The RIC Modernization Act of 2010 in Practice: Guidance on 2011 Excise Capital Gains Distribution Requirements

Posted by Investment Management Group on Mar 1, 2012 10:12:00 AM

UPDATE TO ORIGINAL POST: Contrary to prior rumors in the industry, the IRS did issue a revised Form 8613 before March 15, which is currently available on the IRS Web site.

The RIC Modernization Act of 2010 raised the excise capital gains distribution requirement from 98% to 98.2% for calendar years beginning after the date of the enactment. For excise period 2011, the regulations weren’t clear regarding when the new capital gains distributions requirement will apply, since the capital gains measurement timeframe for the 2011 excise period starts on November 1, 2010, which is before the date of the enactment. As of the end of February 2012, Form 8613 has not yet been updated to reflect the new capital gains requirement. Although we have heard that the IRS intends to revise Form 8613, we do not expect it to be ready if you file 2011 forms by March 15. Until that form is released, we suggest that you cross out 98% on line 2b on Form 8613 and insert 98.2%.

The unrevised form also does not provide for the new elective deferral of late year ordinary losses. We recommend taxpayers who made such an election for 2011, and intend to use the unrevised form, to attach a statement to their tax return with respect to the election made.

 

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