This Subtopic provides guidance for investment companies on accounting for and financial reporting of income taxes.
This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section
946-10-15.
If a provision for deferred income taxes on unrealized appreciation exists, it shall be charged against the unrealized gains account.
Regulated investment companies may have realized net capital and foreign currency gains during the period from the beginning of their current taxable year through October 31, which they are required to distribute to avoid federal excise tax. If those regulated investment companies then incur net capital or currency losses from November 1 to the close of their taxable year, their Form 1120-RIC tax returns would indicate that they had made distributions during the taxable year in excess of taxable gains (that is, returns of capital), even though the distributions were properly paid from gains at the time of the excise-tax distribution. To avoid this result, federal income tax regulations permit such post-October losses to be deferred and recognized on the Form 1120-RIC tax return of the next succeeding taxable year.