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Department of the Treasury

Internal Revenue Service

Instructions for
Form 1120-PC
U.S. Property and Casualty Insurance Company
Income Tax Return
Section references are to the Internal Revenue Code unless otherwise noted.

Paperwork Reduction Act Estimated Tax Rules lobbying expenses qualify under the de
minimis rule, they are deductible.
Notice The estimated tax penalty is waived for
● A portion of payments for membership
underpayments of estimated taxes for any
We ask for the information on this form to period before March 16, 1994, to the dues to a trade organization or a
carry out the Internal Revenue laws of the extent that the underpayment is noncharitable organization that engages in
United States. You are required to give us attributable to changes made by the Act. lobbying activities may not be deductible if
the information. We need it to ensure that the dues are allocable to nondeductible
you are complying with these laws and to There are new estimated tax rules for tax
lobbying expenditures by the organization.
allow us to figure and collect the right years beginning after December 31, 1993.
For more information, see section 162.
amount of tax. The new rules require a corporation to
base its estimated tax payments on 100% ● Charitable contributions paid or incurred
The time needed to complete and file (rather than 97%) of the tax shown on its after December 31, 1993, to an
this form will vary depending on individual return for the current year. The “safe organization that conducts lobbying
circumstances. The estimated average time harbor” rule that allows a corporation to activities are not deductible if (1) the
is: avoid the penalty by paying 100% of its lobbying activities relate to matters of
Recordkeeping 104 hr., 31 min. prior year tax still applies. The Act also direct financial interest to the donor’s trade
added two new sets of periods over which or business, and (2) the principal purpose
Learning about the a corporation may elect to annualize of the contribution was to avoid federal
law or the form 33 hr., 53 min. income. For details, see Form 1120-W, income tax by obtaining a deduction for
Preparing the form 55 hr., 41 min. Corporation Estimated Tax. activities that would have been
nondeductible under the lobbying expense
Copying, assembling, Depreciation and Amortization rules if conducted directly by the donor.
and sending the ● Goodwill and certain other intangible See section 170(f).
form to the IRS 5 hr., 22 min. property acquired after August 10, 1993, ● No deduction is allowed for amounts
If you have comments concerning the may now be amortized over a 15-year paid or incurred for club dues (including
accuracy of these time estimates or period. dues for airline and hotel clubs), after
suggestions for making this form more ● Certain computer software acquired after December 31, 1993. For details, see
simple, we would be happy to hear from August 10, 1993, may be depreciated section 274.
you. You can write to both the Internal using the straight line method over a No deduction is allowed for travel
Revenue Service, Attention: Reports 36-month period. expenses paid or incurred after December
Clearance Officer, PC:FP, Washington, DC 31, 1993, for a spouse, dependent, or
● The recovery period for figuring
20224; and the Office of Management other individual accompanying an officer or
depreciation for nonresidential real
and Budget, Paperwork Reduction Project employee of the corporation on business
property is 39 years for property placed in
(1545-1027), Washington, DC 20503. DO travel, unless that spouse, dependent, or
service after May 12, 1993.
NOT send the tax form to either of these other individual is an employee of the
offices. Instead, see Where To File on ● The maximum section 179 deduction for corporation and the travel is for a bona
page 2. most filers has been increased to $17,500 fided business purpose and would
for property placed in service in tax years otherwise be deductible. For details, see
beginning after December 31, 1992. section 274.
Changes To Note For details, see Form 4562, Depreciation ● Generally, no deduction is allowed for
and Amortization. any charitable contribution of $250 or more
The Revenue Reconciliation Act of 1993
(“the Act”) made changes to the tax law made after December 31, 1993, unless the
Other Tax Law Changes corporation has a contemporaneous
for corporations, including changes to the ● Lobbying expenses paid or incurred after
tax rates and the estimated tax rules. written acknowledgment from the donee
December 31, 1993, are no longer organization of the contribution (including a
Tax Rates and Related Changes deductible business expenses under good faith estimate of the value of any
section 162. Lobbying expenses include goods or services provided to the donor in
The Act increased the maximum corporate amounts paid or incurred in connection exchange for the donation). For details, see
tax rate to 35% for corporations with with influencing Federal or state legislation section 170.
taxable income over $10 million. (but not local legislation), or amounts paid
Corporations with taxable income over $15 ● The percentage for computing the 70%
or incurred in connection with any
million are subject to an additional tax of dividends-received deduction for dividends
communication with certain covered
3% of the excess over $15 million, or received on the preferred stock of a public
Federal executive branch officials in an
$100,000, whichever is smaller. The new utility (section 244) has increased from
attempt to influence the offical actions or
rates appear in the Tax Rate Schedule on 41.176 percent to 42 percent for tax years
positions of the officals. A de minimis rule
page 5. beginning after 1992.
applies if the total amount of certain
The Act also increased the personal in-house expenditures for lobbying does ● The percentage for computing the 80%
holding company tax rate (Schedule PH not exceed $2,000. If the corporation’s dividends-received deduction for dividends
(Form 1120)) to 39.6%. received on the preferred stock of a public

Cat. No. 64537I


utility (section 243(c)(1) and section 244) 3rd month after its tax year ends. A new A group of corporations located in
has increased from 47.059 percent to 48 corporation filing a short period return several service center regions will often
percent for tax years beginning after 1992. must generally file by the 15th day of the keep all the books and records at the
● The following credits, which expired on 3rd month after the short period ends. A principal office of the managing
June 30, 1992, are extended. Effective July corporation that has dissolved must corporation. If this is the case, the income
1, 1992: generally file by the 15th day of the 3rd tax returns of the corporations may be filed
month after the date it dissolved. A foreign with the service center region in which this
The orphan drug credit is extended corporation that does not maintain an principal office is located.
through December 31, 1994, office or place of business in the U.S. has
The credit for increasing research until the 15th day of the 6th month after
activities is extended through June 30, the end of its tax year to file.
Who Must Sign
1995, If the due date falls on a Saturday, The return must be signed and dated by
The targeted jobs credit is extended Sunday, or legal holiday, the corporation the president, vice-president, treasurer,
through December 31, 1994, and may file on the next business day. assistant treasurer, chief accounting
officer, or any other corporate officer (such
The low-income housing credit is Extension.—File Form 7004, Application as tax officer) authorized to sign.
permanently extended. for Automatic Extension of Time To File Receivers, trustees, or assignees must sign
● The Act added a new general business Corporation Income Tax Return, to request and date any return filed on behalf of a
credit which allows corporations a credit of a 6-month extension of time to file. corporation.
5% of qualified cash contributions to If a corporate officer prepared Form
certain community development Where To File 1120-PC, the Paid Preparer’s space should
corporations (CDCs). The CDCs are remain blank. Anyone who prepares Form
selected by the Secretary of Housing and Use the following
If the corporation’s 1120-PC but does not charge the
Internal Revenue
Urban Development, and must be selected principal business, office,
Service Center corporation, should not sign the return.
by July 1, 1994. Get Form 8847, Credit for or agency is located in
address Generally, anyone who is paid to prepare
Contributions to Certain Community Ä Ä the return must sign it and fill in the Paid
Development Corporations, for more Preparer’s Use Only area.
information. New Jersey, New York
(New York City and The paid preparer must complete the
counties of Nassau, Holtsville, NY 00501 required preparer information and:
Rockland, Suffolk, and
● Sign it, by hand, in the space provided
General Instructions Westchester)
for the preparer’s signature. (Signature
New York (all other stamps and labels are not acceptable.)
counties), Connecticut,
Purpose of Form Maine, Massachusetts, New Andover, MA 05501 ● Give a copy of the return to the
Form 1120-PC, U.S. Property and Hampshire, Rhode Island, taxpayer.
Casualty Insurance Company Income Tax Vermont
Return, is used to report income, gains, Florida, Georgia, South
Atlanta, GA 39901
Accounting Methods
losses, deductions, credits, and to figure Carolina
the income tax liability of insurance Taxable income must be computed using
Kansas, New Mexico, the method of accounting regularly used in
companies other than life insurance Oklahoma, Texas
Austin, TX 73301
companies. keeping the corporation’s books and
Indiana, Kentucky, Michigan records. Generally, permissible methods
Cincinnati, OH 45999 include the cash, accrual, or any other
Ohio, West Virginia
Who Must File method authorized by the Internal Revenue
Illinois, Iowa, Minnesota,
Generally, every domestic nonlife insurance Missouri, Wisconsin
Kansas City, MO 64999 Code. In all cases, the method used must
company and every foreign corporation clearly show taxable income.
carrying on an insurance business in the Alabama, Arkansas, Generally, a corporation (other than a
U.S. that would qualify as a nonlife Louisiana, Mississippi, Memphis, TN 37501
North Carolina, Tennessee
qualified personal service corporation)
insurance company subject to taxation must use the accrual method of
under section 831, if it were a U.S. Alaska, Arizona, California accounting if its average annual gross
corporation, must file Form 1120-PC. This (counties of Alpine, Amador, receipts exceed $5 million. See section
includes organizations described in section Butte, Calaveras, Colusa, 448(c).
501(m)(1) that provide commercial-type Contra Costa, Del Norte, El
Dorado, Glenn, Humboldt, Under the accrual method, an amount is
insurance and organizations described in Lake, Lassen, Marin, includible in income when all the events
section 833. Mendocino, Modoc, Napa, have occurred that fix the right to receive
Exceptions.—A nonlife insurance company Nevada, Placer, Plumas, the income and the amount can be
that is: Sacramento, San Joaquin,
Shasta, Sierra, Siskiyou,
Ogden, UT 84201 determined with reasonable accuracy. See
● Exempt under section 501(c)(15) should Solano, Sonoma, Sutter, Regulations section 1.451-1(a) for details.
file Form 990, Return of Organization Tehama, Trinity, Yolo, and Generally, an accrual basis taxpayer can
Exempt from Income Tax. Yuba), Colorado, Idaho, deduct accrued expenses in the tax year in
Montana, Nebraska,
● Subject to taxation under section 831, Nevada, North Dakota,
which all events that determine the liability
and disposes of its insurance business and Oregon, South Dakota, have occurred, the amount of the liability
reserves, or otherwise ceases to be taxed Utah, Washington, can be figured with reasonable accuracy,
under section 831, but continues its Wyoming and economic performance takes place
corporate existence while winding up and with respect to the expense. There are
California (all other
liquidating its affairs, should file Form counties), Hawaii
Fresno, CA 93888 exceptions to the economic performance
1120, U.S. Corporation Income Tax Return. rule for certain items, including recurring
Delaware, District of expenses. See section 461(h) and the
Life insurance companies.—Life Columbia, Maryland, Philadelphia, PA 19255 related regulations for the rules for
insurance companies should file Form Pennsylvania, Virginia determining when economic performance
1120-L, U.S. Life Insurance Company
Corporations having their principal place takes place.
Income Tax Return.
of business outside the United States or Generally, the corporation may change
claiming a possessions tax credit (section the method of accounting used to report
When To File 936) must file with the Internal Revenue taxable income (for income as a whole or
In general, a corporation must file its Service Center, Philadelphia, PA 19255. for any material item) only by getting
income tax return by the 15th day of the consent on Form 3115, Application for
Page 2
Change in Accounting Method. For more Estimated Tax Payments Other penalties.—Other penalties can be
information, get Pub. 538, Accounting imposed for negligence, substantial
Periods and Methods. Generally, a corporation must make understatement of tax, and fraud. See
installment payments of estimated tax if it sections 6662 and 6663.
expects its estimated tax (income tax
Rounding Off to Whole minus credits) to be $500 or more. For a
Dollars calendar or fiscal year corporation, the Unresolved Tax Problems
installments are due by the 15th day of the The IRS has a Problem Resolution
The corporation may show amounts on the
4th, 6th, 9th, and 12th months of the tax Program for taxpayers who have been
return and accompanying schedules as
year. If any date falls on a Saturday, unable to resolve their problems with the
whole dollars. To do so, drop any amount
Sunday, or legal holiday, the installment is IRS. If the corporation has a tax problem it
less than 50 cents and increase any
due on the next regular business day. Use has been unable to resolve through normal
amount from 50 cents through 99 cents to
Form 1120-W, Corporation Estimated Tax, channels, write to the corporation’s local
the next higher dollar.
as a worksheet to compute estimated tax. IRS district director or call the
Use the deposit coupons (Form 8109) to corporation’s local IRS office and ask for
Recordkeeping make deposits of estimated tax. For Problem Resolution Assistance.
The corporation’s records should be kept information on estimated tax payments, Hearing-impaired persons who have
for as long as they may be needed for the including penalties that apply if the access to TDD equipment may call
administration of any provision of the corporation fails to make required 1-800-829-4059 to ask for help. The
Internal Revenue Code. Usually, records payments, see the instructions for line 15 Problem Resolution office will ensure that
that support an item of income, deduction, on page 7. your problem receives proper attention.
or credit on the return must be kept for 3 If the corporation overpaid estimated Although the office cannot change the tax
years from the date the return is due or tax, it may be able to get a quick refund law or make technical decisions, it can
filed, whichever is later. Keep records that by filing Form 4466, Corporation help clear up problems that resulted from
verify the corporation’s basis in property Application for Quick Refund of previous contacts.
for as long as they are needed to figure Overpayment of Estimated Tax. The
the basis of the original or replacement overpayment must be at least 10% of Other Forms, Returns, and
property. expected income tax liability and at least
$500. To apply for a quick refund, file Form Statements That May Be
The corporation should also keep copies
of any returns it has filed. They help in 4466 before the 16th day of the 3rd month Required
preparing future returns and in making after the end of the tax year, but before
the corporation files its income tax return. Forms
computations when filing an amended
return. Do not file Form 4466 before the end of The corporation may have to file the
the corporation’s tax year. following:
Caution: Foreign insurance companies, see
Depositary Method of Tax Notice 90-13, 1990-1 C.B. 321, before
Form W-2, Wage and Tax Statement, and
Form W-3, Transmittal of Income and Tax
Payment computing estimated tax. Statements.
The corporation must pay the tax due in Form 940 or Form 940-EZ, Employer’s
full when the return is filed but no later Interest and Penalties Annual Federal Unemployment (FUTA) Tax
than the 15th day of the 3rd month after Return. The corporation may be liable for
Interest.—Interest is charged on taxes not
the end of the tax year. FUTA tax and may have to file Form 940 or
paid by the due date, even if an extension
Deposit corporation income tax of time to file is granted. Interest is also 940-EZ if it paid wages of $1,500 or more
payments (and estimated tax payments) charged on penalties imposed for failure to in any calendar quarter during the calendar
with a Form 8109, Federal Tax Deposit file, negligence, fraud, gross valuation year (or the preceding calendar year) or
Coupon. Do not send deposits directly to overstatements, and substantial one or more employees worked for the
an IRS office. Mail or deliver the completed understatements of tax from the due date corporation for some part of a day in any
Form 8109 with the payment to a qualified (including extensions) to the date of 20 different weeks during the calendar year
depositary for Federal taxes or to the payment. The interest charge is figured at (or the preceding calendar year).
Federal Reserve bank (FRB) servicing the a rate determined under section 6621. Form 941, Employer’s Quarterly Federal
corporation’s geographic area. Make Tax Return. Employers must file this form
Late filing of return.—A corporation that
checks or money orders payable to that quarterly to report income tax withheld and
does not file its tax return by the due date,
depositary or FRB. employer and employee social security and
including extensions, may have to pay a
To help ensure proper crediting, write penalty of 5% of the unpaid tax for each Medicare taxes.
the corporation’s employer identification month or part of a month the return is late, Caution: The trust fund recovery penalty
number, the tax period to which the up to a maximum of 25% of the unpaid may apply if income, social security, and
deposit applies, and “Form 1120-PC” on tax. The minimum penalty for a return that Medicare taxes that must be withheld are
the check or money order. Be sure to is more than 60 days late is the smaller of not withheld or are not paid to the IRS.
darken the “1120” box on the coupon. the tax due or $100. The penalty will not The penalty is equal to the unpaid trust
These records of deposits will be sent to be imposed if the corporation can show fund tax. The trust fund recovery penalty
the IRS. that the failure to file on time was due to may be imposed on all persons who are
A penalty may be imposed if the reasonable cause. Corporations that file determined by the IRS to be responsible
deposits are mailed or delivered to an IRS late must attach a statement explaining the for collecting, accounting for, and paying
office rather than to an authorized reasonable cause. over these taxes, and who acted willfully in
depositary or FRB. Late payment of tax.—A corporation that not doing so. See Circular E, Employer’s
For more information on deposits, see does not pay the tax when due may have Tax Guide, for more details.
the instructions in the coupon booklet to pay a penalty of 1⁄2 of 1% of the unpaid Form 966, Corporate Dissolution or
(Form 8109) and Pub. 583, Taxpayers tax for each month or part of a month the Liquidation.
Starting a Business. tax is not paid, up to a maximum of 25% Form 1042, Annual Withholding Tax Return
Caution: If the corporation owes tax when of the unpaid tax. This penalty may also for U.S. Source Income of Foreign
it files Form 1120-PC, do not include the apply to any additional tax not paid within Persons, and Form 1042S, Foreign
payment with the tax return. Instead, mail 10 days of the date of the notice and Person’s U.S. Source Income Subject to
or deliver the payment with Form 8109 to a demand for payment. The penalty will not Withholding. Use these forms to report and
qualified depositary or FRB. be imposed if the corporation can show transmit withheld tax on payments or
that the failure to pay on time was due to distributions made to nonresident alien
reasonable cause. individuals, foreign partnerships, or foreign
Page 3
corporations to the extent such payments shelter, which is required to be registered, The parent corporation of an affiliated
or distributions constitute gross income use this form to report the tax shelter’s group of corporations must attach Form
from sources within the U.S. (see sections registration number. Form 8271 must be 851, Affiliations Schedule, to the
861 through 865). For more information, attached to any tax return (including an consolidated return. For the first year a
see sections 1441 and 1442, and Pub. application for tentative refund (Form consolidated return is filed, each subsidiary
515, Withholding of Tax on Nonresident 1139, Corporation Application for Tentative must attach Form 1122, Authorization and
Aliens and Foreign Corporations. Refund) or an amended return) on which a Consent of Subsidiary Corporation To Be
Form 1096, Annual Summary and deduction, credit, loss, or other tax benefit Included in a Consolidated Income Tax
Transmittal of U.S. Information Returns. attributable to a tax shelter is taken or any Return.
income attributable to a tax shelter is File supporting statements for each
Form 1098, Mortgage Interest Statement. reported.
This form is used to report the receipt from corporation included in the consolidated
any individual of $600 or more of mortgage Form 8275, Disclosure Statement. Form return. Use columns to show the following,
interest and points in the course of the 8275 is used by taxpayers and income tax both before and after adjustments:
corporation’s trade or business for any preparers to disclose items or positions, ● Items of gross income and deductions.
calendar year. (except those contrary to a regulation–see
Form 8275-R, below), that are not ● A computation of taxable income.
Forms 1099-A, B, DIV, INT, MISC, OID, otherwise adequately disclosed on a tax ● Balance sheets as of the beginning and
PATR, R, and S. These information returns return. The disclosure is made to avoid end of the tax year.
are for reporting abandonments,
acquisitions through foreclosure, proceeds
parts of the accuracy-related penalty ● A reconciliation of income per books
imposed for negligence, disregard of rules, with income per return.
from broker and barter exchange or substantial understatement of tax. Form
transactions, certain dividends and ● A reconciliation of retained earnings.
8275 is also used for disclosures relating
distributions, interest payments, payments to preparer penalties for understatements Attach consolidated balance sheets and
for certain fishing boat crew members, due to unrealistic positions or for willful or a reconciliation of consolidated retained
medical and dental health care payments, reckless conduct. earnings.
direct sales of consumer goods for resale,
Form 8275-R, Regulation Disclosure Note: If a nonlife insurance company is a
miscellaneous income payments,
Statement, is used to disclose any item on member of an affiliated group, file Form
nonemployee compensation, original issue
a tax return for which a position has been 1120-PC as an attachment to the
discount, patronage dividends, and
taken that is contrary to Treasury consolidated return in lieu of filing
distributions from profit-sharing plans,
regulations. supporting statements. Write across the
retirement plans, individual retirement
top of page 1 of Form 1120-PC,
arrangements, insurance contracts, etc., Form 8281, Information Return for Publicly
“Supporting Statement to Consolidated
and proceeds from real estate Offered Original Issue Discount
Return.”
transactions. Also use these returns to Instruments. This form is generally required
report amounts that were received as a to be filed by issuers of public offerings of Statements
nominee on behalf of another person. debt instruments within 30 days of the
For more information, see the issuance of the debt instrument. NAIC annual statement.—Regulations
instructions for Form 1099 and Pub. 937, Form 8300, Report of Cash Payments section 1.6012-2(c) requires that the NAIC
Employment Taxes and Information Over $10,000 Received in a Trade or annual statement be filed with Form
Returns. Business. Generally, this form is used to 1120-PC. A penalty for the late filing of a
report the receipt of more than $10,000 in return may be imposed for not including
Note: Every corporation must file Form the annual statement when the return is
1099-MISC if, in the course of its trade or cash or foreign currency in one transaction
or a series of related transactions. filed.
business, it makes payments of rents,
commissions, or other fixed or Cashier’s checks, bank drafts, and Stock ownership in foreign
determinable income (see section 6041) money orders with face amounts of corporations.—Attach the statement
totaling $600 or more to any one person $10,000 or less are considered cash under required by section 551(c) if (a) the
during the calendar year. certain circumstances. For more corporation owned 5% or more in value of
information, see Form 8300 and the outstanding stock of a foreign personal
Form 5452, Corporate Report of holding company and (b) the corporation
Nondividend Distributions. Regulations section 1.6050I-1(c).
was required to include in its gross income
Form 5498, Individual Retirement Form 8594, Asset Acquisition Statement, any undistributed foreign personal holding
Arrangement Information. Use this form to must be filed by both the purchaser and company income from a foreign personal
report contributions (including rollover seller of a group of assets constituting a holding company.
contributions) to an individual retirement trade or business if goodwill or a going
concern value attaches, or could attach, to A corporation may have to file Form
arrangement (IRA) and the value of an IRA 5471, Information Return of U.S. Persons
or simplified employee pension (SEP) such assets and if the purchaser’s basis in
the assets is determined only by the With Respect to Certain Foreign
account. Corporations, if any of the following
amount paid for the assets.
Form 5713, International Boycott Report, applies:
for persons having operations in or related Form 8816, Special Loss Discount
Account and Special Estimated Tax 1. It controls a foreign corporation.
to “boycotting” countries. Also, persons
who participate in or cooperate with an Payments for Insurance Companies. This 2. It acquires, disposes of, or owns 5%
international boycott may have to complete form must be filed by any insurance or more in value of the outstanding stock
Schedule A or Schedule B and Schedule C company that elects to take an additional of a foreign corporation.
of Form 5713 to compute their loss of the deduction under section 847. 3. It owns stock in a foreign corporation
following items: the foreign tax credit, the that is a controlled foreign corporation for
deferral of earnings of a controlled foreign Consolidated Return an uninterrupted period of 30 days or more
corporation, IC-DISC benefits, and FSC If an affiliated group of corporations during the tax year of the foreign
benefits. includes one or more domestic life corporation that ends with or within its tax
Form 8264, Application for Registration of insurance companies taxed under section year, and it owned that stock on the last
a Tax Shelter. This form is used by tax 801, the common parent may elect to treat day of the foreign corporation’s tax year.
shelter organizers to register tax shelters those companies as includible Foreign ownership in a domestic
with the IRS for the purpose of receiving a corporations. The life insurance companies corporation.—A domestic corporation that
tax shelter registration number. must have been members of the group for is 25% or more foreign-owned may have
the 5 tax years immediately preceding the to file Form 5472, Information Return of a
Form 8271, Investor Reporting of Tax
tax year for which the election is made. 25% Foreign-Owned U.S. Corporation or a
Shelter Registration Number. Taxpayers
See section 1504(c)(2) and Regulations Foreign Corporation Engaged in a U.S.
who have acquired an interest in a tax
section 1.1502-47(d)(12).
Page 4
Trade or Business. See the instructions on 87-50, 1987-2 C.B. 357, and Notice 89-79,
page 15 for more information. 1989-2 C.B. 392, for the procedural rules Tax Rate Schedule
Transfers to a corporation controlled by for making the respective elections under If the amount on
the transferor.—If a person receives stock section 953(c)(3)(C) or section 953(d). To line 1 or 2, page 1,
of a corporation in exchange for property, make a valid election, the corporation must Form 1120-PC is:
and no gain or loss is recognized under file an election statement at the addresses
Of the
section 351, the person (transferor) and the given in Notice 87-50 and Notice 89-79. But not amount
transferee must each attach to their tax These notices provide formats for the Over— over— Tax is: over—
returns the information required by election statements for each election.
$ 0 $50,000 15% $ 0
Regulations section 1.351-3. Note: Once either election is made, it will 50,000 75,000 $ 7,500 + 25% 50,000
apply to the tax year for which it is made 75,000 100,000 13,750 + 34% 75,000
Attachments and all subsequent tax years unless 100,000 335,000 22,250 + 39% 100,000
Attach Form 4136, Credit for Federal Tax revoked with the consent of the Secretary. 335,000 10,000,000 113,900 + 34% 335,000
Also, any loss of a foreign corporation 10,000,000 15,000,000 3,400,000 + 35% 10,000,000
Paid on Fuels, after page 8. Attach 15,000,000 18,333,333 5,150,000 + 38% 15,000,000
schedules in alphabetical order and other electing to be treated as a domestic
18,333,333 ----- 35% 0
forms in numerical order after Form 4136. insurance company under section 953(d),
will be treated as a dual consolidated loss
To assist us in processing the return, Members of a controlled group.—A
and will not be allowed to reduce the
please complete every applicable entry member of a controlled group, as defined
taxable income of any other member of the
space on Form 1120-PC. Do not write in section 1563, must check the box on
affiliated group for this tax year or any
“See attached” instead of completing the line 3 and complete lines 3a and 3b on
other tax year.
entry spaces. If you need more space on page 1.
the forms or schedules, attach separate Members of a controlled group are
sheets. Use the same size and format as Taxable Income entitled to one $50,000, one $25,000, and
on the printed forms. But show your totals Line 1, Taxable income, and line 2, one $9,925,000 taxable income bracket
on the printed forms. Attach these taxable investment income.—If the amount (in that order) on line 3a.
separate sheets after all the schedules and corporation is a small company as defined When a controlled group adopts or later
forms. Be sure to put the corporation’s in section 831(b)(2) and elects under amends an apportionment plan, each
name and EIN on each sheet. section 831(b)(2)(A)(ii) to be taxed on member must attach to its tax return a
taxable investment income, complete copy of its consent to this plan. The copy
Schedule B (ignore Schedule A) and enter (or an attached statement) must show the
Specific Instructions the amount from Schedule B, line 21, on
line 2, page 1. All other corporations
part of the amount in each taxable income
bracket apportioned to that member. See
Period Covered.—File the 1993 return for should complete Schedule A (ignore Regulations section 1.1561-3(b) for other
calendar year 1993. Schedule B) and enter on line 1, page 1, requirements and for the time and manner
the amount from Schedule A, line 37. of making the consent.
Address and Employer
Equal apportionment plan. If no
Identification Number Tax Computation and apportionment plan is adopted, the
Address.—Include the suite, room, or Payments members of the controlled group must
other unit number after the street address. divide the amount in each taxable income
If the Post Office does not deliver mail to Page 1, lines 3 through 18 bracket equally among themselves. For
the street address and the corporation has example, controlled group AB consists of
Most corporations figure their tax by using Corporation A and Corporation B. They do
a P.O. box, show the box number instead the Tax Rate Schedule below. Exceptions
of the street address. not elect an apportionment plan. Therefore,
apply to members of a controlled group. both Corporation A and Corporation B are
Note: If a change of address occurs after See the instructions below the Tax Rate entitled to $25,000 (one-half of $50,000) in
the return is filed, use Form 8822, Change Schedule for more information. the $50,000 taxable income bracket on
of Address, to notify the IRS of the new
address.
Item A. Employer identification number Worksheet for Members of a Controlled Group (Keep for your records)
(EIN).—Show the correct EIN in item A on Note: Each member of a controlled group must compute the tax using the worksheet
page 1 of Form 1120-PC. If the below.
corporation does not have an EIN, it
should apply for one on Form SS-4, 1. Enter taxable income (line 1 or 2, page 1)
Application for Employer Identification 2. Enter line 1 above or the corporation’s share of the $50,000 taxable income bracket,
Number. Form SS-4 can be obtained at whichever is less
most IRS or Social Security Administration 3. Subtract line 2 from line 1
(SSA) offices. If the corporation has not 4. Enter line 3 or the corporation’s share of the $25,000 taxable income bracket, whichever
received its EIN by the time the return is is less
due, write “Applied for” in the space 5. Subtract line 4 from line 3
provided for the EIN. See Pub. 583 for
6. Enter line 5 or the corporation’s share of the $9,925,000 taxable income bracket,
more information. whichever is less
Item D.—Indicate a final return, change of 7. Subtract line 6 from line 5
address, or amended return by checking
8. Multiply line 2 by 15%
the appropriate box.
9. Multiply line 4 by 25%
Item E.—Check the applicable box if the
corporation is a foreign corporation and 10. Multiply line 6 by 34%
elects under: (1) section 953(c)(3)(C) to 11. Multiply line 7 by 35%
treat its related person insurance income 12. If the taxable income of the controlled group exceeds $100,000, enter this member’s
as effectively connected with the conduct share of the smaller of 5% of the taxable income in excess of $100,000 or $11,750. See
of a trade or business in the U.S., or (2) Additional 5% tax on page 6
section 953(d) to be treated as a domestic 13. If the taxable income of the controlled group exceeds $15 million, enter this member’s
corporation. Generally, a foreign share of the smaller of 3% of the taxable income in excess of $15 million, or $100,000.
corporation making either election must file See Additional 3% Tax on page 6
its return with the Internal Revenue Service 14. Add lines 8 through 13. Enter here and on line 4, page 1
Center, Philadelphia, PA 19255. See Notice
Page 5
line 3a(1) and to $12,500 (one-half of amounts paid or incurred to a qualifying (including an ESOP credit), or a passive
$25,000) in the $25,000 taxable income attorney-in-fact to the amount of the activity credit. Enter the amount of the
bracket on line 3a(2), and $4,962,500 deductions of the attorney-in-fact allocable general business credit on line 7c, and
(one-half of $9,925,000) in the $9,925,000 to the income received by the check the box for Form 3800. If the
taxable income bracket on line 3a(3). attorney-in-fact from the reciprocal. If this corporation has only one credit, enter on
Unequal apportionment plan. Members of election is made, any increase in taxable line 7c the amount of the credit from the
a controlled group may elect an unequal income of a reciprocal as a result of this form. Also be sure to check the
apportionment plan and divide the taxable limitation is taxed at the highest rate of tax appropriate box for that form.
income brackets as they wish. There is no specified in section 11(b). Investment credit. This credit was
need for consistency between taxable Make no entry on line 5 if the mutual generally repealed for property placed in
income brackets. Any member of the insurance company’s taxable income service after 1985. See Form 3468,
controlled group may be entitled to all, before including the section 835(b) amount Investment Credit, for exceptions.
some, or none of the taxable income is $100,000 or more. Otherwise, this tax is Jobs credit. The corporation may qualify
bracket. However, the total amount for all 35% of the section 835(b) amount. If an to take this credit if it hired members of
members of the controlled group cannot entry is made on line 5, attach a statement special targeted groups during the tax
be more than the total amount in each showing how the tax was computed. year. See Form 5884, Jobs Credit, for
taxable income bracket. Reciprocal underwriters making the more information.
Additional 5% tax. Members of a section 835(a) election are allowed a credit Credit for alcohol used as fuel. A
controlled group are treated as one on line 14h for the amount of tax paid by corporation may be able to take a credit
corporation for purposes of figuring the the attorney-in-fact that is related to the for alcohol used as fuel. Use Form 6478,
additional 5% tax that must be paid by income received by the attorney-in-fact Credit for Alcohol Used as Fuel, to figure
corporations with taxable income in excess from the reciprocal in the tax year. the credit.
of $100,000. If the additional tax applies, See section 835 and the related
each member of the controlled group will Credit for increasing research activities.
regulations for special rules and See Form 6765, Credit for Increasing
pay that tax based on the part of the information regarding the statements
amount that is used in each taxable Research Activities, and section 41.
required to be attached to the return.
income bracket to reduce that member’s Low-income housing credit. See Form
tax. See section 1561(a). Each member of Line 7a. Foreign tax credit.—To find out 8586, Low-Income Housing Credit, and
the group must enter its share of the when a corporation can take this credit for section 42.
additional 5% tax on line 3b(1) and attach payment of income tax to a foreign country
or U.S. possession, see Form 1118, Enhanced oil recovery credit. A
to its tax return a schedule that shows the corporation may claim a credit for 15% of
taxable income of the entire group as well Foreign Tax Credit— Corporations.
its qualified enhanced oil recovery costs.
as how its share of the additional tax was Line 7b. Other credits.—Possessions tax Use Form 8830, Enhanced Oil Recovery
figured. credit—For rules on how to elect to claim Credit, to figure the credit.
Additional 3% tax.—Members of a the possessions tax credit (section 936),
see Form 5712, Election to be Treated as Disabled access credit. A corporation
controlled group are treated as one may be able to take a credit for certain
corporation for purposes of figuring the a Possessions Corporation Under Section
936. Figure the credit on Form 5735, expenditures paid or incurred to assist
additional 3% tax that must be paid by individuals with disabilities. See Form
corporations with taxable income in excess Possessions Corporation Tax Credit
Allowed Under Section 936. 8826, Disabled Access Credit, and Section
of $15 million. If the additional tax applies, 44.
each member of the controlled group will Include the credit in the amount shown
on line 7b. On the line to the left of the Renewable electricity production
pay that tax based on the part of the
entry space, write the amount of the credit credit.—A corporation may be able to take
amount that is used in each taxable
and identify it as a section 936 credit. a credit for electricity produced by the
income bracket to reduce that member’s
corporation using closed-loop biomass or
tax. See section 1561(a). Each member of Orphan drug credit.—To find out when a wind and sold to an unrelated person. See
the group must enter its share of the corporation can take this credit and how it Form 8835, Renewable Electricity
additional 3% tax on line 3b(2) and attach is figured, see section 28 and Form 6765, Production Credit, for details.
to its tax return a schedule that shows the Credit for Increasing Research Activities (or
taxable income of the entire group as well for claiming the orphan drug credit). Credit for contributions to certain
as how its share of the additional 3% tax community development corporations.—
Nonconventional source fuel credit.—A A cooperative may claim a credit for
was figured.
credit is allowed for the sale of qualified contributions to certain community
Deferred tax amount of a shareholder in fuels produced from a nonconventional development corporations. On the dotted
a passive foreign investment company source. Section 29 contains a definition of line next to line 7c, write “Form 8847” and
(section 1291).—If the corporation was a qualified fuels, provisions for figuring the the amount of the credit.
shareholder in a passive foreign investment credit, and other special rules. Attach a
company (PFIC), and the corporation separate schedule to the return showing Line 7d. Credit for prior year minimum
received an excess distribution or disposed the computation of the credit. tax. To figure the minimum tax credit and
of its investment in the PFIC during the any carryforward of that credit, use Form
See Form 8827 if any of the 1992 credit 8827, Credit for Prior Year Minimum Tax—
year, it must include the total increases in
was disallowed solely because of the Corporations.
taxes due under section 1291(c)(2) in the
tentative minimum tax limitation. Also, see
amount entered on line 4. On the dotted Line 9. Foreign corporations.—A foreign
section 53(d).
line to the left of line 4, write “Section corporation carrying on an insurance
1291” and the amount. Do not include on Qualified electric vehicle credit.— business in the United States is taxed as a
line 4 any interest due under section Include on line 7b any credit from Form domestic insurance company on its
1291(c)(3). Instead, write the amount of 8834, Qualified Electric Vehicle Credit. This income effectively connected with the
interest owed in the bottom margin of credit is available for qualified new electric conduct of a trade or business in the
page 1 and label it “Section 1291 interest.” vehicles placed in service after June 30, United States. See sections 842 and 897,
For details, see Form 8621, Return by a 1993. Vehicles that qualify for this credit and Notice 89-96, 1989-2 C.B. 417, for
Shareholder of a Passive Foreign are not eligible for the deduction for more information. See Rev. Proc. 91-27,
Investment Company or Qualified Electing clean-fuel vehicles under section 179A. 1991-1 C.B. 544; Rev. Proc. 91-27A,
Fund. Line 7c. General business credit.— 1991-1 C.B. 555, for the domestic
Line 5. Enter amount of tax that a Complete this line if the corporation can asset/liability percentages and domestic
reciprocal must include.—A mutual take any of the following credits. Complete investment yields needed by foreign
insurance company which is an interinsurer Form 3800, General Business Credit, if the insurance companies to compute their
or reciprocal underwriter may elect, under corporation has two or more of these minimum effectively connected net
section 835, to limit the deduction for credits, a credit carryforward or carryback investment income under section 842(b).
Page 6
Income from sources outside the United Tax—Corporations. The corporation must to include in, or subtract from, the total on
States from U.S. business is treated as file Form 4626 if its taxable income (loss) line 13. Form 8621 also explains how to
effectively connected with the conduct of a combined with these adjustments and tax report any interest due under section 1294
trade or business in the United States. For preference items is more than the smaller on the deferred tax.
a definition of effectively connected of: Line 14b. Prior year(s) special estimated
income, see sections 864(c) and 897. ● $40,000, or tax payments to be applied.—Enter the
Generally, any other U.S. source income ● The corporation’s allowable exemption portion of the special estimated tax
received by a foreign corporation that is amount (from Form 4626). payments made in earlier tax years being
not effectively connected with the conduct applied this year. The amount entered
of a trade or business in the United States For this purpose, taxable income does must agree with the amount(s) from line
is taxed at 30% (or at a lower treaty rate). not include the NOL deduction. Get Form 10, Part II, Form 8816. See Form 8816 and
4626 for details. Reduce alternative section 847(2) for additional information.
Note: Interest received from certain minimum tax by any amount on Form
portfolio debt investments that were issued 3800, Schedule A, line 34. Write on the Line 14c. 1993 Estimated tax
after July 18, 1984, is not subject to the dotted line to the left of line 11a, “Section payments.—Enter the corporation’s
tax. 38(c)(2)” and the amount. estimated tax payments for 1993. Do not
See section 881. If the corporation has include any amount being applied on line
Line 11b. Environmental tax.—The 14d as a “Special estimated tax payment.”
this income, attach a schedule showing corporation may be liable for the
the kind and amount of income, the tax environmental tax if the modified Line 14d. 1993 Special estimated tax
rate, and the amount of tax. alternative minimum taxable income of the payments.—If the deduction under section
Additional taxes resulting from the net corporation exceeds $2 million. See Form 847 is claimed on Schedule A, line 27,
investment income adjustment may offset 4626 for details. special estimated tax payments must be
a corporation’s 30% tax on U.S. source made in an amount equal to the tax benefit
Line 12. Personal holding company attributable to the deduction. See Form
income. The tax reduction is determined tax.—A corporation is taxed as a personal
by multiplying the 30% tax by the ratio of 8816 and section 847(2) for additional
holding company (PHC) under section 542 information.
the amount of income adjustment to if:
income subject to the 30% tax, computed Line 14h. Credit by reciprocal for tax
without the exclusion for interest on state ● At least 60% of the corporation’s paid by attorney-in-fact under section
and local bonds or income exempted from adjusted ordinary gross income for the tax 835(d).—Enter the amount of tax paid by
taxation by treaty. See section 842(c)(2). year is PHC income, and an attorney-in-fact as a result of income
Attach a statement showing how the ● At any time during the last half of the tax received by the attorney-in-fact from the
reduction under section 881 tax was year more than 50% in value of the reciprocal during the tax year. For more
figured. Include the net tax imposed by corporation’s outstanding stock is owned, information, see section 835, the related
section 881 on line 9. directly or indirectly, by 5 or fewer regulations, and the instructions for line 5
Note: Section 953(d) allows a foreign individuals. on page 6.
insurance company to elect to be taxed as To figure this tax Use Schedule PH Line 14i. Other credits and payments.—
a domestic corporation. If the corporation (Form 1120), U.S. Personal Holding Enter the amount of any other credits the
makes this election, include the additional Company Tax. corporation may take and/or payments
tax required to be paid on line 13. Write on made. Write to the left of the entry space,
the dotted line to the left of line 13, “Sec. Line 13. Total tax an explanation of the entry.
953(d) tax” and the amount. Attach a ● Interest on tax attributable to Backup withholding.—If the corporation
schedule showing the computation. See payments received on installment sales had income tax withheld from any
Section 953(d) for more details. of certain timeshares and residential payments it received, because, for
lots. If the corporation elected to pay example, it failed to give the payer its
Line 10. Recapture taxes interest on the amount of tax attributable correct EIN, include the amount withheld in
Recapture of investment credit. If the to payments received on installment the total for line 14i. This type of
corporation disposed of investment credit obligations arising from the disposition of withholding is called backup withholding.
property or changed its use before the end certain timeshares and residential lots Show the amount withheld in the blank
of its useful life or recovery period, it may under section 453(I)(3), it must include the space in the right hand column between
owe a tax. See Form 4255, Recapture of interest due in the amount to be entered lines 13 and 14j, and write “backup
Investment Credit, for details. on line 13. On the dotted line to the left of withholding.”
Recapture of low-income housing credit. line 13, write “Section 453(I)(3) interest” Line 14j. Total Payments.—Add the
If the corporation disposed of property (or and the amount. Attach a schedule amounts on lines 14f through 14i and enter
there was a reduction in the qualified basis showing the computation. the total on line 14j.
of the property) on which it took the ● Interest on tax deferred under the Line 15. Estimated tax penalty.—A
low-income housing credit, it may owe a installment method for certain nondealer corporation that does not make estimated
tax. See Form 8611, Recapture of installment obligations. If an obligation tax payments when due may be subject to
Low-Income Housing Credit, and section arising from the disposition of property to an underpayment penalty for the period of
42(j) for details. which section 453A applies is outstanding underpayment. Generally, a corporation is
Recapture of qualified electric vehicle at the close of the tax year, the subject to the penalty if its tax liability is
(QEV) credit. The corporation must corporation must include the interest due $500 or more, and it did not timely pay the
recapture part of the QEV credit it claimed under section 453A(c) in the amount on smaller of (a) 97% of its tax liability for
in a prior year if, within 3 years of the date line 13. Write on the dotted line to the left 1993, or (b) 100% of its prior year’s tax.
the vehicle was placed in service, it ceases of line 13, “Section 453A(c) interest” and See section 6655 for details and
to qualify for the credit. Get Pub. 535 to the amount. Attach a schedule showing exceptions, including special rules for large
see how to figure the recapture. Include the computation. corporations.
the amount of the recapture in the total for ● Deferred tax and interest on Note: The estimated tax penalty is waived
line 10, page 1, Form 1120-PC. On the undistributed earnings of a qualified for underpayments of estimated taxes for
dotted line next to the entry space, write electing fund under section 1294. any period before March 16, 1994, to the
“QEV” and the amount. Complete Form 8621 to determine the extent that the underpayment is
Line 11a. Alternative minimum tax.—The corporation’s share of tax attributable to attributable to changes made by the
corporation may owe the alternative the undistributed earnings of a qualified Revenue Reconciliation Act of 1993.
minimum tax if it has any of the electing fund, or the deferred tax due, if
any, as a result of the termination of a Form 2220, Underpayment of Estimated
adjustments and tax preference items Tax by Corporations, is used to see if the
listed on Form 4626, Alternative Minimum section 1294 election. See the instructions
for Form 8621 to figure the amount of tax corporation owes a penalty and to figure
Page 7
the amount of the penalty. Generally, the be reported in detail on Schedule D (Form with respect to insurance on state and
corporation does not have to file this form 1120). The corporation must report every local obligations.
because the IRS can figure the amount of sale or exchange of a capital asset in Amounts required to be subtracted from
any penalty and bill the corporation for it. detail, even though no gain or loss is these accounts under sections 832(e)(5)
However, you must complete and attach indicated. and 832(e)(6) must be reported as income
Form 2220 even if the corporation does In general, losses from sales or on line 9. See section 832(e) for more
not owe the penalty if any of the following exchanges of capital assets are only information.
apply: allowed to the extent of gains. However, Line 11. Mutual interinsurers or
● The annualized income or adjusted for corporations taxable under section 831, reciprocal underwriters—decrease in
seasonal installment method is used. this rule does not apply to losses from subscriber accounts.—Enter the decrease
● The corporation is a large corporation capital assets sold or exchanged to get for the tax year in savings credited to
computing its first required installment funds needed to meet abnormal insurance subscriber accounts of a mutual insurance
based on the prior year’s tax. (See the losses and to pay dividends and similar company that is an interinsurer or
Form 2220 instructions for the definition of distributions to policyholders. DO NOT reciprocal underwriter. See the instructions
a large corporation.) include those types of losses here, instead for line 30, Schedule A, for a definition of
report them on Schedule G. savings credited to subscriber accounts.
● The corporation is claiming a waiver of
the penalty as described in the Note The net capital loss for these Line 12. Income from a special loss
above. corporations is the amount by which discount account.—Enter the total from
losses for the year from sales or line 6, Part I, Form 8816. See section
If you attach Form 2220, be sure to exchanges of capital assets exceed the
check the box on line 15, and enter the 847(5) and the instructions for Form 8816
gains from these sales or exchanges plus for more information.
amount of any penalty on that line. the smaller of:
Line 13. Other income.—Enter any other
1. Taxable income (computed without taxable income not reported on lines 1
gains or losses from sales or exchanges of
Schedule A—Taxable Income capital assets); or
through 12. List the type and amount of
income on an attached schedule. If the
Gross income.—The gross amounts of 2. Losses from the sale or exchange of corporation has only one item of other
underwriting and investment income capital assets sold or exchanged to obtain income, describe it in parentheses on line
should be computed on the basis of the funds to meet abnormal insurance losses 13.
underwriting and investment exhibit of the and to provide for the payment of ● The amount of any deduction previously
NAIC annual statement. dividends and similar distributions to taken under section 179A that is subject to
Note: In computing the amounts entered policyholders. recapture. The corporation must recapture
on lines 2, 3, and 4, take all interest, Subject to the limitations in section the benefit of any allowable deduction for
dividends, or rents received during the 1212(a), a net capital loss can be carried qualified clean-fuel vehicle property (or
year, add interest, dividends, or rents due back 3 years and forward 5 years as a clean-fuel vehicle refueling property), if,
and accrued at the end of the tax year, and short-term capital loss. within 3 years of the date the property was
deduct interest, dividends, or rents due placed in service, the property ceases to
For more information on gains and
and accrued at the end of the preceding qualify. See Pub. 535 for details, including
losses from sales or exchanges of
tax year. For rules regarding the accrual of how to figure the recapture.
property, see the instructions for Schedule
dividends, see Regulations section
D (Form 1120) and Pub. 544, Sales and
1.301-1(b).
Other Dispositions of Assets. Deductions
Line 3a, column (a). Gross interest.— Reducing certain expenses for which
Line 8. Certain mutual fire or flood
Enter the gross amount of interest income, credits are allowable.—For each of the
insurance companies.—A mutual fire or
including all tax-exempt interest. credits listed below, the corporation must
flood insurance company whose principal
Line 3b, column (a). Interest exempt business is the issuance of policies: reduce the otherwise allowable deductions
under section 103.—Section 103(a) for expenses used to figure the credit by
1. for which the premium deposits are
excludes interest on state or local bonds the amount of the current year credit:
the same (regardless of the length of the
from gross income. This exclusion does 1. The orphan drug credit.
term the policies are written for), and
not apply to: (1) any private activity bond
which is not a qualified bond as defined by 2. under which the unabsorbed portion 2. The credit for increasing research
section 141; (2) any arbitrage bond as of such premium deposits not required for activities.
defined by section 148; or (3) any bond losses, expenses, or establishment of 3. The enhanced oil recovery credit.
not meeting the requirements of section reserves is returned or credited to the 4. The disabled access credit.
149 (regarding the registration of policyholder on cancellation or expiration
of the policy. 5. The jobs credit.
tax-exempt bonds).
If 1 and 2 apply, the corporation must If the corporation has any of these
Lines 3a and 3b, column (b).
include in income an amount equal to 2% credits, be sure to figure each current year
Amortization of premium.—Enter on line
of the premiums earned on insurance credit before figuring the deduction for
3a, column (b), the total amortization of
contracts during the tax year with respect expenses on which the credit is based.
bond premium, including amortization on
tax-exempt bonds. Enter on line 3b, to such policies after deduction of Line 15. Compensation of officers.—
column (b), the amortization of bond premium deposits returned or credited Attach a schedule for all officers using the
premium on tax-exempt bonds only. during the same tax year. See section following columns: (1) name of officer; (2)
832(b)(1)(D). Social security number; (3) percentage of
Note: Insurance companies electing to
Line 9. Income on account of the special time devoted to business; (4) amount of
amortize discount for tax purposes, should
income and deduction accounts.— compensation.
reduce the amortization of premium by any
amortization of discount. Corporations which write the kinds of This information must be submitted by
insurance listed below are required to each member of an affiliated group
Line 4. Gross rents.—Enter gross rents,
maintain the following special accounts. A included in a consolidated return.
computed as indicated under the
corporation which writes: (1) mortgage Line 16a. Salaries and wages.—Enter the
instructions for Gross income. Deduct
guaranty insurance, must maintain a amount of total salaries and wages paid or
rental expenses, such as repairs, interest,
mortgage guaranty account; (2) lease incurred for the tax year. Do not include
taxes, and depreciation on the proper lines
guaranty insurance, must maintain a lease salaries and wages deductible elsewhere
in the deductions section (lines 15 through
guaranty account; and (3) insurance on on the return, such as elective
31).
obligations the interest on which is contributions to a section 401(k) cash or
Line 6. Capital gain net income.—Every excludible from gross income under deferred arrangement, or amounts
sale or exchange of a capital asset must section 103, must maintain an account
Page 8
contributed under a salary reduction SEP See section 163(e)(5) for special rules for resolution authorizing the contributions was
agreement. the disqualified portion of original issue adopted by the board of directors during
Caution: If the corporation provided discount on a high yield discount the tax year. Also attach a copy of the
taxable fringe benefits to its employees, obligation. resolution.
such as the personal use of a car, do not Certain interest paid or accrued by the If a corporation (other than a closely held
deduct as wages the amount allocated for corporation (directly or indirectly) to a or personal service corporation) contributes
depreciation and other expenses that are related person may be limited if no tax is property other than cash and the
claimed elsewhere on its return. imposed on that interest. See section deduction claimed for the property
Line 16b. Less jobs credit.—Enter on line 163(j) for more detailed information. exceeds $500, the corporation must attach
16b the amount of jobs credit from Form Do not deduct interest on debt allocable a schedule to the return describing the
5884, Jobs Credit. to the production of qualified property. kind of property contributed and the
Interest that is allocable to certain property method used to determine its fair market
Line 18. Rents.—Enter rent paid or value.
accrued for business property in which the produced by a corporation for its own use
corporation has no equity. or for sale must be capitalized. A Closely-held and personal service
corporation must also capitalize any corporations generally must complete
If the corporation rented or leased a interest on debt allocable to an asset used Form 8283, Noncash Charitable
vehicle, enter the total annual rent or lease to produce the above property. See Contributions, and attach it to their returns.
expense paid or incurred during the year. section 263A and Notice 88-99, 1988-2 All other corporations generally must
Also complete Part V of Form 4562, C.B. 422, for definitions and more complete and attach Form 8283 to their
Depreciation and Amortization. If the information. returns for contributions of property other
corporation leased a vehicle for a term of than money, if the total claimed deduction
30 days or more, the deduction for the See section 7872 for special rules on the
deductibility of forgone interest on certain for all property contributed was more than
vehicle lease expense may have to be $5,000.
reduced by an amount called the inclusion below-market rate loans.
amount. The corporation may have an Line 20b. Less tax-exempt interest A corporation must also keep records,
inclusion amount if: expense.—Enter interest paid or accrued as required by the regulations for section
And the vehicle’s during the tax year on indebtedness 170, for all of its charitable contributions.
fair market value incurred or continued to purchase or carry If the corporation made a “qualified
on the first day of obligations if the interest is wholly exempt conservation contribution” under section
The lease term began: the lease exceeded:
from income tax. For exceptions, see 170(h), also include the fair market value of
After 12/31/92 $14,300 section 265(b). the underlying property before and after
After 12/31/91 but before 1/1/93 $13,700 Line 21. Charitable contributions.—Enter the donation, as well as the type of legal
contributions or gifts actually paid in the interest contributed, and describe the
After 12/31/90 but before 1/1/92 $13,400
tax year to or for the use of charitable and conservation purpose benefited by the
After 12/31/86 but before 1/1/91 $12,800 donation.
governmental organizations described in
If the lease term began after June 18, section 170(c), and any unused If a contribution carryover is included,
1984, but before January 1, 1987, see contributions carried over from prior years. show the amount and how it was
Pub. 917, Business Use of a Car, to find determined.
The total amount claimed may not be
out if the corporation has an inclusion
more than 10% of taxable income (line 37, Special rule for contributions of certain
amount. Also see Pub. 917 for instructions
Schedule A) computed without regard to property.—For a charitable contribution of
on figuring the inclusion amount.
the following: property, the corporation must reduce the
Line 19. Taxes and licenses.—Enter taxes contribution by the sum of:
● Any deduction for contributions,
paid or accrued during the tax year, but do
● The deduction for dividends received, ● The ordinary income or short-term
not include the following:
capital gain that would have resulted if the
● Federal income taxes (except the ● The deduction allowed under section property had been sold at its fair market
environmental tax under section 59A); 249, value, and
● Foreign or U.S. possession income taxes ● Any net operating loss (NOL) carryback ● For certain contributions, all of the
if a credit is claimed; to the tax year under section 172, and long-term capital gain that would have
● Taxes not imposed on the corporation; ● Any capital loss carryback to the tax resulted if the property were sold at its fair
year under section 1212(a)(1). market value.
● Taxes, including state or local sales
taxes, that are paid or incurred in Charitable contributions over the 10% The reduction for long-term capital gain
connection with an acquisition or limitation may not be deducted for the tax applies to:
disposition of property. (These taxes must year but may be carried over to the next 5 ● Contributions of tangible personal
be treated as a part of the cost of the tax years. property for use by an exempt organization
acquired property or, in the case of a Special rules apply if the corporation has for a purpose or function unrelated to the
disposition, as a reduction in the amount an NOL carryover to the tax year. In basis for its exemption, and
realized on the disposition.); or figuring the charitable contributions ● Contributions of any property (except
● Taxes assessed against local benefits deduction for the tax year, the 10% limit is stock for which market quotations are
that increase the value of the property applied using the taxable income after the readily available—see section 170(e)(5)) to
assessed (such as for paving, etc.) deduction for NOL. or for the use of certain private
See section 164(d) for the apportionment To figure the amount of any remaining foundations. See section 170(e) and
of taxes on real estate between a seller NOL carryover to later years, taxable Regulations section 1.170A-4.
and a purchaser. income must be modified (see section For special rules for contributions of
172(b)). To the extent that contributions are inventory and other property to certain
If the corporation is liable for the
used to reduce taxable income for this organizations, see section 170(e)(3) and
environmental tax under section 59A, see
purpose and increase an NOL carryover, a Regulations section 1.170A-4A.
Form 4626, Alternative Minimum Tax—
contributions carryover is not allowed. See
Corporations, for computation of the Charitable contributions of scientific
section 170(d)(2)(B).
environmental tax deduction. property used for research.—A
Corporations on the accrual basis may corporation (other than a personal holding
Line 20a. Interest.—Enter all interest paid
elect to deduct contributions paid by the company or a personal service
or accrued during the tax year.
15th day of the 3rd month after the end of organization) can receive a larger
Generally, the interest and carrying the tax year if the contributions are
charges on straddles cannot be deducted deduction for contributing scientific
authorized by the board of directors during property used for research to an institution
and must be capitalized. See section the tax year. Attach a declaration to the
263(g). of higher education. See section 170(e).
return, signed by an officer, stating that the
Page 9
Line 22. Depreciation.—Besides ● Make special estimated tax payments A corporation may deduct dividends it
depreciation, include on line 22 the part of equal to the tax benefit from the pays in cash on stock held by an
the cost that the corporation elected to deduction, and employee stock ownership plan. However,
expense under section 179 for certain ● Establish and maintain a Special Loss a deduction may only be taken if,
tangible property placed in service during Discount Account. See section 847 and according to the plan, the dividends are:
tax year 1993 or carried over from 1992. Form 8816 for details. ● Paid in cash directly to the plan
See Form 4562, Depreciation and participants or beneficiaries;
Amortization and its instructions. Line 29. Dividends to policyholders.—
Enter the total dividends and similar ● Paid to the plan which distributes them
Line 23. Depletion.—See sections 613 distributions paid or declared to in cash to the plan participants or their
and 613A for percentage depletion rates policyholders in their capacity as such, beneficiaries no later than 90 days after
applicable to natural deposits. Also, see except in the case of a mutual fire the end of the plan year in which the
section 291 for the limitation on the insurance company exclusively issuing dividends are paid; or
depletion deduction for iron ore and coal perpetual policies. Whether dividends have
(including lignite). ● Used to make payments on a loan
been paid or declared should be described in section 404(a)(9).
Foreign intangible drilling costs and determined according to the method of
foreign exploration and development costs accounting employed by the insurance See section 404(k) for more details and
must either be added to the corporation’s company. the limitation on certain dividends.
basis for cost depletion purposes or be “Dividends and similar distributions” Generally, the corporation can deduct
deducted ratably over a 10-year period. include amounts returned or credited to only 80% of the amount otherwise
See sections 263(i), 616, and 617 for policyholders on cancellation or expiration allowable for meals and entertainment
details. of policies issued by a mutual fire or flood expenses paid or incurred in its trade or
Attach Form T (Timber), Forest insurance company (1) where the premium business. Also, meals must not be lavish or
Industries Schedules, if a deduction for deposits for the policy are the same extravagant; a bona fide business
depletion of timber is taken. (regardless of the length of the term for discussion must occur during, immediately
which the policies are written), and (2) before, or immediately after the meal; and
Line 24. Pension, profit-sharing, etc., an employee of the corporation must be
plans.—Enter the deduction for under which the unabsorbed portion of
such premium deposits not required for present at the meal. See section 274(k)(2)
contributions to qualified pension, for exceptions. If the corporation claims a
profit-sharing, or other funded deferred losses, expenses, or establishment of
reserves is returned or credited to the deduction for unallowable meal expenses,
compensation plans. Employers who it may have to pay a penalty.
maintain such a plan generally must file policyholder on cancellation or expiration
one of the forms listed below, even if the of the policy. Additional limitations apply to deductions
plan is not a qualified plan under the In the case of a qualified group for gifts, skybox rentals, luxury water
Internal Revenue Code. The filing self-insurers fund, the fund’s deduction for travel, convention expenses, and
requirement applies even if the corporation policyholder dividends is allowed no earlier entertainment tickets. For details see
does not claim a deduction for the current than the date the state regulatory authority section 274 and Pub. 463, Travel,
tax year. There are penalties for failure to determines the amount of the policyholder Entertainment, and Gift Expenses.
file these forms on time and for overstating dividend that may be paid. See section Generally, a corporation can deduct all
the pension plan deduction. See sections 6076 of the Technical and Miscellaneous other ordinary and necessary travel and
6652(e) and 6662(f). Revenue Act of 1988 (“Act of 1988”). entertainment expenses paid or incurred in
Form 5500.—Complete this form for each Line 30. Mutual interinsurers or its trade or business. However, it cannot
plan with 100 or more participants. reciprocal underwriters—increase in deduct an expense paid or incurred for a
subscriber accounts.—A mutual facility (such as a yacht or hunting lodge)
Form 5500-C/R.—Complete this form for that is used for an activity that is usually
each plan with fewer than 100 participants. insurance company that is an interinsurer
or reciprocal underwriter may deduct the considered entertainment, amusement, or
Form 5500-EZ.—Complete this form for a increase in savings credited to subscriber recreation. The following expenses are not
one-participant plan. The term accounts for the tax year. deductible if paid or incurred after
“one-participant plan” also means a plan December 31, 1993:
that covers the owner(s) and his or her “Savings credited to subscriber
accounts” means the surplus credited to ● Club dues
spouse, or a plan that covers partners in a
business partnership (or the partners and the individual accounts of subscribers ● Travel expenses for a taxpayer’s spouse
their spouses). before the 16th day of the 3rd month and certain other individuals.
following the close of the tax year. This is See Changes To Note on page 1.
Line 25. Employee benefit programs.— true only if the corporation would be
Enter contributions to employee benefit Note: The corporation may be able to
required to pay this amount promptly to a
programs not claimed elsewhere on the deduct otherwise nondeductible meals,
subscriber if the subscriber ended the
return (e.g., insurance, health and welfare travel, and entertainment expenses if the
contract when the corporation’s tax year
programs) that are not an incidental part of amounts are treated as compensation and
ends. The corporation must notify the
a pension, profit-sharing, etc., plan reported on Form W-2 for an employee or
subscriber as required by Regulations
included on line 24. on Form 1099-MISC for an independent
section 1.823-6(c)(2)(v). The subscriber
Line 27. Additional deduction.—Any contractor.
must treat any savings credited to the
insurance company required to discount subscriber’s account as a dividend paid or Section 179A allows a deduction for part
unpaid losses under section 846 is allowed declared. of the cost of qualified clean-fuel vehicle
an additional deduction not to exceed the property and qualified clean-fuel vehicle
Line 31. Other deductions
excess of: refueling property placed in service after
Note: Do not deduct penalties such as June 30, 1993.
● The amount of certain undiscounted those listed under Interest and Penalties
unpaid losses over Line 32. Total deductions.—Insurance
on page 3.
● The amount of the related discounted companies that issue specified insurance
Attach a schedule, listing by type and contracts (as defined in section 848(e)(1))
unpaid losses, to the extent the amount amount, all allowable deductions that are
was not deducted in a preceding tax year. are generally required to amortize policy
not deductible elsewhere on Form acquisition expenses on a straight-line
Enter the amount of the additional 1120-PC. Enter the total deductions basis over a period of 120 months
deduction on this line and attach Form allowable under sections 832(c)(1) and (10) beginning with the 1st month in the 2nd
8816. (net of the annual statement change in half of the tax year (section 848(a)).
Any insurance company taking the undiscounted unpaid loss adjustment Reduce total deductions on line 32 by the
additional deduction is required to: expenses) that are not deductible on lines amount required to be capitalized under
15 through 30. Section 848. Attach a schedule showing all
Page 10
computations. See section 848 and its amount of the taxable income of a loss Line 5. Gross income from a trade or
regulations for special rules, definitions, corporation that can be offset by business other than insurance and from
and exceptions. Also see Form 1120-L, pre-change NOL carryovers is limited). See Form 4797.—Enter the gross income from
Schedule G, and its instructions for more section 382. Also see Temporary a trade or business other than insurance
information. Regulations section 1.382-2T(a)(2)(ii), which carried on by the insurance company or by
Line 34a. Special deduction for section requires that a loss corporation file an a partnership of which the insurance
833 organizations.—The amount claimed information statement with its income tax company is a partner. Include section 1245
cannot exceed taxable income for the tax return for each tax year that it is a loss and section 1250 gains (as modified by
year (determined without regard to this corporation and certain shifts in ownership section 291), and other gains from Form
deduction). occurred. 4797, Sales of Business Property, on
See section 384 for the limitation on the investment assets only.
Line 34b. Deduction on account of the
special income and deduction use of preacquisition losses of one Line 6. Income from leases described in
accounts.—Enter the total of the amounts corporation to offset recognized built-in sections 834(b)(1)(B) and 834(b)(1)(C).—
required to be added under sections gains of another corporation. Enter gross income from entering into,
832(e)(4) and (6). However, no deduction is Exceptions to carryback rules—A changing, or ending any lease, mortgage,
permitted unless the corporation purchases corporation may make an irrevocable or other instrument or agreement from
tax and loss bonds in an amount equal to election to forego the carryback period and which the company earns interest,
the tax benefit attributable to the instead carry the NOL over to each of the dividends, rents, or royalties.
deduction. See section 832(e). 15 years following the year of the loss. To
make this election, check the box in Deductions
Note: The deduction on account of the
special income and deduction accounts is question 14 on Schedule I. The return Note: Also see section 834(d)(1) regarding
limited to taxable income for the tax year must be timely filed (including extensions). the limitation of expenses on real estate
(computed without regard to this deduction An NOL cannot be carried to or from any owned and occupied in part or in whole by
or to any carryback of a net operating loss). tax year for which the insurance company a mutual insurance company.
Line 36b. Net operating loss is not subject to tax under section 831(a), Line 9. Real estate taxes.—Enter taxes
deduction.—A net operating loss (NOL) or to any tax year if (between the tax year paid or accrued on real estate owned by
incurred by a corporation in 1 tax year may from which the loss is being carried and the corporation and deductible under
be used to reduce the corporation’s such tax year) there is an intervening tax section 164.
taxbable income in another year. Generally, year for which the insurance company was Line 10. Other real estate expenses.—
a corporation may carry an NOL back to not subject to tax imposed by section Enter all ordinary and necessary real estate
each of the 3 years preceding the year of 831(a). expenses, such as fire insurance, heat,
the loss and then carry any remaining See section 844 for special loss light, and labor. Also enter the cost of
amount over to each of the 15 years carryover rules for insurance companies. incidental repairs, such as labor and
following the year of the loss (but see supplies, that do not add to the property’s
Exceptions to carryback rules on page value nor appreciably prolong its life. Do
11). Enter on line 36b, the total NOL Schedule B, Part I—Taxable not include any amount paid for new
carryovers from prior tax years, but do not buildings or for permanent improvements
enter more than the corporation’s taxable Investment Income of or betterments made to increase the value
income (after dividends-received Electing Small Companies of any property or any amount spent on
deduction). An NOL deduction cannot be foreclosed property before the property is
taken in a year in which the corporation Note: (1) Once an election, under section
held for rent.
has negative taxable income. Attach a 831(b) is made to be taxed only on
investment income, it can only be revoked Line 11. Depreciation.—Enter depreciation
schedule showing the computation of the on assets only to the extent that the
NOL deduction. Also complete question 15 with the consent of the Secretary, and (2) a
corporation making this election must assets are used to produce the income
on Schedule I. specified in section 834(b) and reported on
include in gross investment income on line
For more information about NOL and the 8 any amount subtracted from a protection lines 1 through 7 of Schedule B. For more
NOL deduction, get Pub. 536, Net against loss account. information, see the instructions for line 22,
Operating Losses. Schedule A.
Carryback and carryover rules— Income Line 12. Depletion.—Enter any allowable
Generally, an NOL first must be carried Line 1a, column (a). Gross interest.— depletion on royalty income reported on
back to the third tax year preceding the Enter the gross amount of interest income line 4, Schedule B. See the instructions for
year of the loss. To carry back the loss including all tax-exempt interest income. line 23, Schedule A, for more information.
and obtain a quick refund of taxes, use Line 13. Trade or business deductions.—
Form 1139, Corporation Application for Line 1b, column (a). Interest exempt
under section 103.—Enter the amount of Enter the total deductions for any trade or
Tentative Refund. Form 1139 must be filed business income included in gross
within 12 months after the close of the tax interest on state and local bonds that is
exempt from taxation under section 103. investment income under section 834(b)(2).
year of the loss. See section 6411 for Do not include deductions for any
details. Do not attach Form 1139 to the See the instructions for Schedule A, line
3b, column (a), for more information. insurance business. Do not include losses
corporation’s income tax return. from sales or exchanges of capital assets
For carryback claims filed later than 12 Lines 1a and 1b, column (b). or property used in the business, or from
months after the close of the tax year of Amortization of premiums.—Enter on line the compulsory or involuntary conversion
the loss, file an amended Form 1120-PC 1a, column (b), the total amortization of of property used in the trade or business.
instead of Form 1139. bond premiums, including amortization of
premium on tax-exempt bonds. Enter on Line 14. Interest.—See the instructions for
After the corporation has applied the line 1b, column (b), the amortization of lines 20a and 20b, Schedule A.
NOL to the first tax year to which it may bond premium on tax-exempt bonds. Line 17. Investment expenses.—Enter
be carried, the taxable income of that year expenses that are properly chargeable as
is modified (as described in section 172(b)) Note: Insurance companies electing to
amortize discount for tax purposes, should investment expenses. If general expenses
to determine how much of the remaining are allocated to investment expenses, the
loss may be carried to other years. See reduce the amortization of premium by any
amortization of discount. total deduction cannot be more than the
section 172(b) and the related regulations amount shown on Schedule B, Part II, line
for details. Line 3. Gross rents.—Enter the gross 39. Attach a schedule showing the kind
Special rules apply when an ownership rents received or accrued during the tax and amount of the items and group the
change occurs (i.e., for any tax year ending year. Deduct rental expenses such as minor items into one amount.
after a post-1986 ownership change, the repairs, interest, taxes and depreciation on
the proper lines in the deductions section.
Page 11
See section 267 for the limitation on Lines 1 through 9, column (a).—Enter in Line 5.—Enter dividends received on
deductions for unpaid expenses and column (a) of the appropriate line those preferred stock of a 20%-or-more-owned
interest in transactions between related dividends that are not subject to the public utility that is subject to income tax
taxpayers. provisions of section 832(b)(5)(B). This will and is allowed the deduction provided in
include: section 247 for dividends paid.
(i) all dividends received on stock whose Line 6.—Enter the U.S. source portion of
Schedule B, Part II— acquisition date is before August 8, 1986; dividends received from
and (ii) 100% dividends (defined above) on less-than-20%-owned foreign corporations
Invested Assets Book Values stock acquired after August 7, 1986, to the and that qualify for the 70% deduction
Schedule B, Part II, is used to compute the extent that such dividends are not under section 245(a). To qualify for the
limitation on investment expenses required attributable to prorated amounts. 70% deduction, the corporation must own
under section 834(c)(2) when any general Lines 1 through 9, column (b).—Enter in at least 10% of the foreign corporation by
expenses are in part assigned to or column (b) of the appropriate line those vote and value. Also include dividends
included in the investment expenses dividends that are subject to the provisions received from a less-than-20% foreign
deducted on Schedule B, Part I, line 17. of section 832(b)(5)(B). This will include: (i) sales corporation (FSC) that are
all dividends (other than 100% dividends) attributable to income treated as effectively
received on stock acquired after August 7, connected with the conduct of a trade or
Schedule C—Dividends and 1986; and (ii) 100% dividends received on business within the United States
stock acquired after August 7, 1986, to the (excluding foreign trade income) and that
Special Deductions extent that such dividends are attributable qualify for the 70% deduction provided in
Definitions to prorated amounts (see definition on section 245(c)(1)(B).
page 11). Line 7.—Enter the U.S.-source portion of
“Acquisition date” means in the case of In the case of an insurance company dividends received from
investments acquired by direct purchase, that files a consolidated return, the 20%-or-more-owned foreign corporations
the trade date rather than the settlement determination with respect to any dividend and that qualify for the 80% deduction
date. In the case of investments acquired paid by a member to another member of under section 245(a). Also include
other than by direct purchase (such as the affiliated group is made as if no dividends received from a
those acquired through transfers among consolidated return was filed. See section 20%-or-more-owned FSC that are
affiliates, tax-free reorganizations, or the 832(g). attributable to income treated as effectively
liquidation of a subsidiary, etc.), the actual connected with the conduct of a trade or
acquisition date should be used regardless Line 1.—Enter dividends (except those
received on debt-financed stock acquired business within the United States
of the holding period determined under (excluding foreign trade income) and that
section 1223. after July 18, 1984—see section 246A) that
are received from less-than-20%-owned qualify for the 80% deduction provided in
In the case of dividends received from domestic corporations subject to income section 245(c)(1)(B).
affiliates, a special rule applies in tax and that are subject to the 70% Line 8.—Enter dividends received from
determining the acquisition date. This rule deduction under section 243(a)(1). Include wholly owned foreign subsidiaries that are
provides that the portion of any 100% on this line taxable distributions from an eligible for the 100% deduction provided in
dividend which is attributable to prorated IC-DISC or former DISC that are section 245(b) and dividends from a FSC
amounts shall be treated as received with designated as eligible for the 70% that qualify for the deduction provided in
respect to stock acquired on the later of: deduction and certain dividends of Federal section 245(c)(1)(A). In general, the
(a) the date the payor acquired the stock Home Loan Banks. See section 246(a)(2). deduction under section 245(b) applies to
or obligation to which the prorated dividends paid out of the earnings and
amounts are attributable, or (b) the first For dividends received from a regulated
investment company, see section 854 for profits of a foreign corporation for a tax
day on which the payor and payee were year during which:
members of the same affiliated group as the amount subject to the 70% deduction.
defined in section 243(b)(5). Also, if the Report so-called dividends or earnings ● All of its outstanding stock is owned
taxpayer is a member of an affiliated group received from mutual savings banks, etc., (directly or indirectly) by the domestic
filing a consolidated return, its as interest. Do not treat them as dividends. corporation receiving the dividends, and
determination of dividends received is Line 2.—Enter dividends (except those ● All of its gross income from all sources
made as if the group were not filing a received on debt-financed stock acquired is effectively connected with the conduct
consolidated return. after July 18, 1984) received from of a trade or business within the United
“Prorated amounts” means tax-exempt 20%-or-more-owned domestic States. Also include all dividends received
interest and dividends with respect to corporations subject to income tax that are from a FSC that are attributable to export
which a deduction is allowable under subject to the 80% deduction under sales income and that qualify for the 100%
section 243, 244, or 245 (other than 100% section 243(c). deduction under section 245(c).
dividends). Include on this line taxable distributions Line 9.—Enter only those dividends that
“100% dividend” means any dividend if from an IC-DISC or former DISC that are qualify under section 243(b) for the 100%
the percentage used for purposes of considered eligible for the 80% deduction. dividends-received deduction described in
determining the deduction allowable under section 243(a)(3). Corporations taking this
Line 3.—Enter dividends on debt-financed deduction are subject to the provisions of
section 243, 244, or 245(b) is 100%. A stock acquired after July 18, 1984, that are
special rule applies to certain dividends section 1561.
received from domestic and foreign
received by a foreign corporation. corporations subject to income tax and Line 10, column (c).—Enter foreign
that would otherwise be subject to the dividends not reportable on lines 6, 7, and
Lines 1 through 23 8. Exclude distributions of amounts
dividends-received deduction under
For purposes of the 20% ownership test section 243(a)(1), 243(c), or 245(a). constructively taxed in the current year or
on lines 1 through 7, the percentage of Generally, debt-financed stock is stock in prior years under Subpart F (sections
stock owned by the corporation is based that the corporation acquired by incurring 951 through 964).
on voting power and value of the stock. a debt (e.g., it borrowed money to buy the Line 11, column (c).—Include income
Preferred stock described in section stock). constructively received from controlled
1504(a)(4) is not taken into account. Line 4.—Enter dividends received on the foreign corporations under Subpart F. This
Corporations filing a consolidated return preferred stock of a less-than-20%-owned amount should equal the total amounts
should see Regulations sections public utility that is subject to income tax reported on Schedule I of Form 5471.
1.1502-14, 1.1502-26, and 1.1502-27 and is allowed the deduction provided in Line 12, column (c).—Include gross-up for
before completing Schedule C. section 247 for dividends paid. taxes deemed paid under sections 902 and
960.

Page 12
Line 13, column (c).—Include the 4. Multiply line 3 by 80% section 481 over a period not to exceed 4
following: 5. Add lines 16, 19, 21, and 22 (without tax years beginning with the 1st tax year
1. Dividends (other than capital gain and regard to FSC dividends), column (c) beginning on or after September 30, 1990.
and the portion of the deduction on line
exempt-interest dividends) that are 17, column (c) that is attributable to
Lines 2b and 4b.—Include on lines 2b and
received from regulated investment dividends received from 20% 4b, 90% of unearned premiums for
companies and are not subject to the 70% -or-more-owned corporations insurance against default in the payment of
deduction. 6. Enter the smaller of line 4 or line 5. If principal or interest on securities described
2. Dividends from tax-exempt line 5 is greater than line 4, stop here; in section 165(g)(2)(C) (relating to worthless
organizations. enter the amount from line 6 on line securities) with maturities of more than 5
23, column (c) (without regard to FSC years.
3. Dividends (other than capital gain dividends). Do not complete the rest of
dividends) received from a real estate this worksheet Lines 2c and 4c.—The amount of the
investment trust that, for the tax year of discounted unearned premiums as of the
7. Enter the total amount of dividends
the trust in which the dividends are paid, received from 20%-or-more-owned
end of any tax year must be the present
qualifies under sections 856 through 860. corporations that are included on lines value of such premiums (as of such time
2, 3, 5, 7, and 8 (without regard to FSC and separately with respect to premiums
4. Dividends not eligible for a dividends), column (a) received in each calendar year) determined
dividends-received deduction because of by using: (1) the amount of the
8. Subtract line 7 from line 3
the holding period of the stock or an undiscounted unearned premiums at such
obligation to make corresponding 9. Multiply line 8 by 70%
time; (2) the applicable interest rate; and
payments with respect to similar stock. 10. Subtract line 5 from line 23, column (c)
(3) the applicable statutory premium
(without regard to FSC dividends)
Two situations in which the recognition pattern.
dividends-received deduction will not be 11. Enter the smaller of line 9 or line 10
Lines 2d and 4d.—Include on lines 2d and
allowed on any share of stock are: 12. Dividends-received deduction after
4d, 80% of the total of all unearned
limitation (section 246(b)). Add lines
● If the corporation held it 45 days or less 6 and 11. Enter the result on line 23, premiums not reported on lines 2a through
(see section 246(c)(1)(A)), or column (c) (without regard to FSC 2c, or 4a through 4c, respectively.
● To the extent the corporation is under an dividends) A reciprocal or interinsurer required
obligation to make related payments for under state law to reflect unearned
substantially similar or related property. premiums on its annual statement net of
5. Any other taxable dividend income not Schedule E—Premiums premium acquisition expenses, should
properly reported above, (including Earned increase its unearned premiums by the
distributions under section 936(h)(4)). amount of such acquisition expenses prior
Definitions to making the computation on lines 2d and
Line 17.—Dividends received on
4d. See section 832(b)(7)(E).
debt-financed stock acquired after July 18, “Undiscounted unearned premiums” means
1984, are not entitled to the full 70% or the unearned premiums shown in the Line 6.—Transitional adjustments apply to
80% dividends-received deduction. The annual statement filed for the year ending companies which become taxable under
70% or 80% deduction is reduced by a with or in the tax year. section 831(a). See section 832(b)(7)(D) for
percentage that is related to the amount of more information.
“Applicable interest rate” means the
debt incurred to acquire the stock. See
annual rate determined under section
section 246A. Also see section 245(a)
846(c)(2) for the calendar year the
before making this computation for an
premiums are received. Schedule F—Losses
additional limitation which applies to
dividends received from foreign “Applicable statutory premium Incurred
corporations. recognition pattern” means the statutory Line 1. Losses paid.—Enter the total
premium recognition pattern in effect for losses paid on insurance contracts during
Attach a schedule showing how the
the calendar year the premiums are the tax year less salvage and reinsurance
amount on line 17 was figured.
received, and is based on the statutory recovered during the tax year.
Line 23. Total. premium recognition pattern which applies
Lines 2a and 4a. Unpaid losses on life
to premiums received by the corporation in
insurance contracts.—Unpaid losses
Limitations on dividends-received such calendar year. For purposes of the
must be adjusted for recoveries of
deduction preceding sentence, premiums received
reinsurance. The amounts of expected
during any calendar year will be treated as
Generally, line 23, column (c) may not recoveries should be estimated based on
received in the middle of such year.
exceed the amount from the worksheet the facts in each case and the
below. However, in a year in which an NOL Line 1.—Enter gross premiums written on corporation’s experience with similar
occurs, this limitation does not apply even insurance contracts during the tax year, cases.
if the loss is created by the less return premiums and premiums paid
Lines 2b and 4b. Discounted unpaid
dividends-received deduction. See for reinsurance.
losses outstanding.—Enter all discounted
sections 172(d) and 246(b). Lines 2a and 4a.—Include on lines 2a and unpaid losses as defined in section 846.
4a:
Section 846 provides that the amount of
Worksheet for Schedule C, line 23 (Keep 1. All life insurance reserves, as defined discounted unpaid losses must be
for your records) in section 816(b) (but determined under computed separately by line of business
section 807); and (multiple peril lines must be treated as a
1. Enter the amount from Schedule A, line 2. All unearned premiums of a Blue single line of business) and by accident
37 or Schedule B, line 21, whichever Cross or Blue Shield organization to which year and must be equal to the present
applies, without: the NOL deduction section 833 applies. value of such losses determined by using:
(section 172); dividend-received
deduction (sections 243(a)(1), 244(a), Note: If due to the amendments made to 1. The amount of the undiscounted
245(a) or (b), and 247); any adjustment section 832(b)(4) applicable to tax years unpaid losses,
under section 1059; and any capital beginning on or after September 30, 1990, 2. The applicable interest rate, and
loss carryback to the tax year under a corporation is required to change its
section 1212(a)(1) 3. The applicable loss payment pattern.
method of computing reserves, this change
2. Enter the sum of the amounts from line is treated as a change in method of Special rules apply with respect to
22, column (c), (without regard to accounting, initiated by the corporation, unpaid losses related to disability
wholly owned foreign subsidiary and made with the consent of the insurance (other than credit disability
dividends) and line 24, column (c) insurance), noncancelable accident and
Secretary. The corporation must take into
3. Subtract line 2 from line 1 account the net adjustments required by health insurance, cancelable accident and

Page 13
health insurance, and to the international Note: There is a special application of the
and reinsurance lines of business. With “Fresh Start” provision in the case of an
regard to the special rules for discounting insurance company that: Schedule G—Other Capital
unpaid losses on accident and health 1. is exempt from tax for its first tax year Losses
insurance (other than disability income beginning after 1986 under section 501(a)
insurance), unpaid losses are assumed to Capital assets are considered sold or
that is described in any paragraph of exchanged to provide funds to meet
be paid in the middle of the year following section 501(c) or, under section 831(b), is
the accident year. abnormal insurance losses and to pay
taxed only on investment income, and dividends and make similar distributions to
As a general rule, the amount of 2. if the insurance company later policyholders to the extent that the gross
undiscounted unpaid losses means the becomes subject to tax under section receipts from their sale or exchange are
unpaid losses and unpaid loss adjustment 831(a), the rules relating to the Fresh Start not more than the amount by which the
expenses shown in the annual statement. under the discounting provisions are to be sum of dividends and similar distributions
However, see Regulations sections applied by treating the last tax year before paid to policyholders, losses paid, and
1.846-1(a)(1) referring to Regulations the year in which the insurance company expenses paid for the tax year is more
section 1.832-4(b). Under section becomes subject to tax under section than the total on line 9, Schedule G.
832(b)(5)(A), however, unpaid losses must 831(a) as the insurance company’s last tax
be adjusted to take into account estimated Total gross receipts from sales of capital
year beginning before 1987. See section assets (line 12, column (c)) must not be
recoveries due to salvage and reinsurance 1010(e) of the Act of 1988 and Notice
for those losses. If the amounts shown in more than line 10. If necessary, the
88-100. corporation may report part of the gross
the annual statement were determined on
a discounted basis and if the extent to Lines 6 and 7. Estimated salvage and receipts from a particular sale of a capital
which these losses were discounted can reinsurance recoverable.—An insurance asset on this schedule and the rest on
be determined on the basis of information company’s treatment of salvage in Schedule D (Form 1120). Otherwise, do not
disclosed on or with the annual statement, determining its paid and unpaid losses is a include on Schedule D (Form 1120) any
the amount of the undiscounted unpaid method of accounting for Federal income sales reported on this schedule.
losses must be recomputed to eliminate tax purposes. Generally, insurance
any reduction caused by such discounting. companies that did not previously treat
In no event can the amount of discounted salvage in accordance with section Schedule H—Special
unpaid losses determined under section 832(b)(5)(A) are required to change their
846 with respect to any line of business for method of accounting for the first tax year Deduction for Section 833
an accident year exceed the total amount beginning after December 31, 1989. A Organizations and Ending
change in the method of computing losses
of unpaid losses with respect to any line of
incurred, is treated as a change in a Adjusted Surplus
business for an accident year as reported
on the annual statement. Also see method of accounting, initiated by the Line 5. Beginning adjusted surplus.—
Regulations section 1.832-4(d) regarding insurance company, and made with the Enter the amount from Schedule H, Part II,
increasing unpaid losses shown on the consent of the Secretary. In applying line 12 of the 1992 Form 1120–PC.
annual statement by salvage recoverable. section 481 due to a change required by The adjusted surplus as of the beginning
Also see Rev. Proc. 92-77, 1992-2 C.B. section 832(b)(5)(A), only 13% of the net of any tax year is an amount equal to the
454. amount of adjustments (otherwise required adjusted surplus as of the beginning of the
by section 481 to be taken into account) preceding tax year: (1) increased by the
The applicable interest rate for each will be taken into account. In addition, the
calendar year and the applicable loss amount of any adjusted taxable income for
portion of net adjustments required to be the preceding tax year, or (2) decreased by
payment pattern for each accident year for taken into account, must be taken into
each line of business are determined by the amount of any adjusted net operating
account over a period not to exceed 4 tax loss for the preceding tax year.
the Secretary. The applicable interest rate years beginning with the insurance
for 1993 is 8.10%. See Rev. Rul. 92-104, company’s first tax year beginning after For purposes of the computation of the
1992-2, C.B. 212. The applicable loss December 31, 1989. If an insurance adjusted surplus, the terms “adjusted
payment patterns are published in Rev. company, subject to tax under section taxable income” and “adjusted net
Proc. 93-29, 1993-25 I.R.B. 18. Applicable 831, took salvage recoverable into account operating loss” mean the taxable income
interest rates and payment patterns for in determining losses incurred for its last or the net operating loss, respectively,
prior years are published in Rev. Proc. tax year beginning before January 1, 1990, determined with the following
92-47, 1992-1 C.B. 980; Rev. Rul. 91-42, (and reflected such treatment in its annual modifications: (1) without regard to the
1991-2 C.B. 332; Rev. Rul. 90-26, 1990-1 statement) 87% of the discounted amount deduction determined under section
C.B. 124; Rev. Rul. 89-66A, 1989-1 C.B. of estimated salvage recoverable as of the 833(b)(1); (2) without regard to any
220; and Rev. Rul. 88-63, 1988-2 C.B. close of such last tax year will be allowed carryover or carryback to that tax year;
130. as a deduction ratably over its first 4 tax and (3) by increasing gross income by an
However, under section 846(e), years beginning after December 31, 1989. amount equal to the net exempt income
corporations having sufficient historical Also see Rev. Procs. 91-48, 1991-2 C.B. for the tax year.
experience to determine a loss payment 760, 93-30, 1993-25, I.R.B. 26, and Line 6. Special deduction.—The
pattern may, under certain circumstances, Regulations section 1.832-4. deduction for any tax year is limited to
elect to use their own historical See section 11305(c)(4) of the “Revenue taxable income for such tax year
experience. If an election is made, the loss Reconciliation Act of 1990” (“Act of 1990”) determined without regard to such
payment patterns will be based on the for the special rule for overestimates and deduction.
most recent calendar year for which an section 11305(c)(5) of the “Act of 1990” for Note: Under section 833(b)(4), any
annual statement was filed before the the effect on earnings and profits. determination under section 833(b) must
beginning of the accident year. No election be made by only taking into account items
under section 846(e) will apply to any Line 9. Tax-exempt interest subject to
section 832(b)(5)(B).—Enter the amount of from the health-related business of the
international or reinsurance line of corporation.
business. If the corporation elects to use tax-exempt interest received or accrued
its own loss payment patterns, be sure to during the tax year on investments made Line 8a. Adjusted tax-exempt income.—
check the “Yes” column for question 10 in after August 7, 1986. For additional Reduce the total tax-exempt interest
Schedule I, Other Information. For more information regarding the determination of received or accrued during the tax year by
information regarding this election, see the acquisition date of an investment, see any amount (not otherwise deductible)
section 846(e), Regulations section the instructions for Schedule C. which would have been allowable as a
1.846-2, and Rev. Proc. 92-76, 1992-2 deduction for the tax year if such interest
C.B. 453. were not tax-exempt. Enter the result on
line 8a.

Page 14
Line 8b. Adjusted dividends-received 1. 80% of the total combined voting of Form 5472 with the Internal Revenue
deduction.—Reduce the total amount power of all classes of stock entitled to Service Center, Philadelphia, PA 19255.
allowed as a deduction under sections vote or at least 80% of the total value of If the corporation’s tax return is not filed
243, 244, and 245 by the amount of any all classes of stock of each corporation in when due, Form 5472 must nevertheless
decrease in deductions allowable for the the group (except the parent) must be be timely filed at the service center where
tax year because of section 832(b)(5)(B) owned by one or more of the other the tax return is due (with a copy to
when the decrease is caused by the corporations in the group. Philadelphia). When the tax return is filed,
deductions under sections 243, 244, and 2. The common parent must own at attach a copy of the previously filed Form
245. Enter the result on line 8b. least 80% of the total combined voting 5472.
power of all classes of stock entitled to Penalties for failure to file Form 5472. If
vote or at least 80% of the total value of a corporation does not file Form 5472 as
Schedule I—Other all classes of stock of at least one of the described above, a $10,000 penalty
Information other corporations in the group. Stock applies. The penalty also applies for failure
owned directly by other members of the to maintain records as required by
Be sure to answer all of the questions that group is not counted when computing the Regulations section 1.6038A-3.
apply to the corporation. voting power or value.
See section 1563(d)(1) for the definition Question 8
Question 4
of “stock” for purposes of determining Foreign financial accounts.—Check the
Check the “Yes” box for question 4 if stock ownership above. “Yes” box if either 1 or 2 below, applies to
either 1 or 2 below applies to the the corporation. Otherwise, check the “No”
corporation: Question 6
box:
1. The corporation is a subsidiary in an Check the “Yes” box if one foreign person 1. At any time during the 1993 calendar
affiliated group (defined below), but is not owned at least 25% of (a) the total voting year the corporation had an interest in or
filing a consolidated return for the tax year power of all classes of stock of the signature or other authority over a bank,
with that group. corporation entitled to vote, or (b) the total securities, or other financial account in a
2. The corporation is a subsidiary in a value of all classes of stock of the foreign country; and
parent-subsidiary controlled group (defined corporation.
● The combined value of the account(s)
below). The constructive ownership rules of was more than $10,000 at any time during
Any corporation that meets either of the section 318 apply in determining if a the calendar year; AND
requirements above should check the corporation is foreign-owned. See section
6038A(c)(5) and the related regulations. ● The account was NOT with a U.S.
“Yes” box. This applies even if the military banking facility operated by a U.S.
corporation is a subsidiary member of one Enter on line 6a the percentage owned financial institution.
group and the parent corporation of by the foreign person specified in question
another. 6. On line 6b, write the name of the 2. The corporation owns more than 50%
owner’s country. of the stock in any corporation that would
Note: If the corporation is an “excluded answer “Yes” to item 1 above.
member” of a controlled group (see section Note: If there is more than one
1563(b)(2)), it is still considered a member 25%-or-more foreign owner, complete lines Get Form TD F 90-22.1, Report of
of a controlled group for this purpose. 6a and 6b for the foreign person with the Foreign Bank and Financial Accounts, to
highest percentage of ownership. see if the corporation is considered to
Affiliated group.—The term “affiliated have an interest in or signature or other
group” means one or more chains of Foreign person.—The term “Foreign authority over a financial account in a
includible corporations (section 1504(a)) person” means: foreign country.
connected through stock ownership with a ● A foreign citizen or nonresident alien,
common parent corporation. The common If “Yes” is checked for this question, file
parent must be an includible corporation ● An individual who is a citizen of a U.S. Form TD F 90-22.1 by June 30, 1994, with
and the following requirements must be possession (but who is not a U.S. citizen the Department of the Treasury at the
met: or resident), address shown on the form. Form TD F
● A foreign partnership, 90-22.1 is not a tax return, so do not file it
1. The common parent must own directly with Form 1120-PC. You can get Form TD
stock that represents at least 80% of the ● A foreign corporation, F 90-22.1 from an IRS Distribution Center
total voting power and at least 80% of the ● Any foreign estate or trust within the or by calling our toll free number
total value of the stock of at least one of meaning of section 7701(a)(31) or 1-800-TAX-FORM (1-800-829-3676).
the other includible corporations.
● A foreign government (or one of its Also, if “Yes” is checked for this
2. Stock that represents at least 80% of agencies or instrumentalities) to the extent question, write the name of the foreign
the total voting power and at least 80% of that it is engaged in the conduct of a country or countries. Attach a separate
the total value of the stock of each of the commercial activity as described in section sheet if more space is needed.
other corporations (except for the common 892.
parent) must be owned directly by at least Question 13
one of the other includible corporations. Owner’s country.—For individuals, the
term “owners country” means the country Show any tax-exempt interest received or
For this purpose, the term “stock” of residence. For all others, it is the accrued. Include any exempt-interest
generally does not include any stock that country where incorporated, organized, dividends received as a shareholder in a
(a) is nonvoting, (b) is nonconvertible, (c) is created, or administered. mutual fund or other regulated investment
limited and preferred as to dividends and company.
does not participate significantly in Requirement to file Form 5472.—If the
corporate growth, and (d) has redemption corporation checked “Yes” to Question 6,
Question 14
and liquidation rights that do not exceed it may have to file Form 5472, Information
the issue price of the stock (except for a Return of a 25% Foreign-Owned U.S. Check the box on line 14 if the corporation
reasonable redemption or liquidation Corporation or a Foreign Corporation elects under section 172(b)(3) to forgo the
premium). Engaged in a U.S. Trade or Business. carryback period for an NOL. If you check
Generally, a 25% foreign-owned this box, do not attach the statement
Parent-subsidiary controlled group.— corporation that had a reportable described in Temporary Regulations
The term “parent-subsidiary controlled transaction with a foreign or domestic section 7.0(d).
group” means one or more chains of related party during the tax year must file
corporations connected through stock Form 5472. Form 5472 must be filed by Question 15
ownership (section 1563(a)(1)). Both of the the due date of the corporation’s income
following requirements must be met: Enter the amount of the net operating loss
tax return (including extensions). Attach (NOL) carryover to the tax year from prior
Form 5472 to the tax return and file a copy
Page 15
years, regardless of whether any of the Line 2d. Section 824(d)(1)(E).—Enter the
loss is used to offset income on this amount by which the total amount in the
return. The amount to enter is the total of account exceeds the greater of: Schedule M-1—
all NOLs generated in prior years but not (i) 10% of premiums earned on Reconciliation of Income
used to offset income (either as a insurance contracts during the tax year (as
carryback or carryover) to a tax year prior (Loss) per Books With
defined in section 832(b)(4)) minus
to 1993. Do not reduce the amount by any dividends to policyholders (as defined in Income per Return
NOL deduction reported on Schedule A, section 832(c)(11)), or Line 5c. Travel and entertainment.—
line 36b. Pub. 536 has a worksheet for
(ii) the total amount in the account at the Include on line 5c any of the following:
figuring a corporation’s NOL carryover.
close of the preceding tax year. ● 20% of meals and entertainment not
allowed under section 274(n).
Schedule J—Protection ● Expenses for the use of an
Schedule L—Balance Sheets entertainment facility.
Against Loss Account
Note: All insurance companies required to ● The part of business gifts over $25.
Section 1024 of P.L. 99-514 repealed file Form 1120-PC must complete
section 824 relating to the protection ● Expenses over $2,000 of an individual
Schedule L. allocable to conventions on cruise ships.
against loss account (PAL account).
Line 5. Tax-exempt securities.—Include ● Employee achievement awards over
However, PAL account balances are
on this line: $400.
includible in income as though section 824
were still in effect. 1. State and local government ● The cost of entertainment tickets over
obligations, the interest on which is face value (also subject to 20%
Line 2a. Section 824(d)(1)(B).—Enter the
excludable from gross income under disallowance under section 274(n)).
amount, if any, by which the sum of the
section 103(a), and
investment loss and the statutory ● The cost of skyboxes over the face value
underwriting loss for the tax year exceeds 2. Stock in a mutual fund or other of non-luxury box seat tickets.
the sum of the statutory underwriting regulated investment company that
distributed exempt-interest dividends ● The part of the cost of luxury water
income and the taxable investment income travel not allowed under section 274(m).
for the tax year. during the tax year of the corporation.
Line 18. Insurance liabilities.—Include on ● Expenses for travel as a form of
Line 2b. Section 824(d)(1)(C).—Enter (in education.
the order the losses occurred) amounts this line:
equal to the unused loss carryovers to the ● Undiscounted unpaid losses, ● Other travel and entertainment expenses
tax year. not allowed as a deduction.
● Loss adjustment expenses, and
Line 2c. Section 824(d)(1)(D).—Enter any Line 7a. Tax exempt-interest.—Include as
● Unearned premiums. interest on line 7a any exempt-interest
amount remaining in the account which
was added to the account for the fifth See section 846 for more information. dividends received as a shareholder in a
preceding tax year minus one-half of the mutual fund or other regulated investment
amount remaining in the account for such company.
tax year which was added by section
824(a)(1)(B).

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