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 Inter nal Revenue Code unless otherwise noted.

Paperwork Reduction Act Internet, telnet to fedworld.gov. or, for file Life insurance companies.—Life
transfer protocol services, connect to insurance companies should file Form
Notice ftp.fedworld.gov. If you are using the 1120-L, U.S. Life Insurance Company
We ask for the information on this form to World Wide Web, connect to Income Tax Return.
carry out the Internal Revenue laws of the http://www.ustreas.gov. FedWorld’s help
United States. You are required to give us desk offers technical assistance on When To File
the information. We need it to ensure that accessing IRIS (not tax help) during regular
you are complying with these laws and to business hours at 703-487-4608. The IRIS In general, a corporation must file its
allow us to figure and collect the right menus offer information on available file income tax return by the 15th day of the
amount of tax. formats and software needed to read and 3rd month after its tax year ends. A new
print files. You must print the forms to use corporation filing a short period return
The time needed to complete and file must generally file by the 15th day of the
them; the forms are not designed to be
this form will vary depending on individual 3rd month after the short period ends. A
filled out on-screen.
circumstances. The estimated average corporation that has dissolved must
times are: Tax forms, instructions, and publications
are also available on CD-ROM, including generally file by the 15th day of the 3rd
Recordkeeping 104 hr., 31 min. prior-year forms starting with the 1991 tax month after the date it dissolved. A foreign
year. For ordering information and software corporation that does not maintain an
Learning about the office or place of business in the U.S. has
law or the form 33 hr., 53 min. requirements, contact the Government
Printing Office’s Superintendent of until the 15th day of the 6th month after
Preparing the form 55 hr., 41 min. Documents (202-512-1800) or Federal the end of its tax year to file.
Copying, assembling, Bulletin Board (202-512-1387). If the due date falls on a Saturday,
and sending the Sunday, or legal holiday, the corporation
form to the IRS 5 hr., 22 min. may file on the next business day.
General Instructions Extension.—File Form 7004, Application
If you have comments concerning the for Automatic Extension of Time To File
accuracy of these time estimates or Purpose of Form Corporation Income Tax Return, to request
suggestions for making this form simpler, a 6-month extension of time to file.
we would be happy to hear from you. You Use Form 1120-PC, U.S. Property and
can write to the Tax Forms Committee, Casualty Insurance Company Income Tax
Western Area Distribution Center, Rancho Return, to report income, gains, losses, Where To File
Cordova, CA 95743-0001. DO NOT send deductions, credits, and to figure the Use the following
income tax liability of insurance companies If the corporation’s
the tax form to this office. Instead, see principal business, office,
Internal Revenue
Where To File. other than life insurance companies. or agency is located in
Service Center
address
Ä Ä
Who Must File
Changes To Note Every domestic nonlife insurance company
New Jersey, New York
(New York City and
● Corporations that had total deposits of and every foreign corporation that would counties of Nassau, Holtsville, NY 00501
withheld income, social security, and qualify as a nonlife insurance company Rockland, Suffolk, and
Medicare taxes during calendar year 1993 subject to taxation under section 831, if it Westchester)
or 1994 in excess of $47 million are were a U.S. corporation, must file Form New York (all other
required to use the electronic funds 1120-PC. This includes organizations counties), Connecticut,
transfer (EFT) system for depository taxes described in section 501(m)(1) that provide Maine, Massachusetts, New Andover, MA 05501
due in 1996. Corporations required to use commercial-type insurance and Hampshire, Rhode Island,
the EFT system in 1995 must continue to organizations described in section 833. Vermont
use the EFT system in 1996. For details, Exceptions.—A nonlife insurance company Florida, Georgia, South
see Depository Method of Tax Payment. Atlanta, GA 39901
that is: Carolina
● You can use your computer to get forms ● Exempt under section 501(c)(15) should Kansas, New Mexico,
and publications. If you subscribe to an Austin, TX 73301
file Form 990, Return of Organization Oklahoma, Texas
on-line service, ask if IRS information is Exempt from Income Tax.
available and if so, how to access it. Indiana, Kentucky, Michigan
Cincinnati, OH 45999
● Subject to taxation under section 831, Ohio, West Virginia
You can also get information through and disposes of its insurance business and
IRIS, the Internal Revenue Information Illinois, Iowa, Minnesota,
reserves, or otherwise ceases to be taxed Missouri, Wisconsin
Kansas City, MO 64999
Service, on FedWorld, a government under section 831, but continues its
services bulletin board. Tax forms, corporate existence while winding up and Alabama, Arkansas,
instructions, publications, and other IRS liquidating its affairs, should file Form Louisiana, Mississippi, Memphis, TN 37501
information, are available through IRIS. North Carolina, Tennessee
1120, U.S. Corporation Income Tax Return.
IRIS is accessible directly by calling
FedWorld at 703-321-8020. On the
Cat. No. 64537I
 the method used must clearly show funds transfer (EFT) system, deposit
Alaska, Arizona, California
(counties of Alpine, Amador, taxable income. corporation income tax payments (and
Butte, Calaveras, Colusa, Generally, a corporation (other than a estimated tax payments) with a Form
Contra Costa, Del Norte, El qualified personal service corporation) 8109, Federal Tax Deposit Coupon. Do not
Dorado, Glenn, Humboldt, must use the accrual method of send deposits directly to an IRS office.
Lake, Lassen, Marin, Mail or deliver the completed Form 8109
Mendocino, Modoc, Napa, accounting if its average annual gross
receipts exceed $5 million. See section with the payment to a qualified depository
Nevada, Placer, Plumas,
Sacramento, San Joaquin, 448(c). for Federal taxes or to the Federal Reserve
Ogden, UT 84201 bank (FRB) servicing the corporation’s
Shasta, Sierra, Siskiyou, Under the accrual method, an amount is
Solano, Sonoma, Sutter, geographic area. Make checks or money
Tehama, Trinity, Yolo, and
includible in income when all the events orders payable to that depository or FRB.
Yuba), Colorado, Idaho, have occurred that fix the right to receive
Montana, Nebraska, the income and the amount can be To help ensure proper crediting, write
Nevada, North Dakota, determined with reasonable accuracy. See the corporation’s employer identification
Oregon, South Dakota, Regulations section 1.451-1(a) for details. number, the tax period to which the
Utah, Washington, deposit applies, and “Form 1120-PC” on
Wyoming Generally, an accrual basis taxpayer can the check or money order. Be sure to
deduct accrued expenses in the tax year in darken the “1120” box on the coupon.
California (all other which: (1) all events that determine the
Fresno, CA 93888 Records of these deposits will be sent to
counties), Hawaii liability have occurred, (2) the amount of the IRS.
Delaware, District of the liability can be figured with reasonable
Columbia, Maryland, Philadelphia, PA 19255 accuracy, and (3) economic performance A penalty may be imposed if the
Pennsylvania, Virginia takes place with respect to the expense. deposits are mailed or delivered to an IRS
There are exceptions to the economic office rather than to an authorized
Corporations with their principal place of performance rule for certain items, depository or FRB.
business outside the United States or including recurring expenses. See section For more information on deposits, see
claiming a possessions tax credit (section 461(h) and the related regulations for the the instructions in the coupon booklet
936) must file with the Internal Revenue rules for determining when economic (Form 8109) and Pub. 583, Starting a
Service Center, Philadelphia, PA 19255. performance takes place. Business and Keeping Records.
A group of corporations located in Generally, the corporation may change Caution: If the corporation owes tax when
several service center regions will often the method of accounting used to report it files Form 1120-PC, do not include the
keep all the books and records at the taxable income (for income as a whole or payment with the tax return. Instead, mail
principal office of the managing for any material item) only by getting or deliver the payment with Form 8109 to a
corporation. In this case, the income tax consent on Form 3115, Application for qualified depository or FRB, or use the EFT
returns of the corporations may be filed Change in Accounting Method. For more system, if applicable.
with the service center for the region in information, get Pub. 538, Accounting
which the principal office is located. Generally, corporations that had total
Periods and Methods. deposits of withheld income, social
security, and Medicare taxes during
Who Must Sign Rounding Off to Whole calendar year 1993 or 1994 that exceeded
$47 million are required to deposit all
The return must be signed and dated by Dollars depository taxes due in 1996 by EFT.
the president, vice-president, treasurer,
assistant treasurer, chief accounting The corporation may show amounts on the TAXLINK, an electronic remittance
officer, or any other corporate officer (such return and accompanying schedules as processing system, must be used to make
as tax officer) authorized to sign. whole dollars. To do so, drop any amount deposits by EFT. Corporations that are not
Receivers, trustees, or assignees must sign less than 50 cents and increase any required to make deposits by EFT may
and date any return filed on behalf of a amount from 50 cents through 99 cents to voluntarily participate in TAXLINK. For
corporation. the next higher dollar. more details on TAXLINK, call the TAXLINK
HELPLINE at 1-800-829-5469 (for TAXLINK
If a corporate officer prepared Form information only), or write to: Internal
1120-PC, the Paid Preparer’s space should Recordkeeping Revenue Service, Cash Management
remain blank. Anyone who prepares Form Keep the corporation’s records for as long Office, P.O. Box 47699, Stop 295,
1120-PC but does not charge the as they may be needed for the Doraville, GA 30362.
corporation, should not sign the return. administration of any provision of the
Generally, anyone who is paid to prepare Internal Revenue Code. Usually, records
the return must sign it and fill in the Paid that support an item of income, deduction,
Estimated Tax Payments
Preparer’s Use Only area. or credit on the return must be kept for 3 Generally, a corporation must make
The paid preparer must complete the years from the date the return is due or installment payments of estimated tax if it
required preparer information and: filed, whichever is later. Keep records that expects its estimated tax (income tax
● Sign it, by hand, in the space provided verify the corporation’s basis in property minus credits) to be $500 or more. For a
for the preparer’s signature. (Signature for as long as they are needed to figure calendar or fiscal year corporation, the
stamps and labels are not acceptable.) the basis of the original or replacement installments are due by the 15th day of the
property. 4th, 6th, 9th, and 12th months of the tax
● Give a copy of the return to the year. If any date falls on a Saturday,
taxpayer. The corporation should also keep copies
of any returns it has filed. They help in Sunday, or legal holiday, the installment is
preparing future returns and in making due on the next regular business day. Use
Accounting Methods computations when filing an amended Form 1120-W, Estimated Tax for
Figure taxable income using the method of return. Corporations, as a worksheet to compute
accounting regularly used in keeping the estimated tax. Use the deposit coupons
(Form 8109) to make deposits of estimated
corporation’s books and records. Depository Method of Tax tax. For information on estimated tax
Permissible methods include the cash,
accrual, or any other method authorized by Payment payments, including penalties that apply if
the Internal Revenue Code. The gross the corporation fails to make required
The corporation must pay the tax due in payments, see the instructions for line 15
amounts of underwriting and investment full when the return is filed but no later
income should be computed on the basis on page 7.
than the 15th day of the 3rd month after
of the underwriting and investment exhibit the end of the tax year. If the corporation overpaid estimated
of the NAIC annual statement. In all cases, tax, it may be able to get a quick refund
If the corporation is not required to (or by filing Form 4466, Corporation
does not voluntarily) use the electronic
Page 2
Application for Quick Refund of Other Forms, Returns, and discount, patronage dividends, and
Overpayment of Estimated Tax. The distributions from profit-sharing plans,
overpayment must be at least 10% of Statements That May Be retirement plans, individual retirement
expected income tax liability and at least Required arrangements, insurance contracts, etc.,
$500. To apply for a quick refund, file Form and proceeds from real estate
4466 before the 16th day of the 3rd month Form W-2, Wage and Tax Statement, and transactions. Also use these returns to
after the end of the tax year, but before Form W-3, Transmittal of Income and Tax report amounts received as a nominee for
the corporation files its income tax return. Statements. another person.
Do not file Form 4466 before the end of Form 940 or Form 940-EZ, Employer’s For more information, see the
the corporation’s tax year. Annual Federal Unemployment (FUTA) Tax instructions for Form 1099, 1098, 5498,
Caution: Foreign insurance companies, see Return. The corporation may be liable for and W-2G.
Notice 90-13, 1990-1 C.B. 321, before FUTA tax and may have to file Form 940 or
940-EZ if it paid wages of $1,500 or more Note: Every corporation must file Form
computing estimated tax. 1099-MISC if, in the course of its trade or
in any calendar quarter during the calendar
year (or the preceding calendar year) or business, it makes payments of rents,
Interest and Penalties one or more employees worked for the commissions, or other fixed or
corporation for some part of a day in any determinable income (see section 6041)
Interest.—Interest is charged on taxes totaling $600 or more to any one person
paid late, even if an extension of time to 20 different weeks during the calendar year
(or the preceding calendar year). during the calendar year.
file is granted. Interest is also charged on
penalties imposed for failure to file, Form 941, Employer’s Quarterly Federal Form 5452, Corporate Report of
negligence, fraud, gross valuation Tax Return. Employers must file this form Nondividend Distributions.
overstatements, and substantial quarterly to report income tax withheld and Form 5498, Individual Retirement
understatements of tax from the due date employer and employee social security and Arrangement Information. Use this form to
(including extensions) to the date of Medicare taxes. report contributions (including rollover
payment. The interest charge is figured at Caution: See Trust fund recovery penalty contributions) to an individual retirement
a rate determined under section 6621. on page 4. arrangement (IRA) and the value of an IRA
Penalty for late filing of return.—A or simplified employee pension (SEP)
Form 945, Annual Return of Withheld account.
corporation that does not file its tax return Federal Income Tax. Form 945 is used to
by the due date, including extensions, may report income tax withholding from Form 5713, International Boycott Report,
be penalized 5% of the unpaid tax for nonpayroll distributions or payments. for persons having operations in or related
each month or part of a month the return Nonpayroll payments include pensions, to “boycotting” countries. Also, persons
is late, up to a maximum of 25% of the annuities, IRAs, military retirement, who participate in or cooperate with an
unpaid tax. The minimum penalty for a gambling winnings, Indian gaming profits, international boycott may have to complete
return that is over 60 days late is the and backup withholding. Schedule A or Schedule B and Schedule C
smaller of the tax due or $100. The penalty of Form 5713 to compute their loss of the
will not be imposed if the corporation can Caution: See Trust fund recovery penalty following items: the foreign tax credit, the
show that the failure to file on time was on page 4. deferral of earnings of a controlled foreign
due to reasonable cause. Corporations that Form 966, Corporate Dissolution or corporation, IC-DISC benefits, and FSC
file late must attach a statement explaining Liquidation. benefits.
the reasonable cause. Form 1042, Annual Withholding Tax Return Form 8264, Application for Registration of
Penalty for late payment of tax.—A for U.S. Source Income of Foreign a Tax Shelter. Tax shelter organizers use
corporation that does not pay the tax when Persons, and Form 1042-S, Foreign Form 8264 to register tax shelters with the
due may have to pay a penalty of 1⁄2 of 1% Person’s U.S. Source Income Subject to IRS to get a tax shelter registration
of the unpaid tax for each month or part of Withholding. Use these forms to report and number.
a month the tax is not paid, up to a send withheld tax on payments or Form 8271, Investor Reporting of Tax
maximum of 25% of the unpaid tax. The distributions made to nonresident alien Shelter Registration Number. Taxpayers
penalty will not be imposed if the individuals, foreign partnerships, or foreign who have acquired an interest in a tax
corporation can show that the failure to corporations to the extent such payments shelter, which is required to be registered,
pay on time was due to reasonable cause. or distributions constitute gross income use this form to report the tax shelter’s
Other penalties.—Other penalties can be from sources within the U.S. (see sections registration number. Form 8271 must be
imposed for negligence, substantial 861 through 865). For more information, attached to any tax return (including an
understatement of tax, and fraud. See see sections 1441 and 1442, and Pub. application for tentative refund (Form
sections 6662 and 6663. 515, Withholding of Tax on Nonresident 1139, Corporation Application for Tentative
Aliens and Foreign Corporations. Refund) or an amended return) on which a
Form 1096, Annual Summary and deduction, credit, loss, or other tax benefit
Unresolved Tax Problems Transmittal of U.S. Information Returns. attributable to a tax shelter is taken or any
The IRS has a Problem Resolution Form 1098, Mortgage Interest Statement. income attributable to a tax shelter is
Program for taxpayers who have been This form is used to report the receipt from reported.
unable to resolve their problems with the any individual of $600 or more of mortgage Form 8275, Disclosure Statement.
IRS. If the corporation has a tax problem it interest and points in the course of the Taxpayers and income tax return preparers
has been unable to resolve through normal corporation’s trade or business for any file Form 8275 to disclose items or
channels, write to the corporation’s local calendar year. positions, (except those contrary to a
IRS district director or call the regulation—see Form 8275-R, below), that
corporation’s local IRS office and ask for Forms 1099-A, B, C, DIV, INT, MISC,
OID, PATR, R, and S. Use these are not otherwise adequately disclosed on
Problem Resolution Assistance. a tax return. The disclosure is made to
Hearing-impaired persons who have information returns to report
abandonments, acquisitions through avoid parts of the accuracy-related penalty
access to TDD equipment may call imposed for disregard of rules or
1-800-829-4059 to ask for help. The foreclosure, proceeds from broker and
barter exchange transactions, discharges substantial understatement of tax. Form
Problem Resolution office will ensure that 8275 is also used for disclosures relating
your problem receives proper attention. of indebtedness, certain dividends and
distributions, interest payments, payments to preparer penalties for understatements
Although the office cannot change the tax due to unrealistic positions or disregard of
law or make technical decisions, it can for certain fishing boat crew members,
medical and dental health care payments, rules.
help clear up problems that resulted from
previous contacts. direct sales of consumer goods for resale, Form 8275-R, Regulation Disclosure
miscellaneous income payments, Statement, is used to disclose any item on
nonemployee compensation, original issue a tax return for which a position has been

Page 3
taken that is contrary to Treasury those companies as includible 3. It owns stock in a foreign corporation
regulations. corporations. The life insurance companies that is a controlled foreign corporation for
Form 8281, Information Return for Publicly must have been members of the group for an uninterrupted period of 30 days or more
Offered Original Issue Discount the 5 tax years immediately preceding the during the tax year of the foreign
Instruments. Issuers of public offerings of tax year for which the election is made. corporation that ends with or within its tax
debt instruments generally must file this See section 1504(c)(2) and Regulations year, and it owned that stock on the last
form within 30 days of the issuance of the section 1.1502-47(d)(12). day of the foreign corporation’s tax year.
debt instrument. The parent corporation of an affiliated Foreign ownership in a domestic
Form 8300, Report of Cash Payments group of corporations must attach Form corporation.—A domestic corporation that
Over $10,000 Received in a Trade or 851, Affiliations Schedule, to the is 25% or more foreign-owned may have
Business. File this form to report the consolidated return. For the first year a to file Form 5472, Information Return of a
receipt of more than $10,000 in cash or consolidated return is filed, each subsidiary 25% Foreign-Owned U.S. Corporation or a
foreign currency in one transaction or a must attach Form 1122, Authorization and Foreign Corporation Engaged in a U.S.
series of related transactions. Consent of Subsidiary Corporation To Be Trade or Business. See the instructions on
Included in a Consolidated Income Tax page 16 for more information.
Cashier’s checks, bank drafts, and Return.
money orders with face amounts of Transfers to a corporation controlled by
$10,000 or less are considered cash under File supporting statements for each the transferor.—If a person receives stock
certain circumstances. For more corporation included in the consolidated of a corporation in exchange for property,
information, see Form 8300 and return. Use columns to show the following, and no gain or loss is recognized under
Regulations section 1.6050I-1(c). both before and after adjustments: section 351, the person (transferor) and the
● Items of gross income and deductions. transferee must each attach to their tax
Form 8594, Asset Acquisition Statement returns the information required by
under Section 1060, must be filed by both ● A computation of taxable income. Regulations section 1.351-3.
the purchaser and seller of a group of ● Balance sheets as of the beginning and
assets constituting a trade or business if end of the tax year. Attachments
goodwill or a going concern value
attaches, or could attach, to such assets ● A reconciliation of income per books Attach Form 4136, Credit for Federal Tax
and if the purchaser’s basis in the assets with income per return. Paid on Fuels, after page 8, Form
is determined only by the amount paid for ● A reconciliation of retained earnings. 1120-PC. Attach schedules in alphabetical
the assets. Enter the totals for the consolidated order and other forms in numerical order
group on Form 1120-PC. Attach after Form 4136.
Form 8816, Special Loss Discount
Account and Special Estimated Tax consolidated balance sheets and a To help us in processing the return,
Payments for Insurance Companies. This reconciliation of consolidated retained complete every applicable entry space on
form must be filed by any insurance earnings. Form 1120-PC. Do not write “See
company that elects to take an additional For more information on consolidated attached” instead of completing the entry
deduction under section 847. returns, see the regulations under section spaces. If you need more space on the
1502. forms or schedules, attach separate
Form 8842, Election To Use Different
sheets. Use the same size and format as
Annualization Periods for Corporate Note: If a nonlife insurance company is a on the printed forms. But show the
Estimated Tax. Corporations use Form member of an affiliated group, file Form corporation’s totals on the printed forms.
8842 for each year they want to elect one 1120-PC as an attachment to the Attach these separate sheets after all the
of the annualization periods in section consolidated return in lieu of filing schedules and forms. Be sure to put the
6655(e)(2)(C) for figuring estimated tax supporting statements. Write across the corporation’s name and EIN on each
payments under the annualized income top of page 1 of Form 1120-PC, sheet.
installment method. “Supporting Statement to Consolidated
Form 8849, Claim for Refund of Excise Return.”
Taxes. Use this form in the first three
quarters of the tax year to claim a refund Statements Specific Instructions
of excise taxes paid on Form 720, Form NAIC annual statement.—Regulations Period Covered.—File the 1995 return for
730, or Form 2290. See the instructions to section 1.6012-2(c) requires that the NAIC calendar year 1995.
Form 8849 and Pub. 378, Fuel Tax Credits annual statement be filed with Form
and Refunds, for more information. 1120-PC. A penalty for the late filing of a Address and Employer
Trust fund recovery penalty.—This return may be imposed for not including Identification Number
penalty may apply if certain excise, the annual statement when the return is
income, social security, and Medicare filed. Address.—Include the suite, room, or
taxes that must be collected or withheld other unit number after the street address.
Stock ownership in foreign
are not collected or withheld, or these corporations.—Attach the statement If the Post Office does not deliver mail to
taxes are not paid to IRS. These taxes are required by section 551(c) if (a) the the street address and the corporation has
generally reported on Forms 720, 941, 943, corporation owned 5% or more in value of a P.O. box, show the box number instead
or 945. The trust fund recovery penalty the outstanding stock of a foreign personal of the street address.
may be imposed on all persons who are holding company and (b) the corporation Note: If a change of address occurs after
determined by the IRS to have been was required to include in its gross income the return is filed, use Form 8822, Change
responsible for collecting, accounting for, any undistributed foreign personal holding of Address, to notify the IRS of the new
and paying over these taxes, and who company income from a foreign personal address.
acted willfully in not doing so. The penalty holding company. Item A. Employer identification number
is equal to the unpaid trust fund tax. See
A corporation may have to file Form (EIN).—Show the correct EIN in item A on
the instructions for Form 720, Pub. 15
5471, Information Return of U.S. Persons page 1 of Form 1120-PC. If the
(Circular E), Employer’s Tax Guide, for
With Respect to Certain Foreign corporation does not have an EIN, it
details, including the definition of
Corporations, if any of the following should apply for one on Form SS-4,
responsible persons.
applies: Application for Employer Identification
Consolidated Return 1. It controls a foreign corporation. Number. Form SS-4 can be obtained at
most IRS or Social Security Administration
If an affiliated group of corporations 2. It acquires, disposes of, or owns 5% (SSA) offices. If the corporation has not
includes one or more domestic life or more in value of the outstanding stock received its EIN by the time the return is
insurance companies taxed under section of a foreign corporation. due, write “Applied for” in the space
801, the common parent may elect to treat

Page 4
 in the $25,000 taxable income bracket on
Tax Computation Worksheet for Members of a Controlled Group line 3a(2), and $4,962,500 (one-half of
(Keep for your records.) $9,925,000) in the $9,925,000 taxable
Note: Each member of a controlled group must compute the tax using this worksheet. income bracket on line 3a(3).
Unequal apportionment plan. Members of
1. Enter taxable income (line 1 or line 2, page 1) a controlled group may elect an unequal
2. Enter line 1 above or the corporation’s share of the $50,000 taxable income bracket, apportionment plan and divide the taxable
whichever is less income brackets as they want. There is no
3. Subtract line 2 from line 1 need for consistency among taxable
4. Enter line 3 or the corporation’s share of the $25,000 taxable income bracket, whichever
income brackets. Any member of the
is less controlled group may be entitled to all,
some, or none of the taxable income
5. Subtract line 4 from line 3
bracket. However, the total amount for all
6. Enter line 5 or the corporation’s share of the $9,925,000 taxable income bracket, members of the controlled group cannot
whichever is less be more than the total amount in each
7. Subtract line 6 from line 5 taxable income bracket.
8. Multiply line 2 by 15%
Line 3b
9. Multiply line 4 by 25%
Additional 5% tax. Members of a
10. Multiply line 6 by 34%
controlled group are treated as one
11. Multiply line 7 by 35% corporation to figure the additional 5% tax
12. If the taxable income of the controlled group exceeds $100,000, enter this member’s that must be paid by corporations with
share of the smaller of 5% of the taxable income in excess of $100,000 or $11,750. See taxable income over $100,000. If the
Additional 5% tax below additional tax applies, each member of the
13. If the taxable income of the controlled group exceeds $15 million, enter this member’s controlled group will pay that tax based on
share of the smaller of 3% of the taxable income in excess of $15 million, or $100,000. the part of the amount that is used in each
See Additional 3% tax below taxable income bracket to reduce that
14. Add lines 8 through 13. Enter here and on line 4, page 1 member’s tax. See section 1561(a). Each
member of the group must enter its share
of the additional 5% tax on line 3b(1) and
attach to its tax return a schedule that
provided for the EIN. See Pub. 583 for line 2, page 1. All other corporations
shows the taxable income of the entire
more information. should complete Schedule A (ignore
group as well as how it figured its share of
Item D.—Indicate a final return, change of Schedule B) and enter on line 1, page 1,
the additional 5% tax.
address, or amended return by checking the amount from Schedule A, line 37.
Additional 3% tax.—Members of a
the appropriate box.
controlled group are treated as one
Item E.—Check the applicable box if the Tax Computation and corporation to figure the additional 3% tax
corporation is a foreign corporation and Payments that must be paid by corporations with
elects under: (1) section 953(c)(3)(C) to taxable income over $15 million. If the
treat its related person insurance income Note: Members of a controlled group must
additional tax applies, each member of the
as effectively connected with the conduct attach a statement showing the
controlled group will pay that tax based on
of a trade or business in the U.S., or (2) computation of the tax entered on line 4.
the part of the amount that is used in each
section 953(d) to be treated as a domestic taxable income bracket to reduce that
corporation. Generally, a foreign Line 3a
member’s tax. See section 1561(a). Each
corporation making either election must file Members of a controlled group.—A member of the group must enter its share
its return with the Internal Revenue Service member of a controlled group, as defined of the additional 3% tax on line 3b(2) and
Center, Philadelphia, PA 19255. See Notice in section 1563, must check the box on attach to its tax return a schedule that
87-50, 1987-2 C.B. 357, and Notice 89-79, line 3 and complete lines 3a and 3b on shows the taxable income of the entire
1989-2 C.B. 392, for the procedural rules page 1. group as well as how it figured its share of
election statement formats, and filing Members of a controlled group are the additional 3% tax.
addresses for making the respective entitled to one $50,000, one $25,000, and
elections under section 953(c)(3)(C) or one $9,925,000 taxable income bracket Line 4
section 953(d). amount (in that order) on line 3a. Most corporations figure their tax by using
Note: Once either election is made, it will When a controlled group adopts or later the Tax Rate Schedule below. Exceptions
apply to the tax year for which it is made amends an apportionment plan, each apply to members of a controlled group.
and all subsequent tax years unless member must attach to its tax return a See the instructions below the Tax Rate
revoked with the consent of the Secretary. copy of its consent to this plan. The copy Schedule and the worksheet above for
Also, any loss of a foreign corporation (or an attached statement) must show the more information.
electing to be treated as a domestic part of the amount in each taxable income
insurance company under section 953(d), bracket apportioned to that member. See
will be treated as a dual consolidated loss Tax Rate Schedule
Regulations section 1.1561-3(b) for other
and may not be used to reduce the taxable requirements and for the time and manner If the amount on
income of any other member of the of making the consent. line 1 or line 2, page 1,
affiliated group for this tax year or any Form 1120-PC is:
other tax year. Equal apportionment plan. If no Of the
apportionment plan is adopted, members But not amount
of a controlled group must divide the Over— over— Tax is: over—
Taxable Income amount in each taxable income bracket
equally among themselves. For example, $0 $50,000 15% $0
Line 1, Taxable income, and line 2, 50,000 75,000 $ 7,500 + 25% 50,000
taxable investment income.—If the controlled group AB consists of 75,000 100,000 13,750 + 34% 75,000
corporation is a small company as defined Corporation A and Corporation B. They do 100,000 335,000 22,250 + 39% 100,000
in section 831(b)(2) and elects under not elect an apportionment plan. Therefore, 335,000 10,000,000 113,900 + 34% 335,000
section 831(b)(2)(A)(ii) to be taxed on both Corporation A and Corporation B are 10,000,000 15,000,000 3,400,000 + 35% 10,000,000
entitled to $25,000 (one-half of $50,000) in 15,000,000 18,333,333 5,150,000 + 38% 15,000,000
taxable investment income, complete 18,333,333 ----- 35% 0
Schedule B (ignore Schedule A) and enter the $50,000 taxable income bracket on line
the amount from Schedule B, line 21, on 3a(1) and to $12,500 (one-half of $25,000)

Page 5
Deferred tax amount of a shareholder in Include the credit in the amount shown Indian employment credit. A corporation
a passive foreign investment company on line 7b. On the line to the left of the may be able to claim a credit of 20% of a
(section 1291).—If the corporation was a entry space, write the amount of the credit limited amount of the wages and health
shareholder in a passive foreign investment and identify it as a section 936 credit. insurance costs it pays or incurs for
company (PFIC), and the corporation Nonconventional source fuel credit.—A qualified employees. A qualified employee
received an excess distribution or disposed credit is allowed for the sale of qualified is a member of an enrolled Indian tribe (or
of its investment in the PFIC during the fuels produced from a nonconventional whose spouse is a member), who also
year, it must include the total increase in source. Section 29 contains a definition of meets certain other qualifications. See
taxes due under section 1291(c)(2) in the qualified fuels, provisions for figuring the Form 8845, Indian Employment Credit, and
amount entered on line 4. On the dotted credit, and other special rules. Attach a section 45A.
line to the left of line 4, write “Section separate schedule to the return showing Credit for employer social security and
1291” and the amount. the computation of the credit. Medicare taxes paid on certain
Do not include on line 4 any interest due See Form 8827 if any of the 1994 credit employee tips. Food and beverage
under section 1291(c)(3). Instead, write the was disallowed solely because of the establishments may claim a credit equal to
amount of interest owed in the bottom tentative minimum tax limitation. Also, see the employer’s social security and
margin of page 1 and label it “Section section 53(d). Medicare obligations attributable to tips in
1291 interest.” For details, see Form 8621, excess of those treated as wages for
Return by a Shareholder of a Passive Qualified electric vehicle (QEV) credit.— purposes of the minimum wage laws. See
Foreign Investment Company or Qualified Include on line 7b any credit from Form Form 8846, Credit for Employer Social
Electing Fund. 8834, Qualified Electric Vehicle Credit. Security and Medicare Taxes Paid on
Vehicles that qualify for this credit are not Certain Employee Tips, and section 45B.
Additional tax under section 197(f).—A eligible for the deduction for clean-fuel
corporation that elects to pay tax on the vehicles under section 179A. Credit for contributions to certain
gain from the sale of an intangible under community development corporations.
the related person exception to the Line 7c. General business credit.— Corporations may claim a credit of 5% of
anti-churning rules, should include any Complete this line if the corporation can qualified cash contributions to certain
additional tax due under section 197(f)(9)(B) take any of the following credits. Complete community development corporations
in the amount entered on line 4. On the Form 3800, General Business Credit, if the (CDCs) selected by the Secretary of
dotted line next to line 4, write “Section corporation has two or more of these Housing and Urban Development. See
197” and the amount. For more credits, a credit carryforward or carryback Form 8847, Credit for Contributions to
information, see Pub. 535, Business (including an ESOP credit), a trans-Alaska Selected Community Development
Expenses. pipeline liability fund credit, a passive Corporations.
activity credit. Enter the amount of the
Line 5. Enter amount of tax that a general business credit on line 7c, and Note: The empowerment zone employment
reciprocal must include.—A mutual check the box for Form 3800. If the credit (described below) is a component of
insurance company which is an interinsurer corporation has only one credit, enter on the general business credit, but is figured
or reciprocal underwriter may elect, under line 7c the amount of the credit from the separately and is not carried to Form 3800.
section 835, to limit the deduction for form. Also be sure to check the Empowerment zone employment credit.
amounts paid or incurred to a qualifying appropriate box for that form. A corporation that has employees that live
attorney-in-fact to the amount of the and work for the corporation in an area
deductions of the attorney-in-fact allocable Investment credit. This credit was
generally repealed for property placed in designated by the Federal government as
to the income received by the an “empowerment zone” may be able to
attorney-in-fact from the reciprocal. If this service after 1985. See Form 3468,
Investment Credit, for exceptions. take a credit for wages paid to certain
election is made, any increase in taxable employees. The credit is equal to 20% of
income of a reciprocal as a result of this Jobs credit. The corporation may qualify the first $15,000 of qualified wages and is
limitation is taxed at the highest rate of tax to take this credit if it hired members of limited to $3,000 per year per employee.
specified in section 11(b). special targeted groups during the tax See Form 8844, Empowerment Zone
Make no entry on line 5 if the mutual year. See Form 5884, Jobs Credit, for Employment Credit, and section 1396.
insurance company’s taxable income more information.
Line 7d. Credit for prior year minimum
before including the section 835(b) amount Credit for alcohol used as fuel. Use tax. To figure the minimum tax credit and
is $100,000 or more. Otherwise, this tax is Form 6478, Credit for Alcohol Used as any carryforward of that credit, use Form
35% of the section 835(b) amount. If an Fuel, to figure the credit. 8827, Credit for Prior Year Minimum Tax—
entry is made on line 5, attach a statement Credit for increasing research activities. Corporations.
showing how the tax was computed. See Form 6765, Credit for Increasing Line 9. Foreign corporations.—A foreign
Reciprocal underwriters making the Research Activities, and section 41. corporation carrying on an insurance
section 835(a) election are allowed a credit Low-income housing credit. See Form business in the United States is taxed as a
on line 14h for the amount of tax paid by 8586, Low-Income Housing Credit, and domestic insurance company on its
the attorney-in-fact that is related to the section 42. income effectively connected with the
income received by the attorney-in-fact conduct of a trade or business in the
Enhanced oil recovery credit. A
from the reciprocal in the tax year. United States. See sections 842 and 897,
corporation may claim a credit for 15% of
See section 835 and the related its qualified enhanced oil recovery costs. and Notice 89-96, 1989-2 C.B. 417, for
regulations for special rules and Use Form 8830, Enhanced Oil Recovery more information. See Rev. Proc. 95-26,
information regarding the statements Credit. 1995-22 I.R.B. 6 for the domestic
required to be attached to the return. asset/liability percentages and domestic
Disabled access credit. A corporation
Line 7a. Foreign tax credit.—To find out investment yields needed by foreign
may be able to take a credit for certain
when a corporation can take this credit for insurance companies to compute their
expenditures paid or incurred to help
payment of income tax to a foreign country minimum effectively connected net
individuals with disabilities. See Form
or U.S. possession, see Form 1118, investment income under section 842(b).
8826, Disabled Access Credit, and
Foreign Tax Credit— Corporations. Income from sources outside the United
section 44.
States from U.S. business is treated as
Line 7b. Other credits.—Possessions tax Renewable electricity production effectively connected with the conduct of a
credit—For rules on how to elect to claim credit.—A corporation may be able to take trade or business in the United States. For
the possessions tax credit (section 936), a credit for electricity produced by the a definition of effectively connected
see Form 5712, Election to be Treated as corporation using closed-loop biomass or income, see sections 864(c) and 897.
a Possessions Corporation Under Section wind and sold to an unrelated person. See
936. Figure the credit on Form 5735, Generally, any other U.S. source income
Form 8835, Renewable Electricity
Possessions Corporation Tax Credit received by a foreign corporation that is
Production Credit, for details.
Allowed Under Section 936. not effectively connected with the conduct
Page 6
of a trade or business in the United States Line 11a. Alternative minimum tax.—The Complete Form 8621 to determine the
is taxed at 30% (or at a lower treaty rate). corporation may owe the alternative corporation’s share of tax attributable to
See section 881. If the corporation has minimum tax if it has any of the the undistributed earnings of a qualified
this income, attach a schedule showing adjustments and tax preference items electing fund, or the deferred tax due, if
the kind and amount of income, the tax listed on Form 4626, Alternative Minimum any, as a result of the termination of a
rate, and the amount of tax. Tax—Corporations. The corporation must section 1294 election. See the instructions
file Form 4626 if its taxable income (loss) for Form 8621 to figure the amount of tax
Note: Interest received from certain combined with these adjustments and tax to include in, or subtract from, the total on
portfolio debt investments that were issued preference items is more than the smaller line 13. These instructions also explain
after July 18, 1984, is not subject to the of: how to report any interest due under
tax. section 1294 on the deferred tax.
● $40,000, or
Additional taxes resulting from the net Line 14b. Prior year(s) special estimated
investment income adjustment may offset ● The corporation’s allowable exemption
amount (from Form 4626). tax payments to be applied.—The
a corporation’s 30% tax on U.S. source amount entered on line 14b must agree
income. The tax reduction is determined For this purpose, taxable income does with the amount(s) from line 10, Part II,
by multiplying the 30% tax by the ratio of not include the NOL deduction. Get Form Form 8816. See Form 8816 and section
the amount of income adjustment to 4626 for details. 847(2) for additional information.
income subject to the 30% tax, computed Reduce alternative minimum tax by any
without the exclusion for interest on state Line 14c. 1995 Estimated tax
amount from line 34, Schedule A, Form payments.—Enter the corporation’s
and local bonds or income exempted from 3800 (or from line 21, Form 8844). Write on
taxation by treaty. See section 842(c)(2). estimated tax payments for 1995. Do not
the dotted line to the left of line 11a, include any amount being applied on line
Attach a statement showing how the “Section 38(c)(2)” (or “EZE”) and the
reduction under section 881 tax was 14d as a “Special estimated tax payment.”
amount(s).
figured. Include the net tax imposed by Line 14d. 1995 Special estimated tax
section 881 on line 9. Line 11b. Environmental tax.—The payments.—If the deduction under section
corporation may be liable for the 847 is claimed on Schedule A, line 27,
Note: Section 953(d) allows a foreign environmental tax if the modified
insurance company to elect to be taxed as special estimated tax payments must be
alternative minimum taxable income of the made in an amount equal to the tax benefit
a domestic corporation. If elected, include corporation exceeds $2 million. See Form
the additional tax required to be paid on of the deduction. These payments must be
4626 for details. made on or before the due date (without
line 13. Write on the dotted line to the left
of line 13, “Sec. 953(d) tax” and the Line 12. Personal holding company regard to extensions) of this tax return. See
amount. Attach a schedule showing the tax.—A corporation is taxed as a personal Form 8816 and section 847(2) for
computation. See section 953(d) for more holding company (PHC) under section 542 additional information.
details. if: Line 14h. Credit by reciprocal for tax
● At least 60% of the corporation’s paid by attorney-in-fact under section
Line 10. Recapture taxes adjusted ordinary gross income for the tax 835(d).—Enter the amount of tax paid by
Recapture of investment credit. If the year is PHC income, and an attorney-in-fact as a result of income
corporation disposed of investment credit ● At any time during the last half of the tax received by the attorney-in-fact from the
property or changed its use before the end year more than 50% in value of the reciprocal during the tax year. For more
of its useful life or recovery period, it may corporation’s outstanding stock is owned, information, see section 835, the related
owe a tax. See Form 4255, Recapture of directly or indirectly, by 5 or fewer regulations, and the instructions for line 5
Investment Credit, for details. individuals. on page 6.
Recapture of low-income housing credit. To figure this tax, use Schedule PH Line 14i. Other credits and payments.—
If the corporation disposed of property (or (Form 1120), U.S. Personal Holding Enter the amount of any other credits the
there was a reduction in the qualified basis Company Tax. corporation may take and/or payments
of the property) for which it took the made. Write to the left of the entry space,
low-income housing credit, it may owe a Line 13. Total tax an explanation of the entry.
tax. See Form 8611, Recapture of ● Interest on tax attributable to Backup withholding.—If the corporation
Low-Income Housing Credit, and section payments received on installment sales had income tax withheld from any
42(j) for details. of certain timeshares and residential payments it received, because, for
Recapture of qualified electric vehicle lots. If the corporation elected to pay example, it failed to give the payer its
(QEV) credit. The corporation must interest on the amount of tax attributable correct EIN, include the amount withheld in
recapture part of the QEV credit it claimed to payments received on installment the total for line 14i. This type of
in a prior year if, within 3 years of the date obligations arising from the disposition of withholding is called backup withholding.
the vehicle was placed in service, it ceases certain timeshares and residential lots Show the amount withheld in the blank
to qualify for the credit. See Regulations under section 453(I)(3), it must include the space in the right hand column between
section 1.30-1 for details on how to figure interest due in the amount to be entered lines 13 and 14j, and write “backup
the recapture. Include the amount of the on line 13. On the dotted line to the left of withholding.”
recapture in the total for line 10, page 1, line 13, write “Section 453(I)(3) interest” Line 14j. Total payments.—Add the
Form 1120-PC. On the dotted line next to and the amount. Attach a schedule amounts on lines 14f through 14i and enter
the entry space, write “QEV” and the showing the computation. the total on line 14j.
amount. ● Interest on tax deferred under the Line 15. Estimated tax penalty.—A
Recapture of Indian employment credit. installment method for certain nondealer corporation that does not make estimated
Generally, if an employer terminates the installment obligations. If an obligation tax payments when due may be subject to
employment of a qualified employee less arising from the disposition of property to an underpayment penalty for the period of
than 1 year after the date of initial which section 453A applies is outstanding underpayment. Generally, a corporation is
employment, any Indian employment credit at the close of the tax year, the subject to the penalty if its tax liability is
allowed for a prior tax year by reason of corporation must include the interest due $500 or more, and it did not timely pay the
wages paid or incurred to that employee under section 453A(c) in the amount on smaller of (a) 100% of its tax liability for
must be recaptured. For details, see Form line 13. Write on the dotted line to the left 1995, or (b) 100% of its prior year’s tax.
8845, Indian Employment Credit, and of line 13, “Section 453A(c) interest” and See section 6655 for details and
section 45A. Include the amount of the the amount. Attach a schedule showing exceptions, including special rules for large
recapture in the total for line 10, page 1. the computation. corporations.
On the dotted line next to the entry space, ● Deferred tax and interest on Form 2220, Underpayment of Estimated
write “IEC recapture” and the amount. undistributed earnings of a qualified Tax by Corporations, is used to see if the
electing fund under section 1294.
Page 7
corporation owes a penalty and to figure Generally, losses from sales or subscriber accounts.—Enter the decrease
the amount of the penalty. Generally, the exchanges of capital assets are only for the tax year in savings credited to
corporation does not have to file this form allowed to the extent of gains. However, subscriber accounts of a mutual insurance
because the IRS can figure the amount of corporations taxed under section 831 may company that is an interinsurer or
any penalty and bill the corporation for it. claim losses from capital assets sold or reciprocal underwriter. See the instructions
However, even if the corporation does not exchanged to get funds to meet abnormal for line 30, Schedule A, for a definition of
owe the penalty, you must complete and insurance losses and to pay dividends and savings credited to subscriber accounts.
attach Form 2220 if either of the following similar distributions to policyholders. DO Line 12. Income from a special loss
apply: NOT include those types of losses here, discount account.—Enter the amount
● The annualized income or adjusted instead report them on Schedule G. from Form 8816, Part I, line 6. See section
seasonal installment method is used. The net capital loss for these 847(5) and the instructions for Form 8816
● The corporation is a large corporation corporations is the amount by which for more information.
computing its first required installment losses for the year from sales or Line 13. Other income.—Enter any other
based on the prior year’s tax. (See the exchanges of capital assets exceed the taxable income not reported on lines 1
Form 2220 instructions for the definition of gains from these sales or exchanges plus through 12. List the type and amount of
a large corporation.) the smaller of: income on an attached schedule. If the
If you attach Form 2220, be sure to 1. Taxable income (computed without corporation has only one item of other
check the box on line 15, and enter the gains or losses from sales or exchanges of income, describe it in parentheses on line
amount of any penalty on that line. capital assets); or 13.
2. Losses from the sale or exchange of ● The amount of any deduction previously
capital assets sold or exchanged to obtain taken under section 179A that is subject to
Schedule A—Taxable Income funds to meet abnormal insurance losses recapture. The corporation must recapture
and to provide for the payment of the benefit of any allowable deduction for
Gross income.—The gross amounts of dividends and similar distributions to qualified clean-fuel vehicle property (or
underwriting and investment income policyholders. clean-fuel vehicle refueling property), if,
should be computed on the basis of the within 3 years of the date the property was
Subject to the limitations in section
underwriting and investment exhibit of the placed in service, the property ceases to
1212(a), a net capital loss can be carried
NAIC annual statement. qualify. See Pub. 535 for details, including
back 3 years and forward 5 years as a
Note: In computing the amounts for lines short-term capital loss. how to figure the recapture.
2, 3, and 4, take all interest, dividends, or ● Ordinary income from trade or business
For more information on gains and
rents received during the year, add interest, activities of a partnership (from Schedule
losses from sales or exchanges of
dividends, or rents due and accrued at the K-1 (Form 1065), line 1).
property, see the instructions for Schedule
end of the tax year, and deduct interest,
D (Form 1120) and Pub. 544, Sales and
dividends, or rents due and accrued at the
Other Dispositions of Assets. Deductions
end of the preceding tax year. For rules
regarding the accrual of dividends, see Line 8. Certain mutual fire or flood Reducing certain expenses for which
Regulations section 1.301-1(b). insurance companies.—A mutual fire or credits are allowable.—For each credit
flood insurance company whose principal listed below, the corporation must reduce
Line 3a, column (a). Gross interest.— the otherwise allowable deductions for
business is the issuance of policies:
Enter the gross amount of interest income, expenses used to figure the credit by the
including all tax-exempt interest. 1. For which the premium deposits are
amount of the current year credit:
the same (regardless of the length of the
Line 3b, column (a). Interest exempt 1. The credit for increasing research
term the policies are written for), and
under section 103.—Section 103(a) activities.
excludes interest on state or local bonds 2. Under which the unabsorbed portion
from gross income. This exclusion does of such premium deposits not required for 2. The enhanced oil recovery credit.
not apply to: (1) any private activity bond losses, expenses, or establishment of 3. The disabled access credit.
which is not a qualified bond as defined by reserves is returned or credited to the 4. The jobs credit.
section 141; (2) any arbitrage bond as policyholder on cancellation or expiration
of the policy must include in income an 5. The employer credit for social security
defined by section 148; or (3) any bond
amount equal to 2% of the premiums and Medicare taxes paid on tips.
not meeting the requirements of section
149 (regarding the registration of earned on insurance contracts during the 6. The empowerment zone employment
tax-exempt bonds). tax year with respect to such policies after credit.
deduction of premium deposits returned or 7. The Indian employment credit.
Lines 3a and 3b, column (b).
credited during the same tax year. See
Amortization of premium.—Enter on line If the corporation has any of these
section 832(b)(1)(D).
3a, column (b), the total amortization of credits, be sure to figure each current
bond premium, including amortization on Line 9. Income on account of the special year’s credit before figuring the deduction
tax-exempt bonds. Enter on line 3b, income and deduction accounts.— for expenses on which the credit is based.
column (b), the amortization of bond Corporations which write the kinds of
insurance below must maintain the Line 15. Compensation of officers.—
premium on tax-exempt bonds only. Attach a schedule for all officers using the
following special accounts. A corporation
Note: Insurance companies electing to following columns: (1) name of officer;
which writes: (1) mortgage guaranty
amortize discount for tax purposes must (2) Social security number; (3) percentage
insurance, must maintain a mortgage
reduce the amortization of premium by any of time devoted to business; (4) amount of
guaranty account; (2) lease guaranty
amortization of discount. compensation.
insurance, must maintain a lease guaranty
Line 4. Gross rents.—Enter gross rents, account; and (3) insurance on obligations This information must be submitted by
computed as indicated under the the interest on which is excludible from each member of an affiliated group
instructions for Gross income. Deduct gross income under section 103, must included in a consolidated return.
rental expenses, such as repairs, interest, maintain an account with respect to Disallowance of deduction for employee
taxes, and depreciation on the proper lines insurance on state and local obligations. compensation in excess of $1 million.—
in the deductions section (lines 15 through Publicly-held corporations may not deduct
Amounts required to be subtracted from
31). compensation to a “covered employee” to
these accounts under sections 832(e)(5)
Line 6. Capital gain net income.—Every and 832(e)(6) must be reported as income the extent that the compensation exceeds
sale or exchange of a capital asset by a on line 9. See section 832(e) for more $1 million. Generally, a covered employee
corporation must be reported in detail on information. is:
Schedule D (Form 1120) even though no
Line 11. Mutual interinsurers or
gain or loss is indicated.
reciprocal underwriters—decrease in
Page 8
● The chief executive officer of the out if the corporation has an inclusion section 170(c), and any unused
corporation (or an individual acting in that amount. Also see Pub. 917 for instructions contributions carried over from prior years.
capacity) as of the end of the tax year, or on figuring the inclusion amount. The total amount claimed may not be
● An employee whose total compensation Line 19. Taxes and licenses.—Enter taxes more than 10% of taxable income (line 37,
must be reported to shareholders under paid or accrued during the tax year, but do Schedule A) computed without regard to
the Securities Exchange Act of 1934 not include the following: the following:
because the employee is among the four ● Federal income taxes (except the ● Any deduction for contributions,
highest compensated officers for that tax environmental tax under section 59A).
year (other than the chief executive officer). ● The deduction for dividends received,
● Foreign or U.S. possession income taxes ● The deduction allowed under section
For this purpose, compensation does not if a credit is claimed (however, see the
include the following: 249,
instructions for Form 5735 for special rules
● Income from certain employee trusts, for possession income taxes). ● Any net operating loss (NOL) carryback
annuity plans, or pensions; to the tax year under section 172, and
● Taxes not imposed on the corporation.
● Any benefit paid to an employee that is ● Any capital loss carryback to the tax
● Taxes, including state or local sales year under section 1212(a)(1).
excluded from the employee’s income. taxes, that are paid or incurred in
The deduction limit does not apply to: connection with an acquisition or Charitable contributions over the 10%
disposition of property. (These taxes must limitation may not be deducted for the tax
● Commissions based on individual year but may be carried over to the next 5
performance; be treated as a part of the cost of the
acquired property or, in the case of a tax years.
● Qualified performance-based disposition, as a reduction in the amount Special rules apply if the corporation has
compensation; and realized on the disposition.). an NOL carryover to the tax year. In
● Income payable under a written, binding ● Taxes assessed against local benefits figuring the charitable contributions
contract in effect on February 17, 1993. that increase the value of the property deduction for the tax year, the 10% limit is
The $1 million limit is reduced by assessed (such as for paving, etc.) applied using the taxable income after the
amounts disallowed as excess parachute deduction for NOL.
See section 164(d) for the apportionment
payments under section 280G. of taxes on real estate between a seller To figure the amount of any remaining
For details, see section 162(m) and and a purchaser. NOL carryover to later years, taxable
Notice 94-68, 1994-1 C.B. 376. income must be modified (see section
If the corporation is liable for the 172(b)). To the extent that contributions are
Line 16. Salaries and wages.—Enter the environmental tax under section 59A, get used to reduce taxable income for this
amount of salaries and wages paid for the Form 4626, Alternative Minimum Tax— purpose and increase an NOL carryover, a
tax year, less the amount of any jobs credit Corporations, for computation of the contributions carryover is not allowed. See
from Form 5884, empowerment zone credit environmental tax deduction. section 170(d)(2)(B).
from Form 8844, and Indian employment Line 20a. Interest.—Enter all interest paid
credit from Form 8845. See the Corporations on the accrual basis may
or accrued during the tax year. elect to deduct contributions paid by the
instructions for these forms for more
information. Do not include salaries and Generally, the interest and carrying 15th day of the 3rd month after the end of
wages deductible elsewhere on the return, charges on straddles cannot be deducted the tax year if the contributions are
such as elective contributions to a section and must be capitalized. See section authorized by the board of directors during
401(k) cash or deferred arrangement, or 263(g). the tax year. Attach a declaration to the
amounts contributed under a salary See section 163(e)(5) for special rules for return, signed by an officer, stating that the
reduction SEP agreement. the disqualified portion of original issue resolution authorizing the contributions was
discount on a high yield discount adopted by the board of directors during
Caution: If the corporation provided 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
deduct as wages the amount allocated for corporation (directly or indirectly) to a Substantiation requirements.—Generally,
depreciation and other expenses that are related person may be limited if no tax is no deduction is allowed for any
claimed elsewhere on its return. imposed on that interest. See section contribution of $250 or more unless the
163(j) for more information. corporation obtains a written
Line 18. Rents.—Enter rent paid or acknowledgment from the donee
accrued for business property in which the Do not deduct interest on debt allocable organization that shows the amount of
corporation has no equity. to the production of qualified property. cash contributed, describes any property
If the corporation rented or leased a Interest that is allocable to certain property contributed, and gives an estimate of the
vehicle, enter the total annual rent or lease produced by a corporation for its own use value of any goods or services provided in
expense paid or incurred during the year. or for sale must be capitalized. A return for the contribution. The
Also complete Part V of Form 4562, corporation must also capitalize any acknowledgment must be obtained by the
Depreciation and Amortization. If the interest on debt allocable to an asset used due date (including extensions) of the
corporation leased a vehicle for a term of to produce the above property. See corporation’s return, or if earlier, the date
30 days or more, the deduction for the section 263A and Regulations section the return is filed. Do not attach the
vehicle lease expense may have to be 1.263A-8 through 1.263A-15, for definitions acknowledgment to the tax return, but
reduced by an amount called the inclusion and more information. keep it with the corporation’s records.
amount. The corporation may have an See section 7872 for special rules on the These rules apply in addition to the filing
inclusion amount if: deductibility of forgone interest on certain requirements for Form 8283 described
And the vehicle’s below-market rate loans. below.
fair market value
on the first day of
Line 20b. Less tax-exempt interest For more information on substantiation
The lease term began: the lease exceeded: expense.—Enter interest paid or accrued and recordkeeping requirements, see the
After 12/31/94 $15,500 during the tax year on indebtedness regulations under section 170 and Pub.
After 12/31/93 but before 1/1/95 $14,600
incurred or continued to purchase or carry 526, Charitable Contributions.
obligations if the interest is wholly exempt Contribution of property other than
After 12/31/92 but before 1/1/94 $14,300
from income tax. For exceptions, see cash.—If a corporation (other than a
After 12/31/91 but before 1/1/93 $13,700
section 265(b). closely held or personal service
After 12/31/90 but before 1/1/92 $13,400
Line 21. Charitable contributions.—Enter corporation) contributes property other
After 12/31/86 but before 1/1/91 $12,800
contributions or gifts actually paid in the than cash and claims over a $500
If the lease term began after June 18, tax year to or for the use of charitable and deduction for the property it must attach a
1984, but before January 1, 1987, see governmental organizations described in schedule to the return describing the kind
Pub. 917, Business Use of a Car, to find
Page 9
of property contributed and the method Line 22. Depreciation.—Besides policies. Whether dividends have been
used to determine its fair market value. depreciation, include on line 22 the part of paid or declared should be determined
Closely-held and personal service the cost that the corporation elected to according to the method of accounting
corporations generally must complete expense under section 179 for certain employed by the insurance company.
Form 8283, Noncash Charitable tangible property placed in service during Dividends and similar distributions
Contributions, and attach it to their returns. tax year 1995 or carried over from 1994. include amounts returned or credited to
All other corporations generally must See Form 4562, Depreciation and policyholders on cancellation or expiration
complete and attach Form 8283 to their Amortization and its instructions. of policies issued by a mutual fire or flood
returns for contributions of property other Line 23. Depletion.—See sections 613 insurance company (1) where the premium
than money, if the total claimed deduction and 613A for percentage depletion rates deposits for the policy are the same
for all property contributed was more than applicable to natural deposits. Also, see (regardless of the length of the policy), and
$5,000. section 291 for the limitation on the (2) the unabsorbed portion of the premium
If the corporation made a “qualified depletion deduction for iron ore and coal deposits not required for losses, expenses,
conservation contribution” under section (including lignite). or establishment of reserves is returned or
170(h), also include the fair market value of Foreign intangible drilling costs and credited to the policyholder on cancellation
the underlying property before and after foreign exploration and development costs or expiration of the policy.
the donation, as well as the type of legal must either be added to the corporation’s In the case of a qualified group
interest contributed, and describe the basis for cost depletion purposes or be self-insurers fund, the fund’s deduction for
conservation purpose benefited by the deducted ratably over a 10-year period. policyholder dividends is allowed no earlier
donation. If a contribution carryover is See sections 263(i), 616, and 617 for than the date the state regulatory authority
included, show the amount and how it was details. determines the amount of the policyholder
determined. Attach Form T (Timber), Forest dividend that may be paid. See section
Special rule for contributions of certain Activities Schedules, if a deduction for 6076 of the Technical and Miscellaneous
property.—For a charitable contribution of depletion of timber is taken. Revenue Act of 1988 (“Act of 1988”).
property, the corporation must reduce the Line 24. Pension, profit-sharing, etc., Line 30. Mutual interinsurers or
contribution by the sum of: plans.—Enter the deduction for reciprocal underwriters—increase in
● The ordinary income or short-term contributions to qualified pension, subscriber accounts.—A mutual
capital gain that would have resulted if the profit-sharing, or other funded deferred insurance company that is an interinsurer
property had been sold at its fair market compensation plans. Employers who or reciprocal underwriter may deduct the
value, and maintain such a plan generally must file increase in savings credited to subscriber
one of the forms listed below, even if the accounts for the tax year.
● For certain contributions, all of the
long-term capital gain that would have plan is not a qualified plan under the Savings credited to subscriber
resulted if the property were sold at its fair Internal Revenue Code. The filing accounts means the surplus credited to
market value. requirement applies even if the corporation the individual accounts of subscribers
does not claim a deduction for the current before the 16th day of the 3rd month
The reduction for long-term capital gain tax year. There are penalties for failure to following the close of the tax year. This is
applies to: file these forms on time and for overstating true only if the corporation would be
● Contributions of tangible personal the pension plan deduction. See sections required to pay this amount promptly to a
property for use by an exempt organization 6652(e) and 6662(f). subscriber if the subscriber ended the
for a purpose or function unrelated to the Form 5500.—File this form for each plan contract when the corporation’s tax year
basis for its exemption, and with 100 or more participants. ends. The corporation must notify the
● Contributions of any property (except Form 5500-C/R.—File this form for each
subscriber as required by Regulations
stock for which market quotations are section 1.823-6(c)(2)(v). The subscriber
plan with fewer than 100 participants. must treat any savings credited to the
readily available—see section 170(e)(5)) to
or for the use of certain private Form 5500-EZ.—File this form for a subscriber’s account as a dividend paid or
foundations. See section 170(e) and one-participant plan. The term declared.
Regulations section 1.170A-4. “one-participant plan” also means a plan Line 31. Other deductions
that covers the owner(s) and his or her
For special rules for contributions of spouse, or a plan that covers partners in a Note: Do not deduct fines or penalties paid
inventory and other property to certain business partnership (or the partners and to a government for violating any law.
organizations, see section 170(e)(3) and their spouses). Attach a schedule listing by type and
Regulations section 1.170A-4A. amount, all deductions allowable under
Line 25. Employee benefit programs.—
Charitable contributions of scientific Enter contributions to employee benefit sections 832(c)(1) and (10) (net of the
property used for research.—A programs not claimed elsewhere on the annual statement change in undiscounted
corporation (other than a personal holding return (e.g., insurance, health and welfare unpaid loss adjustment expenses) that are
company or a personal service programs) that are not an incidental part of not deductible on lines 15 through 30.
organization) can receive a larger a pension, profit-sharing, etc., plan Also include ordinary losses from trade
deduction for contributing scientific included on line 24. or business activities of a partnership (from
property used for research to an institution Schedule K-1 (Form 1065), line 1).
of higher education. See section 170(e). Line 27. Additional deduction.—Enter the
total from Form 8816, Part I, line 5. A corporation may deduct dividends it
Contributions to organizations pays in cash on stock held by an
conducting lobbying activities.— Any insurance company taking the
additional deduction MUST: employee stock ownership plan. However,
Contributions made to an organization that a deduction may only be taken if,
conducts lobbying activities are not ● Make special estimated tax payments according to the plan, the dividends are:
deductible if: equal to the tax benefit from the
deduction, and ● Paid in cash directly to the plan
● The lobbying activities relate to matters participants or beneficiaries;
of direct financial interest to the donor’s ● Establish and maintain a Special Loss
trade or business, and Discount Account. See section 847 and ● Paid to the plan which distributes them
Form 8816 for more information. in cash to the plan participants or their
● The principal purpose of the contribution beneficiaries no later than 90 days after
was to avoid Federal income tax by Line 29. Dividends to policyholders.— the end of the plan year in which the
obtaining a deduction for activities that Enter the total dividends and similar dividends are paid; or
would have been nondeductible under the distributions paid or declared to
lobbying expense rules if conducted policyholders, as policyholders, except in ● Used to make payments on a loan
directly by the donor. the case of a mutual fire insurance described in section 404(a)(9).
company exclusively issuing perpetual
Page 10
 See section 404(k) for more details and expenses include amounts paid or incurred year of the loss. To carry back the loss
the limitation on certain dividends. in connection with influencing Federal or and obtain a quick refund of taxes, use
Meals, travel, and entertainment.— state legislation (but not local legislation), Form 1139, Corporation Application for
Generally, the corporation can deduct only or amounts paid or incurred in connection Tentative Refund. Form 1139 must be filed
50% of the amount otherwise allowable for with any communication with certain within 12 months after the close of the tax
meals and entertainment expenses paid or Federal executive branch officials in an year of the loss. See section 6411 for
incurred in its trade or business. Also, attempt to influence the official actions or details. Do not attach Form 1139 to the
meals must not be lavish or extravagant; a positions of the officials. However, if corporation’s income tax return.
bona fide business discussion must occur certain in-house expenditures do not For carryback claims filed later than 12
during, immediately before, or immediately exceed $2,000, they are deductible. Dues months after the close of the tax year of
after the meal; and an employee of the and other similar amounts paid to certain the loss, file an amended Form 1120-PC
corporation must be present at the meal. tax-exempt organizations may not be instead of Form 1139.
See section 274(k)(2) for exceptions. If the deductible. See section 162(e) and the
related regulations. For information on After the corporation has applied the
corporation claims a deduction for NOL to the first tax year to which it may
unallowable meal expenses, it may have to contributions to charitable organizations
that conduct lobbying activities, see the be carried, the taxable income of that year
pay a penalty. is modified (as described in section 172(b))
instructions for Schedule A, line 21. For
Additional limitations apply to deductions more information on lobbying expenses, to determine how much of the remaining
for gifts, skybox rentals, luxury water see section 162(e). loss may be carried to other years. See
travel, convention expenses, and section 172(b) and the related regulations
entertainment tickets. For details see Line 32. Total deductions.—Insurance for details.
section 274 and Pub. 463, Travel, companies that issue specified insurance
contracts (as defined in section 848(e)(1)) Special rules apply when an ownership
Entertainment, and Gift Expenses. change occurs (i.e., for any tax year ending
are generally required to amortize policy
No deduction is allowed for dues paid or acquisition expenses on a straight-line after a post-1986 ownership change, the
incurred for membership in any club basis over a period of 120 months amount of the taxable income of a loss
organized for business, pleasure, beginning with the 1st month in the 2nd corporation that can be offset by
recreation, or other social purpose. This half of the tax year (section 848(a)). pre-change NOL carryovers is limited). See
includes country clubs, golf and athletic Reduce total deductions on line 32 by the section 382 and the related regulations.
clubs, airline and hotel clubs, and clubs amount required to be capitalized under Also see Temporary Regulations section
operated to provide meals under Section 848. Attach a schedule showing all 1.382-2T(a)(2)(ii), which requires that a loss
conditions favorable to business computations. See section 848 and its corporation file an information statement
discussion. But it does not include civic or regulations for special rules, definitions, with its income tax return for each tax year
public service organizations, professional and exceptions. Also see Schedule G, that it is a loss corporation and certain
organizations (such as bar or medical Form 1120-L, and its instructions for more shifts in ownership occurred. Also see
associations), business leagues, trade information. Regulations section 1.382-6(b) for details
associations, chambers of commerce, on how to make the closing-of-the-books
boards of trade, and real estate boards, Line 34b. Deduction on account of the election.
unless a principal purpose of the special income and deduction
accounts.—Enter the total of the amounts See section 384 for the limitation on the
organization is to entertain or provide use of preacquisition losses of one
entertainment facilities for members or required to be added under sections
832(e)(4) and (6). However, no deduction is corporation to offset recognized built-in
their guests. gains of another corporation.
permitted unless tax and loss bonds are
Also, no deduction is allowed for travel purchased in an amount equal to the tax Exceptions to carryback rules—A
expenses paid or incurred for a spouse, benefit of the deduction. See section corporation may make an irrevocable
dependent, or other individual 832(e). election to forego the carryback period and
accompanying an officer or employee of instead carry the NOL over to each of the
the corporation on business travel, unless Note: The deduction on account of the
special income and deduction accounts is 15 years following the year of the loss. To
that spouse, dependent, or other individual make this election, check the box in
is an employee of the corporation and the limited to taxable income for the tax year
(computed without regard to this deduction question 14 on Schedule I. The return
travel is for a bona fide business purpose must be timely filed (including extensions).
and would otherwise be deductible by that or to any carryback of a net operating loss).
person. Line 36b. Net operating loss An NOL cannot be carried to or from any
deduction.—A corporation may use the tax year for which the insurance company
Generally, a corporation can deduct all is not subject to tax under section 831(a),
other ordinary and necessary travel and net operating loss (NOL) incurred in one
tax year to reduce its taxable income in or to any tax year if (between the tax year
entertainment expenses paid or incurred in from which the loss is being carried and
its trade or business. However, it cannot another year. Generally, a corporation may
carry an NOL back to each of the 3 years such tax year) there is an intervening tax
deduct an expense paid or incurred for a year for which the insurance company was
facility (such as a yacht or hunting lodge) preceding the year of the loss and then
carry any remaining amount over to each not subject to tax imposed by section
used for an activity that is usually 831(a).
considered entertainment, amusement, or of the 15 years following the year of the
recreation. loss (but see Exceptions to carryback See section 844 for special loss
rules below). Enter on line 36b, the total carryover rules for insurance companies.
Note: The corporation may be able to NOL carryovers from prior tax years, but
deduct otherwise nondeductible meals, do not enter more than the corporation’s
travel, and entertainment expenses if the
amounts are treated as compensation and
taxable income (after dividends-received Schedule B, Part I—Taxable
deduction). An NOL deduction cannot be
reported on Form W-2 for an employee or taken in a year in which the corporation Investment Income of
on Form 1099-MISC for an independent has negative taxable income. Attach a Electing Small Companies
contractor. schedule showing the computation of the
Deduction for clean-fuel vehicles and Note: (1) Once an election, under section
NOL deduction. Also complete question 15
certain refueling property.—Section 179A 831(b) is made to be taxed only on
on Schedule I.
allows a deduction for part of the cost of investment income, it can only be revoked
For more information about NOL and the with the consent of the Secretary, and (2) a
qualified clean-fuel vehicle property and NOL deduction, get Pub. 536, Net
qualified clean-fuel vehicle refueling corporation making this election must
Operating Losses. include on line 8, gross investment income,
property placed in service after June 30,
1993. For more information, see Pub. 535. Carryback and carryover rules— any amount subtracted from a protection
Generally, an NOL first must be carried against loss account.
Lobbying expenses.—Generally, lobbying back to the third tax year preceding the
expenses are not deductible. These
Page 11
Income foreclosed property before the property is day on which the payor and payee were
held for rent. members of the same affiliated group as
Line 1a, column (a). Gross interest.— defined in section 243(b). Also, if the
Enter the gross amount of interest income Line 11. Depreciation.—Enter depreciation
on assets only to the extent that the taxpayer is a member of an affiliated group
including all tax-exempt interest income. filing a consolidated return, its
assets are used to produce gross
Line 1b, column (a). Interest exempt investment income reported on lines 1 determination of dividends received is
under section 103.—Enter the amount of through 7 of Schedule B. For more made as if the group were not filing a
interest on state and local bonds that is information, see the instructions for line 22, consolidated return.
exempt from taxation under section 103. Schedule A. Prorated amounts means tax-exempt
See the instructions for Schedule A, line interest and dividends for which a
3b, column (a), for more information. Line 12. Depletion.—Enter any allowable
depletion on royalty income reported on deduction is allowable under section 243,
Lines 1a and 1b, column (b). line 4, Schedule B. See the instructions for 244, or 245 (other than 100% dividends).
Amortization of premiums.—Enter on line line 23, Schedule A, for more information. 100% dividend means any dividend if
1a, column (b), the total amortization of the percentage used for purposes of
bond premiums, including amortization of Line 13. Trade or business deductions.—
Enter the total deductions related to any determining the deduction allowable under
premium on tax-exempt bonds. Enter on section 243, 244, or 245(b) is 100%. A
line 1b, column (b), the amortization of trade or business income included in gross
investment income under section 834(b)(2). special rule applies to certain dividends
bond premium on tax-exempt bonds. received by a foreign corporation.
Do not include deductions for any
Note: Insurance companies electing to insurance business. Do not include losses
amortize discount for tax purposes must Lines 1 through 23
from sales or exchanges of capital assets
reduce the amortization of premium by any or property used in the business, or from For purposes of the 20% ownership test
amortization of discount. the compulsory or involuntary conversion on lines 1 through 7, the percentage of
Line 3. Gross rents.—Enter the gross of property used in the trade or business. stock owned by the corporation is based
rents received or accrued during the tax Line 14. Interest.—See the instructions for on voting power and value of the stock.
year. Deduct rental expenses such as lines 20a and 20b, Schedule A. Preferred stock described in section
repairs, interest, taxes and depreciation on 1504(a)(4) is not taken into account.
the proper lines in the deductions section. Line 17. Investment expenses.—Enter Corporations filing a consolidated return
expenses that are properly chargeable as should see Regulations sections 1.1502-13
Line 5. Gross income from a trade or investment expenses. If general expenses
business, other than an insurance (1.1502-14 for calendar year 1995 filers),
are allocated to investment expenses, the 1.1502-26 and 1.1502-27 before
business, and from Form 4797.—Enter total deduction cannot be more than the
the gross income from a trade or business, completing Schedule C.
amount on Schedule B, Part II, line 39.
other than an insurance business, carried Attach a schedule showing the kind and Lines 1 through 9, column (a).—Enter in
on by the insurance company or by a amount of general expenses. Minor items column (a) of the appropriate line those
partnership of which the insurance may be grouped together. dividends that are not subject to the
company is a partner. Include section 1245 provisions of section 832(b)(5)(B). This will
and section 1250 gains (as modified by See section 267 for the limitation on include: (i) all dividends received on stock
section 291), and other gains from Form deductions for unpaid expenses and whose acquisition date is before August 8,
4797, Sales of Business Property, on interest in transactions between related 1986; and (ii) 100% dividends (defined
investment assets only. taxpayers. above) on stock acquired after August 7,
Line 6. Income from leases described in 1986, to the extent that such dividends are
sections 834(b)(1)(B) and 834(b)(1)(C).— not attributable to prorated amounts.
Enter gross income from entering into,
Schedule B, Part II— Lines 1 through 9, column (b).—Enter in
changing, or ending any lease, mortgage, Invested Assets Book Values column (b) of the appropriate line those
or other instrument or agreement from dividends that are subject to the provisions
Use Schedule B, Part II, to compute the
which the company earns interest, of section 832(b)(5)(B). This will include: (i)
limitation on investment expenses under
dividends, rents, or royalties. all dividends (other than 100% dividends)
section 834(c)(2) when any general
Line 8. Gross investment income.—If received on stock acquired after August 7,
expenses are in part assigned to or
gross investment income includes an 1986; and (ii) 100% dividends received on
included in the investment expenses
amount subtracted from the protection stock acquired after August 7, 1986, to the
deducted on Schedule B, Part I, line 17.
against loss account, then write on the extent that such dividends are attributable
dotted line next to line 8, “PAL” and the to prorated amounts (see definition above).
amount. In the case of an insurance company
Schedule C—Dividends and that files a consolidated return, the
Deductions Special Deductions determination with respect to any dividend
Note: Also see section 834(d)(1) regarding paid by a member to another member of
Definitions the affiliated group is made as if no
the limitation of expenses on real estate
owned and occupied in part or in whole by The acquisition date for investments consolidated return was filed. See section
a mutual insurance company. acquired by direct purchase, is the trade 832(g).
date rather than the settlement date. For Line 1.—Enter dividends (except those
Line 9. Real estate taxes.—Enter taxes
investments not acquired by direct received on debt-financed stock acquired
paid or accrued on real estate owned by
purchase (such as those acquired through after July 18, 1984—see section 246A)
the corporation and deductible under
transfers among affiliates, tax-free received from less-than-20%-owned
section 164.
reorganizations, or the liquidation of a domestic corporations subject to income
Line 10. Other real estate expenses.— subsidiary, etc.), the actual acquisition date tax, that are subject to the 70% deduction
Enter all ordinary and necessary real estate should be used regardless of the holding under section 243(a)(1). Include on this line
expenses, such as fire insurance, heat, period determined under section 1223. taxable distributions from an IC-DISC or
light, and labor. Also enter the cost of former DISC that are designated as eligible
A special rule applies in determining the
incidental repairs, such as labor and for the 70% deduction and certain
acquisition date of dividends received from
supplies, that do not add to the property’s dividends of Federal Home Loan Banks.
affiliates. This rule provides that the portion
value nor appreciably prolong its life. Do See section 246(a)(2).
of any 100% dividend which is related to
not include any amount paid for new
prorated amounts be treated as received Also include on line 1 dividends (except
buildings or for permanent improvements
with respect to stock acquired on the later those received on debt-financed stock
or betterments made to increase the value
of: (a) the date the payor acquired the acquired after July 18, 1984) from a
of any property or any amount spent on
stock or obligation to which the prorated regulation investment company (RIC). The
amounts are attributable, or (b) the first amount of dividends eligible for the
Page 12
dividends-received deduction under (excluding foreign trade income) and that Two situations in which the
section 243 is limited by section 854(b). qualify for the 80% deduction provided in dividends-received deduction will not be
The corporation should receive a notice section 245(c)(1)(B). allowed on any share of stock are:
from the RIC specifying the amount of Line 8.—Enter dividends received from ● If the corporation held it 45 days or less
dividends that qualify for the deduction. wholly owned foreign subsidiaries that are (see section 246(c)(1)(A)), or
Report so-called dividends or earnings eligible for the 100% deduction provided in ● To the extent the corporation is under an
received from mutual savings banks, etc., section 245(b) and dividends from a FSC obligation to make related payments for
as interest. Do not treat them as dividends. that qualify for the deduction provided in substantially similar or related property.
Line 2.—Enter dividends (except those section 245(c)(1)(A). In general, the
deduction under section 245(b) applies to 5. Any other taxable dividend income not
received on debt-financed stock acquired properly reported above (including
after July 18, 1984) that are received from dividends paid out of the earnings and
profits of a foreign corporation for a tax distributions under section 936(h)(4)).
20%-or-more-owned domestic
corporations subject to income tax and year during which: Line 17.—Dividends received on
that are subject to the 80% deduction ● All of its outstanding stock is owned debt-financed stock acquired after July 18,
under section 243(c). (directly or indirectly) by the domestic 1984, are not entitled to the full 70% or
corporation receiving the dividends, and 80% dividends-received deduction. The
Include on this line taxable distributions 70% or 80% deduction is reduced by a
from an IC-DISC or former DISC that are ● All of its gross income from all sources percentage that is related to the amount of
considered eligible for the 80% deduction. is effectively connected with the conduct debt incurred to acquire the stock. See
Line 3.—Enter dividends on debt-financed of a trade or business within the United section 246A. Also see section 245(a)
stock acquired after July 18, 1984, States. Also include all dividends received before making this computation for an
received from domestic and foreign from a FSC that are attributable to export additional limitation which applies to
corporations subject to income tax that sales income and that qualify for the 100% dividends received from foreign
would otherwise be subject to the deduction under section 245(c). corporations.
dividends-received deduction under Line 9.—Enter only those dividends that Attach a schedule showing how the
section 243(a)(1), 243(c), or 245(a). qualify under section 243(b) for the 100% amount on line 17 was figured.
Generally, debt-financed stock is stock dividends-received deduction described in
that the corporation acquired by incurring section 243(a)(3). Corporations taking this Line 23. Total
a debt (e.g., it borrowed money to buy the deduction are subject to the provisions of
stock). section 1561. Limitations on dividends-received
deduction
Include on line 3 dividends received from Note: The 100% deduction does not apply
a regulated investment company (RIC) on to affiliated group members that are joining Generally, line 23, column (c) may not
debt-financed stock. The amount of in the filing of a consolidated return. exceed the amount from the worksheet
dividends eligible for the Line 10, column (c).—Enter foreign below. However, in a year in which an NOL
dividends-received deduction is limited by dividends not reportable on lines 6, 7, and occurs, this limitation does not apply even
section 854(b). The corporation should 8. Include on line 10 the corporation’s if the loss is created by the
receive a notice from the RIC specifying share of the ordinary earnings of a dividends-received deduction. See
the amount of dividends that qualify for the qualified electing fund from Form 8621, sections 172(d) and 246(b).
deduction. line 6c, or the amount of any excess
Line 4.—Enter dividends received on the distribution from a passive foreign Worksheet for Schedule C, line 23 (Keep
preferred stock of a less-than-20%-owned investment company from Form 8621, line for your records.)
public utility that is subject to income tax 11b. Exclude distributions of amounts
and is allowed the deduction provided in constructively taxed in the current year or
1. Enter the amount from Schedule A, line
section 247 for dividends paid. in prior years under Subpart F (sections 37 or Schedule B, line 21, whichever
Line 5.—Enter dividends received on 951 through 964). applies, without: the NOL deduction
preferred stock of a 20%-or-more-owned Line 11, column (c).—Include income (section 172); dividend-received
public utility that is subject to income tax constructively received from controlled deduction (sections 243(a)(1), 244(a),
245(a) or (b), and 247); any adjustment
and is allowed the deduction provided in foreign corporations under Subpart F. This under section 1059; and any capital
section 247 for dividends paid. amount should equal the total amounts loss carryback to the tax year under
Line 6.—Enter the U.S. source portion of reported on Schedule I of Form 5471. section 1212(a)(1)
dividends received from Line 12, column (c).—Include gross-up for 2. Enter the sum of the amounts from line
less-than-20%-owned foreign corporations taxes deemed paid under sections 902 and 22, column (c), (without regard to
that qualify for the 70% deduction under 960. wholly owned foreign subsidiary
section 245(a). To qualify for the 70% dividends) and line 24, column (c)
Line 13, column (c).—Include the
deduction, the corporation must own at 3. Subtract line 2 from line 1
following:
least 10% of the foreign corporation by 4. Multiply line 3 by 80%
vote and value. Also include dividends 1. Dividends (other than capital gain and
exempt-interest dividends) that are 5. Add lines 16, 19, 21, and 22 (without
received from a less-than-20% foreign regard to FSC dividends), column (c)
sales corporation (FSC) that are received from regulated investment and the portion of the deduction on line
attributable to income treated as effectively companies and are not subject to the 70% 17, column (c) that is attributable to
connected with the conduct of a trade or deduction. dividends received from 20%
2. Dividends from tax-exempt -or-more-owned corporations
business within the United States
(excluding foreign trade income) and that organizations. 6. Enter the smaller of line 4 or line 5. If
line 5 is greater than line 4, stop here;
qualify for the 70% deduction provided in 3. Dividends (other than capital gain enter the amount from line 6 on line
section 245(c)(1)(B). dividends) received from a real estate 23, column (c) (without regard to FSC
Line 7.—Enter the U.S.-source portion of investment trust that, for the tax year of dividends). Do not complete the rest of
dividends received from the trust in which the dividends are paid, this worksheet
20%-or-more-owned foreign corporations qualifies under sections 856 through 860. 7. Enter the total amount of dividends
and that qualify for the 80% deduction 4. Dividends not eligible for a received from 20%-or-more-owned
under section 245(a). Also include corporations that are included on lines
dividends-received deduction because of 2, 3, 5, 7, and 8 (without regard to FSC
dividends received from a the holding period of the stock or an dividends), column (a)
20%-or-more-owned FSC that are obligation to make corresponding 8. Subtract line 7 from line 3
attributable to income treated as effectively payments with respect to similar stock.
connected with the conduct of a trade or 9. Multiply line 8 by 70%
business within the United States (continued on next page)

Page 13
10. Subtract line 5 from line 23, column (c) Lines 2d and 4d.—Include on lines 2d and basis of information disclosed on or with
(without regard to FSC dividends) 4d, 80% of the total of all unearned the annual statement, the amount of the
11. Enter the smaller of line 9 or line 10 premiums not reported on lines 2a through undiscounted unpaid losses must be
12. Dividends-received deduction after 2c, or 4a through 4c, respectively. recomputed to eliminate any reduction
limitation (section 246(b)). Add lines A reciprocal or interinsurer required caused by such discounting. In no event
6 and 11. Enter the result here and on
under state law to reflect unearned can the amount of discounted unpaid
line 23, column (c) (without regard to losses with respect to any line of business
FSC dividends) premiums on its annual statement net of
premium acquisition expenses, should for an accident year exceed the total
increase its unearned premiums by the amount of unpaid losses with respect to
amount of such acquisition expenses prior any line of business for an accident year
Schedule E—Premiums to making the computation on lines 2d and as reported on the annual statement. Also
Earned 4d. See section 832(b)(7)(E). see Regulations section 1.832-4(d)
regarding increasing unpaid losses shown
Line 1.—Enter gross premiums written on Line 6.—Transitional adjustments apply to on the annual statement by salvage
insurance contracts during the tax year, companies which become taxable under recoverable. Also see Rev. Proc. 92-77,
less return premiums and premiums paid section 831(a). See section 832(b)(7)(D) for 1992-2 C.B. 454.
for reinsurance. more information.
The applicable interest rate for each
Lines 2a and 4a.—Include on lines 2a and calendar year and the applicable loss
4a: payment pattern for each accident year for
1. All life insurance reserves, as defined
Schedule F—Losses each line of business are determined by
in section 816(b) (but determined under Incurred the Secretary. The applicable interest rate
section 807); and for 1995 is 6.99%. The applicable interest
Line 1. Losses paid.—Enter the total
2. All unearned premiums of a Blue rate and loss payment patterns for 1995
losses paid on insurance contracts during
Cross or Blue Shield organization to which are published in Rev. Proc. 95-40, 1995-36
the tax year less salvage and reinsurance
section 833 applies. I.R.B. 21. The applicable interest rates and
recovered during the tax year.
loss payment patterns for 1994 and 1993
Note: If, due to the amendments made to Lines 2a and 4a. Unpaid losses on life are published in Rev. Proc. 94-47, 1994-2
section 832(b)(4) applicable to tax years insurance contracts.—Unpaid losses C.B. 688, and Rev. Proc. 93-29, 1993-2
beginning on or after September 30, 1990, must be adjusted for recoveries of C.B. 344. (Note: The applicable 1995
a corporation is required to change its reinsurance. The amounts of expected interest rate has been published in Rev.
method of computing reserves, this change recoveries should be estimated based on Rul. 94-73, 1994-2 C.B. 688.)
is treated as a change in method of the facts in each case and the
accounting, initiated by the corporation, Section 846(e) allows corporations
corporation’s experience with similar
and made with the consent of the having sufficient historical experience to
cases. See Regulations section 1.832-4(b).
Secretary. The corporation must take into determine a loss payment pattern to elect
Lines 2b and 4b. Discounted unpaid under certain circumstances, to use their
account the net adjustments required by losses outstanding.—Enter all discounted
section 481 over a period not to exceed 4 own historical experience. If this election is
unpaid losses as defined in section 846. made, the loss payment patterns will be
tax years beginning with the 1st tax year
beginning on or after September 30, 1990. Section 846 provides that the amount of based on the most recent calendar year for
discounted unpaid losses must be which an annual statement was filed
Lines 2b and 4b.—Include on lines 2b and computed separately by line of business before the beginning of the accident year.
4b, 90% of unearned premiums for (multiple peril lines must be treated as a The election will not apply to any
insurance against default in the payment of single line of business) and by accident international or reinsurance line of
principal or interest on securities described year and must be equal to the present business. If the corporation makes this
in section 165(g)(2)(C) (relating to worthless value of such losses determined by using: election, check the “Yes” column for
securities) with maturities of more than 5 question 10 in Schedule I, Other
years. 1. The amount of the undiscounted
unpaid losses, Information. For more information, see
Lines 2c and 4c.—The amount of section 846(e), Regulations section
discounted unearned premiums at the end 2. The applicable interest rate, and 1.846-2, and Rev. Proc. 92-76, 1992-2
of any tax year must be the present value 3. The applicable loss payment pattern. C.B. 453.
of those premiums (as of such time and Special rules apply with respect to Note: There is a special application of the
separately with respect to premiums unpaid losses related to disability “Fresh Start” provision for an insurance
received in each calendar year) determined insurance (other than credit disability company that is not subject to tax under
by using: (1) the amount of the insurance), noncancelable accident and section 831(a) for its first taxable year
undiscounted unearned premiums at such health insurance, cancelable accident and beginning after December 31, 1986,
time; (2) the applicable interest rate; and health insurance, and to the international because (1) it is described in section 501(c)
(3) the applicable statutory premium and reinsurance lines of business. With or (2) it is subject to tax under section
recognition pattern. regard to the special rules for discounting 831(b) on its investment income:
Undiscounted unearned premiums unpaid losses on accident and health If the insurance company later becomes
means the unearned premiums shown in insurance (other than disability income subject to tax under section 831(a), the
the annual statement filed for the year insurance), unpaid losses are assumed to rules relating to the Fresh Start under the
ending with or in the tax year. be paid in the middle of the year following discounting provisions are applied by
Applicable interest rate means the the accident year. treating the last tax year before the year in
annual rate determined under section Generally, the amount of undiscounted which the insurance company becomes
846(c)(2) for the calendar year the unpaid losses means the unpaid losses subject to tax under section 831(a) as the
premiums are received. and unpaid loss adjustment expenses insurance company’s last tax year
Applicable statutory premium shown in the annual statement. However, beginning before 1987. See section 1010(e)
recognition pattern means the statutory see Regulations sections 1.846-1(a)(1) of the Act of 1988 and Notice 88-100,
premium recognition pattern in effect for referring to Regulations section 1.832-4(b). 1988-2 C.B. 439.
the calendar year the premiums are Under section 832(b)(5)(A), unpaid losses Lines 6 and 7. Estimated salvage and
received, and is based on the statutory must be adjusted to take into account reinsurance recoverable.—See Rev.
premium recognition pattern which applies estimated recoveries due to salvage and Procs. 91-48, 1991-2 C.B. 760, 92-52,
to premiums received by the corporation in reinsurance for those losses. If the 1992-2 C.B. 388, 92-72, 1992-2 C.B. 439,
that calendar year. For purposes of the amounts shown in the annual statement 93-30, 1993-2 C.B. 352, 94-50, 1994-2
preceding sentence, premiums received were determined on a discounted basis C.B. 709, and 95-41, 1995-36 I.R.B. 28;
during any calendar year will be treated as and if the extent to which these losses and Regulations section 1.832-4.
received in the middle of such year. were discounted can be determined on the
Page 14
Line 9. Tax-exempt interest subject to determined without regard to this For this purpose, the term “stock”
section 832(b)(5)(B).—Enter the amount of deduction. generally does not include any stock that
tax-exempt interest received or accrued Note: Under section 833(b)(4), any (a) is nonvoting, (b) is nonconvertible, (c) is
during the tax year on investments made determination under section 833(b) must limited and preferred as to dividends and
after August 7, 1986. For information be made by only taking into account items does not participate significantly in
regarding the determination of the from the health-related business of the corporate growth, and (d) has redemption
acquisition date of an investment, see the corporation. and liquidation rights that do not exceed
instructions for Schedule C. the issue price of the stock (except for a
Line 8a. Adjusted tax-exempt income.— reasonable redemption or liquidation
Reduce the total tax-exempt interest premium). See section 1504(a)(4).
received or accrued during the tax year by
Schedule G—Other Capital any amount (not otherwise deductible) Parent-subsidiary controlled group.—
Losses which would have been allowable as a The term “parent-subsidiary controlled
deduction for the tax year if such interest group” means one or more chains of
Capital assets are considered sold or were not tax-exempt. Enter the result on corporations connected through stock
exchanged to provide funds to meet line 8a. ownership (section 1563(a)(1)). Both of the
abnormal insurance losses and to pay following requirements must be met:
dividends and make similar distributions to Line 8b. Adjusted dividends-received
deduction.—Reduce the total amount 1. 80% of the total combined voting
policyholders to the extent that the gross power of all classes of stock entitled to
receipts from their sale or exchange are allowed as a deduction under sections
243, 244, and 245 by the amount of any vote or at least 80% of the total value of
not more than the amount by which the all classes of stock of each corporation in
sum of dividends and similar distributions decrease in deductions allowable for the
tax year because of section 832(b)(5)(B) the group (except the parent) must be
paid to policyholders, losses paid, and owned by one or more of the other
expenses paid for the tax year is more when the decrease is caused by the
deductions under sections 243, 244, and corporations in the group.
than the total on line 9, Schedule G.
245. Enter the result on line 8b. 2. The common parent must own at
Total gross receipts from sales of capital least 80% of the total combined voting
assets (line 12, column (c)) must not be power of all classes of stock entitled to
more than line 10. If necessary, the
corporation may report part of the gross Schedule I—Other vote or at least 80% of the total value of
all classes of stock of at least one of the
receipts from a particular sale of a capital Information other corporations in the group. Stock
asset on this schedule and the rest on owned directly by other members of the
Schedule D (Form 1120). Otherwise, do not Be sure to answer all of the questions that
apply to the corporation. group is not counted when computing the
include on Schedule D (Form 1120) any voting power or value.
sales reported on this schedule. Question 4 See section 1563(d)(1) for the definition
Check the “Yes” box for question 4 if of “stock” for purposes of determining
either 1 or 2 below applies to the stock ownership above.
Schedule H—Special corporation:
Deduction for Section 833 1. The corporation is a subsidiary in an
Question 6
Organizations and Ending affiliated group (defined below), but is not Check the “Yes” box if one foreign person
filing a consolidated return for the tax year owned at least 25% of (a) the total voting
Adjusted Surplus power of all classes of stock of the
with that group.
Line 5. Beginning adjusted surplus.—If corporation entitled to vote, or (b) the total
2. The corporation is a subsidiary in a
the LIC was a section 833 organization in value of all classes of stock of the
parent-subsidiary controlled group (defined
1994, it should enter the amount from corporation.
below).
Schedule H, line 10 of the 1994 Form The constructive ownership rules of
1120-PC. Any corporation that meets either of the
section 318 apply in determining if a
requirements above should check the
Generally, the adjusted surplus as of the corporation is foreign-owned. See section
“Yes” box. This applies even if the
beginning of any tax year is an amount 6038A(c)(5) and the related regulations.
corporation is a subsidiary member of one
equal to the adjusted surplus as of the group and the parent corporation of Enter on line 6a the percentage owned
beginning of the preceding tax year: another. by the foreign person specified in question
(1) increased by the amount of any 6. Enter on line 6b, the name of the
adjusted taxable income for the preceding Note: If the corporation is an “excluded
owner’s country.
tax year, or (2) decreased by the amount member” of a controlled group (see section
of any adjusted net operating loss for the 1563(b)(2)), it is still considered a member Note: If there is more than one
preceding tax year. If 1995 is the first tax of a controlled group for this purpose. 25%-or-more foreign owner, complete lines
year the taxpayer qualifies as a section 6a and 6b for the foreign person with the
Affiliated group.—The term “affiliated
833 organization, see section 833(c)(3)(C) highest percentage of ownership.
group” means one or more chains of
to determine the adjusted surplus as of the includible corporations (section 1504(a)) Foreign person.—The term “foreign
beginning of the 1995 tax year. connected through stock ownership with a person” means:
For purposes of the computation of the common parent corporation. The common ● A foreign citizen or nonresident alien.
adjusted surplus, the terms “adjusted parent must be an includible corporation ● An individual who is a citizen of a U.S.
taxable income” and “adjusted net and the following requirements must be possession (but who is not a U.S. citizen
operating loss” mean the taxable income met: or resident).
or the net operating loss, respectively, 1. The common parent must own directly ● A foreign partnership.
determined with the following stock that represents at least 80% of the
modifications: (1) without regard to the total voting power and at least 80% of the ● A foreign corporation.
deduction determined under section total value of the stock of at least one of ● Any foreign estate or trust within the
833(b)(1); (2) without regard to any the other includible corporations. meaning of section 7701(a)(31).
carryover or carryback to that tax year; 2. Stock that represents at least 80% of ● A foreign government (or one of its
and (3) by increasing gross income by an the total voting power and at least 80% of agencies or instrumentalities) to the extent
amount equal to the net exempt income the total value of the stock of each of the that it is engaged in the conduct of a
for the tax year. other corporations (except for the common commercial activity as described in section
Line 6. Special deduction.—The parent) must be owned directly by at least 892.
deduction for any tax year is limited to one of the other includible corporations. Owner’s country.—For individuals, the
taxable income for that tax year term “owners country” means the country

Page 15
of residence. For all others, it is the Question 14 Schedule L—Balance Sheets
country where incorporated, organized,
Check the box on line 14 if the corporation Note: All insurance companies required to
created, or administered.
elects under section 172(b)(3) to forgo the file Form 1120-PC must complete
Requirement to file Form 5472.—If the carryback period for a net operating loss Schedule L.
corporation checked “Yes” to Question 6, (NOL). If you check this box, do not attach
it may have to file Form 5472, Information the statement described in Temporary The balance sheet should agree with the
Return of a 25% Foreign-Owned U.S. Regulations section 301.9100-12T. corporation’s books and records. Include
Corporation or a Foreign Corporation certificates of deposit as cash on line 1 of
Engaged in a U.S. Trade or Business. Question 15 Schedule L.
Generally, a 25% foreign-owned Enter the amount of the net operating loss Line 5. Tax-exempt securities.—Include
corporation that had a reportable (NOL) carryover to the tax year from prior on this line:
transaction with a foreign or domestic years, regardless of whether any of the 1. State and local government
related party during the tax year must file loss is used to offset income on this obligations, the interest on which is
Form 5472. return. The amount to enter is the total of excludable from gross income under
See Form 5472 for filing instructions and all NOLs generated in prior years but not section 103(a), and
penalties for failure to file. used to offset income (either as a 2. Stock in a mutual fund or other
carryback or carryover) to a tax year prior regulated investment company that
Question 8 to 1995. Do not reduce the amount by any distributed exempt-interest dividends
Foreign financial accounts.—Check the NOL deduction reported on Schedule A, during the tax year of the corporation.
“Yes” box if either 1 or 2 below, applies to line 36b. Pub. 536 has a worksheet for
Line 18. Insurance liabilities.—Include on
the corporation. Otherwise, check the “No” figuring a corporation’s NOL carryover.
this line:
box:
● Undiscounted unpaid losses,
1. At any time during the 1995 calendar
year the corporation had an interest in or Schedule J—Protection ● Loss adjustment expenses, and
signature or other authority over a bank, Against Loss Account ● Unearned premiums.
securities, or other financial account in a See section 846 for more information.
foreign country; and Section 1024 of P.L. 99-514 repealed
section 824 relating to the protection
● The combined value of the account(s)
against loss account (PAL account).
was more than $10,000 at any time during Schedule M-1—
However, PAL account balances are
the calendar year; AND
● The account was NOT with a U.S.
includible in income as though section 824 Reconciliation of Income
were still in effect.
military banking facility operated by a U.S. (Loss) per Books With
Line 2a. Section 824(d)(1)(B).—Enter the
financial institution.
amount, if any, by which the sum of the Income per Return
2. The corporation owns more than 50% investment loss and the statutory Line 5c. Travel and entertainment.—
of the stock in any corporation that would underwriting loss for the tax year exceeds Include on line 5c any of the following:
answer “Yes” to item 1 above. the sum of the statutory underwriting
● 50% of meals and entertainment not
Get Form TD F 90-22.1, Report of income and the taxable investment income
allowed under section 274(n).
Foreign Bank and Financial Accounts, to for the tax year.
see if the corporation is considered to ● Expenses for the use of an
Line 2b. Section 824(d)(1)(C).—Enter (in
have an interest in or signature or other entertainment facility.
the order the losses occurred) amounts
authority over a financial account in a equal to the unused loss carryovers to the ● The part of business gifts over $25.
foreign country. tax year. ● Expenses of an individual over $2,000
If “Yes” is checked for this question, file Line 2c. Section 824(d)(1)(D).—Enter any which are allocable to conventions on
Form TD F 90-22.1 by June 30, 1996, with amount remaining in the account which cruise ships.
the Department of the Treasury at the was added to the account for the fifth ● Employee achievement awards over
address shown on the form. Form TD F preceding tax year minus one-half of the $400.
90-22.1 is not a tax return, so do not file it amount remaining in the account for such
with Form 1120-PC. You can get Form TD ● The cost of entertainment tickets over
tax year which was added by section face value (also subject to 50%
F 90-22.1 from an IRS Distribution Center 824(a)(1)(B).
or by calling 1-800-TAX-FORM disallowance under section 274(n)).
Line 2d. Section 824(d)(1)(E).—Enter the ● The cost of skyboxes over the face value
(1-800-829-3676).
amount by which the total amount in the of non-luxury box seat tickets.
Also, if “Yes” is checked for this account exceeds the greater of:
question, enter the name of the foreign ● The part of luxury water travel not
(i) 10% of premiums earned on allowed under section 274(m).
country or countries. Attach a separate
insurance contracts during the tax year (as
sheet if more space is needed.
defined in section 832(b)(4)) minus ● Expenses for travel as a form of
dividends to policyholders (as defined in education.
Question 13
section 832(c)(11)), or ● Other travel and entertainment expenses
Show any tax-exempt interest received or not allowed as a deduction.
accrued. Include any exempt-interest (ii) the total amount in the account at the
dividends received as a shareholder in a close of the preceding tax year. For more information, see Pub. 542.
mutual fund or other regulated investment Line 7a. Tax exempt-interest.—Include as
company. interest on line 7a any exempt-interest
dividends received as a shareholder in a
mutual fund or other regulated investment
company.

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