IRS Form 8927 Guide: Self-Determination for RICs & REITs

Introduction – What Is Form 8927?

IRS Form 8927, officially titled Determination Under Section 860(e)(4) by a Qualified Investment Entity, is a specialized federal tax document used by certain investment entities. Governed by the Internal Revenue Service (IRS) and the U.S. Department of the Treasury, this form allows eligible investment companies to correct income distribution shortfalls from prior tax years.

The form is specifically designed for Regulated Investment Companies (such as mutual funds) and Real Estate Investment Trusts (REITs). Filing Form 8927 allows these organizations to formally establish a “self-determination” of an income adjustment under Internal Revenue Code Section 860.

Purpose of the Form – Why Does Form 8927 Exist?

Regulated Investment Companies (RICs) and Real Estate Investment Trusts (REITs) enjoy special tax treatment. As long as they distribute at least 90 percent of their taxable income to their investors annually, they generally do not pay corporate income tax on the profits they pass through.

However, if an accounting error, audit, or retroactive calculation reveals that the company under-distributed its earnings in a prior year, the entity risks losing its tax-favored status and facing heavy entity-level corporate taxes. To prevent this severe outcome, the tax code provides a relief mechanism known as a deficiency dividend.

A deficiency dividend allows the fund or trust to pay out an extra distribution in the current year to cure the prior-year shortfall. Form 8927 serves as the formal notice to the IRS that the company is exercising its right to establish an adjustment through self-determination, initiating the deficiency dividend cure process without waiting for a formal court ruling or IRS audit agreement.

Who Needs to File This Form?

Form 8927 is not filed by everyday businesses or individuals. You must file this form only if your organization meets all of the following criteria:

• Your organization is classified as a Qualified Investment Entity (QIE), specifically a Regulated Investment Company under Section 851 or a Real Estate Investment Trust under Section 856.
• You discovered an adjustment that increases investment company taxable income, net capital gain, or REIT taxable income for a prior tax year.
• You wish to make a unilateral self-determination under Section 860(e)(4) so that you can distribute a deficiency dividend to cover that shortfall.

Who Is Exempt / Not Required to File?

Most taxpayers and business entities will never need to handle Form 8927. Specifically, you are exempt or not required to file if:

• You operate a standard C corporation, S corporation, partnership, LLC, or sole proprietorship.
• Your RIC or REIT fully distributed its required taxable income and has no adjustment or under-distribution to remedy.
• Your deficiency determination was already established through a formal court judgment (such as a U.S. Tax Court decision) or a formal closing agreement with the IRS under Section 7121 or Section 860(e)(3).

When to File – Deadlines and Timelines

Form 8927 is an event-based filing rather than an annual recurring requirement. You file it only when your RIC or REIT needs to establish a self-determination to cure an adjustment.

The date the form is postmarked or mailed to the IRS generally serves as the legal date of determination. This determination date triggers two strict statutory deadlines under federal tax law:

• 90-Day Distribution Window: The entity must declare and pay the deficiency dividend to shareholders within 90 days after the determination date.
• 120-Day Claim Window: The entity must file Form 976 to claim the deduction for the deficiency dividend within 120 days after the determination date.

Where and How to File

Form 8927 is filed directly by mail as a paper document. It cannot be submitted through standard consumer electronic filing platforms.

The form must be completed, signed by an authorized corporate officer, and mailed to the designated IRS address as per instructions for Form 8927. Always send the form using certified mail, registered mail, or an IRS-approved private delivery service so you have verifiable written proof of the postmark date, which establishes your legal determination date.

Step-by-Step Instructions to Fill Form 8927

Form 8927 is a straightforward, one-page document. Below is a breakdown of how to complete each section accurately.

Tax Period Header

At the top of the form, specify the tax year to which the adjustment applies. Enter either the calendar year or the exact start and end dates of the fiscal tax year that experienced the income shortfall.

Entity Information Fields

Field Name	What to Enter	Helpful Tips
Name of Entity	Legal business name of the RIC or REIT	Use the exact legal name shown on the entity’s federal income tax return (Form 1120-RIC or Form 1120-REIT).
Employer Identification Number (EIN)	9-digit federal tax identification number	Double-check that this matches your prior-year corporate filings.
Address	Mailing address of the fund or trust	Include street address, suite or room number, city, state, and ZIP code. If mail is received in care of an attorney or CPA, include “C/O” followed by their details.
Service Center	IRS Service Center name	State the IRS Service Center where the original tax return for the subject year was filed or where an amended return will be filed.
Sign Here Box	Officer signature, title, and date	Must be signed under penalties of perjury by an authorized corporate officer (such as the President, Treasurer, Chief Financial Officer, or Controller).

Supplemental Statement and Amended Return

Under IRS administrative rules, Form 8927 serves as a formal statement attached to or supplementing an amended return for the relevant tax year. Ensure that detailed workpapers and recalculations of the adjusted taxable income accompany your corporate records.

Required Documents and Information Needed Before Filling

Before preparing and submitting Form 8927, your finance and legal teams should assemble the following records:

• Original Tax Returns: A copy of the originally filed Form 1120-RIC or Form 1120-REIT for the year of the adjustment.
• Income Adjustment Workpapers: Clear accounting schedules identifying the exact source, nature, and amount of the under-distributed income or capital gain.
• Board Resolutions: Corporate minutes or formal resolutions from the board of directors authorizing the self-determination and approving the plan to issue deficiency dividends.
• Shareholder Records: Current shareholder registries to facilitate the required dividend payout within the mandatory 90-day post-filing timeframe.

Common Mistakes to Avoid

Because the deficiency dividend procedure involves strict statutory deadlines, simple missteps can cause significant tax complications. Watch out for these common errors:

• Missing the 90-Day Payout Rule: If you fail to distribute the dividend within 90 days after your determination date, the distribution will not qualify as a deficiency dividend, leaving the prior under-distribution uncorrected.
• Forgetting to File Form 976: Filing Form 8927 merely establishes the determination. You must separately file Form 976 within 120 days of the determination date to formally claim the deduction.
• Inadequate Proof of Mailing: Failing to use certified or registered mail makes it difficult to establish the exact postmark date, which controls your 90-day and 120-day clocks.
• Unauthorized Signatures: Having an unauthorized representative sign the document rather than a recognized corporate officer can invalidate the determination.

Penalties for Non-Filing or Errors

Form 8927 itself does not carry a direct monetary fine for late filing, because it is an elective relief form. However, failing to file it properly when attempting to cure an under-distribution has severe indirect financial consequences:

• Loss of Passthrough Status: Failing to cure an income distribution deficit can disqualify the entity as a RIC or REIT, subjecting all its net earnings to standard corporate income taxes retroactively.
• Excise Tax Assessments: Undistributed income is subject to mandatory nondeductible excise taxes under Section 4981 (for REITs) or Section 4982 (for RICs).
• Interest Charges: Under Section 860(c), when a deficiency dividend deduction is allowed, the entity is assessed interest on the tax deficiency from the original return due date until the claim is filed.

Related Forms and Schedules

Form 8927 operates within a broader network of investment trust tax forms. Key related forms include:

• Form 976: Claim for Deficiency Dividends Deductions by a Personal Holding Company, Regulated Investment Company, or Real Estate Investment Trust.
• Form 1120-RIC: U.S. Income Tax Return for Regulated Investment Companies.
• Form 1120-REIT: U.S. Income Tax Return for Real Estate Investment Trusts.
• Form 8612: Return of Excise Tax on Undistributed Income of Real Estate Investment Trusts.
• Form 8613: Return of Excise Tax on Undistributed Income of Regulated Investment Companies.

Frequently Asked Questions

What is a deficiency dividend?

A deficiency dividend is a special distribution made by a RIC or REIT to its shareholders after the close of a tax year to make up for an under-distribution of taxable income in that earlier year.

Does filing Form 8927 automatically eliminate our tax liability?

No. Form 8927 only establishes the determination date under Section 860(e)(4). You must subsequently distribute the dividend within 90 days and file Form 976 within 120 days to secure the deduction.

What establishes the official determination date?

In general, the date Form 8927 is postmarked and mailed to the IRS functions as the official determination date under Treasury guidelines.

Can a standard LLC or partnership use Form 8927?

No. Form 8927 is exclusively available to entities taxable as Regulated Investment Companies or Real Estate Investment Trusts under federal law.

What happens if the 90-day dividend deadline falls on a weekend?

Under general tax rules, if a statutory deadline falls on a Saturday, Sunday, or legal federal holiday, the action is generally considered timely if taken on the next succeeding business day.

Conclusion – Key Takeaways Summarized

IRS Form 8927 provides a vital safety valve for Regulated Investment Companies and Real Estate Investment Trusts facing income distribution adjustments. By enabling a formal self-determination under Section 860(e)(4), the form allows entities to resolve shortfalls through deficiency dividends and protect their status.

To ensure full compliance, execute your filings with precision: secure certified proof of mailing, distribute the deficiency dividend within 90 days, and follow up with Form 976 within 120 days.