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# Page 1 of 25 Instructions for Form 1120 11:47 - 3-FEB-2009

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### Department of the Treasury **Internal Revenue Service** 

# 2**0**08
Instructions for Form 1120

U.S. Corporation Income Tax Return

Photographs of missing children selected Section references are to the Internal 

# What’s New by the Center may appear in instructions Revenue Code unless otherwise noted. on pages that would otherwise be blank. 

### •The filing address for certain **Contents Page** You can help bring these children home corporations whose principal business Photographs of Missing Children .... 1 by looking at the photographs and calling office or agency is located in Georgia or Unresolved Tax Issues............ 1 1-800-THE-LOST (1-800-843-5678) if you Tennessee has changed. SeeWhere To Direct Deposit of Refund........... 1 recognize a child. File on page 3. How To Make a Contribution To 

### •A corporation can elect to claim

Reduce Debt Held by the 

## Unresolved Tax Issues additional research and minimum tax Public ...................... 1 credits in lieu of claiming any additional The Taxpayer Advocate Service (TAS) is How To Get Forms and first-year special depreciation allowance an independent organization within the

Publications.................. 2 for eligible qualified property. See the IRS whose employees assist taxpayers instructions for line 32g. **General Instructions**............. 2 who are experiencing economic harm,



### • For returns required to be filed after who are seeking help in resolving tax Purpose of Form ................ 2 December 31, 2008, the minimum penalty problems that have not been resolved Who Must File.................. 2 for failure to file a return that is over 60 through normal channels, or who believe Electronic Filing................. 2 days late has increased to the smaller of that an IRS system or procedure is not When To File................... 3 the tax due or $135. See page 4 of the working as it should. The service is free, Where To File .................. 3 Instructions. confidential, tailored to meet your needs,



### • For business start-up and Who Must Sign ................. 3 and is available for businesses, as well as organizational costs paid or incurred after individuals. Paid Preparer Authorization ........ 3 September 8, 2008, a corporation is no Assembling the Return............ 4 The corporation can contact the TAS longer required to attach a statement to Depository Methods of Tax as follows. its return or specifically identify the 

### •Call the TAS toll-free case intake line at Payment .................... 4 amount deducted as organizational or 1-877-777-4778 or TTY/TDD Estimated Tax Payments .......... 4 start-up costs for the election under 1-800-829-4059 to see if the corporation Interest and Penalties............. 4 sections 195(b) or 248(a) to be effective. is eligible for assistance. See page 9 of the instructions. Accounting Methods.............. 5 

### •Call or write the corporation’s local 

### • For tax years ending after May 22, Accounting Period ............... 5 taxpayer advocate, whose phone number 2008, and beginning before May 23, Rounding Off To Whole Dollars . ..... 5 and address are listed in the local 2009, a maximum 15% alternative tax will Recordkeeping.................. 5 telephone directory and in Pub. 1546, apply to the corporation’s qualified timber Taxpayer Advocate Service – Your Voice Other Forms and Statements gain (as defined under section at the IRS.

That May Be Required .......... 5 1201(b)(2)). The alternative tax applies 

### • File Form 911, Request for Taxpayer **Specific Instructions** ............ 6 for both the regular tax and the alternative Advocate Assistance (And Application for minimum tax. See the instructions for Period Covered ................. 6 Taxpayer Assistance Order), or ask an Schedule J, line 2. Name and Address .............. 6 IRS employee to complete it on the 

### •All general business credits allowed Identifying Information ............ 6 corporation’s behalf. against the alternative minimum tax are Employer Identification Number claimed on Form 3800. See the For more information, go towww.irs.

(EIN) ....................... 7 instructions for Schedule J, line 5c, on gov/advocate

. Total Assets ................... 7 page 17, and Form 3800. Initial Return, Final Return, 

### • For information on temporary tax relief 

## Direct Deposit of Refund for certain taxpayers in Kiowa County, Name Change, Address To request a direct deposit of the Kansas, and surrounding areas, see Pub. Change ..................... 7 corporation’s income tax refund into an 4492-A, Information for Taxpayers Income ....................... 7 account at a U.S. bank or other financial Affected by the May 4, 2007, Kansas Deductions .................... 8 institution, attach Form 8050, Direct Storms and Tornadoes. Deposit of Corporate Tax Refund. See Tax and Payments. . . . . . . . . . . . . . 13 

### • For information on tax relief granted to the instructions for line 36 on page 14. Schedule A. Cost of Goods Sold . . . 14 certain taxpayers in the Midwestern Schedule C. Dividends and disaster areas that were affected by 

## How To Make a

Special Deductions. . . . . . . . . . . . 15 floods between May and August 2008 and declared eligible for federal Worksheet for Schedule C . . . . . . . . 16 

## Contribution To Reduce assistance, see Pub. 4492-B, Information Schedule J. Tax Computation . . . . . . 17 

## Debt Held by the Public for Affected Taxpayers in the Midwestern Schedule K. Other Information . . . . . 18 Disaster Areas. To help reduce debt held by the public, Schedule L. Balance Sheets per make a check payable to “Bureau of the

Books . . . . . . . . . . . . . . . . . . . . . 20 Public Debt.” Send it to Bureau of the 

## Photographs of Schedule M-1. Reconciliation of Public Debt, Department G, P.O. Box

Income. . . . . . . . . . . . . . . . . . . . . 20 

## Missing Children 2188, Parkersburg, WV 26106-2188. Or, Principal Business Activity The Internal Revenue Service is a proud enclose a check with the income tax

Codes . . . . . . . . . . . . . . . . . . . . . 22 partner with the National Center for return. Contributions to reduce debt held Index. . . . . . . . . . . . . . . . . . . . . . . . 25 Missing and Exploited Children. by the public are deductible subject to the

Cat. No. 11455T

## Page 2 of 25 Instructions for Form 1120 11:47 - 3-FEB-2009

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rules and limitations for charitable **Limited liability companies.** If an entity Visitwww.irs.gov/efile for details. contributions. with more than one owner was formed as a limited liability company (LLC) under 

### Special Returns for state law, it generally is treated as a 

## How To Get Forms partnership for federal income tax 

### Certain Organizations 

## and Publications purposes and files Form 1065, U.S. Instead of filing Form 1120, certain Return of Partnership Income. Generally, organizations, as shown below, have to **Internet.** You can access the IRS a single-member LLC is disregarded as file special returns. website 24 hours a day, 7 days a week, at an entity separate from its owner and www.irs.gov to: reports its income and deductions on its 

### • Download forms, instructions, and owner’s federal income tax return. The **If the organization is a: File Form** publications; LLC can file a Form 1120 only if it has 

### •Order IRS products online; filed Form 8832, Entity Classification 

### • Research your tax questions online; Election, to elect to be treated as an Exempt organization with 

### •Search publications online by topic or association taxable as a corporation. For unrelated trade or business **990-T** keyword; and more information about LLCs, see Pub. income 

### •Sign up to receive local and national 3402, Tax Issues for Limited Liability tax news by email. Companies. Religious or apostolic **IRS Tax Products DVD.** You can order **Corporations engaged in farming.** A organization exempt under **1065** Pub. 1796, IRS Tax Products DVD, and corporation (other than a corporation that section 501(d) obtain: is a subchapter T cooperative) that engages in farming should use Form 

### •Current-year forms, instructions, and Entity formed as a limited 1120 to report the income (loss) from publications. liability company under state such activities. Enter the income and 

### • Prior-year forms, instructions, and law and treated as a **1065** deductions of the corporation according to publications. partnership for federal the instructions for lines 1 through 10 and 

### •Tax Map: an electronic research tool income tax purposes 12 through 29. and finding aid. **Ownership interest in a Financial** 

### •Tax law frequently asked questions Subchapter T cooperative **Asset Securitization Investment Trust** (FAQs). association (including a **1120-C (FASIT).**  Special rules apply to a FASIT 

### •Tax Topics from the IRS telephone farmers’ cooperative) in existence on October 22, 2004, to the response system. extent that regular interests issued by the 

### • Internal Revenue Code – Title 26. FASIT before October 22, 2004, continue Entity that elects to be treated 

### • Fill-in, print, and save features for most to remain outstanding in accordance with tax forms. as a real estate mortgage **1066** their original terms. 

### • Internal Revenue Bulletins. investment conduit (REMIC)



### •Toll-free and email technical support. If a corporation holds an ownership under section 860D



### •Two releases during the year. interest in a FASIT to which these special – The first release will ship early in rules apply, it must report all items of Interest charge domestic January 2009. income, gain, deductions, losses, and international sales **1120-IC-DISC** – The final release will ship early in credits on the corporation’s income tax corporation (section 992) March 2009. return (except as provided in section 860H). Show a breakdown of the items on Purchase the DVD from the National Foreign corporation (other an attached schedule. For more Technical Information Service (NTIS) at than life and property and information, see sections 860H and 860L. www.irs.gov/cdorders for $30 (no casualty insurance company **1120-F** handling fee) or call 1-877-233-6767 toll 

### Electronic Filing filing Form 1120-L or Form free to buy the DVD for $30 (plus a $6 1120-PC) Corporations can generally electronically handling fee). file(e-file) Form 1120, related forms, schedules, and attachments, Form 7004, Foreign sales corporation **By phone and in person.** You can **1120-FSC** Form 940 and Form 941 employment tax (section 922) order forms and publications by calling returns. If there is a balance due, the 1-800-TAX-FORM (1-800-829-3676). You corporation can authorize an electronic can also get most forms and publications Condominium management, funds withdrawal while e-filing. Form 1099 at your local IRS office. residential real estate and other information returns can also be management, or timeshare electronically filed. **1120-H** association that elects to be However, the option toe-file does not treated as a homeowners 

# General Instructions apply to certain returns, including: association under section 528 

### • Returns with precomputed penalty and 

## Purpose of Form interest, Life insurance company Use Form 1120, U.S. Corporation Income 

### • Returns with reasonable cause for **1120-L** (section 801) Tax Return, to report the income, gains, failing to file timely, losses, deductions, credits, and to figure 

### • Returns with reasonable cause for Fund set up to pay for the income tax liability of a corporation. failing to pay timely, and nuclear decommissioning **1120-ND** 

### • Returns with request for overpayment costs (section 468A) 

## Who Must File to be applied to another account. Unless exempt under section 501, all **Required filers.** Certain corporations Property and casualty domestic corporations (including with total assets of $10 million or more corporations in bankruptcy) must file an that file at least 250 returns a year are insurance company **1120-PC** income tax return whether or not they required toe-file Form 1120. See (section 831) have taxable income. Domestic Regulations section 301.6011-5. corporations must file Form 1120 unless However, these corporations can request Political organization **1120-POL** they are required to file a special return. a waiver of the electronic filing (section 527) SeeSpecial Returns for Certain requirements. See Notice 2005-88, Organizations below. 2005-48 I.R.B. 1060.



### -2- **Instructions for Form 1120**

## Page 3 of 25 Instructions for Form 1120 11:47 - 3-FEB-2009

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If a return is filed on behalf of a box in the signature area of the return. Real estate investment trust corporation by a receiver, trustee, or This authorization applies only to the **1120-REIT** (section 856) assignee, the fiduciary must sign the individual whose signature appears in the return, instead of the corporate officer. “Paid Preparer’s Use Only” section of the Regulated investment Returns and forms signed by a receiver or return. It does not apply to the firm, if any, **1120-RIC** company (section 851) trustee in bankruptcy on behalf of a shown in that section. corporation must be accompanied by a If the “Yes,” box is checked, the copy of the order or instructions of the S corporation (section 1361) **1120S** corporation is authorizing the IRS to call court authorizing signing of the return or the paid preparer to answer any form. Settlement fund questions that may arise during the **1120-SF** If an employee of the corporation (section 468B) processing of its return. The corporation completes Form 1120, the paid preparer’s is also authorizing the paid preparer to: space should remain blank. Anyone who 

### •Give the IRS any information that is prepares Form 1120 but does not charge 

## When To File missing from the return, the corporation should not complete that 

### •Call the IRS for information about the Generally, a corporation must file its section. Generally, anyone who is paid to processing of the return or the status of income tax return by the 15th day of the prepare the return must sign it and fill in any related refund or payment(s), and 3rd month after the end of its tax year. A the “Paid Preparer’s Use Only” area. 

### • Respond to certain IRS notices about new corporation filing a short-period The paid preparer must complete the math errors, offsets, and return return must generally file by the 15th day required preparer information and: preparation. of the 3rd month after the short period


### •Sign the return in the space provided ends. A corporation that has dissolved The corporation is not authorizing the for the preparer’s signature. must generally file by the 15th day of the paid preparer to receive any refund 

### •Give a copy of the return to the 3rd month after the date it dissolved. check, bind the corporation to anything taxpayer. If the due date falls on a Saturday, (including any additional tax liability), or **Note.** A paid preparer may sign original Sunday, or legal holiday, the corporation otherwise represent the corporation or amended returns by rubber stamp, can file on the next business day. before the IRS. mechanical device, or computer software 

### Private Delivery Services program. The authorization will automatically end no later than the due date (excluding Corporations can use certain private extensions) for filing the corporation’s delivery services designated by the IRS to 

## Paid Preparer 2009 tax return. If the corporation wants meet the “timely mailing as timely filing/ 

## Authorization to expand the paid preparer’s paying” rule for tax returns and payments. If the corporation wants to allow the IRS authorization or revoke the authorization These private delivery services include to discuss its 2008 tax return with the paid before it ends, see Pub. 947, Practice only the following. preparer who signed it, check the “Yes,” Before the IRS and Power of Attorney. 

### • DHL Express (DHL): DHL Same Day Service, DHL Next Day 10:30 am, DHL Next Day 12:00 pm, DHL Next Day 3:00 pm, and DHL 2nd Day Service. 

## Where To File • Federal Express (FedEx): FedEx Priority Overnight, FedEx Standard File the corporation’s return at the applicable IRS address listed below. Overnight, FedEx 2Day, FedEx **If the corporation’s principal And the total assets at** International Priority, and FedEx **business, office, or agency the end of the tax year** International First. **is located in: are: Use the following address:** 

### • United Parcel Service (UPS): UPS Next Day Air, UPS Next Day Air Saver, UPS Less than $10 million and Department of the Treasury Connecticut, Delaware, District 2nd Day Air, UPS 2nd Day Air A.M., UPS Schedule M-3 is not filed Internal Revenue Service Center of Columbia, Georgia, Illinois, Worldwide Express Plus, and UPS Cincinnati, OH 45999-0012 Indiana, Kentucky, Maine, Worldwide Express. Maryland, Massachusetts, Michigan, New Hampshire, The private delivery service can tell New Jersey, New York, North you how to get written proof of the mailing Carolina, Ohio, Pennsylvania, date. $10 million or more or Department of the Treasury Rhode Island, South Carolina, less than $10 million and Internal Revenue Service Center Private delivery services cannot Tennessee, Vermont, Virginia, Schedule M-3 is filed Ogden, UT 84201-0012 deliver items to P.O. boxes. You West Virginia, Wisconsin must use the U.S. Postal Service CAUTION 

# !

Alabama, Alaska, Arizona, to mail any item to an IRS P.O. box Arkansas, California, Colorado, address. Florida, Hawaii, Idaho, Iowa, 

### Extension of Time To File Kansas, Louisiana, Minnesota, Department of the Treasury Mississippi, Missouri, Montana, File Form 7004, Application for Automatic Any amount Internal Revenue Service Center Nebraska, Nevada, New Extension of Time To File Certain Ogden, UT 84201-0012 Mexico, North Dakota, Business Income Tax, Information, and Oklahoma, Oregon, South Other Returns, to request a 6-month Dakota, Texas, Utah, extension of time to file. Generally, the Washington, Wyoming corporation must file Form 7004 by the regular due date of the return. Internal Revenue Service Center A foreign country or U.S. Any amount P.O. Box 409101 possession Ogden, UT 84409 

## Who Must Sign The return must be signed and dated by:



### •The president, vice president, A group of corporations with members located in more than one service center area treasurer, assistant treasurer, chief will often keep all the books and records at the principal office of the managing accounting officer; or corporation. In this case, the tax returns of the corporations may be filed with the



### •Any other corporate officer (such as tax service center for the area in which the principal office of the managing corporation is officer) authorized to sign. located.



### -3- **Instructions for Form 1120**

## Page 4 of 25 Instructions for Form 1120 11:47 - 3-FEB-2009

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Do not send deposits directly to an See section 6655 for details and 

## Assembling the Return IRS office; otherwise, the corporation may exceptions, including special rules for To ensure that the corporation’s tax return have to pay a penalty. Mail or deliver the large corporations. is correctly processed, attach all completed Form 8109 with the payment Use Form 2220, Underpayment of schedules and other forms after page 5 of to an authorized depositary (a commercial Estimated Tax by Corporations, to see if Form 1120 in the following order. bank or other financial institution the corporation owes a penalty and to authorized to accept federal tax deposits). 1. Schedule N (Form 1120). figure the amount of the penalty. Make checks or money orders payable to 2. Schedule O (Form 1120). Generally, the corporation does not have the depositary. 3. Form 4626. to file this form because the IRS can 4. Form 8050. If the corporation prefers, it can mail figure the amount of any penalty and bill 5. Form 4136. the coupon and payment to: Financial the corporation for it. However, even if the 6. Form 851. Agent, Federal Tax Deposit Processing, corporation does not owe the penalty, 7. Additional schedules in alphabetical P.O. Box 970030, St. Louis, MO 63197. complete and attach Form 2220 if: order. Make the check or money order payable 

### •The annualized income or adjusted 8. Additional forms in numerical order. to “Financial Agent.” seasonal installment method is used, or To help ensure proper crediting, enter 

### •The corporation is a large corporation Complete every applicable entry space the corporation’s EIN, the tax period to computing its first required installment on Form 1120. Do not enter “See which the deposit applies, and “Form based on the prior year’s tax. See the Attached” instead of completing the entry 1120” on the check or money order. Instructions for Form 2220 for the spaces. If more space is needed on the Darken the “1120” box under “Type of definition of a large corporation. forms or schedules, attach separate Tax” and the appropriate “Quarter” box Also, see the instructions for line 33. sheets using the same size and format as under “Tax Period” on the coupon. the printed forms. If there are supporting Records of these deposits will be sent to statements and attachments, arrange 

## Interest and Penalties the IRS. For more information, see them in the same order as the schedules **Interest.** Interest is charged on taxes “Marking the Proper Tax Period” in the or forms they support and attach them paid late even if an extension of time to Instructions for Form 8109. last. Show the totals on the printed forms. file is granted. Interest is also charged on For more information on deposits, see Enter the corporation’s name and EIN on penalties imposed for failure to file, the instructions in the coupon booklet each supporting statement or attachment. negligence, fraud, substantial valuation (Form 8109) and Pub. 583, Starting a misstatements, substantial Business and Keeping Records. 

## Depository Methods understatements of tax, and reportable If the corporation owes tax when it transaction understatements from the due 

## of Tax Payment files Form 1120, do not include the date (including extensions) to the date of The corporation must pay any tax due in payment with the tax return. payment. The interest charge is figured at CAUTION 

# !
full no later than the 15th day of the 3rd Instead, mail or deliver the payment with a rate determined under section 6621. month after the end of the tax year. The Form 8109 to an authorized depositary, or two methods of depositing taxes are **Late filing of return.** A corporation that use EFTPS, if applicable. discussed below. does not file its tax return by the due date, including extensions, may be penalized 

## Estimated Tax Payments **Electronic Deposit Requirement** 5% of the unpaid tax for each month or Generally, the following rules apply to the The corporation must make electronic part of a month the return is late, up to a corporation’s payments of estimated tax. deposits of all depository taxes (such as maximum of 25% of the unpaid tax. The 

### •The corporation must make installment employment tax, excise tax, and minimum penalty for a return that is over payments of estimated tax if it expects its corporate income tax) using the 60 days late is the smaller of the tax due total tax for the year (less applicable Electronic Federal Tax Payment System or $135. The penalty will not be imposed credits) to be $500 or more. (EFTPS) in 2009 if: if the corporation can show that the failure 

### •The installments are due by the 15th 

### •The total deposits of such taxes in to file on time was due to reasonable day of the 4th, 6th, 9th, and 12th months 2007 were more than $200,000 or cause. Corporations that file late should of the tax year. If any date falls on a 

### •The corporation was required to use attach a statement explaining the Saturday, Sunday, or legal holiday, the EFTPS in 2008. reasonable cause. installment is due on the next regular If the corporation is required to use **Late payment of tax.** A corporation that business day. EFTPS and fails to do so, it may be does not pay the tax when due generally 

### • Use Form 1120-W, Estimated Tax for subject to a 10% penalty. If the may be penalized1/ 2of 1% of the unpaid Corporations, as a worksheet to compute corporation is not required to use EFTPS, tax for each month or part of a month the estimated tax. it can participate voluntarily. To enroll in tax is not paid, up to a maximum of 25% 

### • If the corporation does not use EFTPS, or get more information about EFTPS, of the unpaid tax. The penalty will not be use the deposit coupons (Forms 8109) to call 1-800-555-4477. To enroll online, visit imposed if the corporation can show that make deposits of estimated tax. www.eftps.gov

. the failure to pay on time was due to 

### • If the corporation overpaid estimated **Depositing on time.** For EFTPS reasonable cause. tax, it may be able to get a quick refund deposits to be made timely, the by filing Form 4466, Corporation **Trust fund recovery penalty.** This corporation must initiate the transaction at Application for Quick Refund of penalty may apply if certain excise, least 1 business day before the date the Overpayment of Estimated Tax. income, social security, and Medicare deposit is due. See the instructions for lines 32b and taxes that must be collected or withheld 

### Deposits With Form 8109 32c. are not collected or withheld, or these If the corporation does not use EFTPS, **Estimated tax penalty.** A corporation taxes are not paid. These taxes are deposit corporation income tax payments that does not make estimated tax generally reported on: (and estimated tax payments) with Form payments when due may be subject to an 

### • Form 720, Quarterly Federal Excise 8109, Federal Tax Deposit Coupon. If you underpayment penalty for the period of Tax Return; do not have a preprinted Form 8109, use underpayment. Generally, a corporation is 

### • Form 941, Employer’s QUARTERLY Form 8109-B to make deposits. You can subject to the penalty if its tax liability is Federal Tax Return; get this form by calling 1-800-829-4933 or $500 or more and it did not timely pay the 

### • Form 943, Employer’s Annual Federal visiting an IRS taxpayer assistance smaller of: Tax Return for Agricultural Employees; or center. Have your EIN ready when you 

### • Its tax liability for 2008 or 

### • Form 945, Annual Return of Withheld call or visit. 

### • Its prior year’s tax. Federal Income Tax.



### -4- **Instructions for Form 1120**

## Page 5 of 25 Instructions for Form 1120 11:47 - 3-FEB-2009

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The trust fund recovery penalty may corporation is affected by its participation 

## Accounting Period be imposed on all persons who are in the transaction. The following are A corporation must figure its taxable determined by the IRS to have been reportable transactions. income on the basis of a tax year. A tax responsible for collecting, accounting for, 1. Any listed transaction, which is a year is the annual accounting period a and paying over these taxes, and who transaction that is the same as or corporation uses to keep its records and acted willfully in not doing so. The penalty substantially similar to tax avoidance report its income and expenses. is equal to the unpaid trust fund tax. See transactions identified by the IRS. Generally, corporations can use a the Instructions for Form 720, Pub. 15 2. Any transaction offered under calendar year or a fiscal year. Personal (Circular E), Employer’s Tax Guide, or conditions of confidentiality for which the service corporations, however, must use Pub. 51 (Circular A), Agricultural corporation paid an advisor a fee of at a calendar year unless they meet one of Employer’s Tax Guide, for details, least $250,000. the exceptions discussed on page 6. including the definition of responsible 3. Certain transactions for which the persons. **Change of tax year.** Generally, a corporation has contractual protection corporation, including a personal service against disallowance of the tax benefits. **Other penalties.** Other penalties can be corporation, must get the consent of the 4. Certain transactions resulting in a imposed for negligence, substantial IRS before changing its tax year by filing loss of at least $10 million in any single understatement of tax, reportable Form 1128, Application To Adopt, year or $20 million in any combination of transaction understatements, and fraud. Change, or Retain a Tax Year. However, years. See sections 6662, 6662A, and 6663. under certain conditions, a corporation 5. Any transaction identified by the can change its tax year without getting IRS in published guidance as a consent. “transaction of interest” (a transaction that 

## Accounting Methods the IRS believes has a potential for tax See the Instructions for Form 1128 Figure taxable income using the method avoidance or evasion, but has not yet and Pub. 538 for more information on of accounting regularly used in keeping been identified as a listed transaction). accounting periods and tax years. the corporation’s books and records. In all cases, the method used must clearly For more information, see Regulations 

## Rounding Off To show taxable income. Permissible section 1.6011-4 and the Instructions for methods include cash, accrual, or any 

## Whole Dollars Form 8886. other method authorized by the Internal The corporation can round off cents to **Penalties.** The corporation may have Revenue Code. whole dollars on its return and schedules. to pay a penalty if it is required to disclose If the corporation does round to whole a reportable transaction under section Generally, the following rules apply. dollars, it must round all amounts. To 6011 and fails to properly complete and


### •A corporation (other than a qualified round, drop amounts under 50 cents and file Form 8886. Penalties may also apply personal service corporation) must use increase amounts from 50 to 99 cents to under section 6707A if the corporation the accrual method of accounting if its the next dollar. For example, $1.39 fails to file Form 8886 with its corporate average annual gross receipts exceed $5 becomes $1 and $2.50 becomes $3. return, fails to provide a copy of Form million. However, seeNonaccrual 8886 to the Office of Tax Shelter Analysis If two or more amounts must be added experience method on page 7. (OTSA), or files a form that fails to include to figure the amount to enter on a line, 

### • Unless it is a qualifying taxpayer or a all the information required (or includes include cents when adding the amounts qualifying small business taxpayer, a incorrect information). Other penalties, and round off only the total. corporation must use the accrual method such as an accuracy-related penalty for sales and purchases of inventory under section 6662A, may also apply. 

## Recordkeeping items. SeeSchedule A. Cost of Goods See the Instructions for Form 8886 for Keep the corporation’s records for as long Sold on page 14. details on these and other penalties. as they may be needed for the 

### •A corporation engaged in farming must **Reportable transactions by material** administration of any provision of the use the accrual method. For exceptions, **advisors.** Material advisors to any Internal Revenue Code. Usually, records see section 447. reportable transaction must disclose that support an item of income, deduction, 

### •Special rules apply to long-term certain information about the reportable or credit on the return must be kept for 3 contracts. See section 460. transaction by filing Form 8918, Material years from the date the return is due or 

### • Dealers in securities must use the Advisor Disclosure Statement, with the filed, whichever is later. Keep records that mark-to-market accounting method. IRS. verify the corporation’s basis in property Dealers in commodities and traders in **Transfers to a corporation controlled** for as long as they are needed to figure securities and commodities can elect to **by the transferor.** Every significant the basis of the original or replacement use the mark-to-market accounting transferor (as defined in Regulations property. method. See section 475. section 1.351-3(d)) that receives stock of The corporation should keep copies of a corporation in exchange for property in all filed returns. They help in preparing **Change in accounting method.** a nonrecognition event must attach the future and amended returns. Generally, the corporation must get IRS statement required by Regulations consent to change the method of section 1.351-3(a) to its return for the tax 

## Other Forms and accounting used to report taxable income year of the exchange. The transferee (for income as a whole or for the 

## Statements That May Be corporation must include the statement treatment of any material item). To do so, required by Regulations section the corporation generally must file Form 

## Required 1.351-3(b) for the tax year of the 3115, Application for Change in exchange, unless all the required **Amended return.** Use Form 1120X, Accounting Method. See Form 3115 and information is included in any Amended U.S. Corporation Income Tax Pub. 538, Accounting Periods and statement(s) provided by a significant Return, to correct a previously filed Form Methods, for more information. transferor that is attached to the same 1120. return for the same section 351 There are some instances when the **Reportable transaction disclosure** exchange. corporation can obtain automatic consent **statement.** Disclose information for each from the IRS to change to certain reportable transaction in which the **Distributions under section 355.** Every accounting methods. See Rev. Proc. corporation participated. Form 8886, corporation that makes a distribution of 2008-52, 2008-36 I.R.B. 587, as modified Reportable Transaction Disclosure stock or securities of a controlled by Announcement 2008-84, 2008-38 Statement, must be filed for each tax year corporation, as described in section 355 I.R.B. 748. that the federal income tax liability of the (or so much of section 356 as it relates to



### -5- **Instructions for Form 1120**

## Page 6 of 25 Instructions for Form 1120 11:47 - 3-FEB-2009

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section 355), must attach the statement document creating it), address, and EIN The corporation does not have to required by Regulations section 1.355-5 on the appropriate lines. Enter the complete lines 3, 4, and 5 above, to its return for the year of the distribution. address of the corporation’s principal if its total receipts (line 1a plus 

### TIP

If the distributing corporation is a office or place of business. Include the lines 4 through 10 on page 1 of the controlled foreign corporation, each U.S. suite, room, or other unit number after the return) and its total assets at the end of shareholder (within the meaning of street address. If the post office does not the tax year are less than $250,000. section 951(b)), must include the deliver mail to the street address and the For more information on consolidated statement on or with its return. corporation has a P.O. box, show the box returns, see the regulations under section number instead. **Dual consolidated losses.** If a 1502. domestic corporation incurs a dual **Note.** Do not use the address of the consolidated loss (as defined in 

### Life-Nonlife Consolidated registered agent for the state in which the Regulations section 1.1503-2(c)(5)), the 

### Return corporation is incorporated. For example, corporation (or consolidated group) may if a business is incorporated in Delaware If the corporation is the common parent of need to attach an elective relief or Nevada and the corporation’s principal a consolidated group that includes a agreement and/or an annual certification office is located in Little Rock, AR, the life-nonlife insurance company, check box as provided in Regulations section corporation should enter the Little Rock 1b of Item A. See Temporary Regulations 1.1503-2(g)(2). address. section 1.1502-47T(s). **Election to reduce basis under section 362(e)(2)(C).**  The transferor and If the corporation receives its mail in 

### Personal Holding Company transferee in certain section 351 care of a third party (such as an A personal holding company must attach transactions can make a joint election accountant or an attorney), enter on the to Form 1120 a Schedule PH (Form under section 362(e)(2)(C) to limit the street address line “C/O” followed by the 1120), U.S. Personal Holding Company transferor’s basis in the stock received third party’s name and street address or (PHC) Tax. See the Instructions for instead of the transferee’s basis in the P.O. box. Schedule PH (Form 1120) for details. transferred property. The transferor and transferee may make the election by If the corporation received a Form 

### Personal Service Corporation attaching the statement as provided in 1120 tax package, use the preprinted A personal service corporation is a Notice 2005-70, 2005-41 I.R.B. 694, to label. Cross out any errors and print the corporation whose principal activity for the their tax returns filed by the due date correct information on the label. testing period (generally the prior tax year (including extensions) for the tax year in unless the corporation has just been which the transaction occurred. If the formed) for tax year is the performance of 

## Item A. Identifying transferor is a controlled foreign personal services. Personal services corporation, its controlling U.S. 

## Information include any activity performed in the fields shareholder(s) can make the election. of accounting, actuarial science, The common parent of a consolidated 

### Consolidated Return architecture, consulting, engineering, group can make the election for the Corporations filing a consolidated return health, law, and the performing arts. The group. must attach Form 851, Affiliations services must be substantially performed Once made, the election is irrevocable. Schedule, and other supporting by employee-owners. See section 362(e)(2)(C) and Notice statements to the return. Also, for the first 2005-70. A personal service corporation must year a subsidiary corporation is being **Other forms and statements.** See Pub. use a calendar tax year unless: included in a consolidated return, attach 542 for a list of other forms and 

### • It elects to use a 52-53-week tax year Form 1122, Authorization and Consent of statements a corporation may need to file that ends with reference to the calendar Subsidiary Corporation To Be Included in in addition to the forms and statements year or tax year elected under section a Consolidated Income Tax Return, to the discussed throughout these instructions. 444; parent’s consolidated return. Attach a



### • It can establish a business purpose for separate Form 1122 for each subsidiary a different tax year and obtains the being included in the consolidated return. approval of the IRS (see the Instructions 

# Specific Instructions for Form 1128 and Pub. 538); or File supporting statements for each corporation included in the consolidated 

### • It elects under section 444 to have a 

## Period Covered return. Do not use Form 1120 as a tax year other than a calendar year. To supporting statement. On the supporting make the election, use Form 8716, File the 2008 return for calendar year statement, use columns to show the Election To Have a Tax Year Other Than 2008 and fiscal years that begin in 2008 following, both before and after a Required Tax Year. and end in 2009. For a fiscal or short tax adjustments. year return, fill in the tax year space at the If a corporation makes the section 444 top of the form. 1. Items of gross income and election, its deduction for certain amounts deductions. The 2008 Form 1120 can also be paid to employee-owners may be limited. 2. A computation of taxable income. used if: See Schedule H (Form 1120), Section


### •The corporation has a tax year of less 3. Balance sheets as of the beginning 280H Limitations for a Personal Service than 12 months that begins and ends in and end of the tax year. Corporation (PSC), to figure the 2009, and 4. A reconciliation of income per maximum deduction.


### •The 2009 Form 1120 is not available at books with income per return. If a section 444 election is terminated the time the corporation is required to file 5. A reconciliation of retained and the termination results in a short tax its return. earnings. year, type or print at the top of the first The corporation must show its 2009 page of Form 1120 for the short tax year tax year on the 2008 Form 1120 and take Enter on Form 1120 the totals for each “SECTION 444 ELECTION into account any tax law changes that are item of income, gain, loss, expense, or TERMINATED.” See Temporary effective for tax years beginning after deduction, net of eliminating entries for Regulations section 1.444-1T(a)(5) for December 31, 2008. intercompany transactions between more information. corporations within the consolidated 

## Name and Address group. Attach consolidated balance For more information regarding a Enter the corporation’s true name (as set sheets and a reconciliation of personal service corporation, see Pub. forth in the charter or other legal consolidated retained earnings. 542.



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incorporation and filed the amendment increased by the interest payable under 

### Schedule M-3 (Form 1120) with the state in which it was section 453(l)(3). Report this addition to A corporation with total assets incorporated. the tax on line 9, Schedule J. (non-consolidated or consolidated for all 

### • If the corporation has changed its Enter on line 1 (and carry to line 3), the corporations included within a tax address since it last filed a return gross profit on collections from installment consolidation group) of $10 million or (including a change to an “in care of” sales for any of the following. more on the last day of the tax year must address), check the “Address change” 

### • Dealer dispositions of property before complete Schedule M-3 (Form 1120), Net box. March 1, 1986. Income (Loss) Reconciliation for **Note.** If a change in address occurs after 

### • Dispositions of property used or Corporations With Total Assets of $10 the return is filed, use Form 8822, produced in the trade or business of Million or More, instead of Schedule M-1. Change of Address, to notify the IRS of farming. A corporation filing Form 1120 that is not the new address. 

### •Certain dispositions of timeshares and required to file Schedule M-3 may residential lots reported under the voluntarily file Schedule M-3 instead of installment method. Schedule M-1. 

## Income If you are filing Schedule M-3, check Attach a schedule showing the Except as otherwise provided in the box 4 of Item A to indicate that Schedule following information for the current and Internal Revenue Code, gross income M-3 is attached. See the Instructions for the 3 preceding years: (a) gross sales, (b) includes all income from whatever source Schedule M-3 for more details. cost of goods sold, (c) gross profits, (d) derived. percentage of gross profits to gross sales, **Income from qualifying shipping** (e) amount collected, and (f) gross profit 

## Item B. Employer **activities.** Gross income does not on the amount collected. include income from qualifying shipping 

## Identification Number (EIN) activities if the corporation makes an Enter the corporation’s EIN. If the **Nonaccrual experience method.** election under section 1354 to be taxed corporation does not have an EIN, it must Accrual method corporations are not on its notional shipping income (as apply for one. An EIN can be applied for: required to accrue certain amounts to be defined in section 1353) at the highest 

### •Online—Click on the EIN link atwww. received from the performance of corporate tax rate (35%). If the election is irs.gov/businesses/small. The EIN is services that, on the basis of their made, the corporation generally may not issued immediately once the application experience, will not be collected, if: claim any loss, deduction, or credit with information is validated. 

### •The services are in the fields of health, respect to qualifying shipping activities. A 

### • By telephone at 1-800-829-4933 from law, engineering, architecture, corporation making this election also may 7:00 a.m. to 10:00 p.m. in the accounting, actuarial science, performing elect to defer gain on the disposition of a corporation’s local time zone. arts, or consulting, or qualifying vessel. 

### • By mailing or faxing Form SS-4, 

### •The corporation’s average annual Use Form 8902, Alternative Tax on Application for Employer Identification gross receipts for the 3 prior tax years Qualifying Shipping Activities, to figure Number. does not exceed $5 million. the tax. Include the alternative tax on If the corporation has not received its This provision does not apply to any Schedule J, line 9. EIN by the time the return is due, enter amount if interest is required to be paid “Applied for” and the date you applied in on the amount or if there is any penalty 

### Line 1. Gross Receipts or Sales the space for the EIN. For more details, for failure to timely pay the amount. For Enter gross receipts or sales from all see the Instructions for Form SS-4. more information, see Regulations business operations except those that section 1.448-2. **Note.** Only corporations located in the must be reported on lines 4 through 10. In United States or U.S. possessions can general, advance payments are reported Corporations that qualify to use the use the online application. Foreign in the year of receipt. To report income nonaccrual experience method should corporations must use one of the other from long-term contracts, see section attach a schedule showing total gross methods to apply. 460. For special rules for reporting certain receipts, the amount not accrued as a advance payments for goods and result of the application of section 

## Item D. Total Assets long-term contracts, see Regulations 448(d)(5), and the net amount accrued. section 1.451-5. For permissible methods Enter the net amount on line 1a. Enter the corporation’s total assets (as for reporting advance payments for determined by the accounting method 

### Line 2. Cost of Goods Sold services and certain goods by an accrual regularly used in keeping the Enter the cost of goods sold on line 2, method corporation, see Rev. Proc. corporation’s books and records) at the page 1. Before making this entry, 2004-34, 2004-22 I.R.B. 991. end of the tax year. If there are no assets complete Schedule A on page 2 of Form at the end of the tax year, enter -0-. **Installment sales.** Generally, the 1120. See the Schedule A instructions on installment method cannot be used for If the corporation is required to page 14. dealer dispositions of property. A “dealer complete Schedule L, enter total assets disposition” is any disposition of: (a) from Schedule L, line 15, column (d) on 

### Line 4. Dividends personal property by a person who page 1, item D. If filing a consolidated See the instructions for Schedule C. regularly sells or otherwise disposes of return, report total consolidated assets for Then, complete Schedule C and enter on personal property of the same type on the all corporations joining in the return. line 4 the amount from Schedule C, line installment plan or (b) real property held 19. for sale to customers in the ordinary 

## Item E. Initial Return, Final course of the taxpayer’s trade or 

### Line 5. Interest 

## Return, Name Change, or business. Enter taxable interest on U.S. obligations These restrictions on using the and on loans, notes, mortgages, bonds, 

## Address Change installment method do not apply to bank deposits, corporate bonds, tax 

### • If this is the corporation’s first return, dispositions of property used or produced refunds, etc. Do not offset interest check the “Initial return” box. in a farming business or sales of expense against interest income. Special 

### • If this is the corporation’s final return timeshares and residential lots for which rules apply to interest income from certain and it will no longer exist, check the “Final the corporation elects to pay interest below-market-rate loans. See section return” box. under section 453(l)(3). 7872 for details. 

### • If the corporation changed its name since it last filed a return, check “Name For sales of timeshares and residential **Note.** Report tax-exempt interest income change” box. Generally, a corporation lots reported under the installment on Schedule K, item 9. Also, if required, also must have amended its articles of method, the corporation’s income tax is include the same amount on Schedule



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M-1, line 7, or Schedule M-3 (Form 1120), 1.1363-2 and Rev. Proc. 94-61, 1994-2 

### •Contributions to pension, stock bonus, Part II, line 13, if applicable. C.B. 775. Also see the instructions for and certain profit-sharing, annuity, or Schedule J, line 10. deferred compensation plans. 

### Line 6. Gross Rents 8. Any net positive section 481(a) Regulations section 1.263A-1(e)(3) adjustment. The corporation may have to Enter the gross amount received for the specifies other indirect costs that relate to make an adjustment under section 481(a) rental of property. Deduct expenses such production or resale activities that must to prevent amounts of income or expense as repairs, interest, taxes, and be capitalized and those that may be from being duplicated or omitted. The depreciation on the proper lines for currently deductible. section 481(a) adjustment period is deductions. A rental activity held by a **Interest expense**paid or incurred generally 1 year for a net negative closely held corporation or a personal during the production period of adjustment and 4 years for a net positive service corporation may be subject to the designated property must be capitalized adjustment. However, a corporation can passive activity loss rules. SeePassive and is governed by special rules. For elect to use a 1-year adjustment period if activity limitations on page 9. more details, see Regulations sections the net section 481(a) adjustment for the 1.263A-8 through 1.263A-15. 

### Line 10. Other Income change is less than $25,000. The corporation must complete the Enter any other taxable income not The costs required to be capitalized appropriate lines of Form 3115 to make reported on lines 1 through 9. List the under section 263A are not deductible this election. Also, under certain other type and amount of income on an until the property (to which the costs conditions, the corporation can modify the attached schedule. If the corporation has relate) is sold, used, or otherwise period for taking into account a net only one item of other income, describe it disposed of by the corporation. positive section 481 adjustment. See Rev. in parentheses on line 10. **Exceptions.** Section 263A does not Proc. 2007-67, 2007-48 I.R.B. 1072. If the apply to the following. Examples of other income to report on net section 481(a) adjustment is negative, 

### • Personal property acquired for resale if line 10 include the following. report it on line 26. the corporation’s (or any of its 1. Recoveries of bad debts deducted 9. Part or all of the proceeds received predecessors) average annual gross in prior years under the specific from certain corporate-owned life receipts for the 3 prior tax years were $10 charge-off method. insurance contracts issued after August million or less. 2. The amount included in income 17, 2006. See section 101(j) for details. 

### •Timber. from Form 6478, Alcohol and Cellulosic


### •Most property produced under a Biofuel Fuels Credit. long-term contract. 

## Deductions 3. The amount included in income


### •Certain property produced in a farming from Form 8864, Biodiesel and business. 

### Limitations on Deductions Renewable Diesel Fuels Credit.


### • Research and experimental costs 4. Refunds of taxes deducted in prior **Section 263A uniform capitalization** under section 174. years to the extent they reduced income **rules.** The uniform capitalization rules of 

### •Geological and geophysical costs subject to tax in the year deducted (see section 263A generally require amortized under section 167(h). section 111). Do not offset current year corporations to capitalize, or include in 

### •Capital costs incurred to comply with taxes against tax refunds. inventory, certain costs incurred in EPA sulfur regulations. 5. Any recapture amount under connection with: 

### • Intangible drilling costs for oil, gas, and section 179A for certain clean-fuel vehicle 

### •The production of real property and geothermal property. property (or clean-fuel vehicle refueling tangible personal property held in 

### •Mining exploration and development property) that ceases to qualify. See inventory or held for sale in the ordinary costs. Regulations section 1.179A-1 for details. course of business. 

### • Inventoriable items accounted for in the 6. Ordinary income from trade or 

### • Real property or personal property same manner as materials and supplies business activities of a partnership (from (tangible and intangible) acquired for that are not incidental. SeeCost of Goods Schedule K-1 (Form 1065 or 1065-B)). Do resale. Sold on page 14. not offset ordinary losses against ordinary 

### •The production of real property and income. Instead, include the losses on For more details on the uniform tangible personal property by a line 26. Show the partnership’s name, capitalization rules, see Regulations corporation for use in its trade or business address, and EIN on a separate sections 1.263A-1 through 1.263A-3. See or in an activity engaged in for profit. statement attached to this return. If the Regulations section 1.263A-4 for rules for Tangible personal property produced amount entered is from more than one property produced in a farming business. by a corporation includes a film, sound partnership, identify the amount from **Transactions between related** recording, videotape, book, or similar each partnership. **taxpayers.** Generally, an accrual basis property. 7. Any LIFO recapture amount under taxpayer can only deduct business section 1363(d). The corporation may Corporations subject to the section expenses and interest owed to a related have to include a LIFO recapture amount 263A uniform capitalization rules are party in the year the payment is included in income if it: required to capitalize: in the income of the related party. See a. Used the LIFO inventory method 1. Direct costs and sections 163(e)(3),163(j), and 267 for for its last tax year before the first tax year 2. An allocable part of most indirect limitations on deductions for unpaid for which it elected to become an S costs (including taxes) that (a) benefit the interest and expenses. corporation or assets produced or acquired for resale or Corporations use Form 8926, b. Transferred LIFO inventory assets (b) are incurred because of the Disqualified Corporate Interest Expense to an S corporation in a nonrecognition performance of production or resale Disallowed Under Section 163(j) and transaction in which those assets were activities. Related Information, to figure the amount transferred basis property. of any corporate interest expense The LIFO recapture amount is the For inventory, some of the indirect disallowed by section 163(j). amount by which the C corporation’s expenses that must be capitalized are: inventory under the FIFO method 

### •Administration expenses; **Section 291 limitations.** Corporations exceeds the inventory amount under the 

### •Taxes; may be required to adjust deductions for LIFO method at the close of the 

### • Depreciation; depletion of iron ore and coal, intangible corporation’s last tax year as a C 

### • Insurance; drilling and exploration and development corporation (or for the year of the transfer, 

### •Compensation paid to officers costs, certain deductions for financial if (b) above applies). For more attributable to services; institutions, and the amortizable basis of information, see Regulations section 

### • Rework labor; and pollution control facilities. See section 291



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to determine the amount of the For more details on business start-up and 

### •Mine rescue team training credit. adjustment. Also see section 43. organization costs, see Pub 535. 

### •Agricultural chemicals security credit.



### •Credit for employer differential wage **Passive activity limitations.** Limitations **Golden parachute payments.** A portion payments. on passive activity losses and credits of the payments made by a corporation to under section 469 apply to personal If the corporation has any of these key personnel that exceeds their usual service corporations (defined on page 6) credits, figure each current year credit compensation may not be deductible. and closely held corporations (defined before figuring the deduction for This occurs when the corporation has an below). expenses on which the credit is based. If agreement (golden parachute) with these the corporation capitalized any costs on key employees to pay them these excess Generally, the two kinds of passive which it figured the credit, reduce the amounts if control of the corporation activities are: amount capitalized by the credit changes. See section 280G and 

### •Trade or business activities in which attributable to these costs. Regulations section 1.280G-1. Also see the corporation did not materially the instructions for line 12. participate for the tax year; and See the instructions for the form used



### • Rental activities, regardless of its to figure the applicable credit. **Business start-up and organizational** participation. **costs.** For business start-up and **Limitations on deductions related to** For exceptions, see Form 8810, organization costs paid or incurred after **property leased to tax-exempt entities.** Corporate Passive Activity Loss and September 8, 2008, a corporation can If a corporation leases property to a Credit Limitations. deduct up to $5,000 of such costs for the governmental or other tax-exempt entity, year it begins business (unless the the corporation cannot claim deductions Corporations subject to the passive corporation elects to capitalize all such related to the property to the extent that activity limitations must complete Form costs). The $5,000 deduction is reduced they exceed the corporation’s income 8810 to compute their allowable passive by the amount the total costs exceed from the lease payments (tax-exempt use activity loss and credit. Before completing $50,000. If the total costs are $55,000 or loss). Amounts disallowed may be carried Form 8810, see Temporary Regulations more, the deduction is reduced to zero. over to the next tax year and treated as a section 1.163-8T, which provides rules for Any cost not deducted must be amortized deduction with respect to the property for allocating interest expense among ratably over a 180-month period, that tax year. See section 470 for more activities. If a passive activity is also beginning with the month the corporation details and exceptions. subject to the earnings stripping rules of begins business. The corporation is not section 163(j), the at-risk rules of section 

### Line 12. Compensation of required to attach a statement or 465, or the tax-exempt use loss rules of 

### Officers specifically identify the amount deducted section 470, those rules apply before the in order for the election to be effective. passive loss rules. Enter deductible officers’ compensation The corporation can choose to forgo the on line 12. Do not include compensation For more information, see section 469, deduction and instead elect to capitalize deductible elsewhere on the return, such the related regulations, and Pub. 925, all such costs. The election to deduct or as amounts included in cost of goods Passive Activity and At-Risk Rules. capitalize costs is irrevocable. See sold, elective contributions to a section **Closely held corporations.** A Temporary Regulations sections 1.195-1T 401(k) cash or deferred arrangement, or corporation is a closely held corporation and 1.248-1T. amounts contributed under a salary if: reduction SEP agreement or a SIMPLE For business start-up and organization 

### •At any time during the last half of the IRA plan. costs paid after October 22, 2004, and tax year more than 50% in value of its Complete Schedule E if the total before September 9, 2008, a corporation outstanding stock is directly or indirectly receipts (line 1a, plus lines 4 through 10) can elect to deduct up to $5,000 of such owned by or for not more than five are $500,000 or more. Include only the costs for the year it begins business individuals, and deductible part of each officer’s (otherwise the corporation must capitalize 

### •The corporation is not a personal compensation on Schedule E. See all such costs). The $5,000 deduction is service corporation. Disallowance of deduction for employee reduced by the amount the total costs Certain organizations are treated as compensation in excess of $1 million exceed $50,000. If the total costs are individuals for purposes of this test. See below. Complete Schedule E, line 1, $55,000 or more, the deduction is section 542(a)(2). For rules for columns (a) through (f), for all officers. reduced to zero. Any costs not deducted determining stock ownership, see section The corporation determines who is an must be amortized ratably over a 544 (as modified by section 465(a)(3)). officer under the laws of the state where it 180-month period, beginning with the **Reducing certain expenses for which** is incorporated. month the corporation begins business. If **credits are allowable.** If the corporation the election is made, the corporation must If a consolidated return is filed, each claims certain credits, it may need to attach any statement required by member of an affiliated group must reduce the otherwise allowable Regulations sections 1.195-1(b) and furnish this information. deductions for expenses used to figure 1.248-1(c). However, the corporation can **Disallowance of deduction for** the credit. The following are examples of apply the provisions of Temporary **employee compensation in excess of** such credits. Regulations sections 1.195-1T and **$1 million.** Publicly held corporations 

### •Work opportunity credit. 1.248-1T to all expenses paid or incurred cannot deduct compensation to a 

### •Credits for affected Midwestern after October 22, 2004, provided the “covered employee” to the extent that the disaster area employers. period of limitations on assessment has compensation exceeds $1 million. 

### • Empowerment zone and renewal not expired for the year of the election. Generally, a covered employee is: community credit. Otherwise the provisions under 

### •The principal executive officer of the 

### • Indian employment credit. Regulations sections 1.195-1(b) and corporation (or an individual acting in that 

### •Welfare-to-work credit. 1.248-1(c) will apply. capacity) as of the end of the tax year or 

### • Research credit. For business start-up and organization 

### •An employee whose total 

### •Orphan drug credit. costs paid or incurred before October 23, compensation must be reported to 

### • Disabled access credit. 2004, a corporation can elect to amortize shareholders under the Securities 

### • Employer credit for social security and such costs over a period of 60-months or Exchange Act of 1934 because the Medicare taxes paid on certain employee more. employee is among the three highest tips. compensated officers for that tax year Report the deductible amount of such 

### •Credit for small employer pension plan (other than the principal executive officer). costs and any amortization on line 26. For startup costs. amortization that begins during the 2008 

### •Credit for employer-provided childcare For this purpose, compensation does tax year, complete and attach Form 4562. facilities and services. not include the following.



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### • Income from certain employee trusts, 

### •Taxes assessed against local benefits 

### Line 14. Repairs and annuity plans, or pensions. that increase the value of the property 

### Maintenance

•Any benefit paid to an employee that is assessed (such as for paving, etc.). Enter the cost of incidental repairs and excluded from the employee’s income. 

### •Taxes deducted elsewhere on the maintenance not claimed elsewhere on return, such as those reflected in cost of The deduction limit does not apply to: the return, such as labor and supplies, goods sold. 

### •Commissions based on individual that do not add to the value of the See section 164(d) for apportionment performance, property or appreciably prolong its life. of taxes on real property between seller 

### •Qualified performance-based New buildings, machinery, or permanent and purchaser. compensation, and improvements that increase the value of



### • Income payable under a written, the property are not deductible. They 

### Line 18. Interest binding contract in effect on February 17, must be depreciated or amortized. **Note.** Do not offset interest income 1993. against interest expense. 

### Line 15. Bad Debts The $1 million limit is reduced by The corporation must make an interest Enter the total debts that became amounts disallowed as excess parachute allocation if the proceeds of a loan were worthless in whole or in part during the payments under section 280G. used for more than one purpose (for tax year. A small bank or thrift institution See section 162(m) and Regulations example, to purchase a portfolio using the reserve method of section 585 section 1.162-27. Also see Notice investment and to acquire an interest in a should attach a schedule showing how it 2007-49, 2007-25 I.R.B. 1429. passive activity). See Temporary figured the current year’s provision. A Regulations section 1.163-8T for the cash basis taxpayer cannot claim a bad **Limitations on tax benefits for** interest allocation rules. debt deduction unless the amount was **executive compensation under a** Mutual savings banks, building and previously included in income. **Treasury troubled asset relief program.** loan associations, and cooperative banks The $1 million compensation limit is can deduct the amounts paid or credited reduced to $500,000 for executive 

### Line 16. Rents to the accounts of depositors as remuneration and deferred deduction dividends, interest, or earnings. See executive remuneration paid to covered If the corporation rented or leased a section 591. executives during an applicable tax year vehicle, enter the total annual rent or by an applicable employer under a lease expense paid or incurred during the Do not deduct the following interest. troubled asset relief program. The year. Also complete Part V of Form 4562, 

### • Interest on indebtedness incurred or $500,000 is reduced by any amounts Depreciation and Amortization. If the continued to purchase or carry obligations disallowed as excess parachute corporation leased a vehicle for a term of if the interest is wholly exempt from payments. See section 162(m)(5) for 30 days or more, the deduction for vehicle income tax. For exceptions, see section definitions and other special rules. Also lease expense may have to be reduced 265(b). see Notice 2008-94, 2008-44 I.R.B. 1070, by an amount called the inclusion 

### • For cash basis taxpayers, prepaid for additional guidance. amount. The corporation may have an interest allocable to years following the inclusion amount if: current tax year. For example, a cash In addition, a portion of any parachute basis calendar year taxpayer who in 2008 payments made to a covered executive **And the** prepaid interest allocable to any period by an applicable employer participating in **vehicle’s** after 2008 can deduct only the amount a Treasury troubled asset relief program **FMV on** allocable to 2008. is not deductible as compensation if the **the first** 

### • Interest and carrying charges on payments are made because of a **day of** straddles. Generally, these amounts must severance from employment during an **the lease** be capitalized. See section 263(g). applicable tax year. For this purpose, **The lease term began: exceeded:** 

### • Interest on debt allocable to the applicable employer, covered executive, production of designated property by a and applicable tax year have the same After 12/31/07 but before 1/1/09 . . $18,500 corporation for its own use or for sale. meaning as under section 162(m)(5). After 12/31/06 but before 1/1/08 . . $15,500 The corporation must capitalize this These limits do not apply to a payment interest. Also capitalize any interest on already treated as a parachute payment. After 12/31/04 but before 1/1/07 . . $15,200 debt allocable to an asset used to See section 280G(e) and Notice 2008-94. After 12/31/03 but before 1/1/05 . . $17,500 produce the property. See section 263A(f) If the lease term began before January 1, 2004, see and Regulations sections 1.263A-8 

### Line 13. Salaries and Wages Pub. 463, Travel, Entertainment, Gift, and Car through 1.263A-15 for definitions and Enter the total salaries and wages paid Expenses, to find out if the corporation has an more information. inclusion amount. The inclusion amount for lease for the tax year. Do not include salaries


### • Interest paid or incurred on any portion terms beginning in 2009 will be published in the and wages deductible elsewhere on the Internal Revenue Bulletin in early 2009. of an underpayment of tax that is return, such as amounts included in attributable to an understatement arising officers’ compensation, cost of goods from an undisclosed listed transaction or See Pub. 463 for instructions on sold, elective contributions to a section an undisclosed reportable avoidance figuring the inclusion amount. 401(k) cash or deferred arrangement, or transaction (other than a listed amounts contributed under a salary transaction) entered into in tax years 

### Line 17. Taxes and Licenses reduction SEP agreement or a SIMPLE beginning after October 22, 2004. Enter taxes paid or accrued during the tax IRA plan. year, but do not include the following. **Special rules**apply to: If the corporation claims a credit for 

### • Federal income taxes. 

### • Disqualified interest on certain any wages paid or incurred, it may need 

### • Foreign or U.S. possession income indebtedness under section 163(j). See to reduce its deduction for officer’s taxes if a foreign tax credit is claimed. Form 8926, Disqualified Corporate compensation and salaries and wages. 

### •Taxes not imposed on the corporation. Interest Expense Disallowed Under SeeReducing certain expenses for which 

### •Taxes, including state or local sales Section 163(j) and Related Information, credits are allowable on page 9. taxes, that are paid or incurred in and the related Instructions. If the corporation provided taxable connection with an acquisition or 

### • Interest on which no tax is imposed fringe benefits to its employees, such as disposition of property (these taxes must (see section 163(j)). A corporation that personal use of a car, do not deduct as be treated as a part of the cost of the owns an interest in a partnership, directly wages the amount allocated for acquired property or, in the case of a or indirectly, must treat its distributive depreciation and other expenses claimed disposition, as a reduction in the amount share of the partnership liabilities, interest on lines 20 and 26. realized on the disposition). income, and interest expense as



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liabilities, income, and expenses of the next 15 years subject to the 100% contributed, and, either gives a corporation for purposes of applying the limitation. See section 170(b)(2)(B). description and a good faith estimate of earnings stripping rules. For more details, the value of any goods or services Certain contributions of food made see section 163(j)(8). provided in return for the contribution or after October 2, 2008, and before January 

### • Foregone interest on certain states that no goods or services were 1, 2009, are treated as a qualified below-market-rate loans (see section provided in return for the contribution. The contribution for purposes of the 7872). acknowledgment must be obtained by the suspension of the 10% limit. See section 

### •Original issue discount on certain due date (including extensions) of the 170(b)(3). high-yield discount obligations. (See corporation’s return, or, if earlier, the date **Temporary suspension of 10% limit** section 163(e) to figure the disqualified the return is filed. Do not attach the **for contributions to Midwestern** portion.) acknowledgment to the tax return, but **disaster area.** A corporation can elect to 

### • Interest which is allocable to keep it with the corporation’s records. deduct qualified cash contributions unborrowed policy cash values of life **Contributions of property other than** without regard to the general 10% limit, if insurance, endowment, or annuity **cash.** If a corporation (other than a the contributions were paid after May 1, contracts issued after June 8, 1997. See closely held or personal service 2008, and before January 1, 2009, to a section 264(f). Attach a statement corporation) contributes property other qualified charitable organization as showing the computation of the than cash and claims over a $500 defined in section 170(b)(1)(A) (except for deduction. deduction for the property, it must attach contributions to a section 509(a)(3) a schedule to the return describing the 

### Line 19. Charitable organization or a donor advised fund (as kind of property contributed and the 

### Contributions defined in section 4966(d)(2))), and were method used to determine its fair market for relief efforts in one or more Enter contributions or gifts actually paid value (FMV). Closely held corporations Midwestern disaster areas. The within the tax year to or for the use of and personal service corporations must corporation must obtain charitable and governmental complete Form 8283, Noncash Charitable contemporaneous written organizations described in section 170(c) Contributions, and attach it to their acknowledgment from the organization and any unused contributions carried over returns. All other corporations generally that the contribution was used (or will be from prior years. Special rules and limits must complete and attach Form 8283 to used) for relief efforts in one or more apply to contributions to organizations their returns for contributions of property Midwestern disaster areas. The total conducting lobbying activities. See (other than money) if the total claimed amount claimed cannot exceed 100% of section 170(f)(9). deduction for all property contributed was the excess of the corporation’s taxable Corporations reporting taxable income more than $5,000. Special rules apply to income (as computed underLimitation on on the accrual method can elect to treat the contribution of certain property. See deduction above, substituting “100%” for as paid during the tax year any the Instructions for Form 8283. “10%”) over the corporation’s deduction contributions paid by the 15th day of the for all other charitable contributions. Any **Qualified conservation** 3rd month after the end of the tax year if excess contributions can be carried over **contributions.** Special rules apply to the contributions were authorized by the to the next 5 years. For more information, qualified conservation contributions, board of directors during the tax year. see Pub. 4492-B. including contributions of certain Attach a declaration to the return stating easements on buildings located in a **Carryover.** Charitable contributions over that the resolution authorizing the registered historic district. See section the 10% limitation cannot be deducted for contributions was adopted by the board of 170(h) and Pub. 526, Charitable the tax year but can be carried over to the directors during the tax year. The Contributions. next 5 tax years. declaration must include the date the resolution was adopted. See Regulations Special rules apply if the corporation **Other special rules.** The corporation section 1.170A-11. has an NOL carryover to the tax year. In must reduce its deduction for **Limitation on deduction.** The total figuring the charitable contributions contributions of certain capital gain amount claimed cannot be more than deduction for the current tax year, the property. See sections 170(e)(1) and 10% of taxable income (line 30) 10% limit is applied using the taxable 170(e)(5). computed without regard to the following. income after taking into account any A larger deduction is allowed for 

### •Any deduction for contributions. deduction for the NOL. certain contributions of: 

### •The special deductions on line 29b. To figure the amount of any remaining 

### • Inventory and other property to certain 

### •The deduction allowed under section NOL carryover to later years, taxable organizations for use in the care of the ill, 249. income must be modified (see section needy, or infants (see section 170(e)(3)), 

### •The domestic production activities 172(b)). To the extent that contributions including contributions of “apparently deduction under section 199. are used to reduce taxable income for this wholesome food” (see section 

### •Any net operating loss (NOL) carryback purpose and increase an NOL carryover, 170(e)(3)(C)), and contributions of to the tax year under section 172. a contributions carryover is not allowed. qualified book inventory to public schools 

### •Any capital loss carryback to the tax See section 170(d)(2)(B). (see section 170(e)(3)(D)), year under section 1212(a)(1).


### •Scientific equipment used for research **Cash contributions.** For contributions **Suspension of 10% limitation for** to institutions of higher learning or to of cash, check, or other monetary gifts **farmers and ranchers.** A corporation certain scientific research organizations (regardless of the amount), the that is a qualified farmer or rancher (as (other than by personal holding corporation must maintain a bank record, defined in section 170(b)(1)(E)) that does companies and service organizations or a receipt, letter, or other written not have publicly traded stock, can deduct (section 170(e)(4)), and communication from the donee contributions of qualified conservation 

### •Computer technology and equipment organization indicating the name of the property without regard to the general for educational purposes (section organization, the date of the contribution, 10% limit. The total amount of the 170(e)(6)). and the amount of the contribution. contribution claimed for the qualified conservation property cannot exceed **Contributions of $250 or more.** For more information on charitable 100% of the excess of the corporation’s Generally, no deduction is allowed for any contributions, including substantiation and taxable income (as computed above contribution of $250 or more unless the recordkeeping requirements, see section substituting “100%” for “10%”) over all corporation gets a written 170 and the related regulations and Pub. other allowable charitable contributions. acknowledgment from the donee 526, Charitable Contributions. For other Any excess qualified conservation organization that shows the amount of special rules that apply to corporations, contributions can be carried over to the cash contributed, describes any property see Pub. 542.



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### •Amortization. See Part VI of Form See section 404(k) for more details and 

### Line 20. Depreciation 4562. the limitation on certain dividends. Include on line 20 depreciation and the


### •Certain costs of qualified film or cost of certain property that the Do not deduct the following. television productions that the corporation corporation elected to expense under 

### • Fines or penalties paid to a government elects to deduct. See section 181 and section 179. See Form 4562 and its for violating any law. Temporary Regulations section 1.181-1T. Instructions. 

### •Any amount that is allocable to a class


### •Certain business start-up and of exempt income. See section 265(b) for 

### Line 21. Depletion organizational costs. See page 9 of the exceptions. instructions. See sections 613 and 613A for 

### • Lobbying expenses. However, see


### •Qualified demolition and clean-up costs percentage depletion rates applicable to exceptions (discussed later). attributable to damage from storms and natural deposits. Also see section 291 for **Travel, meals, and entertainment.** tornadoes in the Kansas and Midwestern the limitation on the depletion deduction Subject to limitations and restrictions disaster areas. See Pubs. 4492-A and for iron ore and coal (including lignite). discussed below, a corporation can 4492-B. Attach Form T (Timber), Forest deduct ordinary and necessary travel, 

### •Certain environmental remediation Activities Schedule, if a deduction for meals, and entertainment expenses paid costs. See section 1400N(g) and Pub. depletion of timber is taken. or incurred in its trade or business. Also, 4492-B. special rules apply to deductions for gifts, Foreign intangible drilling costs and 

### •Certain qualified disaster expenses that skybox rentals, luxury water travel, foreign exploration and development the corporation elects to deduct. See convention expenses, and entertainment costs must either be added to the section 198A. tickets. See section 274 and Pub. 463 for corporation’s basis for cost depletion 

### • Reforestation costs. The corporation details. purposes or be deducted ratably over a can elect to deduct up to $10,000 of 10-year period. See sections 263(i), 616, qualifying reforestation expenses for each **Travel.** The corporation cannot and 617 for details. qualified timber property. The corporation deduct travel expenses of any individual can elect to amortize over 84 months any accompanying a corporate officer or See Pub. 535 for more information on amount not deducted. See Pub. 535. employee, including a spouse or depletion. dependent of the officer or employee, 

### • Insurance premiums. 

### Line 23. Pension, unless: 

### • Legal and professional fees.



### •That individual is an employee of the 

### Profit-Sharing, etc., Plans •Supplies used and consumed in the corporation, and Enter the deduction for contributions to business.


### • His or her travel is for a bona fide qualified pension, profit-sharing, or other 

### •Travel, meals, and entertainment business purpose and would otherwise be funded deferred compensation plans. expenses. Special rules apply (discussed deductible by that individual. Employers who maintain such a plan below). generally must file one of the forms listed 

### • Utilities. **Meals and entertainment.** Generally, below, even if the plan is not a qualified the corporation can deduct only 50% of 

### •Ordinary losses from trade or business plan under the Internal Revenue Code. the amount otherwise allowable for meals activities of a partnership (from Schedule The filing requirement applies even if the and entertainment expenses paid or K-1 (Form 1065 or 1065-B)). Do not offset corporation does not claim a deduction for incurred in its trade or business. In ordinary income against ordinary losses. the current tax year. There are penalties addition (subject to exceptions under Instead, include the income on line 10. for failure to file these forms on time and section 274(k)(2)): Show the partnership’s name, address, for overstating the pension plan 

### •Meals must not be lavish or and EIN on a separate statement deduction. See sections 6652(e) and extravagant; attached to this return. If the amount is 6662(f). 

### •A bona fide business discussion must from more than one partnership, identify occur during, immediately before, or the amount from each partnership. **Form 5500,** Annual Return/Report of immediately after the meal; and Employee Benefit Plan. File this form for 

### •Any extraterritorial income exclusion



### •An employee of the corporation must a plan that is not a one-participant plan (from Form 8873, line 52). be present at the meal. (see below). 

### •Any negative net section 481(a) adjustment. See the instructions for line **Form 5500-EZ,** Annual Return of See section 274(n)(3) for a special rule 10. One-Participant (Owners and Their that applies to expenses for meals



### • Deduction for certain energy efficient Spouses) Retirement Plan. File this form consumed by individuals subject to the commercial building property placed in for a plan that only covers the owner (or hours of service limits of the Department service. See section 179D, Notice the owner and his or her spouse) but only of Transportation. 2008-40, 2008-14 I.R.B. 725, and Notice if the owner (or the owner and his or her **Membership dues.** The corporation 2006-52, 2006-26 I.R.B. 1175. spouse) owns the entire business. can deduct amounts paid or incurred for 

### • Dividends paid in cash on stock held by membership dues in civic or public 

### Line 24. Employee Benefit an employee stock ownership plan. service organizations, professional 

### Programs However, a deduction can only be taken organizations (such as bar and medical for the dividends above if, according to Enter contributions to employee benefit associations), business leagues, trade the plan, the dividends are: programs not claimed elsewhere on the associations, chambers of commerce, return (for example, insurance, health and 1. Paid in cash directly to the plan boards of trade, and real estate boards. welfare programs, etc.) that are not an participants or beneficiaries; However, no deduction is allowed if a incidental part of a pension, profit-sharing, 2. Paid to the plan, which distributes principal purpose of the organization is to etc., plan included on line 23. them in cash to the plan participants or entertain, or provide entertainment their beneficiaries no later than 90 days facilities for, members or their guests. In 

### Line 26. Other Deductions after the end of the plan year in which the addition, corporations cannot deduct Attach a schedule, listing by type and dividends are paid; membership dues in any club organized amount, all allowable deductions that are 3. At the election of such participants for business, pleasure, recreation, or not deductible elsewhere on Form 1120. or their beneficiaries (a) payable as other social purpose. This includes Enter the total on line 26. provided under 1or 2 above or (b) paid to country clubs, golf and athletic clubs, the plan and reinvested in qualifying Examples of other deductions include airline and hotel clubs, and clubs employer securities; or the following. See Pub. 535 and Pub. 542 operated to provide meals under for details on other deductions that may 4. Used to make payments on a loan conditions favorable to business apply to corporations. described in section 404(a)(9). discussion.



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**Entertainment facilities.** The deductions for the activities with the loss is carried forward from a tax year corporation cannot deduct an expense losses. preceding the first tax year for which the paid or incurred for a facility (such as a alternative tax election was made. See If the corporation sells or otherwise yacht or hunting lodge) used for an section 1358(b)(2). disposes of an asset or its interest (either activity usually considered entertainment, 

### • If a corporation has a loss attributable total or partial) in an activity to which the amusement, or recreation. to a disaster, special rules apply. See the at-risk rules apply, determine the net Instructions for Form 1139. profit or loss from the activity by **Amounts treated as compensation.** For more details on the NOL combining the gain or loss on the sale or Generally, the corporation may be able to deduction, see section 172, the disposition with the profit or loss from the deduct otherwise nondeductible Instructions for Form 1139, and Pub. 542. activity. If the corporation has a net loss, it entertainment, amusement, or recreation may be limited because of the at-risk expenses if the amounts are treated as 

### Line 29b. Special Deductions rules. compensation to the recipient and See the instructions for Schedule C reported on Form W-2 for an employee or Treat any loss from an activity not beginning on page 15. on Form 1099-MISC for an independent allowed for the tax year as a deduction contractor. allocable to the activity in the next tax 

### Tax and Payments year. However, if the recipient is an officer, 

### Line 30. Taxable Income director, or beneficial owner (directly or 

### Line 29a. Net Operating Loss indirectly) of more than 10% of any class **Minimum taxable income.** The 

### Deduction of stock, the deductible expense is corporation’s taxable income cannot be A corporation can use the NOL incurred limited. See section 274(e)(2) and Notice less than the largest of the following in one tax year to reduce its taxable 2005-45, 2005-24 I.R.B. 1228. amounts. income in another tax year. Enter on line **Lobbying expenses.** Generally, 

### •The inversion gain of the corporation 29a the total NOL carryovers from other lobbying expenses are not deductible. for the tax year, if the corporation is an tax years, but do not enter more than the These expenses include: expatriated entity or a partner in an corporation’s taxable income (after 

### •Amounts paid or incurred in connection expatriated entity. For details, see section special deductions). Attach a schedule with influencing federal or state legislation 7874. showing the computation of the NOL (but not local legislation) or 

### •The sum of the corporation’s excess deduction. Complete item 12 on Schedule 

### •Amounts paid or incurred in connection inclusions from Schedules Q (Form K. with any communication with certain 1066), line 2c, and the corporation’s The following special rules apply. federal executive branch officials in an taxable income determined solely with



### •A personal service corporation may not attempt to influence the official actions or respect to its ownership and high-yield carry back an NOL to or from any tax year positions of the officials. See Regulations interests in FASITs. For details, see to which an election under section 444 to section 1.162-29 for the definition of sections 860E(a) and 860J. have a tax year other than a required tax “influencing legislation.” **Net operating loss (NOL).** If line 30 year applies. (figured without regard to the items listed Dues and other similar amounts paid 

### •A corporate equity reduction interest above under minimum taxable income), is to certain tax-exempt organizations may loss may not be carried back to a tax year zero or less, the corporation may have an not be deductible. See section 162(e)(3). preceding the year of the equity reduction NOL that can be carried back or forward If certain in-house lobbying expenditures transaction (see section 172(b)(1)(E)). as a deduction to other tax years. do not exceed $2,000, they are 

### • If an ownership change occurs, the Generally, a corporation first carries back deductible. amount of the taxable income of a loss an NOL 2 tax years. However, the corporation that may be offset by the 

### Line 28. Taxable Income Before corporation can elect to waive the pre-change NOL carryovers may be 

### NOL Deduction and Special carryback period and instead carry the limited. See section 382 and the related NOL forward to future tax years. To make 

### Deductions regulations. A loss corporation must the election, see the instructions for include the information statement as **At-risk rules.** Generally, special at-risk Schedule K, item 11 on page 20. provided in Regulations section rules under section 465 apply to closely See Form 1139 for details, including 1.382-11(a), with its income tax return for held corporations (seePassive activity other elections that may be available, each tax year that it is a loss corporation limitationson page 9) engaged in any which must be made no later than 6 in which an ownership shift, equity activity as a trade or business or for the months after the due date (excluding structures shift, or other transaction production of income. These corporations extensions) of the corporation’s tax described in Temporary Regulations may have to adjust the amount on line 28. return. section 1.382-2T(a)(2)(i) occur. If the (See below.) corporation makes the **Merchant Marine capital construction** The at-risk rules do not apply to: closing-of-the-books election, see **fund.** To take a deduction for amounts 

### • Holding real property placed in service Regulations section 1.382-6(b). contributed to a capital construction fund by the taxpayer before 1987; (CCF), reduce the amount that would For guidance in applying section 382 

### • Equipment leasing under sections otherwise be entered on line 30 by the to loss corporations whose instruments 465(c)(4), (5), and (6); or amount of the deduction. On the dotted were acquired by Treasury under the 

### •Any qualifying business of a qualified line next to the entry space, enter “CCF” Capital Purchase Program under the corporation under section 465(c)(7). and the amount of the deduction. For Emergency Economic Stabilization Act of However, the at-risk rules do apply to more information, see section 7518. 2008, see Notice 2008-100, 2008-44 the holding of mineral property. I.R.B. 1081. 

### Line 32b. Estimated Tax If the at-risk rules apply, adjust the 

### • If a corporation acquires control of 

### Payments amount on this line for any section 465(d) another corporation (or acquires its Enter any estimated tax payments the losses. These losses are limited to the assets in a reorganization), the amount of corporation made for the tax year. amount for which the corporation is at risk pre-acquisition losses that may offset for each separate activity at the close of recognized built-in gain may be limited **Beneficiaries of trusts.** If the the tax year. If the corporation is involved (see section 384). corporation is the beneficiary of a trust, in one or more activities, any of which 

### • If a corporation elects the alternative and the trust makes a section 643(g) incurs a loss for the year, report the tax on qualifying shipping activities under election to credit its estimated tax losses for each activity separately. Attach section 1354, no deduction is allowed for payments to its beneficiaries, include the Form 6198, At-Risk Limitations, showing an NOL attributable to the qualifying corporation’s share of the payment in the the amount at risk and gross income and shipping activities to the extent that the total for line 32b. Enter “T” and the



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amount on the dotted line next to the payments it received because, for uniform capitalization rules on page 8 entry space. example, it failed to give the payer its before completing Schedule A. correct EIN, include the amount withheld **Special estimated tax payments for** 

### Line 1. Inventory at Beginning in the total for line 32h. Enter the amount **certain life insurance companies.** If 

### of Year withheld and the words “Backup the corporation is required to make or Withholding” in the blank space above If the corporation is changing its method apply special estimated tax payments line 32h. of accounting for the current tax year, it (SETP) under section 847 in addition to must refigure last year’s closing inventory its regular estimated tax payments, enter 

### Line 33. Estimated Tax Penalty using its new method of accounting and on line 32b, the corporation’s total If Form 2220 is attached, check the box enter the result on line 1. If there is a estimated tax payments. In the margin on line 33, and enter the amount of any difference between last year’s closing near line 32b, enter “Form 8816” and the penalty on this line. inventory and the refigured amount, amount. Attach a schedule showing your attach an explanation and take it into computation of estimated tax payments. 

### Line 36 account when figuring the corporation’s See sections 847(2) and 847(8) and Form **Direct deposit of refund.** If the section 481(a) adjustment. 8816, Special Loss Discount Account and corporation wants its refund directly Special Estimated Tax Payments for 

### Line 4. Additional Section 263A deposited into its checking or savings Insurance Companies, for more 

### Costs account at any U.S. bank or other information. financial institution instead of having a An entry is required on this line only for 

### Line 32c. Overpaid estimated check sent to the corporation, complete corporations that have elected a 

### tax Form 8050 and attach it to the simplified method of accounting. corporation’s tax return. If the corporation overpaid estimated tax, For corporations that have elected the it may be able to get a quick refund by simplified production method, additional filing Form 4466. The overpayment must section 263A costs are generally those 

## Schedule A. be at least 10% of the corporation’s costs, other than interest, that were not expected income tax liability and at least capitalized under the corporation’s 

## Cost of Goods Sold $500. File Form 4466 after the end of the method of accounting immediately prior to corporation’s tax year, and no later than the effective date of section 263A but are Generally, inventories are required at the the 15th day of the third month after the now required to be capitalized under beginning and end of each tax year if the end of the tax year. Form 4466 must be section 263A. For details, see production, purchase, or sale of filed before the corporation files its tax Regulations section 1.263A-2(b). merchandise is an income-producing return. factor. For corporations that have elected the 

### Line 32f simplified resale method, additional However, if the corporation is a section 263A costs are generally those qualifying taxpayer or a qualifying small **Credit from Form 2439.** Enter any costs incurred with respect to the business taxpayer, it can adopt or change credit from Form 2439, Notice to following categories. its accounting method to account for Shareholder of Undistributed Long-Term



### •Off-site storage or warehousing. inventoriable items in the same manner Capital Gains, for the corporation’s share



### • Purchasing. as materials and supplies that are not of the tax paid by a regulated investment


### • Handling, such as processing, incidental, unless its business is a tax company (RIC) or a real estate assembling, repackaging, and shelter as defined in section 448(d)(3). investment trust (REIT) on undistributed transporting. long-term capital gains included in the A qualifying taxpayer is a taxpayer 

### •General and administrative costs corporation’s income. Attach Form 2439 that, for each prior tax year ending after (mixed service costs). to Form 1120. December 16, 1998, has average annual For details, see Regulations section gross receipts of $1 million or less for the **Credit for federal tax on fuels.** Enter 1.263A-3(d). 3 prior tax years. any credit from Form 4136, Credit for Federal Tax Paid on Fuels. Attach Form A qualifying small business taxpayer is Enter on line 4 the balance of section 4136 to Form 1120. a taxpayer (a) that, for each prior tax year 263A costs paid or incurred during the tax **Credit for tax on ozone-depleting** ending on or after December 31, 2000, year not includible on lines 2, 3, and 5. **chemicals.** Include on line 32f any credit has average annual gross receipts of $10 

### Line 5. Other Costs the corporation is claiming under section million or less for the 3 prior tax years, 4682(g)(2) for tax on ozone-depleting and (b) whose principal business activity Enter on line 5 any costs paid or incurred chemicals. Enter “ODC” next to the entry is not an ineligible activity. during the tax year not entered on lines 2 space. through 4. Under this accounting method, inventory costs for raw materials 

### Line 32g. Refundable Credits **Line 7. Inventory at End of Year** purchased for use in producing finished 

### From Forms 3800 and 8827 See Regulations sections 1.263A-1 goods and merchandise purchased for The corporation can elect to claim certain through 1.263A-3 for details on figuring resale are deductible in the year the unused research and minimum tax credits the amount of additional section 263A finished goods or merchandise are sold instead of claiming any additional costs to be included in ending inventory. If (but not before the year the corporation first-year special depreciation allowance the corporation accounts for inventoriable paid for the raw materials or for eligible qualified property. If the items in the same manner as materials merchandise, if it is also using the cash corporation makes the election, enter on and supplies that are not incidental, enter method). For additional guidance on this line 32g the amounts from line 19c of on line 7 the portion of its raw materials method of accounting for inventoriable Form 3800 and line 8c of Form 8827, if and merchandise purchased for resale items, see Pub. 538 and the Instructions applicable. See the instructions for these that is included on line 6 and was not sold for Form 3115. forms. Also, see Rev. Proc. 2008-65, during the year. Enter amounts paid for all raw 2008-44 I.R.B. 1082. 

### Lines 9a Through 9f. materials and merchandise during the tax 

### Line 32h. Total Payments year on line 2. The amount the 

### Inventory Valuation Methods corporation can deduct for the tax year is Add the amounts on lines 32d through Inventories can be valued at: figured on line 8. 32g and enter the total on line 32h. 

### •Cost; **Backup withholding.** If the corporation All filers not using the cash method of 

### •Cost or market value (whichever is had federal income tax withheld from any accounting should seeSection 263A lower); or



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### •Any other method approved by the IRS write up the opening inventory to cost in 20%-or-more-owned domestic that conforms to the requirements of the the year of election, report the effect of corporations subject to income tax and applicable regulations cited below. the write-up as other income (line 10, that are subject to the 80% deduction page 1), proportionately over a 3-year under section 243(c), and However, if the corporation is using the period that begins with the year of the 

### •Taxable distributions from an IC-DISC cash method of accounting, it is required LIFO election (section 472(d)). or former DISC that are considered to use cost. eligible for the 80% deduction. **Note.** Corporations using the LIFO Corporations that account for method that make an S corporation inventoriable items in the same manner 

### Line 3, Column (a) election or transfer LIFO inventory to an S as materials and supplies that are not Enter the following. corporation in a nonrecognition incidental can currently deduct 

### • Dividends received on debt-financed transaction may be subject to an expenditures for direct labor and all stock acquired after July 18, 1984, from additional tax attributable to the LIFO indirect costs that would otherwise be domestic and foreign corporations subject recapture amount. See the instructions for included in inventory costs. to income tax that would otherwise be Schedule J, line 10, on page 18, and line subject to the dividends-received Generally, the average cost (rolling 10,Other Income, on page 8. deduction under section 243(a)(1), average) method of valuing inventories For more information on inventory 243(c), or 245(a). Generally, does not conform to the requirements of valuation methods, see Pub. 538. debt-financed stock is stock that the the regulations. See Rev. Rul. 71-234, corporation acquired by incurring a debt 1971-1 C.B. 148. However, if a 

## Schedule C. Dividends (for example, it borrowed money to buy corporation uses the average cost the stock). method for financial accounting purposes, 

## and Special Deductions
• Dividends received from a RIC on there are two safe harbors under which For purposes of the 20% ownership test debt-financed stock. The amount of this method will be deemed to clearly on lines 1 through 7, the percentage of dividends eligible for the reflect income for federal income tax stock owned by the corporation is based dividends-received deduction is limited by purposes. See Rev. Proc. 2008-43, on voting power and value of the stock. section 854(b). The corporation should 2008-30 I.R.B. 186, for details. Preferred stock described in section receive a notice from the RIC specifying Corporations that use erroneous 1504(a)(4) is not taken into account. the amount of dividends that qualify for valuation methods must change to a Corporations filing a consolidated return the deduction. method permitted for federal income tax should see Regulations sections purposes. Use Form 3115 to make this 

### Line 3, Columns (b) and (c) 1.1502-13, 1.1502-26, and 1.1502-27 change. Dividends received on debt-financed before completing Schedule C. On line 9a, check the method(s) used stock acquired after July 18, 1984, are not Corporations filing a consolidated for valuing inventories. Under lower of entitled to the full 70% or 80% return must not report as dividends on cost or market, the term “market” (for dividends-received deduction. The 70% Schedule C any amounts received from normal goods) means the current bid or 80% deduction is reduced by a corporations within the tax consolidation price prevailing on the inventory valuation percentage that is related to the amount group. Such dividends are eliminated in date for the particular merchandise in the of debt incurred to acquire the stock. See consolidation rather than offset by the volume usually purchased by the section 246A. Also see section 245(a) dividends-received deduction. taxpayer. For a manufacturer, market before making this computation for an applies to the basic elements of 

### Line 1, Column (a) additional limitation that applies to cost—raw materials, labor, and burden. If dividends received from foreign Enter dividends (except those received on section 263A applies to the taxpayer, the corporations. Attach a schedule to Form debt-financed stock acquired after July basic elements of cost must reflect the 1120 showing how the amount on line 3, 18, 1984–see section 246A) that are: current bid price of all direct costs and all column (c), was figured. 

### • Received from less-than-20%-owned indirect costs properly allocable to goods domestic corporations subject to income 

### Line 4, Column (a) on hand at the inventory date. tax, and Enter dividends received on preferred Inventory may be valued below cost 

### •Qualified for the 70% deduction under stock of a less-than-20%-owned public when the merchandise is unsalable at section 243(a)(1). utility that is subject to income tax and is normal prices or unusable in the normal Also include on line 1 the following. allowed the deduction provided in section way because the goods are subnormal 

### •Taxable distributions from an IC-DISC 247 for dividends paid. due to damage, imperfections, shopwear, or former DISC that are designated as etc., within the meaning of Regulations 

### Line 5, Column (a) eligible for the 70% deduction and certain section 1.471-2(c). The goods may be dividends of Federal Home Loan Banks. Enter dividends received on preferred valued at the bona fide selling price, See section 246(a)(2). stock of a 20%-or-more-owned public minus direct cost of disposition (but not 

### • Dividends (except those received on utility that is subject to income tax and is less than scrap value). Bona fide selling debt-financed stock acquired after July allowed the deduction provided in section price means actual offering of goods 18, 1984) from a regulated investment 247 for dividends paid. during a period ending not later than 30 company (RIC). The amount of dividends days after inventory date. 

### Line 6, Column (a) eligible for the dividends-received If this is the first year the Last-in, Enter the U.S.-source portion of dividends deduction under section 243 is limited by First-out (LIFO) inventory method was that: section 854(b). The corporation should either adopted or extended to inventory 

### •Are received from receive a notice from the RIC specifying goods not previously valued under the less-than-20%-owned foreign the amount of dividends that qualify for LIFO method provided in section 472, corporations, and the deduction. attach Form 970, Application To Use 

### •Qualify for the 70% deduction under Report so-called dividends or earnings LIFO Inventory Method, or a statement section 245(a). To qualify for the 70% received from mutual savings banks, etc., with the information required by Form deduction, the corporation must own at as interest. Do not treat them as 970. Also check the LIFO box on line 9c. least 10% of the stock of the foreign dividends. On line 9d, enter the amount or the corporation by vote and value. percent of total closing inventories 

### Line 2, Column (a) Also include dividends received from covered under section 472. Estimates are Enter on line 2: a less-than-20%-owned FSC that: acceptable. 

### • Dividends (except those received on 

### •Are attributable to income treated as If the corporation changed or extended debt-financed stock acquired after July effectively connected with the conduct of its inventory method to LIFO and had to 18, 1984) that are received from a trade or business within the United



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States (excluding foreign trade income), 

### Line 10, Columns (a) and (c) Line 14, Column (a) and Small business investment companies Include income constructively received 

### •Qualify for the 70% deduction under operating under the Small Business from CFCs under subpart F. This amount section 245(c)(1)(B). Investment Act of 1958 (see 15 U.S.C. should equal the total subpart F income 661 and following) must enter dividends reported on Schedule I of Form 5471, 

### Line 7, Column (a) that are received from domestic Information Return of U.S. Persons With Enter the U.S.-source portion of dividends corporations subject to income tax even Respect to Certain Foreign Corporations. that: though a deduction is allowed for the 

### •Are received from 20%-or-more-owned 

### Line 15, Column (a) entire amount of those dividends. To foreign corporations, and claim the 100% deduction on line 10, Include gross-up for taxes deemed paid 

### •Qualify for the 80% deduction under column (c), the company must file with its under sections 902 and 960. section 245(a). return a statement that it was a federal Also include dividends received from a licensee under the Small Business 

### Line 16, Column (a) 20%-or-more-owned FSC that: Investment Act of 1958 at the time it Enter taxable distributions from an 

### •Are attributable to income treated as received the dividends. IC-DISC or former DISC that are effectively connected with the conduct of designated as not eligible for a 

### Line 11, Columns (a) and (c) a trade or business within the United dividends-received deduction. States (excluding foreign trade income), Enter only dividends that qualify under and section 243(b) for the 100% No deduction is allowed under section



### •Qualify for the 80% deduction under dividends-received deduction described in 243 for a dividend from an IC-DISC or section 245(c)(1)(B). section 243(a)(3). Corporations taking this former DISC (as defined in section deduction are subject to the provisions of 992(a)) to the extent the dividend: 

### Line 8, Column (a) section 1561. 

### • Is paid out of the corporation’s Enter dividends received from wholly accumulated IC-DISC income or The 100% deduction does not apply to owned foreign subsidiaries that are previously taxed income, or affiliated group members that are joining eligible for the 100% deduction under 

### • Is a deemed distribution under section in the filing of a consolidated return. section 245(b). 995(b)(1). In general, the deduction under section 

### Line 12, Column (a) 245(b) applies to dividends paid out of the 

### Line 17, Column (a) Enter dividends from FSCs that are earnings and profits of a foreign Include the following. attributable to foreign trade income and corporation for a tax year during which: 1. Dividends (other than capital gain that are eligible for the 100% deduction 

### •All of its outstanding stock is directly or distributions reported on Schedule D provided in section 245(c)(1)(A). indirectly owned by the domestic (Form 1120) and exempt-interest corporation receiving the dividends, and 

### Line 13, Column (a) dividends) that are received from RICs 

### •All of its gross income from all sources and that are not subject to the 70% Enter foreign dividends not reportable on is effectively connected with the conduct deduction. lines 3, 6, 7, 8, 11, or 12 of column (a). of a trade or business within the United 2. Dividends from tax-exempt Include on line 13 the corporation’s share States. organizations. of the ordinary earnings of a qualified 

### Line 9, Column (c) 3. Dividends (other than capital gain electing fund from line 1c of Form 8621, distributions) received from a REIT that, Generally, line 9, column (c), cannot Return by a Shareholder of a Passive for the tax year of the trust in which the exceed the amount from the worksheet Foreign Investment Company or dividends are paid, qualifies under below. However, in a year in which an Qualifying Electing Fund. Exclude sections 856 through 860. NOL occurs, this limitation does not apply distributions of amounts constructively 4. Dividends not eligible for a even if the loss is created by the taxed in the current year or in prior years dividends-received deduction, which dividends-received deduction. See under subpart F (sections 951 through include the following. sections 172(d) and 246(b). 964). a. Dividends received on any share of stock held for less than 46 days during the 91-day period beginning 45 days Keep for Your before the ex-dividend date. When 

### Worksheet for Schedule C, line 9 Records counting the number of days the corporation held the stock, you cannot count certain days during which the **1.** Refigure line 28, page 1, Form 1120, without any domestic production activities deduction, any adjustment under section 1059, corporation’s risk of loss was diminished. and without any capital loss carryback to the tax year under section See section 246(c)(4) and Regulations 1212(a)(1)

...................................... **1.** section 1.246-5 for more details. **2.** Complete lines 10, 11, and 12, column (c), and enter the total here **2.** b. Dividends attributable to periods **3.** Subtract line 2 from line 1

........................... **3.** totaling more than 366 days that the **4.** Multiply line 3 by 80%

.............................. **4.** corporation received on any share of **5.** Add lines 2, 5, 7, and 8, column (c), and the part of the deduction preferred stock held for less than 91 days on line 3, column (c), that is attributable to dividends from during the 181-day period that began 90 20%-or-more-owned corporations

...................... **5.** days before the ex-dividend date. When **6.** Enter the smaller of line 4 or 5. If line 5 is greater than line 4, stop counting the number of days the here; enter the amount from line 6 on line 9, column (c), and do not corporation held the stock, you cannot complete the rest of this worksheet

..................... **6.** count certain days during which the **7.** Enter the total amount of dividends from 20%-or-more-owned corporation’s risk of loss was diminished. corporations that are included on lines 2, 3, 5, 7, and 8, column (a) **7.** See section 246(c)(4) and Regulations **8.** Subtract line 7 from line 3

........................... **8.** section 1.246-5 for more details. **9.** Multiply line 8 by 70%

.............................. **9.** Preferred dividends attributable to periods **10.** Subtract line 5 above from line 9, column (c)

............... **10.** totaling less than 367 days are subject to **11.** Enter the smaller of line 9 or line 10

..................... **11.** the 46-day holding period rule above. **12. Dividends-received deduction after limitation**(sec. 246(b)). Add c. Dividends on any share of stock to lines 6 and 11. Enter the result here and on line 9, column (c) . . . **12.** the extent the corporation is under an obligation (including a short sale) to make



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related payments with respect to positions 1. Substantially all of the corporation’s dotted line next to line 2, enter “Section in substantially similar or related property. activities involve the performance of 197” and the amount. 5. Any other taxable dividend income services in the fields of health, law, 

### Line 3 not properly reported above. engineering, architecture, accounting, actuarial science, performing arts, or A corporation that is not a small If patronage dividends or per-unit consulting. corporation exempt from the AMT retain allocations are included on line 17, 2. At least 95% of the corporation’s may be required to file Form 4626 CAUTION 

# ! identify the total of these amounts in a stock, by value, is directly or indirectly if it claims certain credits, even though it schedule attached to Form 1120. owned by does not owe any AMT. See Form 4626 a. Employees performing the 

### Line 18, Column (c) for details. services, Section 247 allows public utilities a Unless the corporation is treated as a b. Retired employees who had deduction of 40% of the smaller of small corporation exempt from the AMT, it performed the services listed above, (a) dividends paid on their preferred stock may owe the AMT if it has any of the c. Any estate of an employee or during the tax year, or (b) taxable income adjustments and tax preference items retiree described above, or computed without regard to this listed on Form 4626. The corporation d. Any person who acquired the stock deduction. In a year in which an NOL must file Form 4626 if its taxable income of the corporation as a result of the death occurs, compute the deduction without (or loss) before the NOL deduction, of an employee or retiree (but only for the regard to section 247(a)(1)(B). See combined with these adjustments and tax 2-year period beginning on the date of the section 172(d). preference items is more than the smaller employee’s or retiree’s death). of $40,000 or the corporation’s allowable exemption amount (from Form 4626). For 

## Schedule J. **Alternative tax for corporations with** this purpose, taxable income does not **qualified timber gains.** A corporation 

## Tax Computation include the NOL deduction. that has net capital gain and qualified timber gain (as defined in section See Form 4626 for definitions and 

### Line 1 1201(b)(2)) is subject to an alternative tax details on how to figure the tax. If the corporation is a member of a computation. The alternative tax applies 

### Line 5a controlled group, check the box on line 1. for tax years ending after May 22, 2008, Complete and attach Schedule O (Form To find out when a corporation can take and beginning before May 23, 2009. The 1120), Consent Plan and Apportionment the credit for payment of income tax to a tax is figured on Schedule D (Form 1120), Schedule for a Controlled Group. foreign country or U.S. possession, see Part IV. Enter on Schedule J, line 2, the Members of a controlled group must use Form 1118, Foreign Tax Credit – tax from Schedule D, Part IV, line 26. Schedule O to report the apportionment Corporations. **Mutual savings bank conducting life** of taxable income, income tax, and **insurance business.** The tax under 

### Line 5b certain tax benefits between the members section 594 consists of the sum of (a) a Enter the amount of any credit from Form of the group. See Schedule O and its partial tax computed on Form 1120 on the 8834, Qualified Electric Vehicle Credit, for Instructions for more information. taxable income of the bank determined qualified electric vehicle passive activity without regard to income or deductions 

### Line 2 credits from prior years allowed on Form allocable to the life insurance department, If the corporation is a member of a 8810 for the current tax year. Also include and (b) a partial tax on the taxable controlled group, enter the corporation’s on line 5b any credits from Form 5735, income computed on Form 1120-L of the tax from Part III of Schedule O (Form American Samoa Economic Development life insurance department. Enter the 1120). Most corporations that are not Credit. See the Instructions for Form combined tax on line 2. Attach Form members of a controlled group and not 5735. 1120-L as a schedule (and identify it as filing a consolidated return figure their tax 

### Line 5c such), together with the annual by using the Tax Rate Schedule below. statements and schedules required to be Enter on line 5c the allowable credit from Qualified personal service corporations filed with Form 1120-L. See Regulations Form 3800, Part II, line 32. should see the instructions later. section 1.6012-2(c)(1)(ii). An exception The corporation is required to file Form **Tax Rate Schedule** applies for insurance companies that 3800, General Business Credit, to claim electronically file their returns. See most business credits. For a list of **If taxable income (line 30, Form 1120) on page 1** Regulations section 1.6012-2(c)(4). **is:** allowable credits, see Form 3800. Also, **Deferred tax under section 1291.** If the see the applicable credit form and its Of the corporation was a shareholder in a instructions. But not amount passive foreign investment company Over — over — Tax is: over — 

### Line 5d (PFIC) and received an excess To figure the minimum tax credit and any distribution or disposed of its investment $0 $50,000 **15%** $0 carryforward of that credit, use Form in the PFIC during the year, it must 50,000 75,000 **$ 7,500 + 25%** 50,000 8827, Credit for Prior Year Minimum include the increase in taxes due under 75,000 100,000 **13,750 + 34%** 75,000 Tax—Corporations. section 1291(c)(2) in the total for line 2. 100,000 335,000 **22,250 + 39%** 100,000 On the dotted line next to line 2, enter 335,000 10,000,000 **113,900 + 34%** 335,000 

### Line 5e 10,000,000 15,000,000 **3,400,000 + 35%**10,000,000 “Section 1291” and the amount. Enter the allowable credits from Form 15,000,000 18,333,333 **5,150,000 + 38%**15,000,000 Do not include on line 2 any interest 8912, Credit to Holders of Tax Credit 18,333,333 - - - - - **35%** 0 due under section 1291(c)(3). Instead, Bonds, line 17. show the amount of interest owed in the **Qualified personal service corporation.** bottom margin of page 1, Form 1120, and 

### Line 8

A qualified personal service corporation enter “Section 1291 interest.” For details, A corporation is taxed as a personal is taxed at a flat rate of 35% on taxable see Form 8621. holding company under section 542 if: income. If the corporation is a qualified **Additional tax under section 197(f).** A 

### •At least 60% of its adjusted ordinary personal service corporation, check the corporation that elects to pay tax on the gross income for the tax year is personal box on line 2 even if the corporation has gain from the sale of an intangible under holding company income, and no tax liability. the related person exception to the 

### •At any time during the last half of the A corporation is a qualified personal anti-churning rules should include any tax year more than 50% in value of its service corporation if it meets both of the additional tax due under section outstanding stock is directly or indirectly following tests. 197(f)(9)(B) in the total for line 2. On the owned by five or fewer individuals.



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See Schedule PH (Form 1120) for 

### •Tax and interest on a nonqualified definitions and details on how to figure withdrawal from a capital construction 

## Schedule K. the tax. fund (section 7518(g)). 

## Other Information
• Interest on deferred tax attributable to 

### Line 9 Complete all items that apply to the (a) installment sales of certain timeshares Include any of the following taxes and corporation. and residential lots (section 453(l)(3)) and interest in the total on line 9. Check the (b) certain nondealer installment 

### Question 3 appropriate box(es) for the form, if any, obligations (section 453A(c)). used to compute the total. Check the “Yes” box for question 3 if: 

### • Interest due on deferred gain (section 

### •The corporation is a subsidiary in an **Recapture of investment credit.** If the 1260(b)). affiliated group (defined below), but is not corporation disposed of investment credit filing a consolidated return for the tax year **How to report.** If the corporation property or changed its use before the with that group, or end of its useful life or recovery period, it checked the “Other” box, attach a


### •The corporation is a subsidiary in a may owe a tax. See Form 4255, schedule showing the computation of parent-subsidiary controlled group. For a Recapture of Investment Credit. each item included in the total for line 9 definition of a parent-subsidiary controlled and identify the applicable Code section **Recapture of low-income housing** group, see the Instructions for Schedule and the type of tax or interest. **credit.** If the corporation disposed of O (Form 1120). property (or there was a reduction in the Any corporation that meets either of 

### Line 10 qualified basis of the property) for which it the requirements above should check the took the low-income housing credit, it may Include any deferred tax on the “Yes” box. This applies even if the owe a tax. See Form 8611, Recapture of termination of a section 1294 election corporation is a subsidiary member of one Low-Income Housing Credit. applicable to shareholders in a qualified group and the parent corporation of electing fund in the amount entered on **Interest due under the look-back** another. line 10. See Form 8621, Part V, andHow **methods.** If the corporation used the **Note.** If the corporation is an “excluded to report,below. look-back method for certain long-term member” of a controlled group (see contracts, see Form 8697, Interest section 1563(b)(2)), it is still considered a **Subtract**the following amounts from Computation Under the Look-Back member of a controlled group for this the total for line 10. Method for Completed Long-Term purpose. 

### • Deferred tax on the corporation’s share Contracts, for information on figuring the of undistributed earnings of a qualified interest the corporation may have to **Affiliated group.** An affiliated group is electing fund (see Form 8621, Part II). include. one or more chains of includible corporations (section 1504(a)) connected 

### • Deferred LIFO recapture tax (section The corporation may also have to through stock ownership with a common 1363(d)). This tax is the part of the LIFO include interest due under the look-back parent corporation. The common parent recapture tax that will be deferred and method for property depreciated under must be an includible corporation and the paid with Form 1120S in the future. To the income forecast method. See Form following requirements must be met. figure the deferred tax, first figure the total 8866, Interest Computation Under the LIFO recapture tax. Follow the steps 1. The common parent must own Look-Back Method for Property below to figure the total LIFO recapture directly stock that represents at least 80% Depreciated Under the Income Forecast tax and the deferred amount. Also see the of the total voting power and at least 80% Method. instructions regarding LIFO recapture of the total value of the stock of at least **Alternative tax on qualifying shipping** amount on page 8 underLine 10. Other one of the other includible corporations. **activities.** Enter any alternative tax on 2. Stock that represents at least 80% Income. qualifying shipping activities from Form of the total voting power and at least 80% 8902. Check the box for Form 8902. **Step 1.**Figure the tax on the of the total value of the stock of each of **Other.** Additional taxes and interest corporation’s income including the LIFO the other corporations (except for the amounts can be included in the total recapture amount. (Complete Schedule J common parent) must be owned directly entered on line 9. Check the box for through line 9, but do not enter a total on by one or more of the other includible “Other” if the corporation includes any line 10 yet.) corporations. additional taxes and interest such as the items discussed below. SeeHow to report **Step 2.**Using a separate worksheet, For this purpose, the term “stock” below for details on reporting these generally does not include any stock that complete Schedule J again, but do not amounts on an attached schedule. (a) is nonvoting, (b) is nonconvertible, include the LIFO recapture amount in the



### • Recapture of qualified electric vehicle (c) is limited and preferred as to dividends corporation’s taxable income. (QEV) credit. The corporation must and does not participate significantly in **Step 3.**Compare the tax in Step 2 to recapture part of the QEV credit it claimed corporate growth, and (d) has redemption in a prior year if, within 3 years of the date the tax in Step 1. (The difference between and liquidation rights that do not exceed the vehicle was placed in service, it the two is the LIFO recapture tax.) the issue price of the stock (except for a ceases to qualify for the credit. See reasonable redemption or liquidation **Step 4.**Multiply the amount figured in Regulations section 1.30-1 for details on premium). See section 1504(a)(4). See Step 3 by 75%. (The result is the deferred how to figure the recapture. section 1563(d)(1) for the definition of LIFO recapture tax.) 

### • Recapture of Indian employment credit. stock for purposes of determining stock Generally, if an employer terminates the ownership above. **How to report.** Attach a schedule employment of a qualified employee less 

### Question 4 showing the computation of each item than 1 year after the date of initial included in, or subtracted from, the total employment, any Indian employment 

### Constructive Ownership of the for line 10. On the dotted line next to line credit allowed for a prior tax year because 

### Corporation 10, specify (a) the applicable Code of wages paid or incurred to that section, (b) the type of tax, and (c) enter employee must be recaptured. For For purposes of question 4, the the amount of tax. For example, if the details, see Form 8845 and section 45A. constructive ownership rules of section corporation is deferring a $100 LIFO 

### • Recapture of new markets credit (see 267(c) (excluding section 267(c)(3)) apply recapture tax, subtract this amount from Form 8874). to ownership of interests in corporate the total on line 10, then enter “Section 

### • Recapture of employer-provided stock and ownership of interests in the 1363-Deferred Tax-$100” on the dotted childcare facilities and services credit profit, loss, or capital of a partnership. An line next to line 10. (see Form 8882). interest in the corporation owned directly



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or indirectly by or for another entity indirectly, through Partnership B, a 35% 

### Question 5a (corporation, partnership, estate, or trust) interest (50% of 70%) in the profit, loss, or List each foreign or domestic corporation is considered to be owned proportionately capital of Partnership C and owns, not included on Form 851, Affiliations by the owners (shareholders, partners, or indirectly, 35% of the voting stock of Schedule, in which the corporation, at the beneficiaries) of the owning entity. Also, Corporation D. Corporation A owns, end of the tax year, owned directly 20% under section 267(c), an individual is directly or indirectly, a 50% interest in the or more, or owned, directly or indirectly, considered to own an interest owned profit, loss, or capital of Partnership C 50% or more of the total voting power of directly or indirectly by or for his or her (15% directly and 35% indirectly), and all classes of stock entitled to vote. family. The family of an individual owns, directly or indirectly, 50% of the Indicate the name of the corporation, EIN includes only that individual’s spouse, voting stock of Corporation D (15% (if any), country of incorporation, and the brothers, sisters, ancestors, and lineal directly and 35% indirectly). percentage interest owned, directly or descendants. An interest will be attributed indirectly, in the total voting power. List Corporation D reports in its answer to from an individual under the family the parent corporation of an affiliated question 4a that its voting stock is owned, attribution rules only if the person to group of corporations filing a consolidated whom the interest is attributed owns a directly or indirectly, 50% by Corporation tax return rather than the subsidiary direct or an indirect interest in the A and is owned, directly, 70% by members except for subsidiary members corporation under section 267(c)(1) or (5). Partnership B. in which an interest is owned, directly or However, for purposes of these indirectly, independent of the interest **Example 2.** A owns, directly, 50% of instructions, an individual will not be owned, directly or indirectly, in the parent the voting stock of Corporation X. B, the considered to own, under section corporation. List a corporation owned daughter of A, does not own, directly, any 267(c)(2), an interest in the corporation through a disregarded entity rather than interest in Corporation X and does not owned, directly or indirectly, by a family the disregarded entity. own, indirectly, any interest in Corporation member unless the individual also owns X through any entity (corporation, an interest in the corporation either 

### Question 5b partnership, trust, or estate). Therefore, directly or indirectly through a corporation, List each foreign or domestic partnership the family attribution rules do not apply partnership or trust. in which the corporation, at the end of the and, for the purposes of question 4b, the tax year, owned directly an interest of Constructive ownership examples for 50% interest of A in Corporation X is not 20% or more, or owned, directly or questions 4 and 5 follow the instructions attributed to B. indirectly, an interest of 50% or more in for questions 4b and 5b. the profit, loss, or capital of the **Example 3.** A owns, directly, 50% of 

### Question 4a partnership. List each trust in which the the voting stock of Corporation X. B, the List each foreign or domestic corporation, corporation, at the end of the tax year, daughter of A, does not own, directly, any partnership, or trust owning, at the end of owned directly an interest of 20% or interest in X but does own, indirectly, 10% the tax year, directly 20% or more, or more, or owned, directly or indirectly, an of the voting stock of Corporation X owning, directly or indirectly, 50% or more interest of 50% or more in the trust through Trust T of which she is the sole of the total voting power of all classes of beneficial interest. Indicate the name, EIN beneficiary. No other family member of A the corporation’s stock entitled to vote. (if any), country of organization, and the or B owns, directly, any interest in Indicate the name of the entity, EIN (if maximum percentage interest owned, Corporation X nor does any own, any), type of entity (corporation, directly or indirectly, in the profit, loss, or indirectly, any interest in Corporation X partnership, or trust), country of capital of the partnership at the end of the through any entity. Neither A nor B owns organization, and the percentage owned, partnership tax year, or, for a trust, the any other interest in Corporation X directly or indirectly, of the voting stock of percentage interest owned in the trust through any entity. the corporation. For an affiliated group beneficial interest. List a partnership or filing a consolidated tax return, list the trust owned through a disregarded entity For the purposes of question 4b, the parent corporation rather than the rather than the disregarded entity. 50% interest of A in the voting stock of subsidiary members. List the entity owner Corporation X is attributed to B and the **Maximum percentage owned in** of a disregarded entity rather than the 10% interest of B in the voting stock of **partnership profit, loss, or capital.** For disregarded entity. If the owner of a Corporation X is attributed to A. A owns, the purposes of question 5b, the term disregarded entity is an individual rather directly or indirectly, 60% of the voting “maximum percentage owned” means the than an entity, list the individual under stock of Corporation X, 50% directly and highest percentage of interest in a question 4b. 10% indirectly through B. B owns, directly partnership’s profit, loss, or capital as of 

### Question 4b or indirectly, 60% of the voting stock of the end of the partnership’s tax year, as Corporation X (50% indirectly through A determined under the partnership List each individual or estate owning, at and 10% indirectly through Trust T). agreement, when taking into account the the end of the tax year, directly 20% or constructive ownership rules above. If the more, or owning, directly or indirectly, partnership agreement does not express 

### Question 5 50% or more, of the total voting power of the partner’s share of profit, loss, and all classes of the corporation’s stock capital as fixed percentages, use a 

### Constructive Ownership of Other entitled to vote. Indicate the name of the reasonable method in arriving at the 

### Entities individual or estate, TIN (if any), country percentage items for the purposes of of citizenship (for an estate, the For purposes of determining the completing question 5b. Such method citizenship of the decedent), and the corporation’s constructive ownership of must be consistent with the partnership percentage owned, directly or indirectly of other entities, the constructive ownership agreement. The method used to compute the voting stock of the corporation. rules of section 267(c) (excluding section a percentage share of profit, loss, and 267(c)(3)) apply to ownership of interests **Example 1.** Corporation A owns, capital must be applied consistently from in partnerships and trusts as well as directly, a 50% interest in the profit, loss, year to year. Maintain records to support corporate stock. Generally, if an entity (a or capital of Partnership B. Corporation A the determination of the share of profits, corporation, partnership, or trust) is also owns, directly, a 15% interest in the losses, and share of capital. owned, directly or indirectly, by or for profit, loss, or capital of Partnership C and another entity (corporation, partnership, owns, directly, 15% of the voting stock of **Example 4.** Assuming the same facts estate, or trust), the owned entity is Corporation D. Partnership B owns, as Example 1, Corporation A reports in its considered to be owned proportionately directly, a 70% interest in the profit, loss, answer to question 5a that it owns, by or for the owners (shareholders, or capital of Partnership C and owns, directly or indirectly, 50% of the voting partners, or beneficiaries) of the owning directly, 70% of the voting stock of stock of Corporation D. Corporation A entity. Corporation D. Corporation A owns, reports in its answer to question 5b that it



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owns, directly, an interest of 50% in the including extensions. Do not attach the 

### •The excess of additional pension profit, loss, or capital of Partnership B and statement described in Temporary liability over unrecognized prior service owns, directly or indirectly, 50% of the Regulations section 301.9100-12T. Once cost. profit, loss, or capital of Partnership C. made, the election is irrevocable. See 

### •Guarantees of employee stock (ESOP) Form 1139 for more details. debt. 

### Question 7
•Compensation related to employee Corporations filing a consolidated Check the “Yes,” box if one foreign stock award plans. return must also attach the statement person owned at least 25% of (a) the total required by Regulations section voting power of all classes of stock of the If the total adjustment to be entered on 1.1502-21(b)(3). corporation entitled to vote, or (b) the total line 26 is a negative amount, enter the value of all classes of stock of the amount in parentheses. 

### Item 12 corporation. Enter the amount of the NOL carryover to The constructive ownership rules of the tax year from prior years, even if section 318 apply in determining if a some of the loss is used to offset income 

## Schedule M-1. corporation is foreign owned. See section on this return. The amount to enter is the 

## Reconciliation of Income 6038A(c)(5) and the related regulations. total of all NOLs generated in prior years but not used to offset income (either as a Enter on line 7a the percentage owned 

## (Loss) per Books With carryback or carryover) to a tax year prior by the foreign person specified in 

## Income per Return to 2008. Do not reduce the amount by question 7. On line 7b, enter the name of any NOL deduction reported on line 29a. the owner’s country. Corporations with total receipts (line 1a plus lines 4 through 10 on page 1)**and Note.**  If there is more than one total assets at the end of the tax year less 25%-or-more foreign owner, complete 

## Schedule L. than $250,000 are not required to lines 7a and 7b for the foreign person with complete Schedules L, M-1, and M-2 if the highest percentage of ownership. 

## Balance Sheet per Books the “Yes” box on Schedule K, question **Foreign person.** The term “foreign The balance sheet should agree with the 13, is checked. person” means: corporation’s books and records.


### •A foreign citizen or nonresident alien, Corporations with total assets Corporations with total receipts (line 1a 

### •An individual who is a citizen of a U.S. non-consolidated (or consolidated for all plus lines 4 through 10 on page 1)**and** possession (but who is not a U.S. citizen corporations included within the tax total assets at the end of the tax year less or resident), consolidation group) of $10 million or than $250,000 are not required to 

### •A foreign partnership, more on the last day of the tax year must complete Schedules L, M-1, and M-2 if 

### •A foreign corporation, complete Schedule M-3 (Form 1120) the “Yes” box on Schedule K, question 

### •Any foreign estate or trust within the instead of Schedule M-1. A corporation 13, is checked. If the corporation is meaning of section 7701(a)(31), or filing Form 1120 that is not required to file required to complete Schedule L, include 

### •A foreign government (or one of its Schedule M-3 may voluntarily file total assets reported on Schedule L, line agencies or instrumentalities) to the Schedule M-3 instead of Schedule M-1. 15, column (d), on page 1, item D. extent that it is engaged in the conduct of See the Instructions for Schedule M-3 a commercial activity as described in Corporations with total assets (Form 1120) for more information. section 892. non-consolidated (or consolidated for all corporations included within the tax 

### Line 5c **Owner’s country.** For individuals, the consolidation group) of $10 million or term “owner’s country” means the country Include any of the following. more on the last day of the tax year must of residence. For all others, it is the 

### •Meal and entertainment expenses not complete Schedule M-3 (Form 1120) country where incorporated, organized, deductible under section 274(n). instead of Schedule M-1. See the created, or administered. 

### • Expenses for the use of an separate Instructions for Schedule M-3 **Requirement to file Form 5472.** If the entertainment facility. (Form 1120) for provisions that also affect corporation checked “Yes,” it may have to 

### •The part of business gifts over $25. Schedule L. file Form 5472, Information Return of a 

### • Expenses of an individual over $2,000, If filing a consolidated return, report 25% Foreign Owned U.S. Corporation or which are allocable to conventions on total consolidated assets, liabilities, and a Foreign Corporation Engaged in a U.S. cruise ships. shareholder’s equity for all corporations Trade or Business. Generally, a 25% 

### • Employee achievement awards over joining in the return. SeeConsolidated foreign-owned corporation that had a $400. Return on page 6 of these instructions. reportable transaction with a foreign or 

### •The cost of entertainment tickets over domestic related party during the tax year face value (also subject to 50% limit 

### Line 1 must file Form 5472. See Form 5472 for under section 274(n)). Include certificates of deposit as cash on filing instructions and penalties for failure 

### •The cost of skyboxes over the face this line. to file. value of nonluxury box seat tickets. 

### Line 5 **Item 9** •The part of luxury water travel expenses not deductible under section Include on this line: Show any tax-exempt interest received or 274(m). 

### •State and local government obligations, accrued. Include any exempt-interest



### • Expenses for travel as a form of the interest on which is excludable from dividends received as a shareholder in a education. gross income under section 103(a) and mutual fund or other RIC. Also, if



### •Stock in a mutual fund or other RIC that 

### •Other nondeductible travel and required, include the same amount on distributed exempt-interest dividends entertainment expenses. Schedule M-1, line 7 (or Schedule M-3, during the tax year of the corporation. Part II, line 13, if applicable). For more information, see Pub. 542. 

### Item 11 Line 26 **Line 7** If the corporation has an NOL for its 2008 Some examples of adjustments to report tax year, it can elect to waive the entire on this line include: Report any tax exempt interest received carryback period for the NOL and instead 

### • Unrealized gains and losses on or accrued, including any exempt-interest carry the NOL forward to future tax years. securities held “available for sale.” dividends received as a shareholder in a To do so, check the box on line 11 and 

### • Foreign currency translation mutual fund or other RIC. Also report this file the tax return by its due date, adjustments. same amount on Schedule K, item 9.



### -20- **Instructions for Form 1120**

## Page 21 of 25 Instructions for Form 1120 11:47 - 3-FEB-2009

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

**Privacy Act and Paperwork Reduction Act Notice.** We ask for the information on these forms to carry out the Internal Revenue laws of the United States. You are required to give us the information. We need it to ensure that you are complying with theselaws and to allow us to figure and collect the right amount of tax. Section 6109 requires return preparers to provide their identifying numbers on the return. You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the form displays a valid OMB control number. Books or records relating to a form or its instructions must be retained as long as their contents may become material in the administration of any Internal Revenue law. Generally, tax returns and return information are confidential, as required by section 6103. The time needed to complete and file the following forms will vary depending on individual circumstances. The estimated average times are: **Copying, assembling,**  **Learning about and sending the Form Recordkeeping the law or the form Preparing the form form to the IRS** 
1120 67 hr., 40 min. 40 hr., 54 min. 69 hr., 51 min. 7 hr., 30 min. Sch B (1120) 2hr., 37 min. 35 min. 40 min. - - - - - Sch. D (1120) 9 hr., 05 min. 3 hr., 55 min. 6 hr., 5 min. 32 min. Sch. H (1120) 5 hr., 58 min. 35 min. 43 min. - - - - - Sch. M-3 (1120) 79 hr., 52 min. 3 hr., 40 min. 5 hr., 8 min. - - - - - Sch. N (1120) 3 hr., 21 min. 1 hr., 30 min. 4 hr., 24 min. 48 min. Sch. O (1120) 12 hr., 40 min. 2 hr., 5 min. 2 hr., 22 min. - - - - - Sch. PH (1120) 12 hr., 54 min. 4 hr., 18 min. 6 hr., 34 min. 32 min. If you have comments concerning the accuracy of these time estimates or suggestions for making this form and related schedules simpler, we would be happy to hear from you. You can write to Internal Revenue Service, Tax Products Coordinating Committee, SE:W:CAR:MP:T:T:SP, 1111 Constitution Ave. NW, IR-6526, Washington, DC 20224. Do not send the tax form to this address. Instead, seeWhere To File on page 3.



### -21- **Instructions for Form 1120**

## Page 22 of 25 Instructions for Form 1120 11:47 - 3-FEB-2009

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

Using the list of activities and codes below, Once the principal business activity is determined, 

### Principal Business Activity determine from which activity the company derives entries must be made on Form 1120, Schedule K, the largest percentage of its “total receipts.” Total lines 2a, 2b, and 2c. For the business activity code 

### Codes receipts is defined as the sum of gross receipts or number, enter the six digit code selected from the list sales (page 1, line 1a) plus all other income (page 1, below. On the next line (Form 1120, Schedule K, line This list of principal business activities and their lines 4 through 10). If the company purchases raw 2b), enter a brief description of the company’s associated codes is designed to classify an materials and supplies them to a subcontractor to business activity. Finally, enter a description of the enterprise by the type of activity in which it is produce the finished product, but retains title to the principal product or service of the company on Form engaged to facilitate the administration of the product, the company is considered a manufacturer 1120, Schedule K, line 2c. Internal Revenue Code. These principal business and must use one of the manufacturing codes activity codes are based on the North American (311110-339900). Industry Classification System.

Code Code Code Code **Heavy and Civil Engineering Wood Product Manufacturing** 332810 Coating, Engraving, Heat **Agriculture, Forestry, Fishing Construction**  Treating, & Allied Activities 321110 Sawmills & Wood **and Hunting** 237100 Utility System Construction Preservation 332900 Other Fabricated Metal **Crop Production** Product Mfg 237210 Land Subdivision 321210 Veneer, Plywood, & 111100 Oilseed & Grain Farming Engineered Wood Product **Machinery Manufacturing** 237310 Highway, Street, & Bridge 111210 Vegetable & Melon Farming Mfg Construction 333100 Agriculture, Construction, & (including potatoes & yams) 321900 Other Wood Product Mfg Mining Machinery Mfg 237990 Other Heavy & Civil 111300 Fruit & Tree Nut Farming Engineering Construction **Paper Manufacturing** 333200 Industrial Machinery Mfg 111400 Greenhouse, Nursery, & **Specialty Trade Contractors** 322100 Pulp, Paper, & Paperboard 333310 Commercial & Service Floriculture Production Mills Industry Machinery Mfg 238100 Foundation, Structure, & 111900 Other Crop Farming Building Exterior Contractors 322200 Converted Paper Product Mfg 333410 Ventilation, Heating, (including tobacco, cotton, (including framing carpentry, Air-Conditioning, & **Printing and Related Support** sugarcane, hay, peanut, masonry, glass, roofing, & Commercial Refrigeration **Activities** sugar beet & all other crop siding) Equipment Mfg 323100 Printing & Related Support farming) 238210 Electrical Contractors 333510 Metalworking Machinery Mfg Activities **Animal Production** 238220 Plumbing, Heating, & 333610 Engine, Turbine & Power **Petroleum and Coal Products** 112111 Beef Cattle Ranching & Air-Conditioning Contractors Transmission Equipment Mfg **Manufacturing** Farming 238290 Other Building Equipment 333900 Other General Purpose 324110 Petroleum Refineries 112112 Cattle Feedlots Contractors Machinery Mfg (including integrated) 112120 Dairy Cattle & Milk 238300 Building Finishing **Computer and Electronic Product** 324120 Asphalt Paving, Roofing, & Production Contractors (including **Manufacturing** Saturated Materials Mfg 112210 Hog & Pig Farming drywall, insulation, painting, 334110 Computer & Peripheral 324190 Other Petroleum & Coal 112300 Poultry & Egg Production wallcovering, flooring, tile, & Equipment Mfg Products Mfg finish carpentry) 112400 Sheep & Goat Farming 334200 Communications Equipment **Chemical Manufacturing** 238900 Other Specialty Trade 112510 Aquaculture (including Mfg 325100 Basic Chemical Mfg Contractors (including site shellfish & finfish farms & 334310 Audio & Video Equipment 325200 Resin, Synthetic Rubber, & preparation) hatcheries) Mfg Artificial & Synthetic Fibers & 112900 Other Animal Production 334410 Semiconductor & Other Filaments Mfg **Manufacturing Forestry and Logging**  Electronic Component Mfg 325300 Pesticide, Fertilizer, & Other **Food Manufacturing** 113110 Timber Tract Operations 334500 Navigational, Measuring, Agricultural Chemical Mfg 311110 Animal Food Mfg Electromedical, & Control 113210 Forest Nurseries & Gathering 325410 Pharmaceutical & Medicine Instruments Mfg of Forest Products 311200 Grain & Oilseed Milling Mfg 334610 Manufacturing & 113310 Logging 311300 Sugar & Confectionery 325500 Paint, Coating, & Adhesive Reproducing Magnetic & Product Mfg **Fishing, Hunting and Trapping** Mfg Optical Media 311400 Fruit & Vegetable Preserving 114110 Fishing 325600 Soap, Cleaning Compound, & **Electrical Equipment, Appliance, and** & Specialty Food Mfg Toilet Preparation Mfg 114210 Hunting & Trapping **Component Manufacturing** 311500 Dairy Product Mfg 325900 Other Chemical Product & **Support Activities for Agriculture** 335100 Electric Lighting Equipment 311610 Animal Slaughtering and Preparation Mfg **and Forestry** Mfg Processing **Plastics and Rubber Products** 115110 Support Activities for Crop 335200 Household Appliance Mfg 311710 Seafood Product Preparation **Manufacturing** Production (including cotton 335310 Electrical Equipment Mfg & Packaging ginning, soil preparation, 326100 Plastics Product Mfg 335900 Other Electrical Equipment & 311800 Bakeries & Tortilla Mfg planting, & cultivating) 326200 Rubber Product Mfg Component Mfg 311900 Other Food Mfg (including 115210 Support Activities for Animal **Nonmetallic Mineral Product** coffee, tea, flavorings & **Transportation Equipment** Production **Manufacturing** seasonings) **Manufacturing** 115310 Support Activities For 327100 Clay Product & Refractory 336100 Motor Vehicle Mfg **Beverage and Tobacco Product** Forestry Mfg **Manufacturing** 336210 Motor Vehicle Body & Trailer 327210 Glass & Glass Product Mfg Mfg 312110 Soft Drink & Ice Mfg **Mining** 327300 Cement & Concrete Product 336300 Motor Vehicle Parts Mfg 312120 Breweries 211110 Oil & Gas Extraction Mfg 336410 Aerospace Product & Parts 312130 Wineries 212110 Coal Mining 327400 Lime & Gypsum Product Mfg Mfg 312140 Distilleries 212200 Metal Ore Mining 327900 Other Nonmetallic Mineral 336510 Railroad Rolling Stock Mfg 312200 Tobacco Manufacturing 212310 Stone Mining & Quarrying Product Mfg 336610 Ship & Boat Building **Textile Mills and Textile Product** 212320 Sand, Gravel, Clay, & **Primary Metal Manufacturing** 336990 Other Transportation **Mills** Ceramic & Refractory 331110 Iron & Steel Mills & Ferroalloy Equipment Mfg Minerals Mining & Quarrying 313000 Textile Mills Mfg **Furniture and Related Product** 212390 Other Nonmetallic Mineral 314000 Textile Product Mills 331200 Steel Product Mfg from **Manufacturing** Mining & Quarrying **Apparel Manufacturing** Purchased Steel 337000 Furniture & Related Product 213110 Support Activities for Mining 315100 Apparel Knitting Mills 331310 Alumina & Aluminum Manufacturing Production & Processing 315210 Cut & Sew Apparel **Miscellaneous Manufacturing Utilities**  Contractors 331400 Nonferrous Metal (except 339110 Medical Equipment & 221100 Electric Power Generation, Aluminum) Production & 315220 Men’s & Boys’ Cut & Sew Supplies Mfg Transmission & Distribution Processing Apparel Mfg 339900 Other Miscellaneous 221210 Natural Gas Distribution 331500 Foundries 315230 Women’s & Girls’ Cut & Sew Manufacturing 221300 Water, Sewage & Other Apparel Mfg **Fabricated Metal Product** Systems **Manufacturing** 315290 Other Cut & Sew Apparel Mfg **Wholesale Trade** 221500 Combination Gas & Electric 332110 Forging & Stamping 315990 Apparel Accessories & Other **Merchant Wholesalers, Durable** Apparel Mfg 332210 Cutlery & Handtool Mfg **Goods Construction**  **Leather and Allied Product** 332300 Architectural & Structural 423100 Motor Vehicle & Motor **Manufacturing** Metals Mfg **Construction of Buildings** Vehicle Parts & Supplies 316110 Leather & Hide Tanning & 332400 Boiler, Tank, & Shipping 236110 Residential Building 423200 Furniture & Home Finishing Container Mfg Construction Furnishings 316210 Footwear Mfg (including 332510 Hardware Mfg 236200 Nonresidential Building 423300 Lumber & Other Construction rubber & plastics) Construction 332610 Spring & Wire Product Mfg Materials 316990 Other Leather & Allied 332700 Machine Shops; Turned 423400 Professional & Commercial Product Mfg Product; & Screw, Nut, & Bolt Equipment & Supplies Mfg



### -22- **Instructions for Form 1120**

## Page 23 of 25 Instructions for Form 1120 11:47 - 3-FEB-2009

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

**Principal Business Activity Codes**(continued)

Code Code Code Code 423500 Metal & Mineral (except 445120 Convenience Stores **Truck Transportation Finance and Insurance**  Petroleum) 445210 Meat Markets 484110 General Freight Trucking, **Depository Credit Intermediation** 423600 Electrical & Electronic Goods Local 445220 Fish & Seafood Markets 522110 Commercial Banking 423700 Hardware, & Plumbing & 484120 General Freight Trucking, 445230 Fruit & Vegetable Markets 522120 Savings Institutions Heating Equipment & Long-distance 445291 Baked Goods Stores 522130 Credit Unions Supplies 484200 Specialized Freight Trucking 445292 Confectionery & Nut Stores 522190 Other Depository Credit 423800 Machinery, Equipment, & **Transit and Ground Passenger** 445299 All Other Specialty Food Intermediation Supplies **Transportation** Stores **Nondepository Credit Intermediation** 423910 Sporting & Recreational 485110 Urban Transit Systems 445310 Beer, Wine, & Liquor Stores 522210 Credit Card Issuing Goods & Supplies 485210 Interurban & Rural Bus **Health and Personal Care Stores** 522220 Sales Financing 423920 Toy & Hobby Goods & Transportation 446110 Pharmacies & Drug Stores Supplies 522291 Consumer Lending 485310 Taxi Service 446120 Cosmetics, Beauty Supplies, 423930 Recyclable Materials 522292 Real Estate Credit (including 485320 Limousine Service & Perfume Stores mortgage bankers & 423940 Jewelry, Watch, Precious 485410 School & Employee Bus 446130 Optical Goods Stores originators) Stone, & Precious Metals Transportation 446190 Other Health & Personal 522293 International Trade Financing 423990 Other Miscellaneous Durable 485510 Charter Bus Industry Care Stores Goods 522294 Secondary Market Financing 485990 Other Transit & Ground **Gasoline Stations Merchant Wholesalers, Nondurable**  522298 All Other Nondepository Passenger Transportation **Goods** 447100 Gasoline Stations (including Credit Intermediation **Pipeline Transportation** convenience stores with gas) 424100 Paper & Paper Products **Activities Related to Credit** 486000 Pipeline Transportation **Clothing and Clothing Accessories Intermediation**  424210 Drugs & Druggists’ Sundries **Scenic & Sightseeing Transportation Stores**  522300 Activities Related to Credit 424300 Apparel, Piece Goods, & 487000 Scenic & Sightseeing 448110 Men’s Clothing Stores Intermediation (including loan Notions Transportation brokers, check clearing, & 448120 Women’s Clothing Stores 424400 Grocery & Related Products money transmitting) **Support Activities for Transportation** 448130 Children’s & Infants’ Clothing 424500 Farm Product Raw Materials 488100 Support Activities for Air **Securities, Commodity Contracts,** Stores 424600 Chemical & Allied Products Transportation **and Other Financial Investments and** 448140 Family Clothing Stores 424700 Petroleum & Petroleum **Related Activities** 488210 Support Activities for Rail 448150 Clothing Accessories Stores Products Transportation 523110 Investment Banking & 448190 Other Clothing Stores 424800 Beer, Wine, & Distilled Securities Dealing 488300 Support Activities for Water Alcoholic Beverages 448210 Shoe Stores Transportation 523120 Securities Brokerage 424910 Farm Supplies 448310 Jewelry Stores 488410 Motor Vehicle Towing 523130 Commodity Contracts 424920 Book, Periodical, & 448320 Luggage & Leather Goods Dealing 488490 Other Support Activities for Newspapers Stores Road Transportation 523140 Commodity Contracts 424930 Flower, Nursery Stock, & **Sporting Goods, Hobby, Book, and** Brokerage 488510 Freight Transportation Florists’ Supplies **Music Stores** Arrangement 523210 Securities & Commodity 424940 Tobacco & Tobacco Products 451110 Sporting Goods Stores Exchanges 488990 Other Support Activities for 424950 Paint, Varnish, & Supplies 451120 Hobby, Toy, & Game Stores Transportation 523900 Other Financial Investment 424990 Other Miscellaneous 451130 Sewing, Needlework, & Piece Activities (including portfolio **Couriers and Messengers** Nondurable Goods Goods Stores management & investment 492110 Couriers advice) **Wholesale Electronic Markets and** 451140 Musical Instrument & 492210 Local Messengers & Local **Agents and Brokers** Supplies Stores **Insurance Carriers and Related** Delivery 425110 Business to Business **Activities** 451211 Book Stores **Warehousing and Storage** Electronic Markets 524140 Direct Life, Health, & Medical 451212 News Dealers & Newsstands 493100 Warehousing & Storage 425120 Wholesale Trade Agents & Insurance & Reinsurance 451220 Prerecorded Tape, Compact (except lessors of Brokers Carriers Disc, & Record Stores miniwarehouses & 524150 Direct Insurance & **General Merchandise Stores** self-storage units) Reinsurance (except Life, **Retail Trade** 452110 Department Stores Health & Medical) Carriers **Motor Vehicle and Parts Dealers** 452900 Other General Merchandise **Information** 524210 Insurance Agencies & 441110 New Car Dealers Stores **Publishing Industries (except** Brokerages 441120 Used Car Dealers **Miscellaneous Store Retailers Internet)** 524290 Other Insurance Related 441210 Recreational Vehicle Dealers 453110 Florists 511110 Newspaper Publishers Activities (including 441221 Motorcycle Dealers 453210 Office Supplies & Stationery 511120 Periodical Publishers third-party administration of 441222 Boat Dealers Stores insurance and pension funds) 511130 Book Publishers 441229 All Other Motor Vehicle 453220 Gift, Novelty, & Souvenir **Funds, Trusts, and Other Financial** 511140 Directory & Mailing List Dealers Stores **Vehicles** Publishers 441300 Automotive Parts, 453310 Used Merchandise Stores 525100 Insurance & Employee 511190 Other Publishers Accessories, & Tire Stores Benefit Funds 453910 Pet & Pet Supplies Stores 511210 Software Publishers **Furniture and Home Furnishings** 525910 Open-End Investment Funds 453920 Art Dealers **Motion Picture and Sound Stores**  (Form 1120-RIC) 453930 Manufactured (Mobile) Home **Recording Industries** 442110 Furniture Stores 525920 Trusts, Estates, & Agency Dealers 512100 Motion Picture & Video Accounts 442210 Floor Covering Stores 453990 All Other Miscellaneous Store Industries (except video 525990 Other Financial Vehicles Retailers (including tobacco, 442291 Window Treatment Stores rental) (including mortgage REITs & candle, & trophy shops) 442299 All Other Home Furnishings 512200 Sound Recording Industries closed-end investment funds) Stores **Nonstore Retailers Broadcasting (except Internet)**  “Offices of Bank Holding Companies” 454110 Electronic Shopping & **Electronics and Appliance Stores** 515100 Radio & Television and “Offices of Other Holding Mail-Order Houses 443111 Household Appliance Stores Broadcasting Companies” are located under 454210 Vending Machine Operators 443112 Radio, Television, & Other 515210 Cable & Other Subscription **Management of Companies (Holding** 454311 Heating Oil Dealers Electronics Stores Programming **Companies)**on page 24. 454312 Liquefied Petroleum Gas 443120 Computer & Software Stores **Telecommunications** (Bottled Gas) Dealers 443130 Camera & Photographic 517000 Telecommunications **Real Estate and Rental and** 454319 Other Fuel Dealers Supplies Stores (including paging, cellular, **Leasing** satellite, cable & other 454390 Other Direct Selling **Building Material and Garden Real Estate**  program distribution, Establishments (including **Equipment and Supplies Dealers** resellers, other 531110 Lessors of Residential door-to-door retailing, frozen 444110 Home Centers telecommunications, & Buildings & Dwellings food plan providers, party 444120 Paint & Wallpaper Stores internet service providers) (including equity REITs) plan merchandisers, & 444130 Hardware Stores coffee-break service 531114 Cooperative Housing **Data Processing Services** 444190 Other Building Material providers) (including equity REITs) 518210 Data Processing, Hosting, & Dealers 531120 Lessors of Nonresidential Related Services 444200 Lawn & Garden Equipment & **Transportation and** Buildings (except **Other Information Services** Supplies Stores Miniwarehouses) (including **Warehousing** 519100 Other Information Services **Food and Beverage Stores** equity REITs) **Air, Rail, and Water Transportation** (including news syndicates, 445110 Supermarkets and Other 531130 Lessors of Miniwarehouses & libraries, internet publishing & 481000 Air Transportation Grocery (except Self-Storage Units (including broadcasting) 482110 Rail Transportation Convenience) Stores equity REITs) 483000 Water Transportation


### -23- **Instructions for Form 1120**

## Page 24 of 25 Instructions for Form 1120 11:47 - 3-FEB-2009

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**Principal Business Activity Codes**(continued)

Code Code Code Code 531190 Lessors of Other Real Estate 541920 Photographic Services 621391 Offices of Podiatrists 721120 Casino Hotels Property (including equity 541930 Translation & Interpretation 621399 Offices of All Other 721191 Bed & Breakfast Inns REITs) Services Miscellaneous Health 721199 All Other Traveler 531210 Offices of Real Estate Agents Practitioners 541940 Veterinary Services Accommodation & Brokers **Outpatient Care Centers** 541990 All Other Professional, 721210 RV (Recreational Vehicle) 531310 Real Estate Property Scientific, & Technical Parks & Recreational Camps 621410 Family Planning Centers Managers Services 721310 Rooming & Boarding Houses 621420 Outpatient Mental Health & 531320 Offices of Real Estate Substance Abuse Centers **Food Services and Drinking Places** Appraisers **Management of Companies** 621491 HMO Medical Centers 722110 Full-Service Restaurants 531390 Other Activities Related to **(Holding Companies)** 621492 Kidney Dialysis Centers 722210 Limited-Service Eating Real Estate 551111 Offices of Bank Holding 621493 Freestanding Ambulatory Places **Rental and Leasing Services** Companies Surgical & Emergency 722300 Special Food Services 532100 Automotive Equipment Rental Centers 551112 Offices of Other Holding (including food service & Leasing Companies 621498 All Other Outpatient Care contractors & caterers) 532210 Consumer Electronics & Centers 722410 Drinking Places (Alcoholic Appliances Rental Beverages) **Administrative and Support Medical and Diagnostic Laboratories**  532220 Formal Wear & Costume **and Waste Management and** 621510 Medical & Diagnostic Rental Laboratories **Other Services Remediation Services**  532230 Video Tape & Disc Rental **Home Health Care Services Repair and Maintenance**  **Administrative and Support Services** 532290 Other Consumer Goods 621610 Home Health Care Services 811110 Automotive Mechanical & 561110 Office Administrative Rental Electrical Repair & Services **Other Ambulatory Health Care** 532310 General Rental Centers Maintenance **Services** 561210 Facilities Support Services 532400 Commercial & Industrial 811120 Automotive Body, Paint, 621900 Other Ambulatory Health 561300 Employment Services Machinery & Equipment Interior, & Glass Repair Care Services (including 561410 Document Preparation Rental & Leasing ambulance services & blood 811190 Other Automotive Repair & Services **Lessors of Nonfinancial Intangible** & organ banks) Maintenance (including oil 561420 Telephone Call Centers **Assets (except copyrighted works)** change & lubrication shops & **Hospitals** 561430 Business Service Centers 533110 Lessors of Nonfinancial car washes) 622000 Hospitals (including private mail centers Intangible Assets (except 811210 Electronic & Precision **Nursing and Residential Care** & copy shops) copyrighted works) Equipment Repair & **Facilities** 561440 Collection Agencies Maintenance 623000 Nursing & Residential Care 561450 Credit Bureaus **Professional, Scientific, and** 811310 Commercial & Industrial Facilities 561490 Other Business Support Machinery & Equipment **Technical Services Social Assistance**  Services (including (except Automotive & **Legal Services** 624100 Individual & Family Services repossession services, court Electronic) Repair & 541110 Offices of Lawyers reporting, & stenotype Maintenance 624200 Community Food & Housing, 541190 Other Legal Services services) & Emergency & Other Relief 811410 Home & Garden Equipment & **Accounting, Tax Preparation,** Services 561500 Travel Arrangement & Appliance Repair & **Bookkeeping, and Payroll Services** Reservation Services Maintenance 624310 Vocational Rehabilitation 541211 Offices of Certified Public Services 561600 Investigation & Security 811420 Reupholstery & Furniture Accountants Services Repair 624410 Child Day Care Services 541213 Tax Preparation Services 561710 Exterminating & Pest Control 811430 Footwear & Leather Goods 541214 Payroll Services Services Repair **Arts, Entertainment, and** 541219 Other Accounting Services 561720 Janitorial Services 811490 Other Personal & Household **Recreation** Goods Repair & Maintenance 561730 Landscaping Services **Architectural, Engineering, and Performing Arts, Spectator Sports,**  **Related Services Personal and Laundry Services**  561740 Carpet & Upholstery Cleaning **and Related Industries** Services 541310 Architectural Services 812111 Barber Shops 711100 Performing Arts Companies 561790 Other Services to Buildings & 541320 Landscape Architecture 812112 Beauty Salons 711210 Spectator Sports (including Dwellings Services 812113 Nail Salons sports clubs & racetracks) 561900 Other Support Services 541330 Engineering Services 812190 Other Personal Care 711300 Promoters of Performing Arts, (including packaging & 541340 Drafting Services Services (including diet & Sports, & Similar Events labeling services, & weight reducing centers) 541350 Building Inspection Services 711410 Agents & Managers for convention & trade show 812210 Funeral Homes & Funeral Artists, Athletes, Entertainers, 541360 Geophysical Surveying & organizers) Services & Other Public Figures Mapping Services **Waste Management and** 812220 Cemeteries & Crematories 711510 Independent Artists, Writers, 541370 Surveying & Mapping (except **Remediation Services** & Performers Geophysical) Services 812310 Coin-Operated Laundries & 562000 Waste Management & Drycleaners 541380 Testing Laboratories **Museums, Historical Sites, and** Remediation Services **Similar Institutions** 812320 Drycleaning & Laundry **Specialized Design Services** Services (except 712100 Museums, Historical Sites, & 541400 Specialized Design Services **Educational Services** Coin-Operated) Similar Institutions (including interior, industrial, 611000 Educational Services 812330 Linen & Uniform Supply graphic, & fashion design) **Amusement, Gambling, and** (including schools, colleges, 812910 Pet Care (except Veterinary) **Recreation Industries Computer Systems Design and**  & universities) Services 713100 Amusement Parks & Arcades **Related Services** 812920 Photofinishing 713200 Gambling Industries 541511 Custom Computer **Health Care and Social** 812930 Parking Lots & Garages Programming Services 713900 Other Amusement & **Assistance** 812990 All Other Personal Services Recreation Industries 541512 Computer Systems Design **Offices of Physicians and Dentists** (including golf courses, skiing Services **Religious, Grantmaking, Civic,** 621111 Offices of Physicians (except facilities, marinas, fitness 541513 Computer Facilities **Professional, and Similar** mental health specialists) centers, & bowling centers) Management Services **Organizations** 621112 Offices of Physicians, Mental 541519 Other Computer Related 813000 Religious, Grantmaking, Health Specialists **Accommodation and Food** Services Civic, Professional, & Similar 621210 Offices of Dentists Organizations (including **Services Other Professional, Scientific, and**  condominium and **Offices of Other Health Practitioners Technical Services**  **Accommodation** homeowners associations) 621310 Offices of Chiropractors 541600 Management, Scientific, & 721110 Hotels (except Casino Hotels) Technical Consulting 621320 Offices of Optometrists & Motels Services 621330 Offices of Mental Health 541700 Scientific Research & Practitioners (except Development Services Physicians) 541800 Advertising & Related 621340 Offices of Physical, Services Occupational & Speech Therapists, & Audiologists 541910 Marketing Research & Public Opinion Polling



### -24- **Instructions for Form 1120**

## Page 25 of 25 Instructions for Form 1120 11:47 - 3-FEB-2009

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### Index

**A** Electronic filing................ 2 Limitations on deductions. . . . . . 8, **R** 11 Accounting methods........... 5 Employee benefit Recapture taxes. . . . . . . . . . . . . . 18 programs. . . . . . . . . . . . . . . . . . 12 Limited liability companies ..... 2 Accounting period (Tax Reconciliation of income. . . . . . 20

Year)....................... 5 Employer identification number Lobbying expenses, Recordkeeping................ 5 (EIN) ....................... 7 nondeductibility . . . . . . . . . . . . 13 Address change............... 7 Refundable credits . . . . . . . . . . . 14 Estimated tax: Affiliated group. . . . . . . . . . . . . . . 18 Related party transactions ..... 8 Penalty. . . . . . . . . . . . . . . . . . 4, 14 Amended return............... 5 Rents (expense). . . . . . . . . . . . . . 10 **M** Estimated tax payments ....... 4 Amortization .................. 9 Rents (income)................ 8 Merchant Marine capital Extension of time to file........ 3 Assembling the return ......... 4 construction fund: Repairs and maintenance. . . . . 10 Deduction for At-risk rules. . . . . . . . . . . . . . . . . . 13 contributions. . . . . . . . . . . . . 13 **F S**  Tax on nonqualified Farming, corporations engaged **B** Salaries and wages. . . . . . . . . . . 10 withdrawal. . . . . . . . . . . . . . . 18 in . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Backup withholding. . . . . . . . . . . 14 Schedule: Minimum tax: Final return.................... 7 Bad debts. . . . . . . . . . . . . . . . . . . . 10 A . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Alternative. . . . . . . . . . . . . . . . . 17 Financial asset securitization C . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Balance sheets. . . . . . . . . . . . . . . 20 Prior year, credit for . . . . . . . . 17 investment trust (FASIT)..... 2 J . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Business startup expenses..... 9 Mutual savings banks conducting Foreign person (defined). . . . . . 20 K . . . . . . . . . . . . . . . . . . . . . . . . . . 18 life insurance business . . . . . 17 Foreign tax credit. . . . . . . . . . . . . 17 L . . . . . . . . . . . . . . . . . . . . . . . . . . 20 **C** M-1 . . . . . . . . . . . . . . . . . . . . . . . . 20 Forms and publications, how to Capital construction fund (See **N** M-3 . . . . . . . . . . . . . . . . . . . . . . 7, 20 get . . . . . . . . . . . . . . . . . . . . . . . . . 2 Merchant Marine capital O . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Name change................. 7 construction fund) Section 263A costs. . . . . . . . . 8, 14 Net operating loss

........ 13, 20 **G** Closely held corporations...... 9 Shareholders’ equity Nonaccrual experience General business credit. . . . . . . 17 Compensation of officers....... 9 adjustments. . . . . . . . . . . . . . . . 20 method..................... 7 Golden parachute Consolidated return. . . . . . . . . 6, 20 Signature..................... 3 payments................... 9 Contributions to reduce debt held Special returns for certain **O** Gross receipts................. 7 by the public................ 1 organizations ............... 2 Other deductions. . . . . . . . . . . . . 12 Contributions, charitable. . . . . . 11 Other income ................. 8 **I** Controlled group . . . . . . . . . . . . . 17 **T** Other taxes. . . . . . . . . . . . . . . . . . 18 Income ....................... 7 Cost of goods sold. . . . . . . . . . 7, 14 Tax issues, unresolved ........ 1 Overpaid estimated tax. . . . . . . 14 Installment sales .............. 7 Credits against tax. . . . . . . . . . . . 17 Tax rate schedule . . . . . . . . . . . . 17 Interest due: Taxes and licenses. . . . . . . . . . . 10 **P** Late payment of tax ......... 4 **D** Tax-exempt securities . . . . . . . . 20 Look-back method. . . . . . . . . . 18 Partnership income (loss). . . . . . 8, Deductions.................... 8 Travel, meals, and 12 Interest expense . . . . . . . . . . . . . 10 Depletion . . . . . . . . . . . . . . . . . . . . 12 entertainment. . . . . . . . . . . . . . 12 Passive activity limitations...... 9 Interest expense (relating to Depository methods of tax section 263A)............... 8 Penalties. . . . . . . . . . . . . . . . . . . 4, 14

payment.................... 4 **W** Interest income: Pension, profit-sharing, etc. Depreciation . . . . . . . . . . . . . . . . . 12 Taxable..................... 7 When to file................... 3 plans. . . . . . . . . . . . . . . . . . . . . . 12 Direct deposit of refund. . . . . 1, 14 Tax-exempt. . . . . . . . . . . . . . . . 20 Where to file .................. 3 Personal holding company..... 6 Disclosure statement .......... 5 Inventory: Who must file ................. 2 Personal holding company Dividend income .............. 7 Section 263A uniform tax . . . . . . . . . . . . . . . . . . . . . . . . 17 Who must sign................ 3 Dividends-received capitalization rules . . . . . 8, 14 Personal service Worksheets. . . . . . . . . . . . . . . . . . 17

deduction

...............15-17 Valuation methods . . . . . . . . . 14 corporation ................. 6 Schedule C. . . . . . . . . . . . . . . . 16 Dues, membership and Preparer, tax return............ 3

other. . . . . . . . . . . . . . . . . . . . . . 12 

### ■ **L** Private delivery services....... 3 LIFO recapture: **E** Tax on. . . . . . . . . . . . . . . . . . . . . 18 **Q** Where to report............. 8 Electronic Federal Tax Payment Qualified personal service

System (EFTPS)............ 4 corporation . . . . . . . . . . . . . . . . 17



### -25- **Instructions for Form 1120**