7923 / What is the gross income test that a company must satisfy in order to qualify to be taxed as a RIC?

To qualify as a RIC, a corporation must satisfy certain requirements regarding the sources of its income. At least 90 percent of the corporation’s gross income must be derived from the following sources:

(a)  dividends, interest, payments with respect to securities loans and gain from the sale or other disposition of stock or securities (or foreign currencies), or other income (such as gain from options, futures or forwards contracts) derived with respect to its business of investing in such stock, securities or currencies, or

(b)  net income derived from an interest in a qualified publicly traded partnership.¹

Gross income of the RIC includes gain from the sale or disposition of stock or securities, but losses from such a sale or disposition are not taken into account (i.e., losses are not used to offset gain in determining whether the 90 percent requirement is satisfied).²

For a discussion of the consequences of failing to satisfy the 90 percent gross income test, see Q 7924.