

• Employment credits. See the instructions for line 10, later.

• Disabled access credit (Form 8826).

• Credit for employer social security and Medicare taxes paid

on certain employee tips (Form 8846).

• Credit for small employer pension plan start-up costs

(Form 8881).

• Credit for employer-provided childcare facilities and services

(Form 8882).

If the REIT is eligible to claim any of these credits, figure each

current-year credit before figuring the deduction for expenses on

which the credit is based. If the REIT capitalized any costs on

which it figured the credit, reduce the amount capitalized by the

credit attributable to these costs.

See the instructions for the form used to figure the applicable

credit.

Line 9. Compensation of officers. Enter the deductible

officers’ compensation on line 9. 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 REIT’s total receipts are $500,000 or more, complete

and attach Form 1125-E. Total receipts are figured by adding:

• Part I, line 8;

• Net capital gain from Part III, line 10; and

• Form 2438, line 9a.

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

Line 10. Salaries and wages. Enter the total 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 officers 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 REIT provided taxable fringe benefits to its employees,

such as personal use of a car, do not deduct as wages the

amounts allocated for depreciation and other expenses claimed

on lines 16 and 19.

If the REIT 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. Repairs and maintenance. Enter the cost of repairs

and maintenance not claimed elsewhere on the return, such as

labor and supplies, that are not payments to produce or improve

tangible or real property. See Regulations section 1.263(a)-1.

For example, amounts are paid for improvements if they are for

betterments to the property, restorations of the property (such as

Instructions for Form 1120-REIT (2025)

replacements of major components or substantial structural

parts), or if they adapt the property to a new or different use.

Amounts paid to produce or improve property must be

capitalized. See Regulations sections 1.263(a)-2 and -3. The

REIT can deduct repair and maintenance expenses only to the

extent they relate to a trade or business activity. See Regulations

section 1.162-4. The REIT may elect to capitalize certain repair

and maintenance costs consistent with its books and records.

See Regulations section 1.263(a)-3(n) for information on how to

make the election.

Line 12. Bad debts. Enter the total debts that became

worthless in whole or in part during the tax year. A cash basis

taxpayer may not claim a bad debt deduction unless the amount

was previously included in income.

Line 13. Rents. If the REIT 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 4562. If the REIT 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 REIT may have an inclusion amount if:

And the vehicle’s FMV on the first day of the

lease exceeded:

The lease term began:

Cars (excluding trucks and vans):

After 12/31/23 but before 1/1/26

. . .

$62,000

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

After 12/31/23 but before 1/1/26

. . .

$62,000

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

Trucks and vans:

See Pub. 463, Travel, Gift, and Car Expenses, for instructions

on figuring the inclusion amount. The inclusion amount for lease

terms beginning in 2026 will be published in the Internal

Revenue Bulletin in early 2026.

Line 14. Taxes and licenses. Enter taxes paid or incurred

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 tax credit is claimed

(however, see the Instructions for Form 5735 for special rules for

territory income taxes).

• Taxes not imposed on the REIT.

• 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.

• Excise taxes imposed under section 4981 on undistributed

REIT income.

See section 164(d) for information on apportionment of taxes

on real property between the seller and the purchaser.

Line 15. Interest. Do not offset interest income against interest

expense.

Instructions for Form 1120-REIT (2025)

The deduction for interest is limited when the REIT 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.

The REIT must make an interest allocation if the proceeds of

a loan were used for more than one purpose. For example, the

loan proceeds were used to purchase a financial investment and

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 rules and exceptions for financial

institutions. Also, see section 265(b)(7) for a temporary de

minimis safe-harbor exception for certain financial institutions for

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 2025 prepaid interest allocable to any

period after 2025 can deduct only the amount allocable to 2025).

• Interest and carrying charges on straddles. Generally, these

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

• Interest paid or incurred on any portion of an underpayment of

tax that is attributable to an understatement arising from an

undisclosed listed transaction or an undisclosed reportable

avoidance transaction (other than a listed transaction) entered

into in tax years beginning after October 22, 2004.

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 on indebtedness properly allocable to a

trade or business.

A taxpayer, other than a tax shelter, 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 $31 million or

less for the 3 prior tax years. Gross receipts generally 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 REIT fails to meet the gross receipts test, Form 8990 is

generally required. An electing real property trade or business is

excepted from the interest expense limitation of section 163(j).

See section 163(j)(7), Form 8990, and the related instructions.

Also, see the questions on Schedule K, line 10, for business

interest expense elections, and on Schedule K, line 11,

regarding conditions for filing Form 8990.

Special rules apply to:

• Foregone interest on certain below-market-rate loans (see

section 7872).

• 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.

Line 16. Depreciation. Include on line 16 depreciation and the

cost of certain property that the REIT elected to expense under

section 179. See Form 4562 and the related instructions to figure

the amount to enter on this line.

Line 18. Energy efficient commercial buildings deduction.

Complete and attach Form 7205 if claiming the energy efficient

building deduction. See the Instructions for Form 7205 for more

information. Also, see section 179D.

Line 19. Other deductions. Attach a statement listing, by type

and amount, all allowable deductions that are not deductible

11

elsewhere on the return. Enter the total on line 19. Include

amortization and organization expenses. Generally, a deduction

may not be taken for any amount that is allocable to a class of

exempt income. See section 265(b) for exceptions.

Examples of other deductions include the following.

• Amortization (see Form 4562).

• Certain business start-up and organizational costs that the

REIT elects to deduct.

• Depletion. Attach Form T (Timber), Forest Activities Schedule,

if a deduction for depletion of timber is taken.

• Reforestation costs. The REIT can elect to deduct up to

$10,000 of qualified reforestation expenses for each qualifying

timber property. The REIT can elect to amortize over 84 months

any amount not deducted.

• Insurance premiums.

• Legal and professional fees.

• 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 the amount

from each partnership.

• Any net negative section 481(a) adjustment. See Section

481(a) adjustment, earlier.

Do not deduct expenses such as the following.

• Fines or penalties paid to a government for violating any law.

However, exceptions apply for certain amounts paid or incurred

after December 21, 2017. See section 162(f), as amended by

P.L. 115-97, section 13306 (discussed later).

• Lobbying expenses. However, see exceptions (discussed

later).

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

settlement, payout, or attorney fees related to sexual harassment

or sexual abuse, if such payments are subject to a nondisclosure

agreement. 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 contributions carried over from prior years.

REITs reporting taxable income on the accrual method may

elect to treat as paid during the tax year any deductible

contributions paid by the due date of the REIT’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 Regulations section 1.170(a)(2)(B).

Limitation on deduction. Generally, the total amount

claimed may not be more than 10% of taxable income (the sum

of Part I, line 23; Part II, line 5; Part IV, line 3; and Form 2438,

line 11) computed without regard to the following.

• Any deduction for contributions.

• The limitation under section 249 on the deduction for bond

premium.

• Any net operating loss (NOL) carryback to the tax year under

section 172.

• Any capital loss carryback to the tax year under section

1212(a)(1).

Carryover. Charitable contributions that exceed the 10%

limitation cannot be deducted for the tax year but may be carried

over to the next 5 tax years.

Special rules apply if the REIT has an NOL carryover to the

tax year. In figuring the charitable contributions deduction for the

12

tax year, the 10% limit is applied using the taxable income after

taking into account any deduction for the NOL.

To figure the amount of any remaining NOL carryover to later

years, taxable income must be modified (see section 172(b)). To

the extent that contributions are used to reduce taxable income

for this purpose and increase an NOL carryover, a contributions

carryover is not allowed. See section 170(d)(2)(B).

Cash contributions. For contributions of cash, check, or

other monetary gifts (regardless of the amount), the REIT must

maintain a bank record, or a receipt, letter, or other written

communication from the donee organization indicating the name

of the organization, the date of the contribution, and the amount

of the contribution.

Contributions of $250 or more. A REIT can deduct a

contribution of $250 or more only if the REIT receives a written

acknowledgment from the donee organization that shows the

amount of cash contributed, describes any property contributed,

and gives a description and a good faith estimate of the value of

any goods or services provided in return for the contribution, or

states that no goods or services were provided in return for the

contribution. The acknowledgment must be obtained by the due

date (including extensions) of the REIT’s return, or, if earlier, the

date the return is filed. Do not attach the acknowledgment to the

tax return, but keep it with the REIT’s records.

For more information on charitable contributions, including

substantiation and recordkeeping requirements, see section 170

and the related regulations, and Pub. 526, Charitable

Contributions. For special rules that apply to corporations, see

Pub. 542.

Pension, profit-sharing, etc., plans. Include the deduction for

contributions to qualified pension, profit-sharing, or other funded

deferred compensation plans. Employers who maintain such a

plan must generally file one of the forms listed below unless

exempt from filing under regulations or other applicable

guidance, even if the plan is not a qualified plan under the

Internal Revenue Code. The filing requirement applies even if the

REIT 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). Also, see the instructions for the applicable forms.

• Form 5500, Annual Return/Report of Employee Benefit Plan.

• Form 5500-SF, Short Form Annual Return/Report of Small

Employee Benefit Plan, instead of Form 5500, generally if under

100 participants at the beginning of the plan year.

Note: Form 5500 and Form 5500-SF must be filed

electronically under the computerized ERISA Filing Acceptance

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

website at EFAST.dol.gov.

• Form 5500-EZ, Annual Return of One-Participant (Owners/

Partners and Their Spouses) Retirement Plan or a Foreign Plan.

File this form for a plan that only covers the owner (or the owner

and spouse) or a foreign plan that is required to file an annual

return and does not file the annual return electronically on Form

5500-SF. See the Instructions for Form 5500-EZ.

Travel, meals, and entertainment. Subject to limitations and

restrictions discussed below, a REIT can deduct ordinary and

necessary travel, meals, 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. A REIT cannot deduct travel expenses of any

individual accompanying a corporate officer or employee,

Instructions for Form 1120-REIT (2025)

including a spouse or dependent of the officer or employee,

unless:

• That individual is an employee of the REIT, and

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

would otherwise be deductible by that individual.

Meals. Generally, the REIT 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 REIT 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.

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 REIT can deduct amounts paid or

incurred for membership dues in civic or public service

organizations, professional organizations (such as bar and

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, REITs cannot deduct

membership dues to 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 discussion.

Entertainment facilities. Generally, the REIT 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 REIT

may be able to deduct otherwise nondeductible meals, travel,

and entertainment 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.

Fines or similar 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 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 REIT establishes

that the amounts were paid for that purpose. Also, any amount

paid or incurred as reimbursement to the government for the

Instructions for Form 1120-REIT (2025)

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. These 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. If certain in-house lobbying

expenditures do not exceed $2,000, they are deductible.

Line 21. Taxable income before NOL deduction, total deduction for dividends paid, and section 857(b)(2)(E) deduction. Generally, special at-risk rules under section 465 apply

to closely held corporations engaged in any activity as a trade or

business or for the production of income. Those REITs that are

closely held may have to adjust the amount on line 21.

The at-risk rules do not apply to:

• Holding real property placed in service by the taxpayer before

1987;

• Equipment leasing under sections 465(c)(4), (5), and (6); or

• Any qualifying business of a qualified REIT under section

465(c)(7).

However, the at-risk rules do apply to the holding of mineral

property.

If the at-risk rules apply, adjust the amount on this line for any

section 465(d) losses. These losses are limited to the amount for

which the REIT is at risk for each separate activity at the close of

the tax year. If the REIT is involved in one or more activities, any

of which incurs a loss for the year, report the losses for each

activity separately. Attach Form 6198, At-Risk Limitations,

showing the amount at risk and gross income and deductions for

the activities with the losses.

If the REIT sells or otherwise disposes of an asset or its

interest (either total or partial) in an activity to which the at-risk

rules apply, determine the net profit or loss from the activity by

combining the gain or loss on the sale or disposition with the

profit or loss from the activity. If the REIT has a net loss, it may be

limited because of the at-risk rules.

Treat any loss from an activity not allowed for the tax year as a

deduction allocable to the activity in the next tax year.

Line 22a. Net operating loss deduction. A REIT can use the

net operating loss (NOL) incurred in one tax year to reduce its

taxable income in another tax year.

Generally, a REIT may carry an NOL over indefinitely to tax

years following the year of loss. REITs are not permitted to carry

back an NOL to any year preceding the year of the loss.

Enter the total NOL carryovers from other tax years, but do

not enter more than the REIT’s taxable income. The REIT’s

taxable income for purposes of the NOL deduction is taxable

income (line 21) reduced by the dividends paid deduction

(line 22b) and the section 857(b)(2)(E) deduction (line 22c). If

this amount is less than zero, an NOL deduction cannot be taken

for the tax year. Attach a statement showing the computation of

the NOL deduction. Also, complete item 9 on Schedule K.

If capital gain dividends are paid during any tax year, the

amount of the net capital gain for such tax year (to the extent of

the capital gain dividends) is excluded in determining:

1. The NOL for the tax year, and

2. The amount of the NOL of any prior tax year that may be

carried over to any succeeding tax year.

13

Carryover rules. The NOL for the current year is computed

using the REIT’s taxable income before it is reduced by the

dividends paid deduction. After the REIT applies the NOL to the

first tax year to which it may be carried, the taxable income of

that year must be modified (as described by section 172(b) and

the modified rules for REITs in section 172(d)(6)) to determine

how much of the remaining loss may be carried to other years.

Although the current-year NOL is computed without regard to the

dividends paid deduction, an NOL carryover from a prior year is

applied to the current year using taxable income after it is

reduced by the dividends paid deduction. The NOL amounts

carried forward by the REIT are not reduced by subsequent year

dividends paid deductions. See Example 1 in Regulations

section 1.172-5(a)(4).

Note. Generally, NOL deductions arising in tax years beginning

after 2017 are limited to 80% of taxable income (determined

without regard to the NOL). However, NOLs arising in taxable

years prior to January 1, 2018, and carried over to the current

taxable year are not subject to this limitation.

Special NOL rules apply when:

• An ownership change (described in section 382(g)) occurs,

the amount of the taxable income of a loss REIT that may be

offset by the pre-change NOL carryovers is limited (see section

382 and the related regulations). A loss REIT must file an

information statement with its income tax return for each tax year

that certain ownership shifts occur (see Temporary Regulations

section 1.382-2T(a)(2)(ii) for details). See Regulations section

1.382-6(b) for details on how to make the closing-of-the-books

election.

• When a REIT acquires control of another REIT (or acquires its

assets in a reorganization), the amount of pre-acquisition losses

that may offset recognized built-in gains is limited (see section

384).

• A REIT may elect under section 965(n) to reduce the amount

of the NOL for a tax year determined under section 172 and the

amount of taxable income reduced by NOL carryovers to such

tax year. The reduction amount is equal to the amount of the

section 965(a) inclusion (net of the section 965(c) deduction)

plus, in the case of a domestic corporation that claims a credit for

deemed paid foreign taxes, the section 78 gross-up with respect

to the foreign taxes deemed paid with respect to the section

965(a) inclusion. If, as a result of an election under section

965(n), the amount of the NOL for the tax year is reduced, the

reduction amount is included in other income on line 7. If, as a

result of an election under section 965(n), the taxable income

reduced by NOL carryovers is reduced, the NOL deduction on

line 22a is reduced by the reduction amount. See section 965(n)

for more information.

Line 24b. First installment of section 1062 applicable net

tax laibility. Complete and attach Form 1062, Schedule(s) A

(Form 1062), and a copy of the covenant if electing to defer the

payment of net income tax attributable to the gain from the sale

or exchange of qualified farmland property during this tax year

under section 1062. Enter the amount from Form 1062, Part III,

line 15. See the Instructions for Form 1062 for more information.

Also, see section 1062.

Tax and Payments

Line 25b. Current year’s estimated tax payments. Enter any

estimated tax payments the REIT made for the current tax year.

Line 25e. Credit from Form 2439. Enter the credit from Form

2439 for the REIT’s share of the tax paid by a Regulated

Investment Company (RIC) or another REIT on undistributed

long-term capital gains included in the REIT’s income. Attach

Form 2439 to Form 1120-REIT.

14

Line 25f. Credit for federal tax on fuels. Enter the credit from

Form 4136, Credit for Federal Tax Paid on Fuels, if the REIT

qualifies to claim this credit. Attach Form 4136 to Form

1120-REIT.

Line 25g. Elective payment election amount from Form

3800. Enter on line 25g the total net elective payment election

amount from Form 3800, General Business Credit, Part III, line 6,

column (j). See the Instructions for Form 3800.

Line 25h. Section 1062 applicable net tax liability. If the

REIT is electing to defer the payment of net income tax

attributable to the gain from the sale or exchange of qualified

farmland property, complete and attach Form 1062 and

Schedule(s) A (Form 1062). Enter the amount from Form 1062,

Part lll, line 14. See the Instructions for Form 1062 for more

information. Also, see section 1062.

Line 25z. Other payments and credits. Include on line 25z

any other refundable credit the REIT is claiming, including the

following. Attach a statement listing the type of credit and the

amount of the payment or credit.

• Credit under section 1341 for repayments of amounts

included in income from earlier years.

• Backup withholding. If the cooperative had federal 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 25z.

Line 26. Total payments and credits. Add the amounts on

lines 25a through 25z and enter the total on line 26.

Line 27. Estimated tax penalty. A REIT that does not make

estimated tax payments when due may be subject to an

underpayment penalty for the period of underpayment.

Generally, a REIT is subject to the penalty if its tax liability is

$500 or more and it did not timely pay the smaller of:

• Its total tax for the current tax year, or

• Its prior year’s tax.

Use Form 2220, Underpayment of Estimated Tax by

Corporations, to determine whether the REIT owes a penalty and

to figure the amount of the penalty. Generally, the REIT does not

have to file this form because the IRS can figure the amount of

any penalty and bill the REIT for it. However, even if it does not

owe the penalty, the REIT must complete and attach Form 2220

if the annualized income or adjusted seasonal installment

method is used, or the REIT is a large corporation computing its

first required installment based on the prior year’s tax. See the

Instructions for Form 2220 for the definition of a “large

corporation.”

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

the amount of any penalty.

Line 28. Tax due. Generally, the REIT must pay any tax due in

full no later than the due date for filing its tax return (excluding

extensions). Payment of the tax due must be made electronically.

See Electronic Deposit Requirement, earlier, for the payment

options for the REIT. Also, go to IRS.gov /payments for more

detailed information.

If the REIT cannot pay the full amount of tax owed, it can

apply for an installment agreement online. The REIT can apply

for an installment agreement online if:

• It cannot pay the full amount shown on line 28;

• The total amount owed is $25,000 or less (including tax,

penalties, and interest); and

• The REIT 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 REIT can pay what it

owes in monthly installments. There are certain conditions that

Instructions for Form 1120-REIT (2025)

must be met to enter into and maintain an installment

agreement, such as paying the liability within 72 months and

making all required deposits and timely filing tax returns during

the length of the agreement.

If the installment agreement is accepted, the REIT 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.

Line 29. Overpayment If there is an overpayment on line 29,

enter the amount the REIT wants refunded on line 30b. See the

Instructions for line 30b, later. The REIT can also choose to have

all or part of the overpayment credited to next year’s estimated

tax by completing line 30a. See the Instructions for line 30a,

next.

30a. Credited to estimated tax. The REIT can elect to apply

all or part of the REIT’s overpayment to next year’s estimated

taxes.

Enter the amount of any overpayment from line 29 that should

be applied to next year’s estimated tax.

This election to apply some or all of the overpayment amount

to the REIT’s 2026 estimated tax cannot be changed at a later

date.

Line 30b. Refunded Enter the amount to be refunded to the

REIT on line 30b. If the REIT has access to U.S. banking

services, it should use direct deposit for any refunds, whenever

possible. The benefits of a direct deposit include a faster refund,

the added security of a paperless payment, and the savings of

tax dollars associated with the reduced processing costs.

Direct deposit of refund. If the REIT wants its refund directly

deposited into its checking or savings account at any U.S. bank

or other financial institution, complete lines 30c through 30e. See

the Instructions for lines 30c, 30d, and 30e, later.

The REIT is not eligible to request a direct deposit if:

• The receiving financial institution is a foreign bank or a foreign

branch of a U.S. bank, or

• The REIT has applied for an EIN but is filing its tax return

before receiving one.

Line 30c. Routing number. The routing number must be nine

digits. The first two digits must be between 01 and 12 or 21

through 32. Ask the REIT’s financial institution for the correct

routing number to enter on line 30c if:

• The routing number on a deposit slip is different from the

routing number on the REIT’s checks.

• The deposit is to a savings account that does not allow the

REIT to write checks, or

• The REIT’s checks state that they are payable through a

financial institution different from the one at which the REIT has

its checking account.

Line 30d. Type of account. Check the appropriate box for the

type of account. Don’t check more than one box. The REIT must

check the correct box to ensure the deposit is accepted.

Line 30e. Account number. The account number can be up to

17 characters (both numbers and letters). Include hyphens but

omit spaces and special symbols. Enter the numbers from left to

right and leave any unused boxes blank. Don’t include the check

number.

If the direct deposit to the REIT’s account is different from the

amount it expected, the REIT will receive an explanation in the

mail about 2 weeks after the refund is deposited

Conditions resulting in a refund by check. If the IRS is

unable to process the request for a direct deposit, a refund by

check will generated instead. Reasons for not processing a

request include.

• The name of the REIT on the tax return does not match the

name on the account.

Instructions for Form 1120-REIT (2025)

• The financial institution rejects the direct deposit because of

an incorrect routing or account number.

• The REIT fails to indicate the type of account the deposit is to

be made to (that is, checking or savings).

Note: The IRS isn’t responsible for a lost refund if the REIT

enters the wrong account information. Check with the REIT’s

financial institution to get the correct routing and account

numbers and to make sure the direct deposit will be accepted.

Part II—Tax on Net Income From

Foreclosure Property

Complete Part II only if the gross income, gains, losses, and

deductions from foreclosure property (defined in section 856(e))

result in net income. If an overall net loss results, report the gross

income, gains, losses, and deductions from foreclosure property

on the appropriate lines of Part I.

Property may be treated as foreclosure property only if it

meets the requirements of section 856(e) and the REIT elects to

treat the property as foreclosure property in the year it was

acquired. The property continues to be foreclosure property until

the close of the 3rd tax year following the tax year in which the

REIT acquired it. For more information, see section 856(e).

However, if the foreclosure property is qualified health care

property, it will cease to be foreclosure property as of the close of

the 2nd year following the tax year the REIT acquired it (although

the REIT may request one or more extensions to this 2-year

grace period not to extend beyond the 6th year). See section

856(e)(6) for details.

This election must be made by the due date for filing Form

1120-REIT (including extensions). To make the election, attach a

statement that:

• Indicates that the election under section 856(e) is being

made;

• Identifies the property to which the election applies;

• Includes the name, address, and EIN of the REIT, the date the

property was acquired, and a brief description of how the

property was acquired (including the name of the person from

whom the property was acquired); and

• Gives a description of the lease or debt with respect to which

default occurred or was imminent.

The REIT can revoke the election by filing a revocation on or

before the due date (including extensions) for filing Form

1120-REIT. See section 856(e) for more details.

Line 2. Gross income from foreclosure property. Do not

include income that qualifies under the REIT’s 75% gross

income test under section 856(c)(3)(A), (B), (C), (D), (E), or (G).

These amounts must be reported in Part I.

Line 4. Deductions. Deduct only those expenses that have a

proximate and primary relationship to earning the income shown

on line 3. This includes:

• Depreciation on foreclosure property;

• Interest paid or accrued on debt of the REIT that is attributable

to the carrying of the property;

• Real estate taxes; and

• Fees charged by an independent contractor to manage such

property.

Do not deduct general overhead and administrative expenses

in Part II.

15

Part III—Tax for Failure To Meet

Certain Source-of-Income

Requirements

Section 856(c)(6) provides REITs with a relief provision if they

have failed to satisfy the source-of-income requirements of

sections 856(c)(2) and 856(c)(3). If section 856(c)(6) applies to a

REIT for any tax year, a tax is imposed on the REIT under

section 857(b)(5).

All REITs must complete lines 1a through 8 of Part III to

determine whether they are subject to the tax imposed under

section 857(b)(5). If line 8 is zero, the tax does not apply, and the

REIT does not have to complete the rest of Part III. However, if

line 8 is greater than zero, the REIT is subject to this tax, and

must complete the rest of Part III to determine the amount of tax.

If a REIT reports passive foreign exchange gain on line 2b or

real estate foreign exchange gain on line 5b, and any part of

such gain is characterized as such by a determination of the

Secretary under section 856(n)(3)(C) or 856(n)(2)(C), the REIT

must attach a copy of this determination to its return. Similarly, if

a REIT reports income that is excluded from section 856(c)(2)

pursuant to a determination of the Secretary under section

856(c)(5)(J)(i) on line 2c or excluded from section 856(c)(3)

pursuant to a determination of the Secretary under section

856(c)(5)(J)(i) on line 5c, the REIT must attach a copy of this

determination allowing for such exclusion to its return.

Additionally, if a REIT reports income on line 7 in Part I that is

excluded from sections 856(c)(2) and 856(c)(3) pursuant to

section 965(m)(1), report that amount on lines 2d and 5d of Part

III. The REIT must attach Forms 965 and 965-B, as applicable, to

its return.

A REIT that has failed the source-of-income requirements of

sections 856(c)(2) and 856(c)(3) may avoid loss of its REIT

status as a result of the failure if, following identification of its

failure to meet the source-of-income requirements, the REIT sets

forth a description of each item of its gross income described in

sections 856(c)(2) and 856(c)(3) on an attached schedule. In

addition, its failure to meet the source-of-income requirements

must be due to reasonable cause and not due to willful neglect.

For information on the relief provisions under sections 856(c)

(7) and 856(g)(5), see the instructions for Schedule J, lines 1f

and 1g.

Part IV—Tax on Net Income From

Prohibited Transactions

Section 857(b)(6) imposes a tax equal to 100% of the net

income derived from prohibited transactions. The 100% tax is

imposed to prevent a REIT from retaining any profit from ordinary

retailing activities such as sales to customers of condominium

units or subdivided lots in a development tract.

Line 1. Gain from sale or other disposition of property.

Include only gain from the sale or other disposition of property

described in section 1221(a)(1) that is not foreclosure property

and that does not qualify as an exception. See section 857(b)(6)

(C) for information on certain sales that do not qualify as

prohibited transactions. See section 856(j) for a special rule

regarding a shared appreciation mortgage. Exceptions apply for

certain sales of timber property by a timber REIT. See section

857(b)(6)(D).

Do not net losses from prohibited transactions against gains

in determining the amount to enter on line 1. Enter losses from

prohibited transactions on the appropriate line in Part I.

Line 2. Deductions. Deduct only those expenses that have a

proximate and primary relationship to the earning of the income

16

shown on line 1. Do not deduct general overhead and

administrative expenses in Part IV.

Schedule A—Deduction for Dividends

Paid

Lines 1 through 5. Section 561 (taking into account sections

857(b)(9), 857(d)(3)(B), and 858(a)) determines the deduction

for dividends paid.

Line 3. Dividends declared in October, November, or December

and payable to shareholders of record in October, November, or

December are treated by the REIT as paid on December 31 of

that calendar year. The REIT is then eligible for the deduction for

dividends paid for the year the dividends are declared even

though they are not actually paid until January of the following

calendar year.

If the REIT declared dividends in any of those months and

actually paid them in January, as discussed above, enter on

line 3 those dividends not already included on lines 1, 2, and 4 of

Schedule A.

Line 7. If, for any tax year the REIT has net income from

foreclosure property (as defined in section 857(b)(4)(B)), the

deduction for dividends paid to be entered on line 6 (and on Part

I, line 22b) is determined by multiplying the amount on line 5 by

the following fraction.

REIT taxable income (determined without regard to the deduction for

dividends paid)

REIT taxable income (determined without regard to the deduction for

dividends paid) +

(Net income from foreclosure property minus the tax on net income from

foreclosure property)

Schedule J—Tax Computation

Line 1a—Tax on REIT Taxable Income

Most REITs figure their tax by multiplying taxable income by 21%

(0.21). A member of a controlled group must use Schedule O

(Form 1120) to figure its tax.

Line 1c

Taxes are imposed for the failure to meet the requirements of the

asset test and/or gross income test. To qualify for relief from the

failure to meet these requirements, attach an explanation of why

the REIT failed to meet the asset test and/or gross income test.

Attach supporting schedules and a statement showing the

computation of the amount of tax. Also, include a reason why the

failure was due to reasonable cause and not willful neglect. See

sections 856(c)(2), 856(c)(3), and 856(c)(4).

The statement for reasonable cause should be attached to

Form 1120-REIT at the time it is filed.

Line 1e

Enter the amount of the 100% REIT tax imposed on the

following.

• Income of a REIT for services provided to the REIT’s tenants

that is improperly included in rents from real property reported by

the REIT instead of being reported by the TRS (see section

857(b)(7)(B));

• Deductions that are improperly allocated between the REIT

and its TRS (see section 857(b)(7)(C));

• Interest deductions of a TRS to the extent that interest

payments to its REIT are in excess of a rate that is commercially

reasonable (see section 857(b)(7)(D)); and

Instructions for Form 1120-REIT (2025)

• Gross income of a TRS of a REIT attributable to services

provided to, or on behalf of, the REIT (less the deductions

properly allocable thereto) that is improperly allocated between

the REIT and the TRS (see section 857(d)(7)(E)).

See section 857(b)(7) for details and exceptions.

Line 1f—Tax Imposed Under Section 856(c)(7)

Enter the tax imposed for relief provisions under section

856(c)(7) relating to failures to meet the requirements of the

asset test of section 856(c)(4). See section 856(c)(7) for detailed

information on the requirements for this relief provision.

If a tax is imposed under section 856(c)(7), attach a

statement providing an explanation of why the REIT failed to

meet the requirements of the asset test and a description of why

such failure is due to reasonable cause and not willful neglect.

Certain REIT qualification failures of sections 856–859

(other than sections 856(c)(2), 856(c)(3), and 856(c)(4)).

Under section 856(g)(5), a REIT that fails to meet the REIT

qualification requirements under sections 856–859, except for

section 856(c)(2), 856(c)(3), and 856(c)(4), may avoid loss of its

REIT status if the failure is due to reasonable cause and not due

to willful neglect. In addition, the REIT must pay (as prescribed

by regulations and in the same manner as tax) a penalty of

$50,000 for each failure to satisfy a provision of sections

856–859. See section 856(g)(5).

Line 1h—Section 1291 Tax from Form 8621

If the REIT 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, enter on line 1h the

increase in taxes due under section 1291(c)(2) from Form 8621.

Failure to meet the asset test requirements of section

856(c)(4) (other than de minimis failures). Under section

856(c)(7)(A), a REIT may avoid loss of its REIT status as a result

of certain failures to meet the asset test requirements of section

856(c)(4) if, following identification of the failure, each of the

following requirements are met.

• The REIT sets forth a description of each asset that causes

the REIT to fail to satisfy the requirements of the asset test at the

close of a quarter in a statement for the quarter attached to its

timely filed Form 1120-REIT;

• The failure must be due to reasonable cause and not due to

willful neglect; and

• The REIT either (a) disposes of the assets shown on the

specified statement within 6 months after the last day of the

quarter in which the REIT’s identification of the failure occurred

(or such other time and in the manner prescribed by regulations);

or (b) the requirements of the asset test of section 856(c)(4) are

otherwise met within the specified time period.

In addition, if section 856(c)(7)(A) applies to a REIT for any

tax year, the REIT must pay a tax that is the greater of:

• $50,000, or

• The amount determined (as prescribed by regulations to be

promulgated by the Secretary) by multiplying the net income

generated by the assets described in the specified schedule for

the quarter in which the failure occurred by 21%.

Do not include on line 1h any interest due under section

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

Schedule J, line 6z, Other taxes.

Note. There is no tax imposed and you are not required to

attach a schedule of assets to Form 1120-REIT for the de

minimis relief provision under section 856(c)(7)(B).

Under section 856(c)(7)(B), a REIT may avoid loss of its REIT

status as a result of certain failures to meet the asset test

requirements of section 856(c)(4)(B)(iv) if:

• Following its identification of the failure, the REIT disposes of

assets within 6 months after the last day of the quarter in which

the REIT’s identification of the failure occurred (or such time

period prescribed by the Secretary and in the manner prescribed

by the Secretary); or

• The requirements of the asset test of section 856(c)(4)(B)(iv)

are otherwise met within the specified time period.

Enter on line 1k the tax that can be reduced by nonrefundable

credits from Form 4255, Certain Credit Recapture, Excessive

Payments and Penalties, Part l, line 3, column (q), if applicable.

See the Instructions for Form 4255.

Line 1g—Tax Imposed Under Section 856(g)(5)

Enter the tax imposed for relief provisions under section 856(g)

(5) relating to failures to meet certain requirements under

sections 856 through 859 (other than sections 856(c)(2), 856(c)

(3), and 856(c)(4)). See section 856(g)(5) for detailed

information on the requirements for this relief provision.

If a tax is imposed for section 856(g)(5), attach a statement

providing an explanation of why the REIT failed to meet the other

qualification requirements under sections 856–859, and a

description of why such failure is due to reasonable cause and

not willful neglect.

Instructions for Form 1120-REIT (2025)

For more information on reporting the deferred tax and

interest, see the Instructions for Form 8621.

Line 1i—Additional Tax under Section 197(f)

A REIT that elects to recognize gain and pay tax on the sale of a

section 197 intangible under the related person exception to the

anti-churning rules should include any additional tax due on

line 1i. See section 197(f)(9)(B)(ii).

Line 1j—Tax Adjustments from Form 8978

If the REIT is filing Form 8978, Partner’s Additional Reporting

Year Tax, to report adjustments shown on Form 8986, Push Out

to Partners Under IRC 6226(a)(2), they received from

partnerships that have been audited and have elected to push

out imputed underpayments to their partners, include any

increase in taxes due (positive amount) from Form 8978, line 14,

on Form 1120-REIT, Schedule J, line 1j. Attach Form 8978. If

Form 8978, line 14, shows a decrease in tax, see the instructions

for Schedule J, line 3d, later.

Line 1k—Amount from Form 4255, Part I, Line 3,

Column (q)

Line 1z—Other Chapter 1 Tax

Enter on line 1z any other chapter 1 tax that can be offset or

reduced by nonrefundable credits such as the foreign tax credit

or general business credit.

Line 3a—Foreign Tax Credit

To find out when a REIT can claim the foreign tax credit for

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

Form 1118, Foreign Tax Credit—Corporations.

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. Attach Form 8834.

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.

17

Line 3d—Adjustment from Form 8978

If the REIT is filing Form 8978 to report adjustments shown on

Form 8986 they received from partnerships that have been

audited and have elected to push out imputed underpayments to

their partners, include any decrease in taxes due (negative

amount) from Form 8978, line 14, in the total for Form

1120-REIT, Schedule J, line 3d. Attach Form 8978. If Form 8978,

line 14, shows an increase in tax, see the instructions for

Schedule J, line 1j.

Line 3z—Other Credits

Credit for prior-year minimum tax. 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.

Line 6a—Personal Holding Company Tax

A REIT 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 Schedule PH (Form 1120), U.S. Personal Holding

Company (PHC) Tax, for definitions and details on how to figure

the tax. Enter on line 6a the tax from Schedule PH (Form 1120),

Part lll, line 26.

Line 6b—Interest on Deferred Tax Liability

Under Section 453A(c)

Include any interest on deferred tax attributable to certain

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

Line 6c—Interest on Deferred Tax Liability Under

Section 453(l)

Include any interest on deferred tax attributable to certain dealer

installment obligations under section 453(l).

Line 6d—Amount from Form 4255, Part 1, Line 3,

Column (r)

Enter on line 6d the tax that cannot be reduced by

nonrefundable credits from Form 4255, Part 1, line 3, column (r),

if applicable. See the Instructions for Form 4255.

Line 6e—Recapture of Low-income Housing

Credit

If the REIT 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 REIT 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.

Line 6z—Other Taxes

Include on line 6z additional taxes and interest such as the

following. Attach a statement showing the computation of each

item included in the total for line 6z 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.

18

• 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 (section 1260(b)).

• Interest due under section 1291(c)(3). See Form 8621 and the

Instructions for Form 8621.

Interest due under the look-back methods. If the REIT used

the look-back method under section 460(b)(2) for certain

long-term contracts, use Form 8697, Interest Computation Under

the Look-Back Method for Completed Long-Term Contracts, to

figure the interest the REIT may have to include. See the

Instructions for Form 8697.

The REIT may also have to include interest due under the

look-back method for property depreciated under the income

forecast method. Use Form 8866, Interest Computation Under

the Look-Back Method for Property Depreciated Under the

Income Forecast Method, to figure any interest due or to be

refunded. See the Instructions for Form 8866.

Include the interest due under the look-back methods on

line 6z.

Built-in Gains Tax and Worksheet

Built-in Gains Tax

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

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

C corporation as a REIT, or (b) the transfer of such property to a

REIT, then the REIT 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 REIT must pay tax on the net recognized built-in

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

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 REIT’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 REIT or

the day the REIT 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 REIT 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 REIT. The

REIT’s tax on net recognized built-in gain is treated as a loss

incurred by the REIT during 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 REIT and transfers of

property in a carryover basis transaction that occurred prior to

January 2, 2002. For REIT elections and property transfers

before this date, the C corporation is subject to deemed sale

treatment on the transferred property unless the REIT elects

section 1374 treatment. See Regulations section 1.337(d)-6 for

information on how to make the election and figure the tax for

REIT elections and property transfers before this date. The REIT

Instructions for Form 1120-REIT (2025)

Built-in Gains Tax Worksheet

a.

b.

c.

d.

e.

f.

g.

h.

i.

Keep for Your Records

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

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

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

years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c.

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

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

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

Enter 21% (0.21) of line f . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . g.

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

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

Tax. Subtract line h from line g (if zero or less, enter -0-). Enter here and include on line 6z of

Schedule J. See instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i.

may also rely on Regulations section 1.337(d)-5 for REIT

elections and property transfers that occurred before January 2,

2002.

Built-in Gains Tax Worksheet Instructions

Complete the Built-in Gains Tax Worksheet to figure the built-in

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

Line a. Enter the amount that would be the taxable income of

the REIT for the tax year if only recognized built-in gain,

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

were taken into account, reduced by any portion of the REIT’s

recognized built-in gain from:

• Net income from foreclosure property,

• Amounts subject to tax for failure to meet certain

source-of-income requirements under section 857(b)(5)

computed in accordance with Regulations section 1.337(d)-6(c)

(2),

• Net income from prohibited transactions under section

857(b)(6), and

• Amounts subject to tax under section 857(b)(7).

Line b. Add the amounts shown on:

• Form 1120-REIT, Part l, line 21;

• Form 1120-REIT, Part II, line 5; and

• Form 2438, line 11.

Subtract from the total the amount on Form 1120-REIT,

line 22c. Enter the result on line b of the Built-in Gains Tax

Worksheet.

Line c. The REIT’s net unrealized built-in gain is the amount, if

any, by which the fair market value of the assets of the REIT at

the beginning of its first REIT 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 REIT’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 NOL carryforward or capital loss carryforward (to the extent

of the net capital gain included in recognized built-in gain for the

tax year) arising in tax years for which the REIT was a C

Instructions for Form 1120-REIT (2025)

corporation. These loss carryforwards must be used to reduce

recognized built-in gain for the tax year to the greatest extent

possible before they can be used to reduce the REIT’s taxable

income.

Line g. A REIT reporting built-in gain for a tax year ending

before 2025 will enter 21% of line f.

Line h. Credit carryforwards arising in tax years for which the

REIT 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

REIT’s taxable income.

Line i. The REIT’s tax on net recognized built-in gain is treated

as a loss sustained by the REIT during the same tax year.

Deduct the tax attributable to:

• Ordinary gain as a deduction for taxes on Form 1120-REIT,

line 14.

• Short-term capital gain as a short-term capital loss in Part I of

Form 8949.

• Long-term capital gain as a long-term capital loss in Part II of

Form 8949.

Line 8a—Total Tax before Deferred Tax

Add lines 5 and 7. Enter the total on line 8a. 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 8a. See the Instructions for Form 8621, Part Vl.

Line 8b—Deferred Tax on Undistributed

Earnings of a QEF

Enter on line 8b the deferred tax on the REIT’s share of

undistributed earnings of a qualified electing fund. See the

Instructions for Form 8621, Part III.

Schedule K—Other Information

Be sure to answer all the lines that apply to the REIT.

Question 3

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

parent-subsidiary controlled group (defined below), even if the

REIT is a subsidiary member of one group and the parent

corporation of another.

If the REIT 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.

19

Parent-subsidiary controlled group. The term

“parent-subsidiary controlled group” means one or more chains

of corporations connected through stock ownership (section

1563(a)(1)). Both of the following requirements must be met.

1. At least 80% of the total combined voting power of all

classes of voting stock entitled to vote or at least 80% of the total

value of all classes of stock of each corporation in the group

(except the parent) must be owned by one or more of the other

corporations in the group, and

2. The common parent must own at least 80% of the total

combined voting power of all classes of stock entitled to vote or

at least 80% of the total value of all classes of stock of one or

more of the other corporations in the group. Stock owned directly

by other members of the group is not counted when computing

the voting power or value.

See section 1563(d)(1) for the definition of “stock” for

purposes of determining stock ownership above.

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 REIT

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

REIT.

The constructive ownership rules of section 318 apply in

determining if a REIT is foreign owned. See section 6038A(c)(5)

and the related regulations.

Enter on line 5a the percentage owned by the foreign person

specified on line 5. On line 5b, enter the name of the owner’s

country.

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

complete lines 5a and 5b for the foreign person with the highest

percentage of ownership.

Foreign person. The term “foreign person” means:

• 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).

• A foreign government (or one of its agencies or

instrumentalities) if 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 REIT checked “Yes” on

line 5, it may have to file Form 5472. 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 and penalties for failure

to file.

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 9

Enter the amount of the net operating loss (NOL) carryforward to

the tax year from prior years, even if some of the loss is used to

offset income on this return. The amount to enter is the total of all

NOLs generated in prior years but not used to offset income in a

20

tax year prior to 2025. Do not reduce the amount by any NOL

deduction reported on line 22a.

Question 10

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 11

Conditions for Filing Form 8990

Generally, a REIT with a trade or business must file Form 8990 to

claim a deduction for business interest. In addition, Form 8990

must be filed by any REIT that owns an interest in a partnership

with current or prior-year carryover from excess business interest

expense allocated from the partnership.

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

8990 if the REIT is a small business taxpayer and does not have

excess business interest expense from a partnership. A REIT is

also not required to file Form 8990 if the REIT only has business

interest expense from the following excepted trades or

businesses.

• An electing real property trade or business,

• An electing farming business, or

• Certain utility businesses.

Small business taxpayer. For 2025, 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 2025, a taxpayer meets the gross

receipts test if the taxpayer has average annual gross receipts of

$31 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 12

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

attach Form 8996, even if the REIT had no income or expenses

to report. If the REIT is attaching Form 8996, check the “Yes” box

Instructions for Form 1120-REIT (2025)

for Question 12. On the line following the dollar sign, enter the

amount from Form 8996, line 15.

Question 13

If the REIT is a member of a controlled group, check the “Yes”

box and complete Schedule O (Form 1120). See Schedule O

(Form 1120) and its instructions for more information.

Schedule L—Balance Sheets per

Books

The balance sheets should agree with the REIT’s books and

records.

Line 1. Cash. Include certificates of deposits as cash on line 1.

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

• State and local government obligations, the interest on which

is excludable from gross income under section 103(a), and

• Stock in a mutual fund or other RIC that distributed

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

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.

• The excess of additional pension liability over unrecognized

prior service cost.

• Guarantees of employee stock (ESOP) debt.

• Compensation related to employee stock award plans.

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

number, enter the amount in parentheses.

Schedule M-1

Reconciliation of Income (Loss) per Books With

Income per Return

Line 5c. Travel and entertainment. Include any of the

following.

• Entertainment not deductible under section 274(a).

• Entertainment-related meal expenses.

• Non-entertainment meal expenses 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 or tangible

property over $400 ($1,600 if part of a qualified plan).

• The cost of skyboxes.

• Nondeductible club dues.

• The part of luxury water travel not deductible under section

274(m).

• Expenses for travel as a form of education.

• Other nondeductible travel and entertainment expenses.

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

exempt-interest dividends received by the REIT as a shareholder

in a mutual fund or other RIC.

Paperwork Reduction Act Notice. We ask for the information on these forms to carry out the Internal Revenue laws of the United

States. You are required to give us the information. We need it to ensure that you are complying with these laws and to allow us to

figure and collect the right amount of tax.

You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the form

displays a valid OMB control number. Books or records relating to a form or its instructions must be retained as long as their contents

may become material in the administration of any Internal Revenue law. Generally, tax returns and return information are confidential,

as required by section 6103.

Estimates of Taxpayer Burden. The following tables show burden estimates based on current statutory requirements as of

December 2025 for taxpayers filing 2024 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 $5,300; the average burden

for corporations filing Form 1120 and associated forms is about 90 hours and $8,600; and the average burden for Forms 1066,

1120-REIT, 1120-RIC, 1120-S, and all related attachments is about 60 hours and $4,800. 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.

Instructions for Form 1120-REIT (2025)

21

Table 1 – Taxpayer Burden for Entities Taxed as Partnerships

Forms 1065, 1066, and all attachments

Primary Form Filed or Type of

Taxpayer

All Partnerships

Total Number of Returns

(millions)

Average Time (hours)

Average Out-of-Pocket

Cost ($)

Average Monetized

Burden ($)

8,700

5.5

60

5,300

Small

5.1

50

3,300

5,200

Large*

0.4

180

29,400

50,700

* A large business is defined as one having end-of-year assets greater than $10 million. A large business is defined the same way for partnerships, taxable corporations, and

pass-through corporations. A small business is any business that doesn’t meet the definition of a large business.

Table 2 – Taxpayer Burden for Entities Taxed as Taxable Corporations

Forms 1120, 1120-C, 1120-F, 1120-H, 1120-ND, 1120-SF, 1120-FSC, 1120-L, 1120-PC, 1120-POL, and all attachments

Primary Form Filed or Type of

Taxpayer

Total Number of Returns

(millions)

Average Time (hours)

Average Out-of-Pocket

Cost ($)

Average Monetized

Burden ($)

All Taxable Corporations

2.3

90

8,600

15,700

Small

2.1

40

3,900

6,000

Large*

0.2

610

69,400

141,500

*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 Out-of-Pocket

Cost ($)

Average Monetized

Burden ($)

All Pass-Through Corporations

7,700

6.2

60

4,800

Small

6.1

50

4,200

6,500

Large*

0.1

290

42,600

76,600

*A large business is defined as one having end-of-year assets greater than $10 million. Total filers counts may not equal the total burden estimates table due to rounding.

Comments. If you have comments concerning the accuracy of these time estimates or suggestions for making these forms simpler,

we would be happy to hear from you. You can send us comments from IRS.gov/FormComments. Or you can write to the Internal

Revenue Service, Tax Forms and Publications, 1111 Constitution Ave. NW, IR-6526, Washington, DC 20224. Do not send the tax form

to this address. Instead, see Where To File, near the beginning of the instructions.

22

Instructions for Form 1120-REIT (2025)

Index

A

Accounting methods 5

Accounting period 5

Address change 8

Amended return 8

Assembling the return 3

Estimated tax payments 4

Extension of time to file 3

R

F

Reconciliation of income from books

to tax return 21

Fines and penalties 13

Foreclosure property 15

Foreign tax credit 17

B

G

Balance sheets 21

Built-in gains tax 18

C

General business credit 17

General Instructions 2

General requirements to qualify as a

REIT 2

Charitable contributions 12

Compensation of officers 10

I

D

Deduction for dividends paid 16

Deductions 9

Direct deposit of refund 15

Disclosure statement 7

E

Electronic deposit requirement 4

Employer identification number

(EIN) 8

Interest and penalties 5

Interest expense 11

Interest income 9

N

Net operating loss (NOL)

deduction 13

S

Source-of-Income requirements 16

Specific instructions 8

T

Tax and payments 14

Tax computation 16

Taxable REIT Subsidiaries (TRS) 2

Taxes and licenses 11

Taxpayer advocate service 1

Travel, meals, and entertainment 12

W

What’s new 1

When to file 3

Where to file 4

O

Other deductions 11

Other income 9

23