Arkansas Administrative Code
Agency 006 - Department of Finance and Administration
Division 05 - Division of Revenues
Regulation 1997-4 - Comprehensive Individual Income Tax Regulations
Rule 26-51-440 - FASITs
Rule 4.26-51-440 - Subchapter M - FASITs - Taxation of FASITs

A FASIT is not subject to income tax, and is not treated as a trust, partnership or corporation. Instead, all of the FASIT's assets and liabilities are treated as the assets and liabilities of the FASIT's owner. Any income, gain, deduction, credit or loss of the FASIT is allocable directly to its owner.

Any FASIT income subject to Arkansas income tax shall be taxed at the corporate rates set forth in ACA 26-51-205. No special Arkansas income tax return has been created specifically for FASITs which are located within Arkansas. As noted above, FASIT income passes through to the FASIT's owner. The FASIT's owner is responsible for reporting any such income on the owner's return and paying any Arkansas individual income tax due. Once an election to be a FASIT is made, the election applies for that tax year and all subsequent years until such time that the election is revoked with the consent of the IRS.

All members of an affiliated group filing a consolidated return are to be treated as one taxpayer. IRC Sec. 860J(d). Specifically, the provision that the taxable income of a holder of a FASIT ownership interest cannot be less than the taxable income with respect to the FASIT interest applies to any consolidated group of corporations of which the holder is a member as if the group were a single taxpayer.

The holder of a FASIT ownership interest cannot offset income or gain from the FASIT ownership interest with nonFASIT losses. IRC Sec. 860J.

The taxable income of a FASIT (in determining the taxable income of the holder of an ownership interest) should be calculated using an accrual method of accounting. IRC Sec. 860H(b)(2).