Schedule K—Other — Instruction 1120-REIT

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.

Instructions for Form 1120-REIT (2025) 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.

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
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

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

20 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.