Department of the Treasury

2010

Internal Revenue Service

Instructions for Form 1120

U.S. Corporation Income Tax Return

Section references are to the Internal 1120-L, and 1120-PC with assets that IRS whose employees assist taxpayers

Revenue Code unless otherwise noted. equal or exceed $100 million must file who are experiencing economic harm,

new Schedule UTP (Form 1120) to report who are seeking help in resolving tax Contents Page uncertain tax positions. See Schedule K problems that have not been resolved Photographs of Missing Children ... . 1 Question 14 , on page 20. through normal channels, or who believe Unresolved Tax Issues ........ ... . 1 that an IRS system or procedure is not Direct Deposit of Refund ....... ... . 1 Federal tax deposits must be made by working as it should. The service is free, How To Make a Contribution To electronic funds transfer. Beginning confidential, tailored to meet your needs, Reduce Debt Held by the January 1, 2011, corporations must use and is available for businesses, as well as electronic funds transfers to make all Public .................. ... . 1 individuals. federal tax deposits (such as deposits of How To Get Forms and employment tax, excise tax, and The corporation can contact the TAS Publications .............. ... . 1 corporate income tax). Forms 8109 and as follows. General Instructions ......... ... . 2 8109-B, Federal Tax Coupon, cannot be • Call the TAS toll-free line at Purpose of Form ............ ... . 2 used after December 31, 2010. See 1-877-777-4778 or TTY/TDD Who Must File .............. ... . 2 Electronic Deposit Requirement on page 1-800-829-4059 to see if the corporation Electronic Filing ............. ... . 2 4. is eligible for assistance. When To File ............... ... . 3 Special rules for eligible small • Call or write the corporation’s local Where To File .............. ... . 3 business credits. taxpayer advocate, whose phone number For tax years Who Must Sign ............. ... . 3 beginning in 2010, if the corporation is an and address are listed in the local

Paid Preparer Authorization .... ... . 3 eligible small business, eligible small telephone directory and in Pub. 1546,

Assembling the Return ........ ... . 4 business credits are not subject to the Taxpayer Advocate Service – Your Voice

Tax Payments .............. ... . 4 alternative minimum tax (AMT). In at the IRS.

Estimated Tax Payments ...... ... . 4 addition, eligible small business credits • File Form 911, Request for Taxpayer

Interest and Penalties ......... ... . 4 can be carried back five years and will not Advocate Service Assistance (And

Accounting Methods .......... ... . 5 be subject to AMT in the carryback years. Application for Taxpayer Assistance

Accounting Period ........... ... . 5 For more information, see the instructions Order), or ask an IRS employee to

Rounding Off to Whole Dollars complete it on the corporation’s behalf. . . ... . 5 for Form 3800.

Recordkeeping .............. ... . 5 Special rule for 2010 start-up costs. For more information, go to www.irs.

Other Forms and Statements For tax years beginning in 2010, a gov/advocate.

That May Be Required ...... ... . 5 corporation can elect to deduct up to Specific Instructions ........ ... . 6 $10,000 of start-up costs. See section Direct Deposit of Refund Period Covered ............. ... . 6 195(b)(3). Also see Business start-up and To request a direct deposit of the Name and Address .......... ... . 6 organizational costs on page 9. corporation’s income tax refund into an Identifying Information ........ ... . 6 Extension of election to accelerate the account at a U.S. bank or other financial

Employer Identification Number AMT credit in lieu of bonus institution, attach Form 8050, Direct

(EIN) ................... ... . 7 depreciation. A corporation can elect to Deposit of Corporate Tax Refund. See

Total Assets ............... ... . 7 increase the minimum tax credit limitation the instructions for line 36.

Initial Return, Final Return, in lieu of bonus depreciation on certain

Name Change, Address “round two” extension property placed in How To Make a

Change ................. ... . 7 service after December 31, 2010, in tax

years ending after such date. See section Contribution To Reduce Income ................... ... . 7

Deductions ................ ... . 9 168(k)(4)(D)(iii). Also see the instructions Debt Held by the Public Tax and Payments for line 32g on page 14. ........... . . . 14 To help reduce debt held by the public, Schedule A. Cost of Goods Sold . . . 15 For the latest information, see www.irs. make a check payable to “Bureau of the Schedule C. Dividends and gov/formspubs. Public Debt.” Send it to: Bureau of the

Special Deductions ......... . . . 16 Public Debt, Department G, P.O. Box

Worksheet for Schedule C ..... . . . 17 Photographs of 2188, Parkersburg, WV 26106-2188. Or,

Schedule J. Tax Computation ... . . . 17 enclose a check with the income tax

Schedule K. Other Information . . . . . 19 Missing Children return. Do not add the contributions to

Schedule L. Balance Sheets per The Internal Revenue Service is a proud any tax the corporation may owe.

Books .................. . . . 20 partner with the National Center for Contributions to reduce debt held by the

Schedule M-1. Reconciliation of Missing and Exploited Children. public are deductible subject to the rules

Income .................. . . . 21 Photographs of missing children selected and limitations for charitable

Principal Business Activity by the Center may appear in instructions contributions.

on pages that would otherwise be blank. Codes .................. . . . 22 You can help bring these children home How To Get Forms Index ..................... . . . 25 by looking at the photographs and calling

1-800-THE-LOST (1-800-843-5678) if you and Publications

recognize a child. What’s New Internet. You can access the IRS

website 24 hours a day, 7 days a week, at

New Schedule UTP (Form 1120), Unresolved Tax Issues IRS.gov to:

Uncertain Tax Position Statement. The Taxpayer Advocate Service (TAS) is • Download forms, instructions, and

Certain filers of Forms 1120, 1120-F, an independent organization within the publications;

Cat. No. 11455T
• Order IRS products online; of Form 8832 to Form 1120 (or the of the above exceptions applies. See

• Research your tax questions online; applicable return) for the year of the Regulations section 301.6011-5.

• Search publications online by topic or election. For more information, see Form However, these corporations can request

keyword; 8832 and its instructions. a waiver of the electronic filing

• View Internal Revenue Bulletins (IRBs) requirements. See Notice 2010-13, Limited liability companies. If an entity published in recent years; and 2010-4 I.R.B. 327. with more than one owner was formed as • Sign up to receive local and national an LLC under state law, it generally is tax news by email. treated as a partnership for federal Visit www.irs.gov/efile for more

information. IRS Tax Products DVD. You can order income tax purposes and files Form 1065,

Pub. 1796, IRS Tax Products DVD, and U.S. Return of Partnership Income.

obtain the following. Generally, a single-member LLC is Special Returns for 

• Current-year forms, instructions, and disregarded as an entity separate from its Certain Organizations owner and reports its income and publications. Instead of filing Form 1120, certain deductions on its owner’s federal income • Prior-year forms, instructions, and organizations, as shown below, file tax return. The LLC can file a Form 1120 publications. special returns. only if it has filed Form 8832 to elect to be • Tax Map: an electronic research tool treated as an association taxable as a and finding aid. corporation. For more information about • Tax law frequently asked questions If the organization is a: File Form

LLCs, see Pub. 3402, Tax Issues for (FAQs). Limited Liability Companies. • Tax Topics from the IRS telephone

response system. Corporations engaged in farming. A Exempt organization with • Internal Revenue Code – Title 26 of corporation (other than a corporation that unrelated trade or business 990-T

the U.S. Code. is a subchapter T cooperative) that income • Fill-in, print, and save features for most engages in farming should use Form

tax forms. 1120 to report the income (loss) from Religious or apostolic • Internal Revenue Bulletins. such activities. Enter the income and organization exempt under 1065 • Toll-free and email technical support. deductions of the corporation according to section 501(d) • Two releases during the year. the instructions for lines 1 through 10 and

– The first release will ship early in 12 through 29.

January. Entity formed as a limited Ownership interest in a Financial – The final release will ship early in liability company under state Asset Securitization Investment Trust March. law and treated as a 1065 (FASIT). Special rules apply to a FASIT partnership for federal Buy the DVD from the National in existence on October 22, 2004, to the income tax purposes Technical Information Service (NTIS) at extent that regular interests issued by the

www.irs.gov/cdorders for $30 (no FASIT before October 22, 2004, continue

handling fee) or call 1-877-233-6767 toll to remain outstanding in accordance with Subchapter T cooperative

free to buy the DVD for $30 (plus a $6 their original terms. association (including a 1120-C

handling fee). farmers’ cooperative) If a corporation holds an ownership

By phone and in person. You can interest in a FASIT to which these special

rules apply, it must report all items of Entity that elects to be treated order forms and publications by calling

1-800-TAX-FORM (1-800-829-3676). You income, gain, deductions, losses, and as a real estate mortgage 1066 can also get most forms and publications credits on the corporation’s income tax investment conduit (REMIC)

at your local IRS office. return (except as provided in section under section 860D

860H). Show a breakdown of the items on

an attached schedule. For more Interest charge domestic information, see sections 860H and 860L. General Instructions international sales 1120-IC-DISC

corporation (section 992) Electronic Filing Purpose of Form Corporations can generally electronically Foreign corporation (other Use Form 1120, U.S. Corporation Income file (e-file) Form 1120, related forms, than life and property and Tax Return, to report the income, gains, schedules, and attachments, Form 7004, casualty insurance company 1120-F losses, deductions, credits, and to figure Form 940 and Form 941 employment tax

returns. If there is a balance due, the filing Form 1120-L or Form the income tax liability of a corporation. 1120-PC) corporation can authorize an electronic

Who Must File funds withdrawal while e-filing. Form 1099

and other information returns can also be Foreign sales corporation Unless exempt under section 501, all 1120-FSC electronically filed. (section 922) domestic corporations (including

corporations in bankruptcy) must file an Exceptions. The option to e-file

Condominium management, income tax return whether or not they generally does not apply to certain

have taxable income. Domestic returns, including: residential real estate

corporations must file Form 1120 unless • Returns with precomputed penalty and management, or timeshare 1120-H they are required to file a special return. interest, association that elects to be

See Special Returns for Certain • Returns with reasonable cause for treated as a homeowners

Organizations below. failing to file timely, association under section 528 • Returns with reasonable cause for Entities electing to be taxed as failing to pay timely, and corporations. A domestic entity Life insurance company • Returns with requests for 1120-L electing to be classified as an association (section 801) overpayments to be applied to another taxable as a corporation must file Form account. 1120 unless it is required to file a special Fund set up to pay for return listed under Special Returns for Required e-filers. Certain corporations nuclear decommissioning 1120-ND

Certain Organizations, below. The entity with total assets of $10 million or more costs (section 468A) must also file Form 8832, Entity that file at least 250 returns a year are

Classification Election, and attach a copy required to e-file Form 1120, even if any

-2- Instructions for Form 1120
• The president, vice president, Paid Preparer Property and casualty treasurer, assistant treasurer, chief insurance company 1120-PC accounting officer; or Authorization

 (section 831) • Any other corporate officer (such as tax If the corporation wants to allow the IRS

officer) authorized to sign. to discuss its 2010 tax return with the paid Political organization preparer who signed it, check the “Yes” (section 527) 1120-POL If a return is filed on behalf of a box in the signature area of the return. corporation by a receiver, trustee, or This authorization applies only to the assignee, the fiduciary must sign the Real estate investment trust individual whose signature appears in the 1120-REIT return, instead of the corporate officer. (section 856) “Paid Preparer Use Only” section of the Returns and forms signed by a receiver or return. It does not apply to the firm, if any, trustee in bankruptcy on behalf of a shown in that section. Regulated investment 1120-RIC corporation must be accompanied by a company (section 851) If the “Yes” box is checked, the copy of the order or instructions of the corporation is authorizing the IRS to call court authorizing signing of the return or the paid preparer to answer any S corporation (section 1361) 1120S form. questions that may arise during the

If an employee of the corporation processing of its return. The corporation Settlement fund 1120-SF completes Form 1120, the paid preparer is also authorizing the paid preparer to: (section 468B) space should remain blank. Anyone who • Give the IRS any information that is

prepares Form 1120 but does not charge missing from the return,

the corporation should not complete that • Call the IRS for information about the When To File section. Generally, anyone who is paid to processing of the return or the status of

Generally, a corporation must file its prepare the return must sign it and fill in any related refund or payment(s), and

the “Paid Preparer Use Only” area. • Respond to certain IRS notices about income tax return by the 15th day of the

3rd month after the end of its tax year. A math errors, offsets, and return The paid preparer must complete the new corporation filing a short-period preparation. required preparer information and: return must generally file by the 15th day The corporation is not authorizing the • Sign the return in the space provided of the 3rd month after the short period paid preparer to receive any refund for the preparer’s signature. ends. A corporation that has dissolved check, bind the corporation to anything must generally file by the 15th day of the • Give a copy of the return to the (including any additional tax liability), or taxpayer. 3rd month after the date it dissolved. otherwise represent the corporation

Note. A paid preparer may sign original before the IRS. If the due date falls on a Saturday,

Sunday, or legal holiday, the corporation or amended returns by rubber stamp, The authorization will automatically

can file on the next business day. mechanical device, or computer software end no later than the due date (excluding

program. extensions) for filing the corporation’s Private Delivery Services

Corporations can use certain private

delivery services designated by the IRS to

meet the “timely mailing as timely filing” Where To File

rule for tax returns. These private delivery

services include only the following. File the corporation’s return at the applicable IRS address listed below.

• DHL Express (DHL): DHL Same Day If the corporation’s principal And the total assets at

Service. business, office, or agency the end of the tax year

• Federal Express (FedEx): FedEx is located in: are: Use the following address:

Priority Overnight, FedEx Standard

Overnight, FedEx 2Day, FedEx Connecticut, Delaware, District Less than $10 million and Department of the Treasury

of Columbia, Georgia, Illinois, Schedule M-3 is not filed Internal Revenue Service Center International Priority, and FedEx Indiana, Kentucky, Maine, Cincinnati, OH 45999-0012 International First. Maryland, Massachusetts, • United Parcel Service (UPS): UPS Next Michigan, New Hampshire, Day Air, UPS Next Day Air Saver, UPS New Jersey, New York, North 2nd Day Air, UPS 2nd Day Air A.M., UPS Carolina, Ohio, Pennsylvania, Worldwide Express Plus, and UPS $10 million or more or Department of the Treasury Rhode Island, South Carolina, Worldwide Express. less than $10 million and Internal Revenue Service Center Tennessee, Vermont, Virginia,

West Virginia, Wisconsin Schedule M-3 is filed Ogden, UT 84201-0012 The private delivery service can tell

you how to get written proof of the mailing Alabama, Alaska, Arizona, date. Arkansas, California, Colorado,

Private delivery services cannot Florida, Hawaii, Idaho, Iowa,

Kansas, Louisiana, Minnesota, deliver items to P.O. boxes. You Department of the Treasury

CAUTION

must use the U.S. Postal Service Mississippi, Missouri, Montana,

!

Any amount Internal Revenue Service Center Nebraska, Nevada, New to mail any item to an IRS P.O. box Ogden, UT 84201-0012 Mexico, North Dakota, address. Oklahoma, Oregon, South

Extension of Time To File Dakota, Texas, Utah,

Washington, Wyoming File Form 7004, Application for Automatic

Extension of Time To File Certain Internal Revenue Service Center

Business Income Tax, Information, and A foreign country or U.S. Any amount P.O. Box 409101

Other Returns, to request a 6-month possession Ogden, UT 84409

extension of time to file. Generally, the

corporation must file Form 7004 by the A group of corporations with members located in more than one service center area regular due date of the return. will often keep all the books and records at the principal office of the managing

corporation. In this case, the tax returns of the corporations may be filed with the Who Must Sign service center for the area in which the principal office of the managing corporation is

The return must be signed and dated by: located.

Instructions for Form 1120 -3-
2011 tax return. If the corporation wants time the day before the date the deposit is Instructions for Form 2220 for the

to expand the paid preparer’s due. If the corporation uses a third party definition of a large corporation.

authorization or revoke the authorization to make deposits on its behalf, they may Also, see the instructions for line 33.

before it ends, see Pub. 947, Practice have different cutoff times.

Before the IRS and Power of Attorney. Same-day wire payment option. If the Interest and Penalties

corporation fails to initiate a deposit Assembling the Return Interest. Interest is charged on taxes transaction on EFTPS by 8 p.m. Eastern paid late even if an extension of time to To ensure that the corporation’s tax return time the day before the date a deposit is file is granted. Interest is also charged on is correctly processed, attach all due, it can still make the deposit on time penalties imposed for failure to file, schedules and other forms after page 5 of by using the Federal Tax Application negligence, fraud, substantial valuation Form 1120 in the following order. (FTA). Before using the same-day wire misstatements, substantial payment option, the corporation will need 1. Schedule N (Form 1120). understatements of tax, and reportable to make arrangements with its financial 2. Schedule O (Form 1120). transaction understatements from the due institution ahead of time. Please check 3. Form 4626. date (including extensions) to the date of with the financial institution regarding 4. Form 8050. payment. The interest charge is figured at availability, deadlines, and costs. To learn 5. Form 4136. a rate determined under section 6621. more about making a same-day wire 6. Form 8941. Late filing of return. A corporation that payment and download the Same-Day 7. Form 851. Payment Worksheet, visit www.eftps.gov. does not file its tax return by the due date, 8. Additional schedules in alphabetical including extensions, may be penalized order. Estimated Tax Payments 5% of the unpaid tax for each month or 9. Additional forms in numerical order. Generally, the following rules apply to the part of a month the return is late, up to a

corporation’s payments of estimated tax. maximum of 25% of the unpaid tax. The Complete every applicable entry space • The corporation must make installment minimum penalty for a return that is over on Form 1120. Do not enter “See payments of estimated tax if it expects its 60 days late is the smaller of the tax due Attached ” or “Available Upon Request” total tax for the year (less applicable or $135. The penalty will not be imposed instead of completing the entry spaces. If credits) to be $500 or more. if the corporation can show that the failure more space is needed on the forms or • The installments are due by the 15th to file on time was due to reasonable schedules, attach separate sheets using day of the 4th, 6th, 9th, and 12th months cause. Corporations that file late should the same size and format as the printed of the tax year. If any date falls on a attach a statement explaining the forms. If there are supporting statements Saturday, Sunday, or legal holiday, the reasonable cause. and attachments, arrange them in the

same order as the schedules or forms installment is due on the next regular Late payment of tax. A corporation that

they support and attach them last. Show business day. does not pay the tax when due generally • The corporation must use electronic may be penalized 1 the totals on the printed forms. Enter the /2 of 1% of the unpaid funds transfers to make installment corporation’s name and EIN on each tax for each month or part of a month the payments of estimated tax. supporting statement or attachment. tax is not paid, up to a maximum of 25% • Use Form 1120-W, Estimated Tax for of the unpaid tax. The penalty will not be

Tax Payments Corporations, as a worksheet to compute imposed if the corporation can show that estimated tax. the failure to pay on time was due to The corporation must pay any tax due in • If the corporation overpaid estimated reasonable cause. full no later than the 15th day of the 3rd tax, it may be able to get a quick refund month after the end of the tax year. Trust fund recovery penalty. This by filing Form 4466, Corporation penalty may apply if certain excise, Electronic Deposit Requirement Application for Quick Refund of income, social security, and Medicare Overpayment of Estimated Tax. Beginning January 1, 2011, corporations taxes that must be collected or withheld

must use electronic funds transfers to See the instructions for lines 32b and are not collected or withheld, or these 32c. make all federal tax deposits (such as taxes are not paid. These taxes are

deposits of employment, excise, and Estimated tax penalty. A corporation generally reported on:

corporate income tax). Forms 8109 and that does not make estimated tax • Form 720, Quarterly Federal Excise

8109-B, Federal Tax Coupon, cannot be payments when due may be subject to an Tax Return;

used after December 31, 2010. Generally, underpayment penalty for the period of • Form 941, Employer’s QUARTERLY

electronic funds transfers are made using underpayment. Generally, a corporation is Federal Tax Return;

the Electronic Federal Tax Payment subject to the penalty if its tax liability is • Form 943, Employer’s Annual Federal

System (EFTPS). However, if the $500 or more and it did not timely pay the Tax Return for Agricultural Employees;

corporation does not want to use EFTPS, smaller of: • Form 944, Employer’s ANNUAL

it can arrange for its tax professional, • Its tax liability for 2010 or Federal Tax Return; or

financial institution, payroll service, or • Its prior year’s tax. • Form 945, Annual Return of Withheld

other trusted third party to make deposits Federal Income Tax. See section 6655 for details and

on its behalf. Also, it may arrange for its exceptions, including special rules for The trust fund recovery penalty may financial institution to initiate a same-day large corporations. be imposed on all persons who are tax wire payment (discussed below) on its Use Form 2220, Underpayment of determined by the IRS to have been behalf. EFTPS is a free service provided Estimated Tax by Corporations, to see if responsible for collecting, accounting for, by the Department of the Treasury. and paying over these taxes, and who the corporation owes a penalty and to Services provided by a tax professional, acted willfully in not doing so. The penalty figure the amount of the penalty. financial institution, payroll service, or Generally, the corporation does not have is equal to the full amount of the unpaid other third party may have a fee. trust fund tax. See the Instructions for to file this form because the IRS can

To get more information about EFTPS Form 720, Pub. 15 (Circular E), or Pub. figure the amount of any penalty and bill or to enroll in EFTPS, visit www.eftps.gov, 51 (Circular A), Agricultural Employer’s the corporation for it. However, even if the or call 1-800-555-4477. Additional Tax Guide, for details, including the corporation does not owe the penalty, information about EFTPS is also available definition of responsible persons. complete and attach Form 2220 if: in Pub. 966, The Secure Way to Pay Your • The annualized income or adjusted Other penalties. Other penalties can be Federal Taxes. seasonal installment method is used, or imposed for negligence, substantial

Depositing on time. For deposits made • The corporation is a large corporation understatement of tax, reportable

by EFTPS to be on time, the corporation computing its first required installment transaction understatements, and fraud.

must initiate the deposit by 8 p.m. Eastern based on the prior year’s tax. See the See sections 6662, 6662A, and 6663.

-4- Instructions for Form 1120
Accounting Methods corporation, must get the consent of the corporation (or a related party) paid an

IRS before changing its tax year by filing advisor a fee of at least $250,000. Figure taxable income using the method Form 1128, Application To Adopt, 3. Certain transactions for which the of accounting regularly used in keeping Change, or Retain a Tax Year. However, corporation (or a related party) has the corporation’s books and records. In all under certain conditions, a corporation contractual protection against cases, the method used must clearly can change its tax year without getting disallowance of the tax benefits. show taxable income. Permissible consent. 4. Certain transactions resulting in a methods include cash, accrual, or any loss of at least $10 million in any single other method authorized by the Internal See the Instructions for Form 1128 year or $20 million in any combination of Revenue Code. and Pub. 538 for more information on

years. Generally, the following rules apply. accounting periods and tax years. 5. Any transaction identified by the • A corporation (other than a qualified IRS by notice, regulation, or other personal service corporation) must use Rounding Off to published guidance as a “transaction of the accrual method of accounting if its Whole Dollars interest.” See Notice 2009-55, 2009-31 average annual gross receipts exceed $5 I.R.B. 170.

million. However, see The corporation can round off cents to Nonaccrual whole dollars on its return and schedules. experience method on page 8. For more information, see Regulations If the corporation does round to whole • Unless it is a qualifying taxpayer or a section 1.6011-4. Also see the dollars, it must round all amounts. To qualifying small business taxpayer, a Instructions for Form 8886. round, drop amounts under 50 cents and corporation must use the accrual method increase amounts from 50 to 99 cents to Penalties. The corporation may have for sales and purchases of inventory the next dollar. For example, $1.39 to pay a penalty if it is required to disclose items. See Schedule A. Cost of Goods becomes $1 and $2.50 becomes $3. a reportable transaction under section Sold on page 15. 6011 and fails to properly complete and • A corporation engaged in farming must If two or more amounts must be added file Form 8886. Penalties may also apply use the accrual method. For exceptions, to figure the amount to enter on a line, under section 6707A if the corporation see section 447. include cents when adding the amounts fails to file Form 8886 with its corporate • Special rules apply to long-term and round off only the total. return, fails to provide a copy of Form contracts. See section 460. 8886 to the Office of Tax Shelter Analysis • Dealers in securities must use the Recordkeeping (OTSA), or files a form that fails to include mark-to-market accounting method. Keep the corporation’s records for as long all the information required (or includes Dealers in commodities and traders in as they may be needed for the incorrect information). Other penalties, securities and commodities can elect to administration of any provision of the such as an accuracy-related penalty use the mark-to-market accounting Internal Revenue Code. Usually, records under section 6662A, may also apply. method. See section 475. that support an item of income, deduction, See the Instructions for Form 8886 for

Change in accounting method. or credit on the return must be kept for 3 details on these and other penalties. Generally, the corporation must get IRS years from the date the return is due or Reportable transactions by material consent to change the method of filed, whichever is later. Keep records that advisors. Material advisors to any accounting used to report taxable income verify the corporation’s basis in property reportable transaction must disclose (for income as a whole or for the for as long as they are needed to figure certain information about the reportable treatment of any material item). To do so, the basis of the original or replacement transaction by filing Form 8918, Material the corporation generally must file Form property. Advisor Disclosure Statement, with the 3115, Application for Change in The corporation should keep copies of IRS. For details, see the Instructions for Accounting Method. See Form 3115, the all filed returns. They help in preparing Form 8918. Instructions for Form 3115, and Pub. 538,

Accounting Periods and Methods, for future and amended returns. Transfers to a corporation controlled

more information. by the transferor. Every significant

Other Forms and transferor (as defined in Regulations There are some instances when the section 1.351-3(d)) that receives stock of corporation can obtain automatic consent Statements That May Be a corporation in exchange for property in from the IRS to change to certain Required a nonrecognition event must include the accounting methods. See Rev. Proc. statement required by Regulations 2008-52, 2008-36 I.R.B. 587, as Amended return. Use Form 1120X, section 1.351-3(a) on or with the amplified, clarified and modified by Rev. Amended U.S. Corporation Income Tax transferor’s tax return for the tax year of Proc. 2009-39, 2009-38 I.R.B. 371. Also Return, to correct a previously filed Form the exchange. The transferee corporation see the Instructions for Form 3115. 1120. must include the statement required by Note. If the corporation is filing an Reportable transaction disclosure Regulations section 1.351-3(b) on or with application for a change in accounting statement. Disclose information for each its return for the tax year of the exchange, method filed on or after January 10, 2011 reportable transaction in which the unless all the required information is for a year of change ending on or after corporation participated. Form 8886, included in any statement(s) provided by April 30, 2010, see Rev. Proc. 2011-14, Reportable Transaction Disclosure a significant transferor that is attached to 2011-4 I.R.B. 330. Statement, must be filed for each tax year the same return for the same section 351

that the federal income tax liability of the exchange. If the transferor or transferee Accounting Period corporation is affected by its participation corporation is a controlled foreign

A corporation must figure its taxable in the transaction. The following are corporation, each U.S. shareholder

income on the basis of a tax year. A tax reportable transactions. (within the meaning of section 951(b))

year is the annual accounting period a must include the required statement on or 1. Any listed transaction, which is a corporation uses to keep its records and with its return. transaction that is the same as or

report its income and expenses. substantially similar to one of the types of Distributions under section 355. Every Generally, corporations can use a transactions that the IRS has determined corporation that makes a distribution of calendar year or a fiscal year. Personal to be a tax avoidance transaction and stock or securities of a controlled

service corporations, however, must use identified by notice, regulation, or other corporation, as described in section 355 a calendar year unless they meet one of published guidance as a listed (or so much of section 356 as it relates to the exceptions discussed on page 7. transaction. section 355), must include the statement

Change of tax year. Generally, a 2. Any transaction offered under required by Regulations section 1.355-5

corporation, including a personal service conditions of confidentiality for which the on or with its return for the year of the

Instructions for Form 1120 -5-
distribution. If the distributing corporation 6. Any deferred OID deduction that Item A. Identifying is a controlled foreign corporation, each has not been deducted in the current or

U.S. shareholder (within the meaning of prior tax years. Information

section 951(b)), must include the

statement on or with its return. Consolidated Return In addition, include a copy of the Corporations filing a consolidated return Dual consolidated losses. If a election statement filed to make the must check Item A, box 1a, and attach domestic corporation incurs a dual election to defer cancellation of debt. For Form 851, Affiliations Schedule, and other consolidated loss (as defined in more information on making the election, supporting statements to the return. Also, Regulations section 1.1503-2(c)(5)), the see the instructions for line 10. For more for the first year a subsidiary corporation corporation (or consolidated group) may information regarding the annual is being included in a consolidated return, need to attach an elective relief information statement, see Rev. Proc. attach Form 1122, Authorization and agreement and/or an annual certification 2009-37, 2009-36 I.R.B. 309. Consent of Subsidiary Corporation To Be as provided in Regulations section Other forms and statements. See Pub. Included in a Consolidated Income Tax 1.1503-2(g)(2). Return, to the parent’s consolidated 542 for a list of other forms and

Election to reduce basis under section return. Attach a separate Form 1122 for statements a corporation may need to file 362(e)(2)(C). The transferor may make each subsidiary being included in the in addition to the forms and statements

an election under section 362(e)(2)(C) to consolidated return. discussed throughout these instructions. limit the transferor’s basis in the stock File supporting statements for each received instead of the transferor’s basis corporation included in the consolidated in the transferred property. The transferor return. Do not use Form 1120 as a can make the election by including the Specific Instructions supporting statement. On the supporting certification provided in Notice 2005-70, statement, use columns to show the 2005-41 I.R.B. 694 on or with its tax Period Covered following, both before and after return filed by the due date (including adjustments. extensions) for the tax year in which the File the 2010 return for calendar year

transaction occurred. If the transferor is a 1. Items of gross income and 2010 and fiscal years that begin in 2010

controlled foreign corporation, its deductions. and end in 2011. For a fiscal or short tax

controlling U.S. shareholder(s) can make 2. A computation of taxable income. year return, fill in the tax year space at the

the election. The common parent of a 3. Balance sheets as of the beginning top of the form.

consolidated group can make the election and end of the tax year.

4. A reconciliation of income per for the group. The 2010 Form 1120 can also be

used if: books with income per return. If the election is made as described 5. A reconciliation of retained • The corporation has a tax year of less above, no election need be made by the earnings. than 12 months that begins and ends in transferee (or any controlling U.S. 2011, and shareholder thereof). Enter on Form 1120 the totals for each • The 2011 Form 1120 is not available at

Once made, the election is irrevocable. item of income, gain, loss, expense, or the time the corporation is required to file

See section 362(e)(2)(C) and Notice deduction, net of eliminating entries for its return. intercompany transactions between 2005-70.

The corporation must show its 2011 corporations within the consolidated Annual information statement for tax year on the 2010 Form 1120 and take group. Attach consolidated balance elections under section 108(i). If the sheets and a reconciliation of into account any tax law changes that are corporation made an election under effective for tax years beginning after consolidated retained earnings. section 108(i) to defer income from December 31, 2010. cancellation of debt (COD) for applicable The corporation does not have to

debt instruments, the corporation must provide the information requested

attach a statement to its return beginning Name and Address in (3), (4), and (5) above, if its total

TIP

with the tax year following the tax year for Enter the corporation’s true name (as set receipts (line 1a plus lines 4 through 10

which the corporation made the election, on page 1 of the return) and its total forth in the charter or other legal and ending the first tax year all income document creating it), address, and EIN assets at the end of the tax year are less

deferred has been included in income. on the appropriate lines. Enter the than $250,000. See Schedule K, question

The statement must be labeled “Section address of the corporation’s principal 13.

108(i) Information Statement” and must office or place of business. Include the For more information on consolidated clearly identify, for each applicable debt suite, room, or other unit number after the returns, see the regulations under section instrument to which an election under street address. If the post office does not 1502. section 108(i) applies, the following. deliver mail to the street address and the

1. Any deferred COD income that is corporation has a P.O. box, show the box Life-Nonlife Consolidated included in income in the current tax year. number instead. Return 2. Any deferred COD income that has

been accelerated because of an event Note. Do not use the address of the If Item A, box 1a, is checked and the

described in section 108(i)(5)(D) and registered agent for the state in which the corporation is the common parent of a

must be included in income in the current corporation is incorporated. For example, consolidated group that includes a

tax year. Include a description and the if a business is incorporated in Delaware life-nonlife insurance company, also

date of the acceleration event. or Nevada and the corporation’s principal check box 1b. See Regulations section

3. Any deferred COD income that has office is located in Little Rock, AR, the 1.1502-47(s) for the filing requirements of

not been included in income in the current corporation should enter the Little Rock a life-nonlife consolidated return.

or prior tax years. address.

4. Any deferred OID deduction Personal Holding Company

allowed as a deduction in the current tax If the corporation receives its mail in A personal holding company must check

year. care of a third party (such as an item A, box 2 and attach a Schedule PH

5. Any deferred OID deduction that is accountant or an attorney), enter on the (Form 1120), U.S. Personal Holding

allowed as a deduction in the current tax street address line “C/O” followed by the Company (PHC) Tax. See the

year because of an accelerated event third party’s name and street address or Instructions for Schedule PH (Form 1120)

described in section 108(i)(5)(D). P.O. box. for details.

-6- Instructions for Form 1120
Personal Service Corporation issued immediately once the application Income

information is validated. If the corporation is a personal service Except as otherwise provided in the • By telephone at 1-800-829-4933 from corporation, check item A, box 3. A Internal Revenue Code, gross income 7:00 a.m. to 10:00 p.m. in the personal service corporation is a includes all income from whatever source corporation’s local time zone. corporation whose principal activity for the derived. • By faxing or mailing Form SS-4, testing period (generally the prior tax year Application for Employer Identification Income from qualifying shipping unless the corporation has just been Number. activities. Gross income does not formed) for tax year is the performance of include income from qualifying shipping personal services. Personal services Note. Only corporations located in the activities if the corporation makes an include any activity performed in the fields United States or U.S. possessions can election under section 1354 to be taxed of accounting, actuarial science, use the online application. Foreign on its notional shipping income (as architecture, consulting, engineering, corporations must use one of the other defined in section 1353) at the highest health, law, and the performing arts. The methods to apply. corporate tax rate (35%). If the election is services must be substantially performed made, the corporation generally may not EIN applied for, but not received. If the by employee-owners. claim any loss, deduction, or credit with corporation has not received its EIN by A personal service corporation must respect to qualifying shipping activities. A the time the return is due, enter “Applied use a calendar tax year unless: corporation making this election also may For” and the date the corporation applied • It elects to use a 52-53-week tax year elect to defer gain on the disposition of a in the space for the EIN. However, if the that ends with reference to the calendar qualifying vessel. corporation is filing its return year or tax year elected under section electronically, an EIN is required at the Use Form 8902, Alternative Tax on 444; time the return is filed. An exception Qualifying Shipping Activities, to figure • It can establish a business purpose for applies to subsidiaries of corporations the tax. Include the alternative tax on

a different tax year and obtains the whose returns are filed with the parent’s Schedule J, line 9. approval of the IRS (see the Instructions electronically filed consolidated Form for Form 1128 and Pub. 538); or Line 1. Gross Receipts or Sales 1120. These subsidiaries should enter • It elects under section 444 to have a “Applied For” in the space for the EIN on Enter gross receipts or sales from all tax year other than a calendar year. To business operations except those that their returns. The subsidiaries’ returns are

make the election, use Form 8716, must be reported on lines 4 through 10. identified under the parent corporation’s Election To Have a Tax Year Other Than EIN. Advance payments. In general, a Required Tax Year. advance payments are reported in the For more information, see the If a corporation makes the section 444 year of receipt. There are exceptions to Instructions for Form SS-4. election, its deduction for certain amounts this general rule for corporations that use

paid to employee-owners may be limited. the accrual method of accounting.

See Schedule H (Form 1120), Section Item D. Total Assets • To report income from long-term

280H Limitations for a Personal Service Enter the corporation’s total assets (as contracts, see section 460.

Corporation (PSC), to figure the determined by the accounting method • For special rules for reporting certain

maximum deduction. regularly used in keeping the advance payments for goods and

corporation’s books and records) at the long-term contracts, see Regulations If a section 444 election is terminated end of the tax year. If there are no assets section 1.451-5. and the termination results in a short tax at the end of the tax year, enter -0-. • For rules that allow a limited deferral of year, type or print at the top of the first advance payments beyond the current tax page of Form 1120 for the short tax year If the corporation is required to year, see Rev. Proc. 2004-34, 2004-22 “SECTION 444 ELECTION complete Schedule L, enter total assets I.R.B. 991, as modified and clarified by TERMINATED.” See Temporary from Schedule L, line 15, column (d) on Rev. Proc. 2011-18, 2011-5 I.R.B. 443, Regulations section 1.444-1T(a)(5) for page 1, item D. If filing a consolidated for advance payments from the sale of more information. return, report total consolidated assets for certain gift cards. all corporations joining in the return. Schedule M-3 (Form 1120) • For information on adopting or

changing to a permissible method for A corporation with total assets Item E. Initial Return, Final reporting advance payments for services (non-consolidated or consolidated for all and certain goods by an accrual method corporations included within a tax Return, Name Change, or corporation, see the Instructions for Form consolidation group) of $10 million or Address Change 3115. more on the last day of the tax year must

complete Schedule M-3 (Form 1120), Net • If this is the corporation’s first return, Installment sales. Generally, the

check the “Initial return” box. installment method cannot be used for Income (Loss) Reconciliation for

Corporations With Total Assets of $10 • If this is the corporation’s final return dealer dispositions of property. A “dealer

Million or More, instead of Schedule M-1. and it will no longer exist, check the “Final disposition” is any disposition of: (a)

A corporation filing Form 1120 that is not return” box. personal property by a person who

• If the corporation changed its name regularly sells or otherwise disposes of required to file Schedule M-3 may

voluntarily file Schedule M-3 instead of since it last filed a return, check the personal property of the same type on the

Schedule M-1. “Name change” box. Generally, a installment plan or (b) real property held

corporation also must have amended its for sale to customers in the ordinary If you are filing Schedule M-3, check articles of incorporation and filed the course of the taxpayer’s trade or Item A, box 4, to indicate that Schedule amendment with the state in which it was business. M-3 is attached. See the Instructions for incorporated. Schedule M-3 for more details. These restrictions on using the • If the corporation has changed its installment method do not apply to address since it last filed a return dispositions of property used or produced Item B. Employer (including a change to an “in care of” in a farming business or sales of address), check the “Address change” Identification Number (EIN) timeshares and residential lots for which

box. Enter the corporation’s EIN. If the the corporation elects to pay interest

Note. under section 453(l)(3). corporation does not have an EIN, it must If a change in address occurs after

apply for one. An EIN can be applied for: the return is filed, use Form 8822, For sales of timeshares and residential

• Online—Click on the EIN link at www. Change of Address, to notify the IRS of lots reported under the installment

irs.gov/businesses/small. The EIN is the new address. method, the corporation’s income tax is

Instructions for Form 1120 -7-
increased by the interest payable under Note. Report tax-exempt interest income if (b) above applies). For more

section 453(l)(3). Report this addition to on Schedule K, item 9. Also, if required, information, see Regulations section

the tax on Schedule J, line 9. include the same amount on Schedule 1.1363-2 and Rev. Proc. 94-61, 1994-2

M-1, line 7, or Schedule M-3 (Form 1120), C.B. 775. Also see the instructions for Enter on line 1 (and carry to line 3), the Part II, line 13, if applicable. Schedule J, line 10. gross profit on collections from installment • Any net positive section 481(a) sales for any of the following. Line 6. Gross Rents adjustment. The corporation may have to • Dealer dispositions of property before Enter the gross amount received for the make an adjustment under section 481(a) March 1, 1986. rental of property. Deduct expenses such to prevent amounts of income or expense • Dispositions of property used or as repairs, interest, taxes, and from being duplicated or omitted. The produced in the trade or business of depreciation on the proper lines for section 481(a) adjustment period is farming. deductions. A rental activity held by a generally 1 year for a net negative • Certain dispositions of timeshares and closely held corporation or a personal adjustment and 4 years for a net positive residential lots reported under the service corporation may be subject to the adjustment. However, a corporation can installment method. passive activity loss rules. See Passive elect to use a 1-year adjustment period if

Attach a schedule showing the activity limitations on page 9. the net section 481(a) adjustment for the

following information for the current and change is less than $25,000. The Line 10. Other Income the 3 preceding years: (a) gross sales, (b) corporation must complete the Enter any other taxable income not cost of goods sold, (c) gross profits, (d) appropriate lines of Form 3115 to make reported on lines 1 through 9. List the percentage of gross profits to gross sales, this election. Also, under certain other type and amount of income on an (e) amount collected, and (f) gross profit conditions, the corporation can modify the attached schedule. If the corporation has on the amount collected. period for taking into account a net only one item of other income, describe it positive section 481 adjustment. See Rev.

Nonaccrual experience method. in parentheses on line 10. Proc. 2008-52 and Rev. Proc. 2009-39. If

Accrual method corporations are not Examples of other income to report on the net section 481(a) adjustment is

required to accrue certain amounts to be line 10 include the following. negative, report it on line 26.

received from the performance of • Recoveries of bad debts deducted in • Part or all of the proceeds received

services that, on the basis of their prior years under the specific charge-off from certain corporate-owned life

experience, will not be collected, if: method. insurance contracts issued after August • The services are in the fields of health, • The amount included in income from 17, 2006. Corporations that own one or

law, engineering, architecture, Form 6478, Alcohol and Cellulosic Biofuel more employer-owned life insurance

accounting, actuarial science, performing Fuels Credit. contracts issued after this date must file

arts, or consulting, or • The amount included in income from Form 8925, Report of Employer-Owned • The corporation’s average annual Form 8864, Biodiesel and Renewable Life Insurance Contracts. See section

gross receipts have not exceeded $5 Diesel Fuels Credit. 101(j) for details.

million for any prior 3-tax-year period. For • Refunds of taxes deducted in prior • Income from cancellation of debt

more detail, see Regulations sections years to the extent they reduced income (COD) for the repurchase of a debt

1.448-2(a)(2) and 1.448-1T(f)(2). subject to tax in the year deducted (see instrument for less than its adjusted issue

section 111). Do not offset current year price. However, for a reacquisition of an This provision does not apply to any taxes against tax refunds. applicable debt instrument after amount if interest is required to be paid • Any recapture amount under section December 31, 2008, and before January on the amount or if there is any penalty 179A for qualified clean-fuel vehicle 1, 2011, a corporation can elect, under for failure to timely pay the amount. For refueling property if, at any time before section 108(i), to defer the income from more information, see Regulations the end of the recovery period, the COD in connection with the election. If the section 1.448-2. property ceases to qualify. corporation makes the election, the

Corporations that qualify to use the • Ordinary income from trade or business income is deferred and ratably included in

nonaccrual experience method should activities of a partnership (from Schedule income over the 5-year period beginning

attach a schedule showing total gross K-1 (Form 1065 or 1065-B)). Do not offset with:

receipts, the amount not accrued as a ordinary losses against ordinary income. 1. For a reacquisition occurring in result of the application of section Instead, include the losses on line 26. 2009, the fifth tax year following the tax 448(d)(5), and the net amount accrued. Show the partnership’s name, address, year in which the reacquisition occurs, Enter the net amount on line 1a. and EIN on a separate statement and attached to this return. If the amount 2. For a reacquisition occurring in Line 2. Cost of Goods Sold entered is from more than one 2010, the fourth tax year following the tax Enter the cost of goods sold on line 2, partnership, identify the amount from year in which the reacquisition occurs. page 1. Before making this entry, each partnership.

• Any LIFO recapture amount under To make the election for a 2010 complete Schedule A on page 2 of Form section 1363(d). The corporation may reacquisition, attach a statement to the 1120. See the instructions for Schedule

have to include a LIFO recapture amount corporation’s 2010 tax return. The A.

in income if it: statement must clearly identify the

Line 4. Dividends applicable instrument and include the 1. Used the LIFO inventory method amount of income to which the election See the instructions for Schedule C. for its last tax year before the first tax year applies. Once made, the election is Then, complete Schedule C and enter on for which it elected to become an S irrevocable and the exclusions for COD line 4 the amount from Schedule C, line corporation or income under section 108(a)(1)(A), (B), 19. 2. Transferred LIFO inventory assets (C), and (D) do not apply for the tax year to an S corporation in a nonrecognition Line 5. Interest of the election or any later tax year. See transaction in which those assets were page 6 for the annual information Enter taxable interest on U.S. obligations transferred basis property. statement that is required. and on loans, notes, mortgages, bonds, The LIFO recapture amount is the

bank deposits, corporate bonds, tax amount by which the C corporation’s For more information, see section

refunds, etc. Do not offset interest inventory under the FIFO method 108(i) and Rev. Proc. 2009-37. If the

expense against interest income. Special exceeds the inventory amount under the corporation is a direct or indirect partner

rules apply to interest income from certain LIFO method at the close of the in a partnership, other special rules apply.

below-market-rate loans. See section corporation’s last tax year as a C See Temporary Regulations section

7872 for details. corporation (or for the year of the transfer, 1.108(i)-2T.

-8- Instructions for Form 1120
Deductions • Certain property produced in a farming $10,000 deduction is reduced (but not

business. below zero) by the amount such start-up

Limitations on Deductions • Research and experimental costs costs exceed $60,000. Any remaining

under section 174. costs must be amortized. See section Section 263A uniform capitalization • Geological and geophysical costs 195(b)(3). rules. The uniform capitalization rules of amortized under section 167(h). Time for making an election. The section 263A generally require • Capital costs incurred to comply with corporation generally elects to deduct corporations to capitalize, or include in EPA sulfur regulations. start-up or organizational costs by inventory, certain costs incurred in • Intangible drilling costs for oil, gas, and claiming the deduction on its income tax connection with the following. geothermal property. return filed by the due date (including • The production of real property and • Mining exploration and development extensions) for the tax year in which the tangible personal property held in costs. active trade or business begins. However, inventory or held for sale in the ordinary • Inventoriable items accounted for in the for start-up or organizational costs paid or course of business. same manner as materials and supplies incurred before September 9, 2008, the • Real property or personal property that are not incidental. See Cost of Goods corporation may be required to attach a (tangible and intangible) acquired for Sold on page 15. statement to its return to elect to deduct resale. For more details on the uniform such costs. See Temporary Regulations • The production of real property and capitalization rules, see Regulations sections 1.195-1T and 1.248-1T for tangible personal property by a sections 1.263A-1 through 1.263A-3. See details. corporation for use in its trade or business Regulations section 1.263A-4 for rules for or in an activity engaged in for profit. If the corporation timely filed its return property produced in a farming business. for the year without making an election, it Tangible personal property produced Transactions between related can still make an election by filing an by a corporation includes a film, sound taxpayers. Generally, an accrual basis amended return within 6 months of the recording, videotape, book, or similar taxpayer can only deduct business due date of the return (excluding property. expenses and interest owed to a related extensions). Clearly indicate the election Corporations subject to the section party in the year the payment is included on the amended return and write “Filed 263A uniform capitalization rules are in the income of the related party. See pursuant to section 301.9100-2” at the top required to capitalize: sections 163(e)(3),163(j), and 267 for of the amended return. File the amended

1. Direct costs and limitations on deductions for unpaid return at the same address the

2. An allocable part of most indirect interest and expenses. corporation filed its original return. The

costs (including taxes) that (a) benefit the election applies when figuring taxable Corporations use Form 8926, assets produced or acquired for resale or income for the current tax year and all Disqualified Corporate Interest Expense (b) are incurred because of the subsequent years. Disallowed Under Section 163(j) and performance of production or resale Related Information, to figure the amount Note. The corporation can choose to activities. of any corporate interest expense forgo the elections above by clearly

disallowed by section 163(j). electing to capitalize its start-up or For inventory, some of the indirect organizational costs on an income tax expenses that must be capitalized are: Section 291 limitations. Corporations return filed by the due date (including • Administration expenses; may be required to adjust deductions for extensions) for the tax year in which the • Taxes; depletion of iron ore and coal, intangible active trade or business begins. • Depreciation; drilling and exploration and development • Insurance; costs, certain deductions for financial Report the deductible amount of

• Compensation paid to officers institutions, and the amortizable basis of start-up and organizational costs and any

attributable to services; pollution control facilities. See section 291 amortization on line 26. For amortization

• Rework labor; and that begins during the 2010 tax year, to determine the amount of the • Contributions to pension, stock bonus, adjustment. Also see section 43. complete and attach Form 4562. See the

and certain profit-sharing, annuity, or instructions for Form 4562. Golden parachute payments. A portion deferred compensation plans. of the payments made by a corporation to For more details on business start-up

Regulations section 1.263A-1(e)(3) key personnel that exceeds their usual and organizational costs, see Pub. 535,

specifies other indirect costs that relate to compensation may not be deductible. Business Expenses.

production or resale activities that must This occurs when the corporation has an Passive activity limitations. Limitations

be capitalized and those that may be agreement (golden parachute) with these on passive activity losses and credits currently deductible. key employees to pay them these excess under section 469 apply to personal

Interest expense paid or incurred amounts if control of the corporation service corporations (defined on page 7)

during the production period of changes. See section 280G and and closely held corporations (defined

designated property must be capitalized Regulations section 1.280G-1. Also see later).

and is governed by special rules. For the instructions for line 12. Generally, the two kinds of passive more details, see Regulations sections Business start-up and organizational activities are:

1.263A-8 through 1.263A-15. costs. A corporation can elect to deduct • Trade or business activities in which

The costs required to be capitalized up to $5,000 of business start-up and up the corporation did not materially

under section 263A are not deductible to $5,000 of organizational costs paid or participate for the tax year; and

until the property (to which the costs incurred after October 22, 2004. Any • Rental activities, regardless of its

relate) is sold, used, or otherwise remaining costs must be amortized. The participation.

disposed of by the corporation. $5,000 deduction is reduced (but not For exceptions, see Form 8810,

Exceptions. Section 263A does not below zero) by the amount the total costs Corporate Passive Activity Loss and

apply to the following. exceed $50,000. If the total costs are Credit Limitations.

$55,000 or more, the deduction is • Personal property acquired for resale if Corporations subject to the passive reduced to zero. See sections 195(b) and the corporation’s (or any of its activity limitations must complete Form 248(a). predecessors) average annual gross 8810 to compute their allowable passive

receipts for the 3 prior tax years were $10 Special rule for 2010 start-up costs. activity loss and credit. Before completing

million or less. For a tax year beginning in 2010, a Form 8810, see Temporary Regulations

• Timber. corporation can elect to deduct up to section 1.163-8T, which provides rules for

• Most property produced under a $10,000 of business start-up costs paid or allocating interest expense among

long-term contract. incurred after December 31, 2009. The activities. If a passive activity is also

Instructions for Form 1120 -9-
subject to the earnings stripping rules of See the instructions for the form used • Income payable under a written,

section 163(j), the at-risk rules of section to figure the applicable credit for more binding contract in effect on February 17,

465, or the tax-exempt use loss rules of details. 1993.

section 470, those rules apply before the The $1 million limit is reduced by Limitations on deductions related to passive loss rules. amounts disallowed as excess parachute property leased to tax-exempt entities. payments under section 280G. For more information, see section 469, If a corporation leases property to a

the related regulations, and Pub. 925, governmental or other tax-exempt entity, See section 162(m) and Regulations

Passive Activity and At-Risk Rules. the corporation cannot claim deductions section 1.162-27. Also see Notice

related to the property to the extent that 2007-49, 2007-25 I.R.B. 1429. Closely held corporations. A they exceed the corporation’s income Limitations on tax benefits for corporation is a closely held corporation from the lease payments. This disallowed executive compensation under the if: tax-exempt use loss can be carried over Treasury Troubled Asset Relief • At any time during the last half of the to the next tax year and treated as a Program (TARP). The $1 million tax year more than 50% in value of its deduction with respect to the property for compensation limit is reduced to outstanding stock is directly or indirectly that tax year. See section 470 for more $500,000 for executive remuneration and owned by or for not more than five details and exceptions. deferred deduction executive individuals, and remuneration paid to covered executives • The corporation is not a personal Line 12. Compensation of by any entity that receives or has service corporation. Officers received financial assistance under

Enter deductible officers’ compensation TARP. The limit applies for each period in Certain organizations are treated as

on line 12. Do not include compensation which obligations arising from financial individuals for purposes of this test. See

deductible elsewhere on the return, such assistance under TARP remain section 542(a)(2). For rules for

as amounts included in cost of goods outstanding. The $500,000 is reduced by determining stock ownership, see section any amounts disallowed as excess 544 (as modified by section 465(a)(3)). sold, elective contributions to a section

401(k) cash or deferred arrangement, or parachute payments. See section

Reducing certain expenses for which amounts contributed under a salary 162(m)(5) for definitions and other special

credits are allowable. If the corporation reduction SEP agreement or a SIMPLE rules. Also see Notice 2008-94, 2008-44

claims any of the following credits, it may I.R.B. 1070, for additional guidance. IRA plan. need to reduce the otherwise allowable In addition, a portion of any parachute deductions for expenses used to figure Complete Schedule E if the total payments made to a covered executive the credit. receipts (line 1a, plus lines 4 through 10) by an applicable employer participating in • Work opportunity credit (Form 5884). are $500,000 or more. Include only the a Treasury troubled asset relief program • Credit for Increasing research activities deductible part of each officer’s is not deductible as compensation if the (Form 6765). compensation on Schedule E. See payments are made because of a • Orphan drug credit (Form 8820). Disallowance of deduction for employee severance from employment during an • Disabled access credit (Form 8826). compensation in excess of $1 million applicable tax year. For this purpose, a • Empowerment zone and renewal below. Complete Schedule E, line 1, parachute payment is any payment to a community employment credit (Form columns (a) through (f), for all officers. senior executive officer for departure from 8844). The corporation determines who is an a company for any reason, except for • Indian employment credit (Form 8845). officer under the laws of the state where it payments for services performed or • Employer credit for social security and is incorporated. benefits accrued. These limits do not

Medicare taxes paid on certain employee apply to a payment already treated as a If a consolidated return is filed, each tips (Form 8846). member of an affiliated group must parachute payment. See section 280G(e) • Credit for small employer pension plan and Notice 2008-94. furnish this information. start-up costs (Form 8881).

• Credit for employer-provided childcare Line 13. Salaries and Wages Disallowance of deduction for

facilities and services (Form 8882). employee compensation in excess of Enter the total salaries and wages paid

• Low sulfur diesel fuel production credit $1 million. Publicly held corporations for the tax year. Do not include salaries

(Form 8896). cannot deduct compensation to a and wages deductible elsewhere on the

• Mine rescue team training credit (Form “covered employee” to the extent that the return, such as amounts included in

8923). compensation exceeds $1 million. officers’ compensation, cost of goods

• Agricultural chemicals security credit Generally, a covered employee is: sold, elective contributions to a section

(Form 8931). • The principal executive officer of the 401(k) cash or deferred arrangement, or

• Credit for employer differential wage corporation (or an individual acting in that amounts contributed under a salary

payments (Form 8932). capacity) as of the end of the tax year or reduction SEP agreement or a SIMPLE

• Credit for small employer health • An employee whose total IRA plan.

insurance premiums (Form 8941). compensation must be reported to If the corporation claims a credit for

shareholders under the Securities any wages paid or incurred, it may need If the corporation has any of these Exchange Act of 1934 because the to reduce its deduction for officer’s credits, figure the current year credit employee is among the three highest compensation and salaries and wages. before figuring the deduction for compensated officers for that tax year See Reducing certain expenses for which expenses on which the credit is based. If (other than the principal executive officer). credits are allowable above. the corporation capitalized any costs on

which it figured the credit, it may need to If the corporation provided taxable For this purpose, compensation does

reduce the amount capitalized by the fringe benefits to its employees, such as not include the following.

credit attributable to these costs. personal use of a car, do not deduct as • Income from certain employee trusts, wages the amount allocated for annuity plans, or pensions. If the corporation has qualified depreciation and other expenses claimed • Any benefit paid to an employee that is investment taken into account in on lines 20 and 26. excluded from the employee’s income. determining the qualified therapeutic Line 14. Repairs and discovery project credit or grant, it may The deduction limit does not apply to:

need to reduce the otherwise allowable • Commissions based on individual Maintenance

deductions for such qualified investment. performance, Enter the cost of incidental repairs and

See section 280C(g) and Notice 2010-45, • Qualified performance-based maintenance not claimed elsewhere on

2010-23 I.R.B. 734. compensation, and the return, such as labor and supplies,

-10- Instructions for Form 1120
that do not add to the value of the See section 164(d) for information on earnings stripping rules. For more details,

property or appreciably prolong its life. apportionment of taxes on real property see section 163(j)(8).

New buildings, machinery, or permanent between seller and purchaser. • Forgone interest on certain

improvements that increase the value of below-market-rate loans (see section Line 18. Interest the property are not deductible. They 7872).

must be depreciated or amortized. Note. Do not offset interest income • Original issue discount (OID) on certain against interest expense. high-yield discount obligations. See Line 15. Bad Debts The corporation must make an interest section 163(e)(5) to determine the

Enter the total debts that became allocation if the proceeds of a loan were amount of the deduction for original issue

worthless in whole or in part during the used for more than one purpose (for discount that is deferred and the amount

tax year. A small bank or thrift institution example, to purchase a portfolio that is disallowed on a high-yield discount

using the reserve method of section 585 investment and to acquire an interest in a obligation. The rules under section

should attach a schedule showing how it passive activity). See Temporary 163(e)(5) do not apply to certain

figured the current year’s provision. A Regulations section 1.163-8T for the high-yield discount obligations issued

corporation that uses the cash method of after August 31, 2008 and before January interest allocation rules.

accounting cannot claim a bad debt 1, 2011. See section 163(e)(5)(F). Also Mutual savings banks, building and deduction unless the amount was see Notice 2010-11, 2010-4 I.R.B. 326. loan associations, and cooperative banks previously included in income. • Interest which is allocable to can deduct the amounts paid or credited unborrowed policy cash values of life Line 16. Rents to the accounts of depositors as insurance, endowment, or annuity dividends, interest, or earnings. See If the corporation rented or leased a contracts issued after June 8, 1997. See section 591. vehicle, enter the total annual rent or section 264(f). Attach a statement

lease expense paid or incurred during the Do not deduct the following interest. showing the computation of the

year. Also complete Part V of Form 4562, • Interest on indebtedness incurred or deduction.

Depreciation and Amortization. If the continued to purchase or carry obligations • Section 108(i) OID deduction. If the

corporation leased a vehicle for a term of if the interest is wholly exempt from corporation issued a debt instrument with

30 days or more, the deduction for vehicle income tax. See section 265(b) for special OID that is subject to section 108(i)(2)

lease expense may have to be reduced rules and exceptions for financial because of an election to defer the

by an amount includible in income called institutions. Also see section 265(b)(7) for income from the cancellation of debt

the inclusion amount. The corporation a de minimis exception for financial (COD), the interest deduction for this OID

may have an inclusion amount if: institutions for certain tax-exempt bonds is deferred until the COD is includible in

issued in 2009 and 2010. income. The accrued OID is allowed as a

And the • For cash basis taxpayers, prepaid deduction ratably over the 5-year period

vehicle’s interest allocable to years following the that the income from COD is includible in

FMV on current tax year. For example, a cash income. The deduction is limited to the

the first basis calendar year taxpayer who in 2010 amount of COD subject to the section day of prepaid interest allocable to any period 108(i) election. See section 108(i) for the lease after 2010 can deduct only the amount more details. Also see page 6 of the The lease term began: exceeded: allocable to 2010. instructions for the annual information • Interest and carrying charges on statement that is required if the election After 12/31/07 but before 1/1/11 . . $18,500 straddles. Generally, these amounts must under section 108(i) is made. be capitalized. See section 263(g). After 12/31/06 but before 1/1/08 . . $15,500 • Interest on debt allocable to the Line 19. Charitable

After 12/31/04 but before 1/1/07 . . $15,200 production of designated property by a Contributions

After 12/31/03 but before 1/1/05 corporation for its own use or for sale. . . $17,500 Enter contributions or gifts actually paid

If the lease term began before January 1, 2004, see The corporation must capitalize this within the tax year to or for the use of Pub. 463, Travel, Entertainment, Gift, and Car interest. Also capitalize any interest on charitable and governmental Expenses, to find out if the corporation has an debt allocable to an asset used to organizations described in section 170(c) inclusion amount. The inclusion amount for lease produce the property. See section 263A(f) and any unused contributions carried over terms beginning in 2011 will be published in the

Internal Revenue Bulletin in early 2011. and Regulations sections 1.263A-8 from prior years. Special rules and limits through 1.263A-15 for definitions and apply to contributions to organizations

See Pub. 463 for instructions on more information. conducting lobbying activities. See

figuring the inclusion amount. • Interest paid or incurred on any portion section 170(f)(9). of an underpayment of tax that is Corporations reporting taxable income Line 17. Taxes and Licenses attributable to an understatement arising on the accrual method can elect to treat Enter taxes paid or accrued during the tax from an undisclosed listed transaction or as paid during the tax year any an undisclosed reportable avoidance year, but do not include the following. contributions paid by the 15th day of the transaction (other than a listed • Federal income taxes. 3rd month after the end of the tax year if transaction) entered into in tax years • Foreign or U.S. possession income the contributions were authorized by the beginning after October 22, 2004. taxes if a foreign tax credit is claimed. board of directors during the tax year. • Taxes not imposed on the corporation. Special rules apply to: Attach a declaration to the return stating • Taxes, including state or local sales • Disqualified interest on certain that the resolution authorizing the taxes, that are paid or incurred in indebtedness under section 163(j). See contributions was adopted by the board of connection with an acquisition or Form 8926, Disqualified Corporate directors during the tax year. The disposition of property (these taxes must Interest Expense Disallowed Under declaration must include the date the be treated as a part of the cost of the Section 163(j) and Related Information, resolution was adopted. See Regulations acquired property or, in the case of a and the related Instructions. section 1.170A-11. disposition, as a reduction in the amount • Interest on which no tax is imposed

realized on the disposition). (see section 163(j)). A corporation that If the corporation contributed

• Taxes assessed against local benefits owns an interest in a partnership, directly money for the relief of victims in

that increase the value of the property or indirectly, must treat its distributive areas affected by the January 12,

CAUTION

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assessed (such as for paving, etc.). share of the partnership liabilities, interest 2010 earthquake in Haiti and chose to

• Taxes deducted elsewhere on the income, and interest expense as deduct those amounts on its 2009 return

return, such as those reflected in cost of liabilities, income, and expenses of the instead of its 2010 return, do not include

goods sold. corporation for purposes of applying the those amounts again on line 19.

Instructions for Form 1120 -11-
Limitation on deduction. The total due date (including extensions) of the Line 21. Depletion amount claimed cannot be more than corporation’s return, or, if earlier, the date See sections 613 and 613A for 10% of taxable income (line 30) the return is filed. Do not attach the percentage depletion rates applicable to computed without regard to the following. acknowledgment to the tax return, but natural deposits. Also see section 291 for • Any deduction for contributions. keep it with the corporation’s records. the limitation on the depletion deduction • The special deductions on line 29b. Contributions of property other than for iron ore and coal (including lignite). • The limitation under section 249 on the cash. If a corporation (other than a Attach Form T (Timber), Forest deduction for bond premium. closely held or personal service Activities Schedule, if a deduction for • The domestic production activities corporation) contributes property other depletion of timber is taken. deduction under section 199.

• Any net operating loss (NOL) carryback than cash and claims over a $500 Foreign intangible drilling costs and deduction for the property, it must attach to the tax year under section 172. foreign exploration and development

• Any capital loss carryback to the tax a schedule to the return describing the costs must either be added to the

year under section 1212(a)(1). kind of property contributed and the corporation’s basis for cost depletion method used to determine its fair market purposes or be deducted ratably over a Suspension of 10% limitation for value (FMV). Closely held corporations 10-year period. See sections 263(i), 616, farmers and ranchers. A corporation and personal service corporations must and 617 for details. that is a qualified farmer or rancher (as complete Form 8283, Noncash Charitable defined in section 170(b)(1)(E)) that does See Pub. 535 for more information on Contributions, and attach it to their not have publicly traded stock, can deduct depletion. returns. All other corporations generally contributions of qualified conservation must complete and attach Form 8283 to Line 23. Pension, property without regard to the general

10% limit. The total amount of the their returns for contributions of property Profit-Sharing, etc., Plans (other than money) if the total claimed contribution claimed for the qualified Enter the deduction for contributions to deduction for all property contributed was conservation property cannot exceed qualified pension, profit-sharing, or other more than $5,000. Special rules apply to 100% of the excess of the corporation’s funded deferred compensation plans. the contribution of certain property. See taxable income (as computed above Employers who maintain such a plan the Instructions for Form 8283. substituting “100%” for “10%”) over all generally must file one of the forms listed

other allowable charitable contributions. Qualified conservation below unless exempt from filing under

Any excess qualified conservation contributions. Special rules apply to regulations or other applicable guidance,

contributions can be carried over to the qualified conservation contributions, even if the plan is not a qualified plan

next 15 years, subject to the 100% including contributions of certain under the Internal Revenue Code. The

limitation. See section 170(b)(2)(B). easements on buildings located in a filing requirement applies even if the

corporation does not claim a deduction for Carryover. Charitable contributions over registered historic district. See section the current tax year. There are penalties the 10% limitation cannot be deducted for 170(h) and Pub. 526, Charitable

Contributions. for failure to file these forms on time and the tax year but can be carried over to the for overstating the pension plan next 5 tax years. Other special rules. The corporation deduction. See sections 6652(e) and Special rules apply if the corporation must reduce its deduction for 6662(f). Also see the instructions for the has an NOL carryover to the tax year. In contributions of certain capital gain applicable form. figuring the charitable contributions property. See sections 170(e)(1) and Form 5500, Annual Return/Report of deduction for the current tax year, the 170(e)(5). Employee Benefit Plan. 10% limit is applied using the taxable A larger deduction is allowed for Form 5500-SF Short Form Annual income after taking into account any certain contributions of: Return/Report of Small Employee Benefit deduction for the NOL. • Plan, instead of Form 5500, generally if Inventory and other property to certain To figure the amount of any remaining organizations for use in the care of the ill, under 100 participants at the beginning of NOL carryover to later years, taxable needy, or infants (see section 170(e)(3)), the plan year. income must be modified (see section including contributions of “apparently Note. Form 5500 and Form 5500-SF 172(b)). To the extent that contributions wholesome food” (see section must be filed electronically under the are used to reduce taxable income for this 170(e)(3)(C)), and contributions of computerized ERISA Filing Acceptance purpose and increase an NOL carryover, qualified book inventory to public schools System (EFAST2). For more information, a contributions carryover is not allowed. (see section 170(e)(3)(D)); see the EFAST2 website at See section 170(d)(2)(B). • Scientific equipment used for research www.efast.dol.gov. Cash contributions. For contributions to institutions of higher learning or to Form 5500-EZ, Annual Return of of cash, check, or other monetary gifts certain scientific research organizations One-Participant (Owners and Their (regardless of the amount), the (other than by personal holding Spouses) Retirement Plan. File this form corporation must maintain a bank record, companies and service organizations for a plan that only covers the owner (or or a receipt, letter, or other written (section 170(e)(4)); and the owner and his or her spouse) but only communication from the donee • Computer technology and equipment if the owner (or the owner and his or her organization indicating the name of the for educational purposes (section spouse) owns the entire business. organization, the date of the contribution, 170(e)(6)). and the amount of the contribution. Line 24. Employee Benefit

Contributions of $250 or more. A For more information on charitable Programs

corporation can deduct a contribution of contributions, including substantiation and Enter contributions to employee benefit $250 or more only if it gets a written recordkeeping requirements, see section programs not claimed elsewhere on the acknowledgment from the donee 170 and the related regulations and Pub. return (for example, insurance, health and organization that shows the amount of 526. For other special rules that apply to welfare programs, etc.) that are not an corporations, see Pub. 542. cash contributed, describes any property incidental part of a pension, profit-sharing, contributed, and, either gives a etc., plan included on line 23. description and a good faith estimate of Line 20. Depreciation

the value of any goods or services Include on line 20 depreciation and the Line 26. Other Deductions

provided in return for the contribution or cost of certain property that the Attach a schedule, listing by type and

states that no goods or services were corporation elected to expense under amount, all allowable deductions that are

provided in return for the contribution. The section 179. See Form 4562 and the not deductible elsewhere on Form 1120.

acknowledgment must be obtained by the Instructions for Form 4562. Enter the total on line 26.

-12- Instructions for Form 1120
Examples of other deductions include See section 404(k) for more details and Entertainment facilities. The

the following. See Pub. 535 and Pub. 542 the limitation on certain dividends. corporation cannot deduct an expense

for details on other deductions that may paid or incurred for a facility (such as a Do not deduct the following. apply to corporations. yacht or hunting lodge) used for an • Fines or penalties paid to a government • Amortization. See Part VI of Form activity usually considered entertainment, for violating any law. 4562. amusement, or recreation. • Any amount that is allocable to a class • Certain costs of qualified film or of exempt income. See section 265(b) for Amounts treated as compensation. television productions that the corporation exceptions. Generally, the corporation may be able to elects to deduct. See section 181 and • Lobbying expenses. However, see deduct otherwise nondeductible

Temporary Regulations section 1.181-1T. exceptions (discussed below). entertainment, amusement, or recreation • Certain business start-up and expenses if the amounts are treated as

organizational costs. See page 9 of the Travel, meals, and entertainment. compensation to the recipient and

instructions. Subject to limitations and restrictions reported on Form W-2 for an employee or discussed below, a corporation can • Certain environmental remediation on Form 1099-MISC for an independent deduct ordinary and necessary travel, costs that the corporation elects to contractor.

meals, and entertainment expenses paid deduct. See section 198. However, if the recipient is an officer, or incurred in its trade or business. Also, • Certain qualified disaster expenses that director, or beneficial owner (directly or special rules apply to deductions for gifts, the corporation elects to deduct. See indirectly) of more than 10% of any class skybox rentals, luxury water travel, section 198A. of stock, the deductible expense is convention expenses, and entertainment • Reforestation costs. The corporation limited. See section 274(e)(2) and Notice tickets. See section 274 and Pub. 463 for can elect to deduct up to $10,000 of 2005-45, 2005-24 I.R.B. 1228. details. qualifying reforestation expenses for each Lobbying expenses. Generally, qualified timber property. The corporation Travel. The corporation cannot lobbying expenses are not deductible. can elect to amortize over 84 months any deduct travel expenses of any individual These expenses include: amount not deducted. See Pub. 535. accompanying a corporate officer or • Amounts paid or incurred in connection • Insurance premiums. employee, including a spouse or with influencing federal or state legislation • Legal and professional fees. dependent of the officer or employee, (but not local legislation) or unless: • Supplies used and consumed in the • Amounts paid or incurred in connection • That individual is an employee of the business. with any communication with certain corporation, and • Travel, meals, and entertainment federal executive branch officials in an • His or her travel is for a bona fide expenses. Special rules apply (discussed attempt to influence the official actions or business purpose and would otherwise be below). positions of the officials. See Regulations deductible by that individual. • Utilities. section 1.162-29 for the definition of

• Ordinary losses from trade or business Meals and entertainment. Generally, “influencing legislation.”

activities of a partnership (from Schedule the corporation can deduct only 50% of Dues and other similar amounts paid K-1 (Form 1065 or 1065-B)). Do not offset the amount otherwise allowable for meals to certain tax-exempt organizations may ordinary income against ordinary losses. and entertainment expenses paid or not be deductible. See section 162(e)(3). Instead, include the income on line 10. incurred in its trade or business. In If certain in-house lobbying expenditures Show the partnership’s name, address, addition (subject to exceptions under do not exceed $2,000, they are and EIN on a separate statement section 274(k)(2)): deductible. attached to this return. If the amount is • Meals must not be lavish or

from more than one partnership, identify extravagant; Line 28. Taxable Income Before

the amount from each partnership. • A bona fide business discussion must NOL Deduction and Special • Any extraterritorial income exclusion occur during, immediately before, or Deductions

(from Form 8873, line 52). immediately after the meal; and

• An employee of the corporation must At-risk rules. Generally, special at-risk • Any negative net section 481(a) be present at the meal. rules under section 465 apply to closely adjustment. See the instructions for line held corporations (see Passive activity 10. See section 274(n)(3) for a special rule limitations on page 9) engaged in any • Deduction for certain energy efficient that applies to expenses for meals activity as a trade or business or for the commercial building property placed in consumed by individuals subject to the production of income. These corporations service during the tax year. See section hours of service limits of the Department may have to adjust the amount on line 28. 179D, Notice 2008-40, 2008-14 I.R.B. of Transportation. (See below.) 725, and Notice 2006-52, 2006-26 I.R.B.

1175. Membership dues. The corporation The at-risk rules do not apply to:

• Dividends paid in cash on stock held by can deduct amounts paid or incurred for • Holding real property placed in service

an employee stock ownership plan. membership dues in civic or public by the taxpayer before 1987;

However, a deduction can only be taken service organizations, professional • Equipment leasing under sections organizations (such as bar and medical 465(c)(4), (5), and (6); or for the dividends above if, according to

the plan, the dividends are: associations), business leagues, trade • Any qualifying business of a qualified associations, chambers of commerce, corporation under section 465(c)(7). 1. Paid in cash directly to the plan boards of trade, and real estate boards. participants or beneficiaries; However, the at-risk rules do apply to However, no deduction is allowed if a

2. Paid to the plan, which distributes the holding of mineral property. principal purpose of the organization is to them in cash to the plan participants or entertain, or provide entertainment If the at-risk rules apply, adjust the their beneficiaries no later than 90 days facilities for, members or their guests. In amount on this line for any section 465(d) after the end of the plan year in which the addition, corporations cannot deduct losses. These losses are limited to the

dividends are paid; membership dues in any club organized amount for which the corporation is at risk

3. At the election of such participants for business, pleasure, recreation, or for each separate activity at the close of

or their beneficiaries (a) payable as other social purpose. This includes the tax year. If the corporation is involved

provided under 1or 2 above or (b) paid to country clubs, golf and athletic clubs, in one or more activities, any of which

the plan and reinvested in qualifying airline and hotel clubs, and clubs incurs a loss for the year, report the

employer securities; or operated to provide meals under losses for each activity separately. Attach

4. Used to make payments on a loan conditions favorable to business Form 6198, At-Risk Limitations, showing

described in section 404(a)(9). discussion. the amount at risk and gross income and

Instructions for Form 1120 -13-
deductions for the activities with the • If a corporation elects the alternative Beneficiaries of trusts. If the

losses. tax on qualifying shipping activities under corporation is the beneficiary of a trust,

section 1354, no deduction is allowed for and the trust makes a section 643(g) If the corporation sells or otherwise

disposes of an asset or its interest (either an NOL attributable to the qualifying election to credit its estimated tax

total or partial) in an activity to which the shipping activities to the extent that the payments to its beneficiaries, include the

at-risk rules apply, determine the net loss is carried forward from a tax year corporation’s share of the payment in the

profit or loss from the activity by preceding the first tax year for which the total for line 32b. Enter “T” and the

combining the gain or loss on the sale or alternative tax election was made. See amount on the dotted line next to the

disposition with the profit or loss from the section 1358(b)(2). entry space.

activity. If the corporation has a net loss, it • If a corporation has a loss attributable Special estimated tax payments for may be limited because of the at-risk to a disaster, special rules apply. See the certain life insurance companies. If Instructions for Form 1139. rules. the corporation is required to make or

Treat any loss from an activity not For more details on the NOL apply special estimated tax payments

allowed for the tax year as a deduction deduction, see section 172 and the (SETP) under section 847 in addition to Instructions for Form 1139. allocable to the activity in the next tax its regular estimated tax payments, enter

year. on line 32b, the corporation’s total Line 29b. Special Deductions estimated tax payments. In the margin Line 29a. Net Operating Loss See the instructions for Schedule C. near line 32b, enter “Form 8816” and the Deduction Tax and Payments amount. Attach a schedule showing your

A corporation can use the NOL incurred computation of estimated tax payments.

in one tax year to reduce its taxable Line 30. Taxable Income See sections 847(2) and 847(8) and Form

income in another tax year. Enter on line 8816, Special Loss Discount Account and Minimum taxable income. The 29a the total NOL carryovers from other Special Estimated Tax Payments for corporation’s taxable income cannot be tax years, but do not enter more than the Insurance Companies, for more less than the largest of the following corporation’s taxable income (after information. amounts. special deductions). Attach a schedule

showing the computation of the NOL • The inversion gain of the corporation Line 32c. Overpaid Estimated for the tax year, if the corporation is an deduction. Complete item 12 on Schedule Tax

K. expatriated entity or a partner in an If the corporation overpaid estimated tax, expatriated entity. For details, see section The following special rules apply. it may be able to get a quick refund by 7874. • A personal service corporation may not filing Form 4466. The overpayment must • The sum of the corporation’s excess carry back an NOL to or from any tax year be at least 10% of the corporation’s inclusions from Schedules Q (Form to which an election under section 444 to expected income tax liability and at least 1066), line 2c, and the corporation’s have a tax year other than a required tax $500. File Form 4466 after the end of the taxable income determined solely with year applies. corporation’s tax year, and no later than respect to its ownership and high-yield • A corporate equity reduction interest the 15th day of the third month after the interests in FASITs. For details, see loss may not be carried back to a tax year end of the tax year. Form 4466 must be sections 860E(a) and 860J. preceding the year of the equity reduction filed before the corporation files its tax Net operating loss (NOL). If line 30 transaction (see section 172(b)(1)(E)). return. (figured without regard to the items listed • If an ownership change (described in

section 382(g)) occurs, the amount of the above under minimum taxable income), is Line 32f

zero or less, the corporation may have an taxable income of a loss corporation that Credit from Form 2439. Enter any may be offset by the pre-change NOL NOL that can be carried back or forward credit from Form 2439, Notice to as a deduction to other tax years. carryovers may be limited. See section Shareholder of Undistributed Long-Term 382 and the related regulations. A loss Generally, a corporation first carries Capital Gains, for the corporation’s share corporation must include the information back an NOL 2 tax years. However, the of the tax paid by a regulated investment statement as provided in Regulations corporation can elect to waive the company (RIC) or a real estate section 1.382-11(a), with its income tax carryback period and instead carry the investment trust (REIT) on undistributed return for each tax year that it is a loss NOL forward to future tax years. See the long-term capital gains included in the corporation in which an ownership shift, instructions for Schedule K, item 11 on corporation’s income. Attach Form 2439 equity structures shift, or other transaction page 20. to Form 1120. described in Temporary Regulations Special rules and exceptions to the section 1.382-2T(a)(2)(i) occur. If the Credit for federal tax on fuels. Enter 2-year carryback period apply to certain corporation makes the the total income tax credit claimed on NOLs. See the Instructions for Form 1139

closing-of-the-books election, see Form 4136, Credit for Federal Tax Paid for details on these special rules and Regulations section 1.382-6(b). on Fuels. Attach Form 4136 to Form other elections that may be available, 1120. The limitations under section 382 do which must be made no later than 6

not apply to certain ownership changes months after the due date (excluding Credit for tax on ozone-depleting

after February 17, 2009, made pursuant extensions) of the corporation’s tax chemicals. Include on line 32f any credit

to a restructuring plan under the return. the corporation is claiming under section

Emergency Economic Stabilization Act of Merchant Marine capital construction 4682(g)(2) for tax on ozone-depleting

2008. See section 382(n). fund. To take a deduction for amounts chemicals. Enter “ODC” next to the entry

For guidance in applying section 382 contributed to a capital construction fund space.

to loss corporations whose instruments (CCF), reduce the amount that would Line 32g. Refundable Credits were acquired by Treasury under certain otherwise be entered on line 30 by the

programs under the Emergency amount of the deduction. On the dotted From Forms 3800 and 8827

Economic Stabilization Act of 2008, see line next to the entry space, enter “CCF” If the corporation elected to claim certain

Notice 2010-2, 2010-2 I.R.B. 251. and the amount of the deduction. For unused research or minimum tax credits

• If a corporation acquires control of more information, see section 7518. instead of claiming any additional

another corporation (or acquires its first-year special depreciation allowance Line 32b. Estimated Tax assets in a reorganization), the amount of for eligible property, see the instructions

pre-acquisition losses that may offset Payments for Forms 3800 and 8827. Enter on line

recognized built-in gain may be limited Enter any estimated tax payments the 32g the amounts from line 19c of Form

(see section 384). corporation made for the tax year. 3800 and line 8c of Form 8827, if

-14- Instructions for Form 1120
applicable. See the instructions for these items, see Pub. 538 and the Instructions costs to be included in ending inventory. If

forms. for Form 3115. the corporation accounts for inventoriable

Corporations that account for items in the same manner as materials Line 32h. Total Payments and supplies that are not incidental, enter inventoriable items in the same manner

Add the amounts on lines 32d through as materials and supplies that are not on line 7 the portion of its raw materials

32g and enter the total on line 32h. incidental can currently deduct and merchandise purchased for resale

expenditures for direct labor and all that is included on line 6 and was not sold Backup withholding. If the corporation during the year. had federal income tax withheld from any indirect costs that would otherwise be

payments it received because, for included in inventory costs. Lines 9a Through 9f. example, it failed to give the payer its Enter amounts paid for all raw Inventory Valuation Methods correct EIN, include the amount withheld materials and merchandise during the tax Inventories can be valued at: in the total for line 32h. Enter the amount year on line 2. The amount the withheld and the words “Backup • Cost, corporation can deduct for the tax year is Withholding” in the blank space above • Cost or market value (whichever is figured on line 8. lower), or line 32h. All filers not using the cash method of • Any other method approved by the IRS

Line 33. Estimated Tax Penalty accounting should see Section 263A that conforms to the requirements of the uniform capitalization rules on page 9 applicable regulations cited on page 16. If Form 2220 is attached, check the box before completing Schedule A. on line 33, and enter any penalty on this However, if the corporation is using the

line. See Estimated tax penalty on page Line 1. Inventory at Beginning cash method of accounting, it is required

4. of Year to use cost.

Line 36 If the corporation is changing its method Generally, a rolling average method

of accounting for the current tax year, it that is used to value inventories for

Direct deposit of refund. If the must refigure last year’s closing inventory financial accounting purposes does not corporation wants its refund directly using its new method of accounting and clearly reflect income for federal income deposited into its checking or savings enter the result on line 1. If there is a tax purposes. However, if a corporation account at any U.S. bank or other difference between last year’s closing uses the average cost method for financial institution instead of having a inventory and the refigured amount, financial accounting purposes, there are check sent to the corporation, complete attach an explanation and take it into two safe harbors under which this method

Form 8050 and attach it to the account when figuring the corporation’s will be deemed to clearly reflect income corporation’s tax return. section 481(a) adjustment. for federal income tax purposes. See

Rev. Proc. 2008-43, 2008-30 I.R.B.186 Line 4. Additional Section 263A and Rev. Proc. 2008-52, 2008-36 I.R.B. Costs Schedule A. 587, or its successor, for details.

An entry is required on this line only for Cost of Goods Sold Corporations that use erroneous corporations that have elected a valuation methods must change to a simplified method of accounting. Generally, inventories are required at the method permitted for federal income tax For corporations that have elected the purposes. Use Form 3115 to make this beginning and end of each tax year if the simplified production method, additional change. production, purchase, or sale of section 263A costs are generally those merchandise is an income-producing On line 9a, check the method(s) used costs, other than interest, that were not factor. for valuing inventories. Under lower of capitalized under the corporation’s cost or market, the term “market” (for However, if the corporation is a method of accounting immediately prior to normal goods) means the current bid qualifying taxpayer or a qualifying small the effective date of section 263A but are price prevailing on the inventory valuation business taxpayer, it can adopt or change now required to be capitalized under date for the particular merchandise in the its accounting method to account for section 263A. For details, see volume usually purchased by the inventoriable items in the same manner Regulations section 1.263A-2(b). taxpayer. For a manufacturer, market as materials and supplies that are not For corporations that have elected the applies to the basic elements of incidental, unless its business is a tax simplified resale method, additional cost—raw materials, labor, and burden. If shelter as defined in section 448(d)(3). section 263A costs are generally those section 263A applies to the taxpayer, the A qualifying taxpayer is a taxpayer costs incurred with respect to the basic elements of cost must reflect the following categories. that, for each prior tax year ending after current bid price of all direct costs and all December 16, 1998, has average annual • Off-site storage or warehousing. indirect costs properly allocable to goods gross receipts of $1 million or less for the • Purchasing. on hand at the inventory date. 3 prior tax years. • Handling, such as processing, Inventory may be valued below cost assembling, repackaging, and A qualifying small business taxpayer is when the merchandise is unsalable at transporting. a taxpayer (a) that, for each prior tax year normal prices or unusable in the normal • General and administrative costs ending on or after December 31, 2000, way because the goods are subnormal (mixed service costs). has average annual gross receipts of $10 due to damage, imperfections, shopwear,

million or less for the 3 prior tax years, For details, see Regulations section etc., within the meaning of Regulations 1.263A-3(d). and (b) whose principal business activity section 1.471-2(c). The goods may be

is not an ineligible activity. Enter on line 4 the balance of section valued at the bona fide selling price, 263A costs paid or incurred during the tax minus the direct cost of disposition (but Under this accounting method, year not includible on lines 2, 3, and 5. not less than scrap value). Bona fide inventory costs for raw materials

Line 5. Other Costs selling price means actual offering of purchased for use in producing finished goods during a period ending not later goods and merchandise purchased for Enter on line 5 any costs paid or incurred than 30 days after inventory date. resale are deductible in the year the during the tax year not entered on lines 2 finished goods or merchandise are sold If this is the first year the Last-in, through 4. (but not before the year the corporation First-out (LIFO) inventory method was

paid for the raw materials or Line 7. Inventory at End of Year either adopted or extended to inventory

merchandise, if it is also using the cash See Regulations sections 1.263A-1 goods not previously valued under the

method). For additional guidance on this through 1.263A-3 for details on figuring LIFO method provided in section 472,

method of accounting for inventoriable the amount of additional section 263A attach Form 970, Application To Use

Instructions for Form 1120 -15-
LIFO Inventory Method, or a statement receive a notice from the RIC specifying • Are received from

with the information required by Form the amount of dividends that qualify for less-than-20%-owned foreign

970. Also check the LIFO box on line 9c. the deduction. corporations, and

On line 9d, enter the amount or the Report so-called dividends or earnings • Qualify for the 70% deduction under

percent of total closing inventories received from mutual savings banks, etc., section 245(a). To qualify for the 70%

covered under section 472. Estimates are deduction, the corporation must own at as interest. Do not treat them as

acceptable. least 10% of the stock of the foreign dividends.

corporation by vote and value. If the corporation changed or extended Line 2, Column (a) its inventory method to LIFO and had to Also include dividends received from

write up the opening inventory to cost in Enter on line 2: a less-than-20%-owned FSC that:

the year of election, report the effect of • Dividends (except those received on • Are attributable to income treated as

the write-up as other income (line 10, debt-financed stock acquired after July effectively connected with the conduct of

page 1), proportionately over a 3-year 18, 1984) that are received from a trade or business within the United

period that begins with the year of the 20%-or-more-owned domestic States (excluding foreign trade income), LIFO election (section 472(d)). corporations subject to income tax and and

that are subject to the 80% deduction Note. Corporations using the LIFO • Qualify for the 70% deduction under under section 243(c), and method that make an S corporation section 245(c)(1)(B). • Taxable distributions from an IC-DISC election or transfer LIFO inventory to an S or former DISC that are considered Line 7, Column (a) corporation in a nonrecognition

transaction may be subject to an eligible for the 80% deduction. Enter the U.S.-source portion of dividends

additional tax attributable to the LIFO that: Line 3, Column (a) recapture amount. See the instructions for • Are received from 20%-or-more-owned Enter the following. Schedule J, line 10, on page 19, and line foreign corporations, and • Dividends received on debt-financed 10, Other Income • Qualify for the 80% deduction under , on page 8. stock acquired after July 18, 1984, from section 245(a). For more information on inventory domestic and foreign corporations subject

valuation methods, see Pub. 538. For to income tax that would otherwise be Also include dividends received from a

more information on changes in the 20%-or-more-owned FSC that: subject to the dividends-received

method of accounting for inventory, see deduction under section 243(a)(1), • Are attributable to income treated as

Form 3115 and the Instructions for Form 243(c), or 245(a). Generally, effectively connected with the conduct of 3115. debt-financed stock is stock that the a trade or business within the United

corporation acquired by incurring a debt States (excluding foreign trade income), Schedule C. Dividends (for example, it borrowed money to buy and

the stock). • Qualify for the 80% deduction under and Special Deductions • Dividends received from a RIC on section 245(c)(1)(B). For purposes of the 20% ownership test debt-financed stock. The amount of

on lines 1 through 7, the percentage of dividends eligible for the Line 8, Column (a)

stock owned by the corporation is based dividends-received deduction is limited by Enter dividends received from wholly on voting power and value of the stock. section 854(b). The corporation should owned foreign subsidiaries that are Preferred stock described in section receive a notice from the RIC specifying eligible for the 100% deduction under 1504(a)(4) is not taken into account. the amount of dividends that qualify for section 245(b). Corporations filing a consolidated return the deduction. In general, the deduction under section should see Regulations sections Line 3, Columns (b) and (c) 245(b) applies to dividends paid out of the 1.1502-13, 1.1502-26, and 1.1502-27 earnings and profits of a foreign before completing Schedule C. Dividends received on debt-financed corporation for a tax year during which: stock acquired after July 18, 1984, are not Corporations filing a consolidated • All of its outstanding stock is directly or return must not report as dividends on entitled to the full 70% or 80% indirectly owned by the domestic Schedule C any amounts received from dividends-received deduction. The 70% corporation receiving the dividends, and or 80% deduction is reduced by a corporations within the tax consolidation • All of its gross income from all sources percentage that is related to the amount group. Such dividends are eliminated in is effectively connected with the conduct of debt incurred to acquire the stock. See consolidation rather than offset by the of a trade or business within the United section 246A. Also see section 245(a) dividends-received deduction. States. before making this computation for an Line 1, Column (a) additional limitation that applies to Line 9, Column (c) Enter dividends (except those received on dividends received from foreign Generally, line 9, column (c), cannot debt-financed stock acquired after July corporations. Attach a schedule to Form exceed the amount from the worksheet 18, 1984–see section 246A) that are: 1120 showing how the amount on line 3, below. However, in a year in which an • Received from less-than-20%-owned column (c), was figured. NOL occurs, this limitation does not apply domestic corporations subject to income Line 4, Column (a) even if the loss is created by the tax, and Enter dividends received on preferred dividends-received deduction. See • Qualified for the 70% deduction under sections 172(d) and 246(b). stock of a less-than-20%-owned public section 243(a)(1). utility that is subject to income tax and is Also include on line 1 the following. Line 10, Columns (a) and (c) allowed the deduction provided in section • Taxable distributions from an IC-DISC Small business investment companies 247 for dividends paid. or former DISC that are designated as operating under the Small Business

eligible for the 70% deduction and certain Line 5, Column (a) Investment Act of 1958 (see 15 U.S.C.

dividends of Federal Home Loan Banks. Enter dividends received on preferred 661 and following) must enter dividends

See section 246(a)(2). stock of a 20%-or-more-owned public that are received from domestic

• Dividends (except those received on utility that is subject to income tax and is corporations subject to income tax even

debt-financed stock acquired after July allowed the deduction provided in section though a deduction is allowed for the

18, 1984) from a regulated investment 247 for dividends paid. entire amount of those dividends. To

company (RIC). The amount of dividends claim the 100% deduction on line 10,

eligible for the dividends-received Line 6, Column (a) column (c), the company must file with its

deduction under section 243 is limited by Enter the U.S.-source portion of dividends return a statement that it was a federal

section 854(b). The corporation should that: licensee under the Small Business

-16- Instructions for Form 1120
Investment Act of 1958 at the time it b. Dividends attributable to periods

received the dividends. Line 16, Column (a) totaling more than 366 days that the

Enter taxable distributions from an corporation received on any share of

Line 11, Columns (a) and (c) IC-DISC or former DISC that are preferred stock held for less than 91 days

Enter only dividends that qualify under designated as not eligible for a during the 181-day period that began 90

section 243(b) for the 100% dividends-received deduction. days before the ex-dividend date. When

dividends-received deduction described in counting the number of days the

section 243(a)(3). Corporations taking this No deduction is allowed under section corporation held the stock, you cannot

deduction are subject to the provisions of 243 for a dividend from an IC-DISC or count certain days during which the

section 1561. former DISC (as defined in section corporation’s risk of loss was diminished. 992(a)) to the extent the dividend: See section 246(c)(4) and Regulations The 100% deduction does not apply to • Is paid out of the corporation’s section 1.246-5 for more details. affiliated group members that are joining accumulated IC-DISC income or Preferred dividends attributable to periods in the filing of a consolidated return. previously taxed income, or totaling less than 367 days are subject to

• the 46-day holding period rule above. Is a deemed distribution under section Line 12, Column (a) 995(b)(1). c. Dividends on any share of stock to Enter dividends from FSCs that are the extent the corporation is under an attributable to foreign trade income and Line 17, Column (a) obligation (including a short sale) to make that are eligible for the 100% deduction Include the following. related payments with respect to positions provided in section 245(c)(1)(A). 1. Dividends (other than capital gain in substantially similar or related property.

Line 13, Column (a) distributions reported on Schedule D 5. Any other taxable dividend income

(Form 1120) and exempt-interest not properly reported elsewhere on Enter foreign dividends not reportable on dividends) that are received from RICs Schedule C. lines 3, 6, 7, 8, 11, or 12 of column (a). and that are not subject to the 70% Include on line 13 the corporation’s share deduction. of the ordinary earnings of a qualified If patronage dividends or per-unit electing fund from line 1c of Form 8621, 2. Dividends from tax-exempt retain allocations are included on line 17, Return by a Shareholder of a Passive organizations. identify the total of these amounts in a Foreign Investment Company or 3. Dividends (other than capital gain schedule attached to Form 1120. Qualifying Electing Fund. Exclude distributions) received from a REIT that,

distributions of amounts constructively for the tax year of the trust in which the

taxed in the current year or in prior years dividends are paid, qualifies under Line 18, Column (c) under subpart F (sections 951 through sections 856 through 860. Section 247 allows public utilities a 964). 4. Dividends not eligible for a deduction of 40% of the smaller of 

dividends-received deduction, which (a) dividends paid on their preferred stock Line 14, Column (a) include the following. during the tax year, or (b) taxable income Include income constructively received a. Dividends received on any share of computed without regard to this from CFCs under subpart F. This amount stock held for less than 46 days during deduction. In a year in which an NOL should equal the total subpart F income the 91-day period beginning 45 days occurs, compute the deduction without reported on Schedule I of Form 5471, before the ex-dividend date. When regard to section 247(a)(1)(B). See Information Return of U.S. Persons With counting the number of days the section 172(d). Respect to Certain Foreign Corporations. corporation held the stock, you cannot

count certain days during which the Line 15, Column (a) corporation’s risk of loss was diminished. Schedule J. 

Include gross-up for taxes deemed paid See section 246(c)(4) and Regulations

under sections 902 and 960. section 1.246-5 for more details. Tax Computation

Line 1

Keep for Your If the corporation is a member of a

Worksheet for Schedule C, line 9 Records controlled group, check the box on line 1.

Complete and attach Schedule O (Form

1120), Consent Plan and Apportionment 1. Refigure line 28, page 1, Form 1120, without any domestic Schedule for a Controlled Group. production activities deduction, any adjustment under section 1059,

and without any capital loss carryback to the tax year under section Component members of a controlled

1212(a)(1) ..................................... . 1. group must use Schedule O to report the

2. Complete lines 10, 11, and 12, column (c), and enter the total here 2. apportionment of taxable income, income

3. Subtract line 2 from line 1 .......................... . 3. tax, and certain tax benefits between the

4. Multiply line 3 by 80% ............................. . 4. members of the group. See Schedule O

5. Add lines 2, 5, 7, and 8, column (c), and the part of the deduction and the Instructions for Schedule O for

on line 3, column (c), that is attributable to dividends from more information.

20%-or-more-owned corporations ..................... . 5.

6. Enter the smaller of line 4 or 5. If line 5 is greater than line 4, stop Line 2 here; enter the amount from line 6 on line 9, column (c), and do not

complete the rest of this worksheet .................... . 6. If the corporation is a member of a

7. Enter the total amount of dividends from 20%-or-more-owned controlled group and is filing Schedule O

corporations that are included on lines 2, 3, 5, 7, and 8, column (a) 7. (Form 1120), enter the corporation’s tax

8. Subtract line 7 from line 3 .......................... . 8. from Part III of Schedule O. Most

9. Multiply line 8 by 70% ............................. . 9. corporations that are not members of a

10. Subtract line 5 above from line 9, column (c) .............. . 10. controlled group and not filing a

11. Enter the smaller of line 9 or line 10 .................... . 11. consolidated return figure their tax by

12. Dividends-received deduction after limitation (sec. 246(b)). Add using the Tax Rate Schedule below.

lines 6 and 11. Enter the result here and on line 9, column (c) . . . 12. Qualified personal service corporations

should see the instructions on page 18.

Instructions for Form 1120 -17-
Tax Rate Schedule combined tax on line 2. Attach Form Form 1118, Foreign Tax Credit –

1120-L as a schedule (and identify it as Corporations.

If taxable income (line 30, Form 1120) on page 1 such), together with the annual is: Line 5b statements and schedules required to be

filed with Form 1120-L. See Regulations Enter any qualified electric vehicle Of the section 1.6012-2(c)(1)(ii). passive activity credits from prior years But not amount

Over— over— Tax is: over— allowed for the current tax year from Form Exception for insurance companies 8834, Qualified Plug-in Electric and filing their Federal income tax returns $0 $50,000 15% $0 Electric Vehicle Credit, line 29. Also electronically. If an insurance company 50,000 75,000 $ 7,500 + 25% 50,000 include on line 5b any credits from Form files its income tax return electronically, it 75,000 100,000 13,750 + 34% 75,000 5735, American Samoa Economic should not include the annual statements 100,000 335,000 22,250 + 39% 100,000 Development Credit. See the Instructions

335,000 10,000,000 113,900 + 34% 335,000 and schedules required to be filed with for Form 5735.

10,000,000 15,000,000 3,400,000 + 35% 10,000,000 Form 1120-L. However, such statements

15,000,000 18,333,333 5,150,000 + 38% 15,000,000 must be available at all times for Line 5c

18,333,333 - - - - - 35% 0 inspection by the IRS and retained for so Enter on line 5c the allowable credit from

long as such statements may be material Form 3800, Part II, line 32.

Qualified personal service corporation. in the administration of any internal The corporation is required to file Form A qualified personal service corporation revenue law. 3800, General Business Credit, to claim is taxed at a flat rate of 35% on taxable Deferred tax under section 1291. If the most business credits. See the income. If the corporation is a qualified corporation was a shareholder in a Instructions for Form 3800 for exceptions. personal service corporation, check the passive foreign investment company For a list of allowable credits, see Form box on line 2 even if the corporation has (PFIC) and received an excess 3800. Also, see the applicable credit form no tax liability. distribution or disposed of its investment and its instructions.

A corporation is a qualified personal in the PFIC during the year, it must

include the increase in taxes due under Line 5d service corporation if it meets both of the

following tests. section 1291(c)(2) in the total for line 2. To figure the minimum tax credit and any

On the dotted line next to line 2, enter carryforward of that credit, use Form 1. Substantially all of the corporation’s “Section 1291” and the amount. 8827, Credit for Prior Year Minimum activities involve the performance of Tax—Corporations. services in the fields of health, law, Do not include on line 2 any interest

engineering, architecture, accounting, due under section 1291(c)(3). Instead, Line 5e

actuarial science, performing arts, or show the amount of interest owed in the Enter the allowable credits from Form consulting. bottom margin of page 1, Form 1120, and 8912, Credit to Holders of Tax Credit 2. At least 95% of the corporation’s enter “Section 1291 interest.” For details, Bonds, line 18. stock, by value, is directly or indirectly see Form 8621.

owned by Line 8 Additional tax under section 197(f). A

a. Employees performing the corporation that elects to pay tax on the A corporation is taxed as a personal services, gain from the sale of an intangible under holding company under section 542 if: b. Retired employees who had the related person exception to the • At least 60% of its adjusted ordinary performed the services listed above, anti-churning rules should include any gross income for the tax year is personal

c. Any estate of an employee or additional tax due under section holding company income, and retiree described above, or 197(f)(9)(B) in the total for line 2. On the • At any time during the last half of the d. Any person who acquired the stock dotted line next to line 2, enter “Section tax year more than 50% in value of its of the corporation as a result of the death 197” and the amount. outstanding stock is directly or indirectly of an employee or retiree (but only for the owned by five or fewer individuals. 2-year period beginning on the date of the Line 3 See Schedule PH (Form 1120) for employee’s or retiree’s death). definitions and details on how to figure A corporation that is not a small Alternative tax on qualified timber the tax. corporation exempt from the AMT gain. If the corporation is a partner in a

CAUTION

may be required to file Form 4626, Line 9

!

partnership and had net capital gain and Alternative Minimum Tax—Corporations, Include any of the following taxes and a distributive share of a qualified timber if it claims certain credits, even though it interest in the total on line 9. Check the gain (as defined in section 1201(b)(2)) does not owe any AMT. See Form 4626 appropriate box(es) for the form, if any, from the partnership for the period that for details. used to compute the total. began before May 23, 2009, the

corporation may be eligible for an Unless the corporation is treated as a Recapture of investment credit. If the

alternative tax under section 1201(b)(1) small corporation exempt from the AMT, it corporation disposed of investment credit

on the portion of its taxable income may owe the AMT if it has any of the property or changed its use before the

attributable to the qualified timber gain. adjustments and tax preference items end of its useful life or recovery period, or

Enter the alternative tax, if any, on listed on Form 4626. The corporation is required to recapture a qualifying

Schedule J, line 2. Attach a statement must file Form 4626 if its taxable income therapeutic discovery project grant, enter

showing the computation of the tax. You (or loss) before the NOL deduction, the increase in tax from Form 4255,

may use Part IV of the 2009 Schedule D combined with these adjustments and tax Recapture of Investment Credit.

preference items is more than the smaller (Form 1120) as a guide. See section Recapture of low-income housing

1201(b). of $40,000 or the corporation’s allowable credit. If the corporation disposed of

Mutual savings bank conducting life exemption amount (from Form 4626). For property (or there was a reduction in the this purpose, taxable income does not qualified basis of the property) for which it insurance business. The tax under include the NOL deduction. section 594 consists of the sum of (a) a took the low-income housing credit, it may

partial tax computed on Form 1120 on the See Form 4626 for definitions and owe a tax. See Form 8611, Recapture of

Low-Income Housing Credit. taxable income of the bank determined details on how to figure the tax.

without regard to income or deductions Interest due under the look-back

allocable to the life insurance department, Line 5a methods. If the corporation used the

and (b) a partial tax on the taxable To find out when a corporation can take look-back method for certain long-term

income computed on Form 1120-L of the the credit for payment of income tax to a contracts, see Form 8697, Interest

life insurance department. Enter the foreign country or U.S. possession, see Computation Under the Look-Back

-18- Instructions for Form 1120
Method for Completed Long-Term tax and the deferred amount. Also see the member of a controlled group for this

Contracts, for information on figuring the instructions regarding LIFO recapture purpose.

interest the corporation may have to amount on page 8 under Line 10. Other Affiliated group. An affiliated group is include. Income. one or more chains of includible

The corporation may also have to Step 1. Figure the tax on the corporations (section 1504(a)) connected include interest due under the look-back corporation’s income including the LIFO through stock ownership with a common method for property depreciated under recapture amount. (Complete Schedule J parent corporation. The common parent the income forecast method. See Form through line 9, but do not enter a total on must be an includible corporation and the 8866, Interest Computation Under the line 10 yet.) following requirements must be met. Look-Back Method for Property Step 2. Using a separate worksheet, 1. The common parent must own Depreciated Under the Income Forecast complete Schedule J again, but do not directly stock that represents at least 80% Method. include the LIFO recapture amount in the of the total voting power and at least 80% Alternative tax on qualifying shipping corporation’s taxable income. of the total value of the stock of at least

activities. Enter any alternative tax on one of the other includible corporations. Step 3. Compare the tax in Step 2 to qualifying shipping activities from Form the tax in Step 1. (The difference between 2. Stock that represents at least 80% 8902. Check the box for Form 8902. the two is the LIFO recapture tax.) of the total voting power and at least 80%

Other. Additional taxes and interest of the total value of the stock of each of Step 4. Multiply the amount figured in amounts can be included in the total the other corporations (except for the Step 3 by 75%. (The result is the deferred entered on line 9. Check the box for common parent) must be owned directly LIFO recapture tax.) “Other” if the corporation includes any by one or more of the other includible

additional taxes and interest such as the How to report. Attach a schedule corporations.

items discussed below. See How to report showing the computation of each item

below for details on reporting these included in, or subtracted from, the total For this purpose, the term “stock”

amounts on an attached schedule. for line 10. On the dotted line next to line generally does not include any stock that 

• Recapture of Indian employment credit. 10, specify (a) the applicable Code (a) is nonvoting, (b) is nonconvertible, 

Generally, if an employer terminates the section, (b) the type of tax, and (c) enter (c) is limited and preferred as to dividends

employment of a qualified employee less the amount of tax. For example, if the and does not participate significantly in

than 1 year after the date of initial corporation is deferring a $100 LIFO corporate growth, and (d) has redemption

employment, any Indian employment recapture tax, subtract this amount from and liquidation rights that do not exceed

credit allowed for a prior tax year because the total on line 10, then enter “Section the issue price of the stock (except for a

of wages paid or incurred to that 1363-Deferred Tax-$100” on the dotted reasonable redemption or liquidation

employee must be recaptured. For line next to line 10. premium). See section 1504(a)(4).

details, see Form 8845 and section 45A. Question 4 • Recapture of new markets credit (see

Form 8874). Schedule K. Constructive Ownership of the • Recapture of employer-provided Other Information Corporation childcare facilities and services credit

(see Form 8882). Complete all items that apply to the Note. For supplemental information and

• Tax and interest on a nonqualified corporation. examples of reasonable methods for

withdrawal from a capital construction determining the percentage interest Question 2 owned in a partnership for purposes of fund (section 7518(g)). 

• See the list of Principal Business Activity Question 4 and Question 5, go to www. Interest on deferred tax attributable to

(a) installment sales of certain timeshares Codes beginning on page 22 of the irs.gov. Click on “Businesses”, click on

and residential lots (section 453(l)(3)) and instructions. Using the list of codes and “Partnerships”, and click on “Form 1065

activities, determine from which activity Frequently Asked Questions.” (b) certain nondealer installment

obligations (section 453A(c)). the corporation derives the highest For purposes of question 4, the • Interest due on deferred gain (section percentage of its total receipts. Enter on constructive ownership rules of section 1260(b)). lines 2a, 2b, and 2c the principal business 267(c) (excluding section 267(c)(3)) apply activity code number, the corporation’s How to report. If the corporation to ownership of interests in corporate business activity, and a description of the checked the “Other” box, attach a stock and ownership of interests in the principal product or service of the schedule showing the computation of profit, loss, or capital of a partnership. If corporation. each item included in the total for line 9 the corporation checked “Yes” to question and identify the applicable Code section Question 3 4a or 4b, complete and attach new and the type of tax or interest. Check the “Yes” box for question 3 if: Schedule G (Form 1120), Information on

Certain Persons Owning the Line 10 • The corporation is a subsidiary in an Corporation’s Voting Stock. affiliated group (defined below), but is not Include any deferred tax on the filing a consolidated return for the tax year termination of a section 1294 election Question 5 with that group, or applicable to shareholders in a qualified

electing fund in the amount entered on • The corporation is a subsidiary in a Constructive Ownership of Other parent-subsidiary controlled group. For a line 10. See Form 8621, Part V, and How Entities definition of a parent-subsidiary controlled to report, below. For purposes of determining the group, see the Instructions for Schedule Subtract the following amounts from O (Form 1120). corporation’s constructive ownership of

the total for line 10. other entities, the constructive ownership Any corporation that meets either of • Deferred tax on the corporation’s share rules of section 267(c) (excluding section the requirements above should check the of undistributed earnings of a qualified 267(c)(3)) apply to ownership of interests “Yes” box. This applies even if the electing fund (see Form 8621, Part II). in partnerships and trusts as well as corporation is a subsidiary member of one • Deferred LIFO recapture tax (section corporate stock. Generally, if an entity (a group and the parent corporation of 1363(d)). This tax is the part of the LIFO corporation, partnership, or trust) is another. recapture tax that will be deferred and owned, directly or indirectly, by or for

paid with Form 1120S in the future. To Note. If the corporation is an “excluded another entity (corporation, partnership,

figure the deferred tax, first figure the total member” of a controlled group (see estate, or trust), the owned entity is

LIFO recapture tax. Follow the steps definition in the Instructions for Schedule considered to be owned proportionately

below to figure the total LIFO recapture O (Form 1120)), it is still considered a by or for the owners (shareholders,

Instructions for Form 1120 -19-
partners, or beneficiaries) of the owning profit, loss, or capital of Partnership C and foreign-owned corporation that had a

entity. owns, directly, 15% of the voting stock of reportable transaction with a foreign or

Corporation D. Partnership B owns, domestic related party during the tax year Question 5a directly, a 70% interest in the profit, loss, must file Form 5472. See Form 5472 for

List each foreign or domestic corporation or capital of Partnership C and owns, filing instructions and penalties for failure not included on Form 851, Affiliations directly, 70% of the voting stock of to file.

Schedule, in which the corporation, at the Corporation D. Corporation A owns, end of the tax year, owned directly 20% indirectly, through Partnership B, a 35% Item 9

or more, or owned, directly or indirectly, interest (50% of 70%) in the profit, loss, or Show any tax-exempt interest received or 50% or more of the total voting power of capital of Partnership C and owns, accrued. Include any exempt-interest all classes of stock entitled to vote. indirectly, 35% of the voting stock of dividends received as a shareholder in a

Indicate the name of the corporation, EIN Corporation D. Corporation A owns, mutual fund or other RIC. Also, if (if any), country of incorporation, and the directly or indirectly, a 50% interest in the required, include the same amount on percentage interest owned, directly or profit, loss, or capital of Partnership C Schedule M-1, line 7 (or Schedule M-3, indirectly, in the total voting power. List (15% directly and 35% indirectly), and Part II, line 13, if applicable). the parent corporation of an affiliated owns, directly or indirectly, 50% of the group of corporations filing a consolidated voting stock of Corporation D (15% Item 11

tax return rather than the subsidiary directly and 35% indirectly). If the corporation has an NOL, it generally members except for subsidiary members can elect to waive the entire carryback Corporation A reports in its answer to in which an interest is owned, directly or period for the NOL and instead carry the question 5a that it owns, directly or indirectly, independent of the interest NOL forward to future tax years. To do indirectly, 50% of the voting stock of owned, directly or indirectly, in the parent so, check the box on line 11 and file the Corporation D. Corporation A reports in corporation. List a corporation owned tax return by its due date, including its answer to question 5b that it owns, through a disregarded entity rather than extensions. Do not attach the statement directly, an interest of 50% in the profit, the disregarded entity. described in Temporary Regulations loss, or capital of Partnership B and section 301.9100-12T. Once made, the Question 5b owns, directly or indirectly, 50% of the election is irrevocable. List each foreign or domestic partnership profit, loss, or capital of Partnership C.

in which the corporation, at the end of the Corporations filing a consolidated Question 7 tax year, owned directly an interest of return that elects to waive the entire

20% or more, or owned, directly or Check the “Yes” box if one foreign person carryback period for the group must also owned at least 25% of (a) the total voting attach the statement required by indirectly, an interest of 50% or more in power of all classes of stock of the Regulations section 1.1502-21(b)(3) or the profit, loss, or capital of the corporation entitled to vote, or (b) the total partnership. List each trust in which the the election will not be valid.

value of all classes of stock of the corporation, at the end of the tax year, corporation. Item 12 owned directly an interest of 20% or

more, or owned, directly or indirectly, an The constructive ownership rules of Enter the amount of the NOL carryover to

the tax year from prior years, even if interest of 50% or more in the trust section 318 apply in determining if a

corporation is foreign owned. See section some of the loss is used to offset income beneficial interest. Indicate the name, EIN

6038A(c)(5) and the related regulations. on this return. The amount to enter is the (if any), country of organization, and the

maximum percentage interest owned, total of all NOLs generated in prior years Enter on line 7a the percentage owned but not used to offset income (either as a directly or indirectly, in the profit, loss, or by the foreign person specified in carryback or carryover) to a tax year prior capital of the partnership at the end of the question 7. On line 7b, enter the name of to 2010. Do not reduce the amount by partnership tax year, or, for a trust, the the owner’s country. any NOL deduction reported on line 29a. percentage interest owned in the trust Note. If there is more than one beneficial interest. List a partnership or 25%-or-more foreign owner, complete Question 14 trust owned through a disregarded entity lines 7a and 7b for the foreign person with A corporation that files Form 1120 must rather than the disregarded entity. the highest percentage of ownership. file Schedule UTP (Form 1120) with its Maximum percentage owned in income tax return if: Foreign person. The term “foreign partnership profit, loss, or capital. For • The corporation has assets that equal person” means: the purposes of question 5b, the term or exceed $100 million; • A foreign citizen or nonresident alien, “maximum percentage owned” means the • The corporation or a related party • An individual who is a citizen of a U.S. highest percentage of interest in a issued audited financial statements possession (but who is not a U.S. citizen partnership’s profit, loss, or capital as of reporting all or a portion of the or resident), the end of the partnership’s tax year, as corporation’s operations for all or a • A foreign partnership, determined under the partnership portion of the corporation’s tax year; and • A foreign corporation, agreement, when taking into account the • The corporation has one or more tax • Any foreign estate or trust within the constructive ownership rules on page 19. meaning of section 7701(a)(31), or positions that must be reported on If the partnership agreement does not Schedule UTP. • A foreign government (or one of its express the partner’s share of profit, loss,

and capital as fixed percentages, use a agencies or instrumentalities) to the Attach Schedule UTP to the

extent that it is engaged in the conduct of corporation’s income tax return. Do not reasonable method in arriving at the

percentage items for the purposes of a commercial activity as described in file it separately. A taxpayer that files a

completing question 5b. Such method section 892. protective Form 1120 must also file

must be consistent with the partnership Owner’s country. For individuals, the Schedule UTP if it satisfies the

requirements set forth above. agreement. The method used to compute term “owner’s country” means the country

a percentage share of profit, loss, and of residence. For all others, it is the For details, see the Instructions for capital must be applied consistently from country where incorporated, organized, Schedule UTP.

year to year. Maintain records to support created, or administered.

the determination of the share of profits, Requirement to file Form 5472. If the

losses, and share of capital. corporation checked “Yes” it may have to Schedule L. 

Example. Corporation A owns, file Form 5472, Information Return of a

directly, a 50% interest in the profit, loss, 25% Foreign Owned U.S. Corporation or Balance Sheets per Books

or capital of Partnership B. Corporation A a Foreign Corporation Engaged in a U.S. The balance sheets should agree with the

also owns, directly, a 15% interest in the Trade or Business. Generally, a 25% corporation’s books and records.

-20- Instructions for Form 1120
Corporations with total receipts (line 1a Line 26 filing Form 1120 that is not required to file

plus lines 4 through 10 on page 1) and Schedule M-3 may voluntarily file Some examples of adjustments to report total assets at the end of the tax year less Schedule M-3 instead of Schedule M-1. on this line include: than $250,000 are not required to See the Instructions for Schedule M-3 • Unrealized gains and losses on complete Schedules L, M-1, and M-2 if (Form 1120) for more information. securities held “available for sale.” the “Yes” box on Schedule K, question

13, is checked. If the corporation is • Foreign currency translation

adjustments. Line 5c required to complete Schedule L, include

• The excess of additional pension Include any of the following. total assets reported on Schedule L, line

15, column (d), on page 1, item D. liability over unrecognized prior service • Meal and entertainment expenses not

cost. deductible under section 274(n).

Corporations with total assets • Guarantees of employee stock (ESOP) • Expenses for the use of an

non-consolidated (or consolidated for all debt. entertainment facility.

corporations included within the tax • Compensation related to employee • The part of business gifts over $25.

consolidation group) of $10 million or stock award plans. • Expenses of an individual over $2,000, more on the last day of the tax year must which are allocable to conventions on

complete Schedule M-3 (Form 1120) If the total adjustment to be entered on cruise ships. instead of Schedule M-1. See the line 26 is a negative amount, enter the • Employee achievement awards over separate Instructions for Schedule M-3 amount in parentheses. $400. (Form 1120) for provisions that also affect • The cost of entertainment tickets over Schedule L. face value (also subject to 50% limit Schedule M-1. under section 274(n)). If filing a consolidated return, report Reconciliation of Income • The cost of skyboxes over the face total consolidated assets, liabilities, and value of nonluxury box seat tickets. shareholder’s equity for all corporations (Loss) per Books With • The part of luxury water travel joining in the return. See Consolidated expenses not deductible under section Return on page 6 of these instructions. Income per Return 274(m). Corporations with total receipts (line 1a • Expenses for travel as a form of Line 1 plus lines 4 through 10 on page 1) and education. total assets at the end of the tax year less Include certificates of deposit as cash on • Other nondeductible travel and than $250,000 are not required to this line. entertainment expenses. complete Schedules L, M-1, and M-2 if

the “Yes” box on Schedule K, question

Line 5 13, is checked. For more information, see Pub. 542.

Include on this line: Corporations with total assets • State and local government obligations, non-consolidated (or consolidated for all Line 7

the interest on which is excludable from corporations included within the tax Report any tax exempt interest received gross income under section 103(a), and consolidation group) of $10 million or or accrued, including any exempt-interest

• Stock in a mutual fund or other RIC that more on the last day of the tax year must dividends received as a shareholder in a

distributed exempt-interest dividends complete Schedule M-3 (Form 1120) mutual fund or other RIC. Also report this

during the tax year of the corporation. instead of Schedule M-1. A corporation same amount on Schedule K, item 9.

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 these laws and to allow us to

figure and collect the right amount of tax.

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 65 hr., 31 min. 41 hr., 16 min. 71 hr., 8 min. 7 hr., 46 min.

Sch B (1120) 3 hr., 06 min. 1 hr. 1 hr., 5 min. - - - - -

Sch. D (1120) 9 hr., 05 min. 3 hr., 55 min. 6 hr., 5 min. 32 min.

Sch G (1120) 2 hr., 37 min. 30 min. 34 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) 13 hr., 23 min. 2 hr., 5 min. 2 hr., 23 min. - - - - -

Sch. PH (1120) 12 hr., 54 min. 4 hr., 18 min. 6 hr., 34 min. 32 min.

Sch UTP (1120) 2 hr., 48 min. 36 min. 34 min. - - - - -

If you have comments concerning the accuracy of these time estimates or suggestions for making these forms 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, see Where To File on page 3.

Instructions for Form 1120 -21-
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, Codes the largest percentage of its “total receipts.” Total lines 2a, 2b, and 2c. For the business activity code

receipts is defined as the sum of gross receipts or number, enter on line 2a the six digit code selected

sales (page 1, line 1a) plus all other income (page 1, from the list below. On the next line (Form 1120, This list of principal business activities and their lines 4 through 10). If the company purchases raw Schedule K, line 2b), enter the company’s business associated codes is designed to classify an materials and supplies them to a subcontractor to activity. Finally, enter a brief description of the enterprise by the type of activity in which it is

engaged to facilitate the administration of the produce the finished product, but retains title to the principal product or service of the company on Form

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

Agriculture, Forestry, Fishing Heavy and Civil Engineering Wood Product Manufacturing 332810 Coating, Engraving, Heat

Construction 321110 Sawmills & Wood Treating, & Allied Activities and Hunting 237100 Utility System Construction Preservation 332900 Other Fabricated Metal Crop Production 237210 Land Subdivision 321210 Veneer, Plywood, & Product Mfg 111100 Oilseed & Grain Farming 237310 Highway, Street, & Bridge Engineered Wood Product Machinery Manufacturing 111210 Vegetable & Melon Farming Construction Mfg 333100 Agriculture, Construction, & (including potatoes & yams) 237990 Other Heavy & Civil 321900 Other Wood Product Mfg Mining Machinery Mfg 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

238100 Foundation, Structure, & Mills Industry Machinery Mfg 111900 Other Crop Farming Building Exterior Contractors 322200 Converted Paper Product Mfg 333410 Ventilation, Heating, (including tobacco, cotton, (including framing carpentry, Printing and Related Support Air-Conditioning, & sugarcane, hay, peanut, masonry, glass, roofing, & Activities Commercial Refrigeration sugar beet & all other crop siding) Equipment Mfg farming) 323100 Printing & Related Support 238210 Electrical Contractors Activities 333510 Metalworking Machinery Mfg Animal Production 238220 Plumbing, Heating, & Petroleum and Coal Products 333610 Engine, Turbine & Power 112111 Beef Cattle Ranching & Air-Conditioning Contractors Manufacturing Transmission Equipment Mfg Farming 238290 Other Building Equipment 333900 Other General Purpose 112112 Cattle Feedlots 324110 Petroleum Refineries Contractors Machinery Mfg (including integrated) 112120 Dairy Cattle & Milk 238300 Building Finishing 324120 Asphalt Paving, Roofing, & Computer and Electronic Product Production Contractors (including Saturated Materials Mfg Manufacturing 112210 Hog & Pig Farming drywall, insulation, painting, 324190 Other Petroleum & Coal 334110 Computer & Peripheral 112300 Poultry & Egg Production wallcovering, flooring, tile, & Products Mfg Equipment Mfg 112400 Sheep & Goat Farming finish carpentry) Chemical Manufacturing 334200 Communications Equipment 112510 Aquaculture (including 238900 Other Specialty Trade Mfg Contractors (including site 325100 Basic Chemical Mfg shellfish & finfish farms & 334310 Audio & Video Equipment hatcheries) preparation) 325200 Resin, Synthetic Rubber, & Mfg Artificial & Synthetic Fibers & 112900 Other Animal Production 334410 Semiconductor & Other Manufacturing Filaments Mfg Forestry and Logging Electronic Component Mfg 325300 Pesticide, Fertilizer, & Other 113110 Timber Tract Operations Food Manufacturing Agricultural Chemical Mfg 334500 Navigational, Measuring,

113210 Forest Nurseries & Gathering 311110 Animal Food Mfg Electromedical, & Control 325410 Pharmaceutical & Medicine of Forest Products 311200 Grain & Oilseed Milling Instruments Mfg Mfg 113310 Logging 311300 Sugar & Confectionery 334610 Manufacturing & 325500 Paint, Coating, & Adhesive Product Mfg Reproducing Magnetic & Fishing, Hunting and Trapping Mfg Optical Media 114110 Fishing 311400 Fruit & Vegetable Preserving 325600 Soap, Cleaning Compound, & & Specialty Food Mfg Electrical Equipment, Appliance, and 114210 Hunting & Trapping Toilet Preparation Mfg 311500 Dairy Product Mfg Component Manufacturing Support Activities for Agriculture 325900 Other Chemical Product &

311610 Animal Slaughtering and 335100 Electric Lighting Equipment and Forestry Preparation Mfg Processing Mfg 115110 Support Activities for Crop Plastics and Rubber Products

311710 Seafood Product Preparation 335200 Household Appliance Mfg Production (including cotton Manufacturing & Packaging 335310 Electrical Equipment Mfg ginning, soil preparation, 326100 Plastics Product Mfg planting, & cultivating) 311800 Bakeries & Tortilla Mfg 335900 Other Electrical Equipment & 326200 Rubber Product Mfg 311900 Other Food Mfg (including Component Mfg 115210 Support Activities for Animal Nonmetallic Mineral Product Production coffee, tea, flavorings & Transportation Equipment Manufacturing seasonings) Manufacturing 115310 Support Activities For 327100 Clay Product & Refractory Forestry Beverage and Tobacco Product 336100 Motor Vehicle Mfg Mfg Manufacturing 336210 Motor Vehicle Body & Trailer 327210 Glass & Glass Product Mfg Mining 312110 Soft Drink & Ice Mfg Mfg 327300 Cement & Concrete Product

211110 Oil & Gas Extraction 312120 Breweries 336300 Motor Vehicle Parts Mfg Mfg

212110 Coal Mining 312130 Wineries 336410 Aerospace Product & Parts 327400 Lime & Gypsum Product Mfg 312140 Distilleries Mfg 212200 Metal Ore Mining 327900 Other Nonmetallic Mineral

312200 Tobacco Manufacturing 336510 Railroad Rolling Stock Mfg 212310 Stone Mining & Quarrying Product Mfg 336610 Ship & Boat Building 212320 Sand, Gravel, Clay, & Textile Mills and Textile Product Primary Metal Manufacturing Ceramic & Refractory Mills 336990 Other Transportation 331110 Iron & Steel Mills & Ferroalloy Minerals Mining & Quarrying Equipment Mfg 313000 Textile Mills Mfg 212390 Other Nonmetallic Mineral 314000 Textile Product Mills Furniture and Related Product 331200 Steel Product Mfg from Mining & Quarrying Manufacturing Apparel Manufacturing Purchased Steel

213110 Support Activities for Mining 337000 Furniture & Related Product 315100 Apparel Knitting Mills 331310 Alumina & Aluminum Manufacturing 315210 Cut & Sew Apparel Production & Processing Utilities Miscellaneous Manufacturing Contractors 331400 Nonferrous Metal (except

221100 Electric Power Generation, Aluminum) Production & 339110 Medical Equipment & 315220 Men’s & Boys’ Cut & Sew Transmission & Distribution Processing Supplies Mfg Apparel Mfg

221210 Natural Gas Distribution 331500 Foundries 339900 Other Miscellaneous 315230 Women’s & Girls’ Cut & Sew Manufacturing 221300 Water, Sewage & Other Apparel Mfg Fabricated Metal Product

Systems 315290 Other Cut & Sew Apparel Mfg Manufacturing

221500 Combination Gas & Electric Wholesale Trade 315990 Apparel Accessories & Other 332110 Forging & Stamping

Apparel Mfg Merchant Wholesalers, Durable 332210 Cutlery & Handtool Mfg

Construction Goods Leather and Allied Product 332300 Architectural & Structural

Manufacturing Metals Mfg 423100 Motor Vehicle & Motor Construction of Buildings Vehicle Parts & Supplies 236110 Residential Building 316110 Leather & Hide Tanning & 332400 Boiler, Tank, & Shipping 423200 Furniture & Home Construction Finishing Container Mfg Furnishings 236200 Nonresidential Building 316210 Footwear Mfg (including 332510 Hardware Mfg 423300 Lumber & Other Construction Construction rubber & plastics) 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-
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 445220 Fish & Seafood Markets Local 522110 Commercial Banking 423700 Hardware, & Plumbing & 445230 Fruit & Vegetable Markets 484120 General Freight Trucking, 522120 Savings Institutions Heating Equipment & Long-distance 445291 Baked Goods Stores Supplies 522130 Credit Unions 484200 Specialized Freight Trucking 445292 Confectionery & Nut Stores 522190 Other Depository Credit 423800 Machinery, Equipment, & Transit and Ground Passenger Supplies 445299 All Other Specialty Food Intermediation Transportation

423910 Sporting & Recreational Stores Nondepository Credit Intermediation 485110 Urban Transit Systems 445310 Beer, Wine, & Liquor Stores Goods & Supplies 522210 Credit Card Issuing 485210 Interurban & Rural Bus Health and Personal Care Stores 423920 Toy & Hobby Goods & 522220 Sales Financing Transportation Supplies 446110 Pharmacies & Drug Stores 522291 Consumer Lending 485310 Taxi Service

423930 Recyclable Materials 446120 Cosmetics, Beauty Supplies, 522292 Real Estate Credit (including 485320 Limousine Service

423940 Jewelry, Watch, Precious & Perfume Stores mortgage bankers & 485410 School & Employee Bus Stone, & Precious Metals 446130 Optical Goods Stores originators) Transportation 423990 Other Miscellaneous Durable 446190 Other Health & Personal 522293 International Trade Financing 485510 Charter Bus Industry Goods Care Stores 522294 Secondary Market Financing 485990 Other Transit & Ground Merchant Wholesalers, Nondurable Gasoline Stations Passenger Transportation 522298 All Other Nondepository

Goods 447100 Gasoline Stations (including Credit Intermediation Pipeline Transportation 424100 Paper & Paper Products convenience stores with gas) Activities Related to Credit 486000 Pipeline Transportation 424210 Drugs & Druggists’ Sundries Clothing and Clothing Accessories Intermediation

Stores Scenic & Sightseeing Transportation 424300 Apparel, Piece Goods, & 522300 Activities Related to Credit

Notions 448110 Men’s Clothing Stores 487000 Scenic & Sightseeing Intermediation (including loan

424400 Grocery & Related Products 448120 Women’s Clothing Stores Transportation brokers, check clearing, &

Support Activities for Transportation money transmitting) 424500 Farm Product Raw Materials 448130 Children’s & Infants’ Clothing

Stores 488100 Support Activities for Air Securities, Commodity Contracts, 424600 Chemical & Allied Products

448140 Family Clothing Stores Transportation and Other Financial Investments and 424700 Petroleum & Petroleum 488210 Support Activities for Rail Related Activities Products 448150 Clothing Accessories Stores Transportation 523110 Investment Banking & 424800 Beer, Wine, & Distilled 448190 Other Clothing Stores 488300 Support Activities for Water Securities Dealing 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 488490 Other Support Activities for Dealing Newspapers Stores Road Transportation 523140 Commodity Contracts 424930 Flower, Nursery Stock, & Sporting Goods, Hobby, Book, and 488510 Freight Transportation Brokerage Florists’ Supplies Music Stores Arrangement 523210 Securities & Commodity 424940 Tobacco & Tobacco Products 451110 Sporting Goods Stores 488990 Other Support Activities for Exchanges 424950 Paint, Varnish, & Supplies 451120 Hobby, Toy, & Game Stores Transportation 523900 Other Financial Investment

424990 Other Miscellaneous 451130 Sewing, Needlework, & Piece Couriers and Messengers Activities (including portfolio Nondurable Goods Goods Stores management & investment 492110 Couriers Wholesale Electronic Markets and 451140 Musical Instrument & advice) 492210 Local Messengers & Local Agents and Brokers Supplies Stores Delivery Insurance Carriers and Related

425110 Business to Business 451211 Book Stores Activities Warehousing and Storage Electronic Markets 451212 News Dealers & Newsstands 524140 Direct Life, Health, & Medical 493100 Warehousing & Storage 425120 Wholesale Trade Agents & 451220 Prerecorded Tape, Compact Insurance & Reinsurance (except lessors of Brokers Disc, & Record Stores Carriers miniwarehouses &

General Merchandise Stores 524150 Direct Insurance & self-storage units) Retail Trade Reinsurance (except Life, 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 511130 Book Publishers insurance and pension funds)

441229 All Other Motor Vehicle 453220 Gift, Novelty, & Souvenir 511140 Directory & Mailing List Funds, Trusts, and Other Financial

Dealers Stores Publishers Vehicles

441300 Automotive Parts, 453310 Used Merchandise Stores 511190 Other Publishers 525100 Insurance & Employee Accessories, & Tire Stores 453910 Pet & Pet Supplies Stores Benefit Funds 511210 Software Publishers

Furniture and Home Furnishings 453920 Art Dealers Motion Picture and Sound 525910 Open-End Investment Funds

Stores (Form 1120-RIC) 453930 Manufactured (Mobile) Home Recording Industries 442110 Furniture Stores Dealers 525920 Trusts, Estates, & Agency 512100 Motion Picture & Video

442210 Floor Covering Stores Accounts 453990 All Other Miscellaneous Store Industries (except video

442291 Window Treatment Stores Retailers (including tobacco, rental) 525990 Other Financial Vehicles

442299 All Other Home Furnishings candle, & trophy shops) (including mortgage REITs & 512200 Sound Recording Industries

Stores Nonstore Retailers closed-end investment funds) Broadcasting (except Internet) “Offices of Bank Holding Companies” Electronics and Appliance Stores 454110 Electronic Shopping & 515100 Radio & Television

Mail-Order Houses and “Offices of Other Holding 443111 Household Appliance Stores Broadcasting Companies” are located under 443112 Radio, Television, & Other 454210 Vending Machine Operators 515210 Cable & Other Subscription Management of Companies (Holding Electronics Stores 454311 Heating Oil Dealers Programming Companies) on page 25.

443120 Computer & Software Stores 454312 Liquefied Petroleum Gas Telecommunications

443130 Camera & Photographic (Bottled Gas) Dealers 517000 Telecommunications Real Estate and Rental and Supplies Stores 454319 Other Fuel Dealers (including paging, cellular, Leasing Building Material and Garden 454390 Other Direct Selling satellite, cable & other

Establishments (including program distribution, Real Estate Equipment and Supplies Dealers

door-to-door retailing, frozen resellers, other 531110 Lessors of Residential 444110 Home Centers food plan providers, party telecommunications, & Buildings & Dwellings 444120 Paint & Wallpaper Stores plan merchandisers, & Internet service providers) (including equity REITs) 444130 Hardware Stores coffee-break service Data Processing Services 531114 Cooperative Housing 444190 Other Building Material providers) 518210 Data Processing, Hosting, & (including equity REITs) Dealers Related Services 531120 Lessors of Nonresidential

444200 Lawn & Garden Equipment & Transportation and Other Information Services Buildings (except Supplies Stores Warehousing Miniwarehouses) (including 519100 Other Information Services Food and Beverage Stores equity REITs) Air, Rail, and Water Transportation (including news syndicates, 445110 Supermarkets and Other libraries, Internet publishing & 531130 Lessors of Miniwarehouses & 481000 Air Transportation Grocery (except Self-Storage Units (including broadcasting) Convenience) Stores 482110 Rail Transportation equity REITs) 483000 Water Transportation

-23-
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 541940 Veterinary Services Practitioners Accommodation

& Brokers 541990 All Other Professional, Outpatient Care Centers 721210 RV (Recreational Vehicle) 531310 Real Estate Property Scientific, & Technical 621410 Family Planning Centers Parks & Recreational Camps Managers Services 621420 Outpatient Mental Health & 721310 Rooming & Boarding Houses 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 551112 Offices of Other Holding Centers (including food service & Leasing Companies 621498 All Other Outpatient Care contractors & caterers) 532210 Consumer Electronics & Centers 722410 Drinking Places (Alcoholic Appliances Rental Administrative and Support Medical and Diagnostic Laboratories Beverages) 532220 Formal Wear & Costume and Waste Management and 621510 Medical & Diagnostic Rental Remediation Services Laboratories Other Services 532230 Video Tape & Disc Rental Administrative and Support Services Home Health Care Services Repair and Maintenance 532290 Other Consumer Goods

561110 Office Administrative 621610 Home Health Care Services 811110 Automotive Mechanical & Rental

Services Other Ambulatory Health Care Electrical Repair & 532310 General Rental Centers Services Maintenance 561210 Facilities Support Services 532400 Commercial & Industrial 621900 Other Ambulatory Health 811120 Automotive Body, Paint, Machinery & Equipment 561300 Employment Services Care Services (including Interior, & Glass Repair Rental & Leasing 561410 Document Preparation ambulance services & blood 811190 Other Automotive Repair & Services Lessors of Nonfinancial Intangible & organ banks) Maintenance (including oil Assets (except copyrighted works) 561420 Telephone Call Centers Hospitals change & lubrication shops & 533110 Lessors of Nonfinancial 561430 Business Service Centers car washes) 622000 Hospitals Intangible Assets (except (including private mail centers 811210 Electronic & Precision copyrighted works) & copy shops) Nursing and Residential Care Equipment Repair & 561440 Collection Agencies Facilities Maintenance

Professional, Scientific, and 561450 Credit Bureaus 623000 Nursing & Residential Care 811310 Commercial & Industrial Facilities Technical Services 561490 Other Business Support Machinery & Equipment

Legal Services Services (including Social Assistance (except Automotive &

repossession services, court 624100 Individual & Family Services Electronic) Repair & 541110 Offices of Lawyers reporting, & stenotype 624200 Community Food & Housing, Maintenance 541190 Other Legal Services services) & Emergency & Other Relief 811410 Home & Garden Equipment & Accounting, Tax Preparation, 561500 Travel Arrangement & Services Appliance Repair & Bookkeeping, and Payroll Services Reservation Services 624310 Vocational Rehabilitation Maintenance

541211 Offices of Certified Public 561600 Investigation & Security Services 811420 Reupholstery & Furniture Accountants Services 624410 Child Day Care Services Repair

541213 Tax Preparation Services 561710 Exterminating & Pest Control 811430 Footwear & Leather Goods

541214 Payroll Services Services Arts, Entertainment, and Repair

541219 Other Accounting Services 561720 Janitorial Services Recreation 811490 Other Personal & Household

Architectural, Engineering, and 561730 Landscaping Services Goods Repair & Maintenance Performing Arts, Spectator Sports, Related Services 561740 Carpet & Upholstery Cleaning Personal and Laundry Services and Related Industries

541310 Architectural Services Services 812111 Barber Shops 711100 Performing Arts Companies 541320 Landscape Architecture 561790 Other Services to Buildings & 812112 Beauty Salons 711210 Spectator Sports (including Services Dwellings sports clubs & racetracks) 812113 Nail Salons

541330 Engineering Services 561900 Other Support Services 711300 Promoters of Performing Arts, 812190 Other Personal Care

541340 Drafting Services (including packaging & Sports, & Similar Events Services (including diet &

541350 Building Inspection Services labeling services, & weight reducing centers) 711410 Agents & Managers for convention & trade show 541360 Geophysical Surveying & Artists, Athletes, Entertainers, 812210 Funeral Homes & Funeral organizers) Mapping Services & Other Public Figures Services

Waste Management and 541370 Surveying & Mapping (except 711510 Independent Artists, Writers, 812220 Cemeteries & Crematories Remediation Services Geophysical) Services & Performers 812310 Coin-Operated Laundries & 562000 Waste Management & 541380 Testing Laboratories Museums, Historical Sites, and Drycleaners Remediation Services

Specialized Design Services Similar Institutions 812320 Drycleaning & Laundry

712100 Museums, Historical Sites, & Services (except 541400 Specialized Design Services Educational Services Similar Institutions Coin-Operated) (including interior, industrial, 611000 Educational Services graphic, & fashion design) Amusement, Gambling, and 812330 Linen & Uniform Supply (including schools, colleges, Computer Systems Design and Recreation Industries 812910 Pet Care (except Veterinary) & universities) Related Services 713100 Amusement Parks & Arcades Services

541511 Custom Computer 713200 Gambling Industries 812920 Photofinishing Health Care and Social Programming Services 713900 Other Amusement & 812930 Parking Lots & Garages Assistance 541512 Computer Systems Design Recreation Industries 812990 All Other Personal Services Offices of Physicians and Dentists Services (including golf courses, skiing Religious, Grantmaking, Civic,

541513 Computer Facilities 621111 Offices of Physicians (except facilities, marinas, fitness Professional, and Similar

Management Services mental health specialists) centers, & bowling centers) Organizations 621112 Offices of Physicians, Mental 541519 Other Computer Related 813000 Religious, Grantmaking,

Services Health Specialists Accommodation and Food Civic, Professional, & Similar

Other Professional, Scientific, and 621210 Offices of Dentists Services Organizations (including

Technical Services Offices of Other Health Practitioners condominium and Accommodation homeowners associations) 541600 Management, Scientific, & 621310 Offices of Chiropractors 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

541910 Marketing Research & Public Therapists, & Audiologists

Opinion Polling

-24-
Index

A E Limited liability companies .... . 2 R

Accounting methods .......... . 5 Electronic filing ............... . 2 Lobbying expenses, Recapture taxes ............. . 18

Accounting period (Tax Employee benefit nondeductibility ........... . 13 Reconciliation of income ..... . 21

Year) ...................... . 5 programs ................. . 12 Recordkeeping ............... . 5

Address change .............. . 7 Employer identification number M Refundable credits .......... . 14

Affiliated group .............. . 19 (EIN) ...................... . 7 Merchant Marine capital Related party transactions .... . 9

Amended return .............. . 5 Estimated tax: construction fund: Rents (expense) ............. . 11

Amortization ................. . 9 Penalty ................... . 15 Deduction for Rents (income) ............... . 8

Assembling the return ........ . 4 Extension of time to file ....... . 3 contributions ............ . 14 Repairs and maintenance .... . 10

At-risk rules ................. . 13 Tax on nonqualified

withdrawal .............. . 19 F S Minimum tax: B Farming, corporations engaged Alternative Salaries and wages .......... . 10 ................ . 18 in .......................... . 2 Backup withholding .......... . 15 Prior year, credit for Schedule: ....... . 18 Final return ................... . 7 Bad debts ................... . 11 Mutual savings banks conducting A ......................... . 15

Balance sheets .............. . 20 Financial asset securitization C ......................... . 16 life insurance business .... . 18

Business startup expenses .... . 9 investment trust (FASIT) .... . 2 J ......................... . 17

Foreign person (defined) ..... . 20 K ......................... . 19

Foreign tax credit ............ . 18 N L ......................... . 20

C Forms and publications, how to Name change ................ . 7 M-1 ....................... . 21

Capital construction fund (See get ........................ . 1 Net operating loss ....... . 14, 20 M-3 ..................... . 7, 21

Merchant Marine capital Nonaccrual experience O ......................... . 17

construction fund) method .................... . 8 Section 263A costs ........ . 9, 15

Closely held corporations .... . 10 G Shareholders’ equity General business credit ...... . 18 Compensation of officers ..... . 10 adjustments ............... . 21 Golden parachute O Consolidated return ........ . 6, 20 Signature .................... . 3 payments .................. . 9 Other deductions ............ . 12 Contributions to reduce debt held Special returns for certain Gross receipts ................ . 7 Other income ................ . 8 by the public ............... . 1 organizations .............. . 2 Other taxes ................. . 18 Contributions, charitable ..... . 11

Overpaid estimated tax ...... . 14 Controlled group ............ . 17 I T

Cost of goods sold ......... . 8, 15 Installment sales ............. . 7 Tax issues, unresolved ....... . 1

Credits against tax ........... . 18 Interest due: P Tax rate schedule ........... . 18 Late payment of tax ........ . 4 Partnership income (loss) .... . 13 Taxes and licenses .......... . 11 Look-back method ......... . 18 Passive activity limitations ..... . 9 D Tax-exempt securities ....... . 21 Interest expense ............ . 11 Penalties .................. . 4, 15 Deductions ................... . 9 Travel, meals, and Interest expense (relating to Pension, profit-sharing, etc. Depletion ................... . 12 entertainment ............. . 13 section 263A) .............. . 9 plans ..................... . 12 Depository methods of tax Interest income: Personal holding company .... . 6 payment ................... . 4 Taxable .................... . 8 Personal holding company W

Depreciation ................ . 12 Tax-exempt ........... . 20, 21 tax ....................... . 18 When to file .................. . 3

Direct deposit of refund .... . 1, 15 Inventory: Personal service Where to file ................. . 3

Disclosure statement ......... . 5 Section 263A uniform corporation ................ . 7 Who must file ................ . 2

Dividend income ............. . 8 capitalization rules .... . 9, 15 Preparer, tax return ........... . 3 Who must sign ............... . 3

Dividends-received Valuation methods ........ . 15 Private delivery services ...... . 3 Worksheets ................. . 17 deduction .............. . 16-17 Schedule C ............... . 17

Dues, membership and L other ..................... . 13 LIFO recapture: Q ■

Qualified personal service Tax on .................... . 19 corporation ............... . 18 Limitations on deductions ..... . 9,

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