Form 2438 (Rev. 1-2019)
Page 2
General Instructions
Section references are to the
Internal Revenue Code.
Future Developments
For the latest information about
developments related to Form 2438
and its instructions, such as legislation
enacted after they were published, go
to www.irs.gov/Form2438.
What’s New
Capital gains tax rate. For tax years
beginning after December 31, 2017,
the capital gains tax rate has been
reduced to 21% for RICs and REITs.
Who Must File
Regulated investment companies
(RICs) and real estate investment
trusts (REITs) file Form 2438 if the
RIC or REIT is electing to designate
undistributed capital gains under
section 852(b)(3)(D) or 857(b)(3)(C).
If a RIC has more than one fund,
each fund must file a separate Form
2438. The term “fund” as used in
these instructions refers to the
definition in section 851(g) and to
any RIC that does not have more
than one portfolio of assets.
Purpose of Form
Form 2438 is used by RICs or REITs
to figure income tax on undistributed
capital gains designated under
section 852(b)(3)(D) or section
857(b)(3)(C).
See the instructions for Schedule
D (Form 1120) and Form 8949 for a
definition of capital assets and
information on figuring and reporting
capital gains and losses.
When To File
File Form 2438 by the 30th day after
the end of the RIC’s or the REIT’s
tax year.
Where To File
File the original form with the:
Internal Revenue Service Center
201 W. Rivercenter Blvd.
Covington, KY 41011
In addition, attach a copy of Form
2438 to Form 1120-RIC or Form
1120-REIT.
Who Must Sign
Form 2438 must be signed and
dated by:
• The president, vice president,
treasurer, assistant treasurer, chief
accounting officer; or
• Any other corporate officer (such
as tax officer) authorized to sign.
If a return is filed on behalf of a RIC
or 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 RIC or REIT must be
accompanied by a copy of the order
or instructions of the court authorizing
signing of the return or form.
For a return that is being filed for a
series fund (discussed in section
851(g)), the return may be signed by
any officer authorized to sign for the
RIC in which the fund is a series.
If a corporate officer completes
Form 2438, the paid preparer space
should remain blank. Anyone who
prepares Form 2438 but doesn’t
charge the RIC or REIT shouldn’t
sign the return. Generally, anyone
who is paid to prepare Form 2438
must sign it and fill in the Paid
Preparer Use Only area.
Paid preparer. The paid preparer
must complete the Paid Preparer
Use Only area (including signing the
form in the space provided for the
preparer’s signature) and give a
copy of Form 2438 to the taxpayer.
Penalty for Late Filing of
Return
A RIC or REIT that doesn’t file its tax
return by the due date, including
extensions, may be penalized 5% of
the unpaid tax for each month or
part of the month the return is late,
up to a maximum of 25% of the
unpaid tax. The minimum penalty for
a return that is more than 60 days
late is the smaller of the tax due or
$210. The penalty won’t be imposed
if the RIC or REIT can show that the
failure to file on time was due to
reasonable cause.
Note: The minimum penalty amount
may be adjusted for inflation. See
the instructions for your applicable
income tax return for the minimum
penalty amount for the current tax
year.
Penalty for Late Payment of
Tax
A RIC or REIT that doesn’t pay the
tax when due generally may be
penalized
1
/2 of 1% of the unpaid tax
for each month or part of a month
the tax is not paid, up to a maximum
of 25% of the unpaid tax. The
penalty won’t be imposed if the RIC
or REIT can show that the failure to
pay on time was due to reasonable
cause.
Reasonable cause determinations.
If the RIC or REIT receives a notice
about penalties after it files its return,
send the IRS an explanation and we
will determine if the RIC or REIT
meets the reasonable cause criteria.
Do not attach an explanation when
the RIC’s or REIT’s return is filed.
Electronic Deposit
Requirement
RICs and REITs must use electronic
funds transfers to make all federal
tax deposits (such as deposits of
employment tax, excise tax, and
corporate income tax). Generally,
electronic fund transfers are made
using the Electronic Federal Tax
Payment System (EFTPS). However,
if you don’t want to use EFTPS, you
can arrange for your tax
professional, financial institution,
payroll service, or other trusted third
party to make deposits on your
behalf. Also, you may arrange for
your financial institution to submit a
same-day tax wire payment
(discussed below) on your behalf.
EFTPS is a free service provided by
the Department of the Treasury.
Services provided by your tax
professional, financial institution,
payroll service, or other third party
may have a fee.
For more information about
EFTPS, or to enroll in EFTPS, visit
the EFTPS website at
www.eftps.gov or call
1-800-555-4477 (TTY/TDD
1-800-733-4829).
Depositing on time. For any deposit
made by EFTPS to be on time, the
RIC or REIT must submit the deposit
by 8 p.m. Eastern time on the day
before the date the deposit is due. If
the RIC or REIT uses a third party to
make the deposits on its behalf, they
may have different cutoff times.