Userid: SD_8R7DB DTD instrx Leadpct: 0% Pt. size: 9 

# ❏ Draft 

# ❏ Ok to Print 

# PAGER/XML Fileid: C:\Documents and Settings\8r7db\Desktop\10_I1120 12 16 2010.xml (Init. & date)



# Page 1 of 25 Instructions for Form 1120 16:40 - 27-JAN-2011 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.



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

# Instructions for Form 1120 U.S. Corporation Income Tax Return 1120-L, and 1120-PC with assets that IRS whose employees assist taxpayers Section references are to the Internal equal or exceed $100 million must file who are experiencing economic harm, Revenue Code unless otherwise noted. 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 **Federal tax deposits must be made by** Direct Deposit of Refund
........... 1 working as it should. The service is free, **electronic funds transfer.** Beginning How To Make a Contribution To confidential, tailored to meet your needs, January 1, 2011, corporations must use Reduce Debt Held by the 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 Requirementon page 1-800-829-4059 to see if the corporation Electronic Filing
................. 2 4. is eligible for assistance. When To File
................... 3 

### • Call or write the corporation’s local **Special rules for eligible small** Where To File
.................. 3 taxpayer advocate, whose phone number **business credits.** For tax years Who Must Sign
................. 3 and address are listed in the local beginning in 2010, if the corporation is an Paid Preparer Authorization
........ 3 telephone directory and in Pub. 1546, eligible small business, eligible small Assembling the Return
............ 4 Taxpayer Advocate Service
–Your Voice business credits are not subject to the Tax Payments
.................. 4 at the IRS. alternative minimum tax (AMT). In 

### • File Form 911, Request for Taxpayer Estimated Tax Payments
.......... 4 addition, eligible small business credits Advocate Service Assistance (And Interest and Penalties
............. 4 can be carried back five years and will not Application for Taxpayer Assistance Accounting Methods
.............. 5 be subject to AMT in the carryback years. Order), or ask an IRS employee to Accounting Period
............... 5 For more information, see the instructions complete it on the corporation’s behalf. Rounding Off to Whole Dollars
. ..... 5 for Form 3800. Recordkeeping
.................. 5 For more information, go towww.irs. **Special rule for 2010 start-up costs.** Other Forms and Statements gov/advocate
. For tax years beginning in 2010, a That May Be Required
.......... 5 corporation can elect to deduct up to **Specific Instructions**
............ 6 

## Direct Deposit of Refund $10,000 of start-up costs. See section Period Covered
................. 6 195(b)(3). Also seeBusiness 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 account at a U.S. bank or other financial **Extension of election to accelerate the** Employer Identification Number institution, attach Form 8050, Direct **AMT credit in lieu of bonus** (EIN)
....................... 7 Deposit of Corporate Tax Refund. See **depreciation.** A corporation can elect to Total Assets
................... 7 the instructions for line 36. increase the minimum tax credit limitation Initial Return, Final Return, in lieu of bonus depreciation on certain

Name Change, Address “round two” extension property placed in 

## How To Make a service after December 31, 2010, in tax Change
..................... 7 

## Contribution To Reduce years ending after such date. See section Income
....................... 7 168(k)(4)(D)(iii). Also see the instructions Deductions
.................... 9 

## Debt Held by the Public for line 32g on page 14. Tax and Payments
............ .. 14 To help reduce debt held by the public, Schedule A. Cost of Goods Sold
. .. 15 For the latest information, seewww.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 2188, Parkersburg, WV 26106-2188. Or, 

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

## Missing Children return. Do not add the contributions to Schedule K. Other Information
. .. .. 19 The Internal Revenue Service is a proud any tax the corporation may owe. Schedule L. Balance Sheets per partner with the National Center for Contributions to reduce debt held by the

Books
................... .. 20 Missing and Exploited Children. public are deductible subject to the rules Schedule M-1. Reconciliation of Photographs of missing children selected and limitations for charitable

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

## and Publications 1-800-THE-LOST (1-800-843-5678) if you recognize a child. **Internet.** You can access the IRS 

# What’s New website 24 hours a day, 7 days a week, at 

## Unresolved Tax Issues **New Schedule UTP (Form 1120),** 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

## Page 2 of 25 Instructions for Form 1120 16:40 - 27-JAN-2011 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.



### • 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. Visitwww.irs.gov/efile for more treated as a partnership for federal 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 disregarded as an entity separate from its 

### Certain Organizations **•** Current-year forms, instructions, and 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 **If the organization is a: File Form**  

### • Tax law frequently asked questions LLCs, see Pub. 3402, Tax Issues for (FAQs). Limited Liability Companies. 

### • Tax Topics from the IRS telephone **Corporations engaged in farming.** A response system. Exempt organization with corporation (other than a corporation that 

### • Internal Revenue Code
–Title 26 of unrelated trade or business **990-T** is a subchapter T cooperative) that the U.S. Code. income engages in farming should use Form 

### • Fill-in, print, and save features for most 1120 to report the income (loss) from tax forms. Religious or apostolic such activities. Enter the income and 

### • Internal Revenue Bulletins. organization exempt under **1065** deductions of the corporation according to 

### • Toll-free and email technical support. section 501(d) the instructions for lines 1 through 10 and 

### • Two releases during the year. 12 through 29.
–The first release will ship early in Entity formed as a limited January. **Ownership interest in a Financial** liability company under state

–The final release will ship early in **Asset Securitization Investment Trust** law and treated as a **1065** March. **(FASIT).** Special rules apply to a FASIT partnership for federal in existence on October 22, 2004, to the Buy the DVD from the National income tax purposes extent that regular interests issued by the Technical Information Service (NTIS) at FASIT before October 22, 2004, continue www.irs.gov/cdorders for $30 (no Subchapter T cooperative to remain outstanding in accordance with handling fee) or call 1-877-233-6767 toll association (including a **1120-C** their original terms. free to buy the DVD for $30 (plus a $6 farmers’ cooperative) handling fee). If a corporation holds an ownership interest in a FASIT to which these special **By phone and in person.** You can Entity that elects to be treated rules apply, it must report all items of order forms and publications by calling as a real estate mortgage income, gain, deductions, losses, and 1-800-TAX-FORM (1-800-829-3676). You **1066** investment conduit (REMIC) credits on the corporation’s income tax can also get most forms and publications under section 860D return (except as provided in section at your local IRS office. 860H). Show a breakdown of the items on an attached schedule. For more Interest charge domestic information, see sections 860H and 860L. international sales **1120-IC-DISC** 

# General Instructions corporation (section 992) 

### Electronic Filing 

## Purpose of Form Corporations can generally electronically Foreign corporation (other file(e-file) Form 1120, related forms, Use Form 1120, U.S. Corporation Income than life and property and schedules, and attachments, Form 7004, Tax Return, to report the income, gains, casualty insurance company **1120-F** Form 940 and Form 941 employment tax losses, deductions, credits, and to figure filing Form 1120-L or Form returns. If there is a balance due, the the income tax liability of a corporation. 1120-PC) corporation can authorize an electronic funds withdrawal while e-filing. Form 1099 

## Who Must File Foreign sales corporation and other information returns can also be Unless exempt under section 501, all **1120-FSC** (section 922) electronically filed. domestic corporations (including corporations in bankruptcy) must file an **Exceptions.** The option toe-file Condominium management, income tax return whether or not they generally does not apply to certain residential real estate have taxable income. Domestic returns, including: management, or timeshare corporations must file Form 1120 unless 

### • Returns with precomputed penalty and **1120-H** association that elects to be they are required to file a special return. interest, SeeSpecial 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 Life insurance company **corporations.** A domestic entity **1120-L** 

### • Returns with requests for 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 underSpecial 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 toe-file Form 1120, even if any 

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

## Page 3 of 25 Instructions for Form 1120 16:40 - 27-JAN-2011 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.



### •The president, vice president, 

## Paid Preparer Property and casualty treasurer, assistant treasurer, chief insurance company **1120-PC** 

## Authorization accounting officer; or (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” **1120-POL** If a return is filed on behalf of a (section 527) 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 individual whose signature appears in the Real estate investment trust **1120-REIT** return, instead of the corporate officer. “Paid Preparer Use Only” section of the (section 856) 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 corporation must be accompanied by a **1120-RIC** If the “Yes” box is checked, the company (section 851) 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 processing of its return. The corporation If an employee of the corporation Settlement fund is also authorizing the paid preparer to: completes Form 1120, the paid preparer **1120-SF** (section 468B) 

### • Give the IRS any information that is space should remain blank. Anyone who missing from the return, prepares Form 1120 but does not charge 

### • Call the IRS for information about the the corporation should not complete that 

## When To File processing of the return or the status of section. Generally, anyone who is paid to any related refund or payment(s), and prepare the return must sign it and fill in Generally, a corporation must file its 

### • Respond to certain IRS notices about the “Paid Preparer Use Only” area. income tax return by the 15th day of the math errors, offsets, and return 3rd month after the end of its tax year. A The paid preparer must complete the preparation. new corporation filing a short-period 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 

### • Give a copy of the return to the must generally file by the 15th day of the (including any additional tax liability), or taxpayer. 3rd month after the date it dissolved. otherwise represent the corporation before the IRS. **Note.** A paid preparer may sign original If the due date falls on a Saturday, or amended returns by rubber stamp, Sunday, or legal holiday, the corporation The authorization will automatically mechanical device, or computer software can file on the next business day. 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 Less than $10 million and Department of the Treasury Connecticut, Delaware, District Overnight, FedEx 2Day, FedEx Schedule M-3 is not filed Internal Revenue Service Center of Columbia, Georgia, Illinois, International Priority, and FedEx Cincinnati, OH 45999-0012 Indiana, Kentucky, Maine, 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, $10 million or more or Department of the Treasury Worldwide Express Plus, and UPS Rhode Island, South Carolina, less than $10 million and Internal Revenue Service Center Worldwide Express. Tennessee, Vermont, Virginia, Schedule M-3 is filed Ogden, UT 84201-0012 West Virginia, Wisconsin The private delivery service can tell you how to get written proof of the mailing Alabama, Alaska, Arizona, date. Arkansas, California, Colorado, Florida, Hawaii, Idaho, Iowa, Private delivery services cannot Kansas, Louisiana, Minnesota, deliver items to P.O. boxes. You Department of the Treasury Mississippi, Missouri, Montana, must use the U.S. Postal Service 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 Dakota, Texas, Utah, 

### Extension of Time To File 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. 

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

## Page 4 of 25 Instructions for Form 1120 16:40 - 27-JAN-2011 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

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. 

## Interest and Penalties **Same-day wire payment option.** If the corporation fails to initiate a deposit **Interest.** Interest is charged on taxes 

## Assembling the Return transaction on EFTPS by 8 p.m. Eastern paid late even if an extension of time to time the day before the date a deposit is To ensure that the corporation’s tax return file is granted. Interest is also charged on due, it can still make the deposit on time is correctly processed, attach all penalties imposed for failure to file, by using the Federal Tax Application schedules and other forms after page 5 of negligence, fraud, substantial valuation (FTA). Before using the same-day wire Form 1120 in the following order. 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. does not file its tax return by the due date, Payment Worksheet, visitwww.eftps.gov. 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. part of a month the return is late, up to a Generally, the following rules apply to the maximum of 25% of the unpaid tax. The corporation’s payments of estimated tax. Complete every applicable entry space minimum penalty for a return that is over 

### •The corporation must make installment on Form 1120. Do not enter “See 60 days late is the smaller of the tax due payments of estimated tax if it expects its Attached ” or “Available Upon Request” or $135. The penalty will not be imposed total tax for the year (less applicable instead of completing the entry spaces. If if the corporation can show that the failure credits) to be $500 or more. more space is needed on the forms or to file on time was due to reasonable 

### •The installments are due by the 15th schedules, attach separate sheets using cause. Corporations that file late should day of the 4th, 6th, 9th, and 12th months the same size and format as the printed attach a statement explaining the of the tax year. If any date falls on a forms. If there are supporting statements reasonable cause. Saturday, Sunday, or legal holiday, the and attachments, arrange them in the installment is due on the next regular **Late payment of tax.** A corporation that same order as the schedules or forms business day. does not pay the tax when due generally they support and attach them last. Show 

### •The corporation must use electronic may be penalized 1/ 2of 1% of the unpaid the totals on the printed forms. Enter the funds transfers to make installment tax for each month or part of a month the corporation’s name and EIN on each payments of estimated tax. tax is not paid, up to a maximum of 25% supporting statement or attachment. 

### • Use Form 1120-W, Estimated Tax for of the unpaid tax. The penalty will not be Corporations, as a worksheet to compute imposed if the corporation can show that 

## Tax Payments 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 **Trust fund recovery penalty.** This month after the end of the tax year. by filing Form 4466, Corporation penalty may apply if certain excise, Application for Quick Refund of 

### Electronic Deposit Requirement income, social security, and Medicare Overpayment of Estimated Tax. taxes that must be collected or withheld Beginning January 1, 2011, corporations See the instructions for lines 32b and are not collected or withheld, or these must use electronic funds transfers to 32c. taxes are not paid. These taxes are make all federal tax deposits (such as generally reported on: **Estimated tax penalty.** A corporation deposits of employment, excise, and 

### • Form 720, Quarterly Federal Excise that does not make estimated tax corporate income tax). Forms 8109 and Tax Return; payments when due may be subject to an 8109-B, Federal Tax Coupon, cannot be 

### • Form 941, Employer’s QUARTERLY underpayment penalty for the period of used after December 31, 2010. Generally, Federal Tax Return; underpayment. Generally, a corporation is electronic funds transfers are made using 

### • Form 943, Employer’s Annual Federal subject to the penalty if its tax liability is the Electronic Federal Tax Payment Tax Return for Agricultural Employees; $500 or more and it did not timely pay the System (EFTPS). However, if the 

### • Form 944, Employer’s ANNUAL smaller of: corporation does not want to use EFTPS, Federal Tax Return; or 

### • Its tax liability for 2010 or it can arrange for its tax professional, 

### • Form 945, Annual Return of Withheld 

### • Its prior year’s tax. financial institution, payroll service, or Federal Income Tax. other trusted third party to make deposits 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 determined by the IRS to have been Use Form 2220, Underpayment of behalf. EFTPS is a free service provided responsible for collecting, accounting for, Estimated Tax by Corporations, to see if 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 is equal to the full amount of the unpaid Generally, the corporation does not have other third party may have a fee. trust fund tax. See the Instructions for to file this form because the IRS can Form 720, Pub. 15 (Circular E), or Pub. To get more information about EFTPS figure the amount of any penalty and bill 51 (Circular A), Agricultural Employer’s or to enroll in EFTPS, visitwww.eftps.gov, the corporation for it. However, even if the Tax Guide, for details, including the or call 1-800-555-4477. Additional corporation does not owe the penalty, definition of responsible persons. information about EFTPS is also available 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**

## Page 5 of 25 Instructions for Form 1120 16:40 - 27-JAN-2011 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

corporation, must get the consent of the corporation (or a related party) paid an 

## Accounting Methods 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 See the Instructions for Form 1128 other method authorized by the Internal year or $20 million in any combination of and Pub. 538 for more information on Revenue Code. years. accounting periods and tax years. Generally, the following rules apply. 5. Any transaction identified by the 

### • A corporation (other than a qualified IRS by notice, regulation, or other 

## Rounding Off to personal service corporation) must use published guidance as a “transaction of the accrual method of accounting if its interest.” See Notice 2009-55, 2009-31 

## Whole Dollars average annual gross receipts exceed $5 I.R.B. 170. The corporation can round off cents to million. However, seeNonaccrual 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 **Penalties.** The corporation may have increase amounts from 50 to 99 cents to for sales and purchases of inventory to pay a penalty if it is required to disclose the next dollar. For example, $1.39 items. SeeSchedule A. Cost of Goods a reportable transaction under section becomes $1 and $2.50 becomes $3. 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. all the information required (or includes Keep the corporation’s records for as long Dealers in commodities and traders in incorrect information). Other penalties, as they may be needed for the securities and commodities can elect to such as an accuracy-related penalty administration of any provision of the use the mark-to-market accounting under section 6662A, may also apply. Internal Revenue Code. Usually, records method. See section 475. See the Instructions for Form 8886 for that support an item of income, deduction, **Change in accounting method.** details on these and other penalties. or credit on the return must be kept for 3 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 IRS. For details, see the Instructions for The corporation should keep copies of Accounting Method. See Form 3115, the Form 8918. all filed returns. They help in preparing Instructions for Form 3115, and Pub. 538, future and amended returns. **Transfers to a corporation controlled** Accounting Periods and Methods, for **by the transferor.** Every significant more information. transferor (as defined in Regulations 

## Other Forms and 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 a nonrecognition event must include the 

## Required 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 Regulations section 1.351-3(b) on or with **Reportable transaction disclosure** application for a change in accounting its return for the tax year of the exchange, **statement.** Disclose information for each method filed on or after January 10, 2011 unless all the required information is reportable transaction in which the for a year of change ending on or after included in any statement(s) provided by corporation participated. Form 8886, April 30, 2010, see Rev. Proc. 2011-14, a significant transferor that is attached to Reportable Transaction Disclosure 2011-4 I.R.B. 330. the same return for the same section 351 Statement, must be filed for each tax year exchange. If the transferor or transferee that the federal income tax liability of the 

## Accounting Period corporation is a controlled foreign corporation is affected by its participation corporation, each U.S. shareholder in the transaction. The following are A corporation must figure its taxable (within the meaning of section 951(b)) reportable transactions. income on the basis of a tax year. A tax must include the required statement on or year is the annual accounting period a 1. Any listed transaction, which is a with its return. corporation uses to keep its records and 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 

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

## Page 6 of 25 Instructions for Form 1120 16:40 - 27-JAN-2011 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

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 

## Information U.S. shareholder (within the meaning of prior tax years. section 951(b)), must include the 

### Consolidated Return statement on or with its return. In addition, include a copy of the Corporations filing a consolidated return election statement filed to make the **Dual consolidated losses.** If a must check Item A, box 1a, and attach election to defer cancellation of debt. For domestic corporation incurs a dual Form 851, Affiliations Schedule, and other more information on making the election, consolidated loss (as defined in supporting statements to the return. Also, see the instructions for line 10. For more Regulations section 1.1503-2(c)(5)), the for the first year a subsidiary corporation information regarding the annual corporation (or consolidated group) may is being included in a consolidated return, information statement, see Rev. Proc. need to attach an elective relief attach Form 1122, Authorization and 2009-37, 2009-36 I.R.B. 309. agreement and/or an annual certification Consent of Subsidiary Corporation To Be as provided in Regulations section Included in a Consolidated Income Tax **Other forms and statements.** See Pub. 1.1503-2(g)(2). Return, to the parent’s consolidated 542 for a list of other forms and return. Attach a separate Form 1122 for **Election to reduce basis under section** statements a corporation may need to file each subsidiary being included in the **362(e)(2)(C).** The transferor may make in addition to the forms and statements consolidated return. an election under section 362(e)(2)(C) to 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 following, both before and after 

## Period Covered return filed by the due date (including adjustments. extensions) for the tax year in which the File the 2010 return for calendar year 1. Items of gross income and transaction occurred. If the transferor is a 2010 and fiscal years that begin in 2010 deductions. controlled foreign corporation, its and end in 2011. For a fiscal or short tax 2. A computation of taxable income. controlling U.S. shareholder(s) can make year return, fill in the tax year space at the 3. Balance sheets as of the beginning the election. The common parent of a top of the form. and end of the tax year. consolidated group can make the election 4. A reconciliation of income per The 2010 Form 1120 can also be for the group. books with income per return. used if: 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 item of income, gain, loss, expense, or Once made, the election is irrevocable. the time the corporation is required to file deduction, net of eliminating entries for See section 362(e)(2)(C) and Notice its return. intercompany transactions between 2005-70. corporations within the consolidated The corporation must show its 2011 **Annual information statement for** group. Attach consolidated balance tax year on the 2010 Form 1120 and take **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 consolidated retained earnings. effective for tax years beginning after 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 in (3), (4), and (5) above, if its total 

## Name and Address with the tax year following the tax year for receipts (line 1a plus lines 4 through 10 Enter the corporation’s true name (as set 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 assets at the end of the tax year are less document creating it), address, and EIN deferred has been included in income. than $250,000. See Schedule K, question on the appropriate lines. Enter the The statement must be labeled “Section 13. address of the corporation’s principal 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 If Item A, box 1a, is checked and the **Note.** Do not use the address of the been accelerated because of an event corporation is the common parent of a registered agent for the state in which the described in section 108(i)(5)(D) and consolidated group that includes a corporation is incorporated. For example, must be included in income in the current life-nonlife insurance company, also if a business is incorporated in Delaware tax year. Include a description and the check box 1b. See Regulations section or Nevada and the corporation’s principal date of the acceleration event. 1.1502-47(s) for the filing requirements of office is located in Little Rock, AR, the 3. Any deferred COD income that has a life-nonlife consolidated return. corporation should enter the Little Rock not been included in income in the current address. or prior tax years. 

### Personal Holding Company 4. Any deferred OID deduction If the corporation receives its mail in allowed as a deduction in the current tax A personal holding company must check care of a third party (such as an year. item A, box 2 and attach a Schedule PH accountant or an attorney), enter on the 5. Any deferred OID deduction that is (Form 1120), U.S. Personal Holding street address line “C/O” followed by the allowed as a deduction in the current tax Company (PHC) Tax. See the third party’s name and street address or year because of an accelerated event Instructions for Schedule PH (Form 1120) P.O. box. described in section 108(i)(5)(D). for details. 

### -6- **Instructions for Form 1120**

## Page 7 of 25 Instructions for Form 1120 16:40 - 27-JAN-2011 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

issued immediately once the application 

### Personal Service Corporation 

## 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 **Income from qualifying shipping** Application for Employer Identification unless the corporation has just been **activities.** Gross income does not Number. 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 respect to qualifying shipping activities. A A personal service corporation must the time the return is due, enter “Applied corporation making this election also may use a calendar tax year unless: For” and the date the corporation applied elect to defer gain on the disposition of a 

### • It elects to use a 52-53-week tax year in the space for the EIN. However, if the qualifying vessel. that ends with reference to the calendar corporation is filing its return year or tax year elected under section Use Form 8902, Alternative Tax on electronically, an EIN is required at the 444; Qualifying Shipping Activities, to figure time the return is filed. An exception 

### • It can establish a business purpose for the tax. Include the alternative tax on applies to subsidiaries of corporations a different tax year and obtains the Schedule J, line 9. whose returns are filed with the parent’s approval of the IRS (see the Instructions electronically filed consolidated Form 

### Line 1. Gross Receipts or Sales for Form 1128 and Pub. 538); or 1120. These subsidiaries should enter 

### • It elects under section 444 to have a Enter gross receipts or sales from all “Applied For” in the space for the EIN on 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 year of receipt. There are exceptions to If a corporation makes the section 444 Instructions for Form SS-4. this general rule for corporations that use election, its deduction for certain amounts the accrual method of accounting. paid to employee-owners may be limited. 

## Item D. Total Assets **•**To report income from long-term See Schedule H (Form 1120), Section Enter the corporation’s total assets (as contracts, see section 460. 280H Limitations for a Personal Service determined by the accounting method 

### • For special rules for reporting certain Corporation (PSC), to figure the regularly used in keeping the advance payments for goods and maximum deduction. 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. 

### • For information on adopting or 

### Schedule M-3 (Form 1120) 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 3115. 

## Address Change more on the last day of the tax year must **Installment sales.** Generally, the 

### • If this is the corporation’s first return, complete Schedule M-3 (Form 1120), Net installment method cannot be used for check the “Initial return” box. Income (Loss) Reconciliation for dealer dispositions of property. A “dealer 

### • If this is the corporation’s final return Corporations With Total Assets of $10 disposition” is any disposition of: (a) and it will no longer exist, check the “Final Million or More, instead of Schedule M-1. personal property by a person who return” box. A corporation filing Form 1120 that is not regularly sells or otherwise disposes of 

### • If the corporation changed its name required to file Schedule M-3 may personal property of the same type on the since it last filed a return, check the voluntarily file Schedule M-3 instead of installment plan or (b) real property held “Name change” box. Generally, a Schedule M-1. for sale to customers in the ordinary corporation also must have amended its If you are filing Schedule M-3, check course of the taxpayer’s trade or articles of incorporation and filed the Item A, box 4, to indicate that Schedule business. amendment with the state in which it was M-3 is attached. See the Instructions for incorporated. These restrictions on using the Schedule M-3 for more details. 

### • 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” timeshares and residential lots for which 

## Identification Number (EIN) box. the corporation elects to pay interest Enter the corporation’s EIN. If the under section 453(l)(3). **Note.** If a change in address occurs after corporation does not have an EIN, it must the return is filed, use Form 8822, apply for one. An EIN can be applied for: For sales of timeshares and residential Change of Address, to notify the IRS of 

### • Online
—Click on the EIN link atwww. lots reported under the installment the new address. irs.gov/businesses/small. The EIN is method, the corporation’s income tax is 

### -7- **Instructions for Form 1120**

## Page 8 of 25 Instructions for Form 1120 16:40 - 27-JAN-2011 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

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. SeePassive elect to use a 1-year adjustment period if activity limitations on page 9. the net section 481(a) adjustment for the Attach a schedule showing the change is less than $25,000. The following information for the current and 

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

### • Ordinary income from trade or business Corporations that qualify to use the income is deferred and ratably included in activities of a partnership (from Schedule nonaccrual experience method should income over the 5-year period beginning K-1 (Form 1065 or 1065-B)). Do not offset attach a schedule showing total gross with: ordinary losses against ordinary income. receipts, the amount not accrued as a 1. For a reacquisition occurring in Instead, include the losses on line 26. result of the application of section 2009, the fifth tax year following the tax Show the partnership’s name, address, 448(d)(5), and the net amount accrued. year in which the reacquisition occurs, and EIN on a separate statement Enter the net amount on line 1a. 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 partnership, identify the amount from Enter the cost of goods sold on line 2, year in which the reacquisition occurs. each partnership. page 1. Before making this entry, To make the election for a 2010 

### •Any LIFO recapture amount under complete Schedule A on page 2 of Form reacquisition, attach a statement to the section 1363(d). The corporation may 1120. See the instructions for Schedule corporation’s 2010 tax return. The have to include a LIFO recapture amount A. statement must clearly identify the in income if it: applicable instrument and include the 

### Line 4. Dividends 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 of the election or any later tax year. See 

### Line 5. Interest 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**

## Page 9 of 25 Instructions for Form 1120 16:40 - 27-JAN-2011 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.



### • Certain property produced in a farming $10,000 deduction is reduced (but not 

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

### • Research and experimental costs costs exceed $60,000. Any remaining 

### Limitations on Deductions 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. SeeCost 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. such costs. See Temporary Regulations For more details on the uniform 

### • The production of real property and sections 1.195-1T and 1.248-1T for capitalization rules, see Regulations tangible personal property by a details. sections 1.263A-1 through 1.263A-3. See corporation for use in its trade or business Regulations section 1.263A-4 for rules for If the corporation timely filed its return or in an activity engaged in for profit. property produced in a farming business. for the year without making an election, it Tangible personal property produced can still make an election by filing an **Transactions between related** by a corporation includes a film, sound amended return within 6 months of the **taxpayers.** Generally, an accrual basis recording, videotape, book, or similar due date of the return (excluding taxpayer can only deduct business property. extensions). Clearly indicate the election expenses and interest owed to a related Corporations subject to the section on the amended return and write “Filed party in the year the payment is included 263A uniform capitalization rules are pursuant to section 301.9100-2” at the top in the income of the related party. See required to capitalize: of the amended return. File the amended sections 163(e)(3),163(j), and 267 for 1. Direct costs and return at the same address the limitations on deductions for unpaid 2. An allocable part of most indirect corporation filed its original return. The interest and expenses. 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 **Note.** The corporation can choose to Related Information, to figure the amount activities. forgo the elections above by clearly of any corporate interest expense electing to capitalize its start-up or disallowed by section 163(j). 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 Report the deductible amount of 

### • Insurance; costs, certain deductions for financial start-up and organizational costs and any 

### • Compensation paid to officers institutions, and the amortizable basis of amortization on line 26. For amortization attributable to services; pollution control facilities. See section 291 that begins during the 2010 tax year, 

### • Rework labor; and to determine the amount of the complete and attach Form 4562. See the 

### • Contributions to pension, stock bonus, adjustment. Also see section 43. instructions for Form 4562. and certain profit-sharing, annuity, or **Golden parachute payments.** A portion deferred compensation plans. For more details on business start-up of the payments made by a corporation to and organizational costs, see Pub. 535, Regulations section 1.263A-1(e)(3) key personnel that exceeds their usual Business Expenses. specifies other indirect costs that relate to compensation may not be deductible. 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 amounts if control of the corporation service corporations (defined on page 7) **Interest expense**paid or incurred changes. See section 280G and and closely held corporations (defined during the production period of Regulations section 1.280G-1. Also see later). designated property must be capitalized the instructions for line 12. and is governed by special rules. For 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 up to $5,000 of business start-up and up the corporation did not materially The costs required to be capitalized to $5,000 of organizational costs paid or participate for the tax year; and under section 263A are not deductible incurred after October 22, 2004. Any 

### • Rental activities, regardless of its until the property (to which the costs remaining costs must be amortized. The participation. relate) is sold, used, or otherwise $5,000 deduction is reduced (but not For exceptions, see Form 8810, disposed of by the corporation. below zero) by the amount the total costs Corporate Passive Activity Loss and **Exceptions.** Section 263A does not exceed $50,000. If the total costs are Credit Limitations. apply to the following. $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 

### -9- **Instructions for Form 1120**

## Page 10 of 25 Instructions for Form 1120 16:40 - 27-JAN-2011 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

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. If a corporation leases property to a For more information, see section 469, See section 162(m) and Regulations governmental or other tax-exempt entity, the related regulations, and Pub. 925, section 1.162-27. Also see Notice the corporation cannot claim deductions Passive Activity and At-Risk Rules. 2007-49, 2007-25 I.R.B. 1429. related to the property to the extent that **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 TARP. The limit applies for each period in Enter deductible officers’ compensation Certain organizations are treated as which obligations arising from financial on line 12. Do not include compensation individuals for purposes of this test. See assistance under TARP remain deductible elsewhere on the return, such section 542(a)(2). For rules for outstanding. The $500,000 is reduced by as amounts included in cost of goods determining stock ownership, see section any amounts disallowed as excess sold, elective contributions to a section 544 (as modified by section 465(a)(3)). parachute payments. See section 401(k) cash or deferred arrangement, or **Reducing certain expenses for which** 162(m)(5) for definitions and other special amounts contributed under a salary **credits are allowable.** If the corporation rules. Also see Notice 2008-94, 2008-44 reduction SEP agreement or a SIMPLE 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 are $500,000 or more. Include only the 

### • Work opportunity credit (Form 5884). a Treasury troubled asset relief program deductible part of each officer’s 

### • Credit for Increasing research activities is not deductible as compensation if the compensation on Schedule E. See (Form 6765). payments are made because of a Disallowance of deduction for employee 

### • Orphan drug credit (Form 8820). severance from employment during an compensation in excess of $1 million 

### • Disabled access credit (Form 8826). applicable tax year. For this purpose, a below. Complete Schedule E, line 1, 

### • Empowerment zone and renewal parachute payment is any payment to a columns (a) through (f), for all officers. community employment credit (Form senior executive officer for departure from The corporation determines who is an 8844). a company for any reason, except for officer under the laws of the state where it 

### • Indian employment credit (Form 8845). payments for services performed or is incorporated. 

### • Employer credit for social security and 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). parachute payment. See section 280G(e) member of an affiliated group must 

### • Credit for small employer pension plan and Notice 2008-94. furnish this information. start-up costs (Form 8881). 

### Line 13. Salaries and Wages **•** Credit for employer-provided childcare **Disallowance of deduction for** facilities and services (Form 8882). Enter the total salaries and wages paid **employee compensation in excess of** 

### • Low sulfur diesel fuel production credit for the tax year. Do not include salaries **$1 million.** Publicly held corporations (Form 8896). and wages deductible elsewhere on the cannot deduct compensation to a 

### • Mine rescue team training credit (Form return, such as amounts included in “covered employee” to the extent that the 8923). officers’ compensation, cost of goods compensation exceeds $1 million. sold, elective contributions to a section 

### • Agricultural chemicals security credit Generally, a covered employee is: 401(k) cash or deferred arrangement, or (Form 8931). 

### •The principal executive officer of the amounts contributed under a salary 

### • Credit for employer differential wage corporation (or an individual acting in that reduction SEP agreement or a SIMPLE payments (Form 8932). capacity) as of the end of the tax year or IRA plan. 

### • Credit for small employer health 

### •An employee whose total 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 SeeReducing 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 If the corporation provided taxable which it figured the credit, it may need to For this purpose, compensation does fringe benefits to its employees, such as reduce the amount capitalized by the not include the following. personal use of a car, do not deduct as credit attributable to these costs. 

### • 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: 

### Maintenance need to reduce the otherwise allowable 

### • Commissions based on individual 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**

## Page 11 of 25 Instructions for Form 1120 16:40 - 27-JAN-2011 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

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). **Note.** Do not offset interest income must be depreciated or amortized. 

### • Original issue discount (OID) on certain against interest expense. high-yield discount obligations. See 

### Line 15. Bad Debts section 163(e)(5) to determine the The corporation must make an interest amount of the deduction for original issue Enter the total debts that became allocation if the proceeds of a loan were discount that is deferred and the amount worthless in whole or in part during the used for more than one purpose (for that is disallowed on a high-yield discount tax year. A small bank or thrift institution example, to purchase a portfolio obligation. The rules under section using the reserve method of section 585 investment and to acquire an interest in a 163(e)(5) do not apply to certain should attach a schedule showing how it passive activity). See Temporary high-yield discount obligations issued figured the current year’s provision. A Regulations section 1.163-8T for the after August 31, 2008 and before January corporation that uses the cash method of interest allocation rules. 1, 2011. See section 163(e)(5)(F). Also accounting cannot claim a bad debt Mutual savings banks, building and see Notice 2010-11, 2010-4 I.R.B. 326. deduction unless the amount was loan associations, and cooperative banks 

### • Interest which is allocable to previously included in income. can deduct the amounts paid or credited unborrowed policy cash values of life to the accounts of depositors as 

### Line 16. Rents insurance, endowment, or annuity dividends, interest, or earnings. See contracts issued after June 8, 1997. See If the corporation rented or leased a section 591. section 264(f). Attach a statement vehicle, enter the total annual rent or Do not deduct the following interest. showing the computation of the lease expense paid or incurred during the 

### • Interest on indebtedness incurred or deduction. year. Also complete Part V of Form 4562, continued to purchase or carry obligations 

### • Section 108(i) OID deduction. If the Depreciation and Amortization. If the if the interest is wholly exempt from corporation issued a debt instrument with corporation leased a vehicle for a term of income tax. See section 265(b) for special OID that is subject to section 108(i)(2) 30 days or more, the deduction for vehicle rules and exceptions for financial because of an election to defer the lease expense may have to be reduced institutions. Also see section 265(b)(7) for income from the cancellation of debt by an amount includible in income called a de minimis exception for financial (COD), the interest deduction for this OID the inclusion amount. The corporation institutions for certain tax-exempt bonds is deferred until the COD is includible in may have an inclusion amount if: issued in 2009 and 2010. income. The accrued OID is allowed as a 

### • For cash basis taxpayers, prepaid deduction ratably over the 5-year period **And the** interest allocable to years following the **vehicle’s** that the income from COD is includible in current tax year. For example, a cash **FMV on** 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 

### Line 19. Charitable **•** Interest on debt allocable to the After 12/31/04 but before 1/1/07
.. $15,200 production of designated property by a 

### Contributions corporation for its own use or for sale. After 12/31/03 but before 1/1/05
.. $17,500 Enter contributions or gifts actually paid The corporation must capitalize this If the lease term began before January 1, 2004, see 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 and Regulations sections 1.263A-8 Internal Revenue Bulletin in early 2011. from prior years. Special rules and limits through 1.263A-15 for definitions and apply to contributions to organizations more information. See Pub. 463 for instructions on conducting lobbying activities. See 

### • Interest paid or incurred on any portion figuring the inclusion amount. section 170(f)(9). of an underpayment of tax that is Corporations reporting taxable income attributable to an understatement arising 

### Line 17. Taxes and Licenses on the accrual method can elect to treat from an undisclosed listed transaction or Enter taxes paid or accrued during the tax 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, 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. 

### -11- **Instructions for Form 1120**

## Page 12 of 25 Instructions for Form 1120 16:40 - 27-JAN-2011 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

**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. for iron ore and coal (including lignite). **Contributions of property other than** 

### • 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. than cash and claims over a $500 Foreign intangible drilling costs and 

### • Any net operating loss (NOL) carryback deduction for the property, it must attach foreign exploration and development to the tax year under section 172. a schedule to the return describing the costs must either be added to the 

### • Any capital loss carryback to the tax kind of property contributed and the corporation’s basis for cost depletion year under section 1212(a)(1). 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 See Pub. 535 for more information on defined in section 170(b)(1)(E)) that does Contributions, and attach it to their depletion. not have publicly traded stock, can deduct 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 their returns for contributions of property 

### Profit-Sharing, etc., Plans 10% limit. The total amount of the (other than money) if the total claimed Enter the deduction for contributions to contribution claimed for the qualified deduction for all property contributed was qualified pension, profit-sharing, or other conservation property cannot exceed more than $5,000. Special rules apply to funded deferred compensation plans. 100% of the excess of the corporation’s the contribution of certain property. See Employers who maintain such a plan taxable income (as computed above the Instructions for Form 8283. generally must file one of the forms listed substituting “100%” for “10%”) over all below unless exempt from filing under other allowable charitable contributions. **Qualified conservation** regulations or other applicable guidance, Any excess qualified conservation **contributions.** Special rules apply to even if the plan is not a qualified plan contributions can be carried over to the qualified conservation contributions, under the Internal Revenue Code. The next 15 years, subject to the 100% including contributions of certain filing requirement applies even if the limitation. See section 170(b)(2)(B). easements on buildings located in a corporation does not claim a deduction for registered historic district. See section **Carryover.** Charitable contributions over the current tax year. There are penalties 170(h) and Pub. 526, Charitable the 10% limitation cannot be deducted for for failure to file these forms on time and Contributions. 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 **Form 5500-SF** Short Form Annual A larger deduction is allowed for income after taking into account any Return/Report of Small Employee Benefit certain contributions of: deduction for the NOL. Plan, instead of Form 5500, generally if 

### • Inventory and other property to certain To figure the amount of any remaining under 100 participants at the beginning of organizations for use in the care of the ill, NOL carryover to later years, taxable the plan year. needy, or infants (see section 170(e)(3)), 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). www.efast.dol.gov. 

### • Scientific equipment used for research **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 For more information on charitable 

### Programs **Contributions of $250 or more.** A contributions, including substantiation and corporation can deduct a contribution of Enter contributions to employee benefit recordkeeping requirements, see section $250 or more only if it gets a written programs not claimed elsewhere on the 170 and the related regulations and Pub. acknowledgment from the donee return (for example, insurance, health and 526. For other special rules that apply to organization that shows the amount of 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. 

### Line 20. Depreciation description and a good faith estimate of 

### Line 26. Other Deductions Include on line 20 depreciation and the the value of any goods or services cost of certain property that the provided in return for the contribution or Attach a schedule, listing by type and corporation elected to expense under states that no goods or services were amount, all allowable deductions that are section 179. See Form 4562 and the provided in return for the contribution. The not deductible elsewhere on Form 1120. Instructions for Form 4562. acknowledgment must be obtained by the Enter the total on line 26. 

### -12- **Instructions for Form 1120**

## Page 13 of 25 Instructions for Form 1120 16:40 - 27-JAN-2011 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

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 activity usually considered entertainment, 

### • Amortization. See Part VI of Form for violating any law. amusement, or recreation. 4562. 

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

### • Certain costs of qualified film or **Amounts treated as compensation.** of exempt income. See section 265(b) for television productions that the corporation Generally, the corporation may be able to exceptions. elects to deduct. See section 181 and deduct otherwise nondeductible 

### • Lobbying expenses. However, see Temporary Regulations section 1.181-1T. entertainment, amusement, or recreation exceptions (discussed below). 

### • Certain business start-up and expenses if the amounts are treated as **Travel, meals, and entertainment.** organizational costs. See page 9 of the compensation to the recipient and Subject to limitations and restrictions instructions. reported on Form W-2 for an employee or discussed below, a corporation can on Form 1099-MISC for an independent 

### • Certain environmental remediation deduct ordinary and necessary travel, contractor. costs that the corporation elects to 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 employee, including a spouse or 

### • Insurance premiums. with influencing federal or state legislation dependent of the officer or employee, 

### • Legal and professional fees. (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 **Meals and entertainment.** Generally, “influencing legislation.” 

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

### • Meals must not be lavish or attached to this return. If the amount is extravagant; from more than one partnership, identify 

### Line 28. Taxable Income Before **•** A bona fide business discussion must the amount from each partnership. 

### NOL Deduction and Special occur during, immediately before, or 

### • Any extraterritorial income exclusion 

### Deductions immediately after the meal; and (from Form 8873, line 52). **At-risk rules.** Generally, special at-risk 

### •An employee of the corporation must 

### • Any negative net section 481(a) rules under section 465 apply to closely be present at the meal. adjustment. See the instructions for line held corporations (seePassive activity 10. See section 274(n)(3) for a special rule limitationson 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. **Membership dues.** The corporation The at-risk rules do not apply to: 1175. can deduct amounts paid or incurred for 

### • Holding real property placed in service 

### • Dividends paid in cash on stock held by membership dues in civic or public by the taxpayer before 1987; an employee stock ownership plan. service organizations, professional 

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

### •Any qualifying business of a qualified the plan, the dividends are: 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. However, the at-risk rules do apply to participants or beneficiaries; However, no deduction is allowed if a the holding of mineral property. 2. Paid to the plan, which distributes 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 

### -13- **Instructions for Form 1120**

## Page 14 of 25 Instructions for Form 1120 16:40 - 27-JAN-2011 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

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 an NOL attributable to the qualifying election to credit its estimated tax disposes of an asset or its interest (either shipping activities to the extent that the payments to its beneficiaries, include the total or partial) in an activity to which the loss is carried forward from a tax year corporation’s share of the payment in the at-risk rules apply, determine the net preceding the first tax year for which the total for line 32b. Enter “T” and the profit or loss from the activity by alternative tax election was made. See amount on the dotted line next to the combining the gain or loss on the sale or section 1358(b)(2). entry space. disposition with the profit or loss from the 

### • If a corporation has a loss attributable activity. If the corporation has a net loss, it **Special estimated tax payments for** to a disaster, special rules apply. See the may be limited because of the at-risk **certain life insurance companies.** If Instructions for Form 1139. rules. the corporation is required to make or For more details on the NOL apply special estimated tax payments Treat any loss from an activity not deduction, see section 172 and the (SETP) under section 847 in addition to allowed for the tax year as a deduction Instructions for Form 1139. its regular estimated tax payments, enter allocable to the activity in the next tax on line 32b, the corporation’s total year. 

### 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 amount. Attach a schedule showing your 

### Tax and Payments A corporation can use the NOL incurred computation of estimated tax payments. in one tax year to reduce its taxable See sections 847(2) and 847(8) and Form 

### Line 30. Taxable Income 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 

### •The inversion gain of the corporation 

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

### Tax expatriated entity or a partner in an K. 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 above under minimum taxable income), is 

### Line 32f section 382(g)) occurs, the amount of the zero or less, the corporation may have an taxable income of a loss corporation that **Credit from Form 2439.** Enter any NOL that can be carried back or forward may be offset by the pre-change NOL credit from Form 2439, Notice to as a deduction to other tax years. carryovers may be limited. See section Shareholder of Undistributed Long-Term Generally, a corporation first carries 382 and the related regulations. A loss Capital Gains, for the corporation’s share back an NOL 2 tax years. However, the corporation must include the information of the tax paid by a regulated investment corporation can elect to waive the statement as provided in Regulations company (RIC) or a real estate carryback period and instead carry the section 1.382-11(a), with its income tax investment trust (REIT) on undistributed NOL forward to future tax years. See the return for each tax year that it is a loss long-term capital gains included in the instructions for Schedule K, item 11 on corporation in which an ownership shift, corporation’s income. Attach Form 2439 page 20. equity structures shift, or other transaction to Form 1120. described in Temporary Regulations Special rules and exceptions to the **Credit for federal tax on fuels.** Enter section 1.382-2T(a)(2)(i) occur. If the 2-year carryback period apply to certain the total income tax credit claimed on corporation makes the NOLs. See the Instructions for Form 1139 Form 4136, Credit for Federal Tax Paid closing-of-the-books election, see for details on these special rules and on Fuels. Attach Form 4136 to Form Regulations section 1.382-6(b). 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 4682(g)(2) for tax on ozone-depleting **Merchant Marine capital construction** 2008. See section 382(n). chemicals. Enter “ODC” next to the entry **fund.** To take a deduction for amounts space. For guidance in applying section 382 contributed to a capital construction fund 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 

### From Forms 3800 and 8827 programs under the Emergency amount of the deduction. On the dotted Economic Stabilization Act of 2008, see If the corporation elected to claim certain line next to the entry space, enter “CCF” Notice 2010-2, 2010-2 I.R.B. 251. unused research or minimum tax credits and the amount of the deduction. For 

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

### Payments pre-acquisition losses that may offset 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**

## Page 15 of 25 Instructions for Form 1120 16:40 - 27-JAN-2011 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

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 items in the same manner as materials Corporations that account for 

### Line 32h. Total Payments and supplies that are not incidental, enter inventoriable items in the same manner Add the amounts on lines 32d through on line 7 the portion of its raw materials as materials and supplies that are not 32g and enter the total on line 32h. and merchandise purchased for resale incidental can currently deduct that is included on line 6 and was not sold expenditures for direct labor and all **Backup withholding.** If the corporation during the year. indirect costs that would otherwise be had federal income tax withheld from any included in inventory costs. payments it received because, for 

### 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 

### • Cost, withheld and the words “Backup corporation can deduct for the tax year is 

### • Cost or market value (whichever is Withholding” in the blank space above figured on line 8. lower), or line 32h. All filers not using the cash method of 

### •Any other method approved by the IRS accounting should seeSection 263A that conforms to the requirements of the 

### Line 33. Estimated Tax Penalty 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 1. Inventory at Beginning line. SeeEstimated tax penalty on page cash method of accounting, it is required 4. to use cost. 

### of Year If the corporation is changing its method Generally, a rolling average method 

### Line 36 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 587, or its successor, for details. 

## Schedule A. An entry is required on this line only for Corporations that use erroneous 

## Cost of Goods Sold corporations that have elected a valuation methods must change to a simplified method of accounting. method permitted for federal income tax Generally, inventories are required at the 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 costs incurred with respect to the A qualifying taxpayer is a taxpayer 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 

### • Off-site storage or warehousing. December 16, 1998, has average annual indirect costs properly allocable to goods 

### • Purchasing. gross receipts of $1 million or less for the on hand at the inventory date. 

### • Handling, such as processing, 3 prior tax years. 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, For details, see Regulations section million or less for the 3 prior tax years, 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 Enter on line 4 the balance of section is not an ineligible activity. 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 selling price means actual offering of 

### Line 5. Other Costs 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 

### Line 7. Inventory at End of Year paid for the raw materials or 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 

### -15- **Instructions for Form 1120**

## Page 16 of 25 Instructions for Form 1120 16:40 - 27-JAN-2011 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

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 

### • Qualify for the 70% deduction under Report so-called dividends or earnings percent of total closing inventories section 245(a). To qualify for the 70% received from mutual savings banks, etc., 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 Enter on line 2: write up the opening inventory to cost in a less-than-20%-owned FSC that: 

### • Dividends (except those received on the year of election, report the effect of 

### • Are attributable to income treated as debt-financed stock acquired after July the write-up as other income (line 10, effectively connected with the conduct of 18, 1984) that are received from page 1), proportionately over a 3-year a trade or business within the United 20%-or-more-owned domestic period that begins with the year of the States (excluding foreign trade income), corporations subject to income tax and LIFO election (section 472(d)). and that are subject to the 80% deduction 

### • Qualify for the 70% deduction under **Note.** Corporations using the LIFO under section 243(c), and section 245(c)(1)(B). method that make an S corporation 

### • Taxable distributions from an IC-DISC election or transfer LIFO inventory to an S 

### Line 7, Column (a) or former DISC that are considered corporation in a nonrecognition eligible for the 80% deduction. Enter the U.S.-source portion of dividends transaction may be subject to an that: additional tax attributable to the LIFO 

### Line 3, Column (a) **•** Are received from 20%-or-more-owned recapture amount. See the instructions for Enter the following. foreign corporations, and Schedule J, line 10, on page 19, and line 

### • Dividends received on debt-financed 

### • Qualify for the 80% deduction under 10,Other Income, on page 8. stock acquired after July 18, 1984, from section 245(a). For more information on inventory domestic and foreign corporations subject Also include dividends received from a valuation methods, see Pub. 538. For to income tax that would otherwise be 20%-or-more-owned FSC that: more information on changes in the 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), (for example, it borrowed money to buy 

## Schedule C. Dividends 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 

### Line 8, Column (a) on lines 1 through 7, the percentage of dividends eligible for the 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 245(b) applies to dividends paid out of the 

### Line 3, Columns (b) and (c) 1.1502-13, 1.1502-26, and 1.1502-27 earnings and profits of a foreign Dividends received on debt-financed before completing Schedule C. 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 entitled to the full 70% or 80% return must not report as dividends on indirectly owned by the domestic dividends-received deduction. The 70% Schedule C any amounts received from 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) dividends received from foreign Enter dividends (except those received on Generally, line 9, column (c), cannot corporations. Attach a schedule to Form debt-financed stock acquired after July exceed the amount from the worksheet 1120 showing how the amount on line 3, 18, 1984
–see section 246A) that are: below. However, in a year in which an column (c), was figured. 

### • Received from less-than-20%-owned NOL occurs, this limitation does not apply domestic corporations subject to income even if the loss is created by the 

### Line 4, Column (a) tax, and dividends-received deduction. See Enter dividends received on preferred 

### • 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 

### Line 10, Columns (a) and (c) Also include on line 1 the following. 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 

### Line 5, Column (a) eligible for the 70% deduction and certain Investment Act of 1958 (see 15 U.S.C. dividends of Federal Home Loan Banks. 661 and following) must enter dividends Enter dividends received on preferred See section 246(a)(2). that are received from domestic stock of a 20%-or-more-owned public 

### • Dividends (except those received on corporations subject to income tax even utility that is subject to income tax and is debt-financed stock acquired after July though a deduction is allowed for the allowed the deduction provided in section 18, 1984) from a regulated investment entire amount of those dividends. To 247 for dividends paid. company (RIC). The amount of dividends claim the 100% deduction on line 10, 

### Line 6, Column (a) eligible for the dividends-received 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**

## Page 17 of 25 Instructions for Form 1120 16:40 - 27-JAN-2011 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

Investment Act of 1958 at the time it b. Dividends attributable to periods received the dividends. totaling more than 366 days that the 

### Line 16, Column (a) corporation received on any share of Enter taxable distributions from an 

### Line 11, Columns (a) and (c) preferred stock held for less than 91 days IC-DISC or former DISC that are during the 181-day period that began 90 Enter only dividends that qualify under designated as not eligible for a days before the ex-dividend date. When section 243(b) for the 100% dividends-received deduction. counting the number of days the dividends-received deduction described in No deduction is allowed under section corporation held the stock, you cannot section 243(a)(3). Corporations taking this 243 for a dividend from an IC-DISC or count certain days during which the deduction are subject to the provisions of former DISC (as defined in section section 1561. 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 related payments with respect to positions Include the following. provided in section 245(c)(1)(A). in substantially similar or related property. 1. Dividends (other than capital gain 5. Any other taxable dividend income distributions reported on Schedule D 

### Line 13, Column (a) (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 2. Dividends from tax-exempt electing fund from line 1c of Form 8621, retain allocations are included on line 17, organizations. Return by a Shareholder of a Passive 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 computed without regard to this a. Dividends received on any share of from CFCs under subpart F. This amount deduction. In a year in which an NOL stock held for less than 46 days during should equal the total subpart F income occurs, compute the deduction without the 91-day period beginning 45 days 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 

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

### 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, Component members of a controlled and without any capital loss carryback to the tax year under section group must use Schedule O to report the 1212(a)(1)
...................................... **1.** apportionment of taxable income, income **2.** Complete lines 10, 11, and 12, column (c), and enter the total here **2.** tax, and certain tax benefits between the **3.** Subtract line 2 from line 1
........................... **3.** members of the group. See Schedule O **4.** Multiply line 3 by 80%
.............................. **4.** and the Instructions for Schedule O for **5.** Add lines 2, 5, 7, and 8, column (c), and the part of the deduction more information. on line 3, column (c), that is attributable to dividends from 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 If the corporation is a member of a complete the rest of this worksheet
..................... **6.** controlled group and is filing Schedule O **7.** Enter the total amount of dividends from 20%-or-more-owned (Form 1120), enter the corporation’s tax corporations that are included on lines 2, 3, 5, 7, and 8, column (a) **7.** from Part III of Schedule O. Most **8.** Subtract line 7 from line 3
........................... **8.** corporations that are not members of a **9.** Multiply line 8 by 70%
.............................. **9.** controlled group and not filing a **10.** Subtract line 5 above from line 9, column (c)
............... **10.** consolidated return figure their tax by **11.** Enter the smaller of line 9 or line 10
..................... **11.** using the Tax Rate Schedule below. **12. Dividends-received deduction after limitation** (sec. 246(b)). Add 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. 

### -17- **Instructions for Form 1120**

## Page 18 of 25 Instructions for Form 1120 16:40 - 27-JAN-2011 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

combined tax on line 2. Attach Form Form 1118, Foreign Tax Credit
– **Tax Rate Schedule** 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 Enter any qualified electric vehicle filed with Form 1120-L. See Regulations Of the passive activity credits from prior years section 1.6012-2(c)(1)(ii). But not amount allowed for the current tax year from Form Over
— over— Tax is: over— **Exception for insurance companies** 8834, Qualified Plug-in Electric and **filing their Federal income tax returns** Electric Vehicle Credit, line 29. Also $0 $50,000 **15%** $0 **electronically.** If an insurance company include on line 5b any credits from Form 50,000 75,000 **$ 7,500 + 25%** 50,000 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 and schedules required to be filed with 335,000 10,000,000 **113,900 + 34%** 335,000 for Form 5735. Form 1120-L. However, such statements 10,000,000 15,000,000 **3,400,000 + 35%**10,000,000 must be available at all times for 

### Line 5c 15,000,000 18,333,333 **5,150,000 + 38%**15,000,000 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. in the administration of any internal **Qualified personal service corporation.** The corporation is required to file Form revenue law. A qualified personal service corporation 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. in the PFIC during the year, it must A corporation is a qualified personal 

### Line 5d include the increase in taxes due under service corporation if it meets both of the To figure the minimum tax credit and any section 1291(c)(2) in the total for line 2. following tests. carryforward of that credit, use Form On the dotted line next to line 2, enter 1. Substantially all of the corporation’s 8827, Credit for Prior Year Minimum “Section 1291” and the amount. 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. 

### Line 8 owned by **Additional tax under section 197(f).** A a. Employees performing the A corporation is taxed as a personal corporation that elects to pay tax on the services, holding company under section 542 if: gain from the sale of an intangible under b. Retired employees who had 

### •At least 60% of its adjusted ordinary the related person exception to the performed the services listed above, gross income for the tax year is personal anti-churning rules should include any c. Any estate of an employee or holding company income, and additional tax due under section retiree described above, or 

### •At any time during the last half of the 197(f)(9)(B) in the total for line 2. On the d. Any person who acquired the stock tax year more than 50% in value of its dotted line next to line 2, enter “Section of the corporation as a result of the death outstanding stock is directly or indirectly 197” and the amount. 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 the tax. **Alternative tax on qualified timber** corporation exempt from the AMT **gain.** If the corporation is a partner in a 

### Line 9 may be required to file Form 4626, 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 **Recapture of investment credit.** If the Unless the corporation is treated as a corporation may be eligible for an corporation disposed of investment credit small corporation exempt from the AMT, it alternative tax under section 1201(b)(1) property or changed its use before the may owe the AMT if it has any of the on the portion of its taxable income end of its useful life or recovery period, or adjustments and tax preference items attributable to the qualified timber gain. is required to recapture a qualifying listed on Form 4626. The corporation Enter the alternative tax, if any, on therapeutic discovery project grant, enter must file Form 4626 if its taxable income Schedule J, line 2. Attach a statement the increase in tax from Form 4255, (or loss) before the NOL deduction, showing the computation of the tax. You Recapture of Investment Credit. combined with these adjustments and tax may use Part IV of the 2009 Schedule D preference items is more than the smaller (Form 1120) as a guide. See section **Recapture of low-income housing** of $40,000 or the corporation’s allowable 1201(b). **credit.** If the corporation disposed of exemption amount (from Form 4626). For property (or there was a reduction in the **Mutual savings bank conducting life** this purpose, taxable income does not qualified basis of the property) for which it **insurance business.** The tax under include the NOL deduction. took the low-income housing credit, it may section 594 consists of the sum of (a) a owe a tax. See Form 8611, Recapture of partial tax computed on Form 1120 on the See Form 4626 for definitions and 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** 

### Line 5a allocable to the life insurance department, **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**

## Page 19 of 25 Instructions for Form 1120 16:40 - 27-JAN-2011 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

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 underLine 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 2. Stock that represents at least 80% the tax in Step 1. (The difference between 8902. Check the box for Form 8902. of the total voting power and at least 80% the two is the LIFO recapture tax.) of the total value of the stock of each of **Other.** Additional taxes and interest **Step 4.**Multiply the amount figured in the other corporations (except for the amounts can be included in the total Step 3 by 75%. (The result is the deferred common parent) must be owned directly entered on line 9. Check the box for LIFO recapture tax.) by one or more of the other includible “Other” if the corporation includes any **How to report.** Attach a schedule corporations. additional taxes and interest such as the showing the computation of each item items discussed below. SeeHow to report For this purpose, the term “stock” included in, or subtracted from, the total below for details on reporting these generally does not include any stock that for line 10. On the dotted line next to line amounts on an attached schedule. (a) is nonvoting, (b) is nonconvertible, 10, specify (a) the applicable Code 

### • Recapture of Indian employment credit. (c) is limited and preferred as to dividends section, (b) the type of tax, and (c) enter Generally, if an employer terminates the and does not participate significantly in the amount of tax. For example, if the employment of a qualified employee less corporate growth, and (d) has redemption corporation is deferring a $100 LIFO than 1 year after the date of initial and liquidation rights that do not exceed recapture tax, subtract this amount from employment, any Indian employment the issue price of the stock (except for a the total on line 10, then enter “Section credit allowed for a prior tax year because reasonable redemption or liquidation 1363-Deferred Tax-$100” on the dotted of wages paid or incurred to that premium). See section 1504(a)(4). line next to line 10. employee must be recaptured. For 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 

### Corporation 

## Other Information childcare facilities and services credit **Note.** For supplemental information and Complete all items that apply to the (see Form 8882). examples of reasonable methods for corporation. 

### • Tax and interest on a nonqualified determining the percentage interest withdrawal from a capital construction 

### 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 towww. 

### • Interest on deferred tax attributable to Codes beginning on page 22 of the irs.gov.Click on “Businesses”, click on (a) installment sales of certain timeshares instructions. Using the list of codes and “Partnerships”, and click on “Form 1065 and residential lots (section 453(l)(3)) and activities, determine from which activity Frequently Asked Questions.” (b) certain nondealer installment the corporation derives the highest obligations (section 453A(c)). For purposes of question 4, the percentage of its total receipts. Enter on 

### • Interest due on deferred gain (section constructive ownership rules of section lines 2a, 2b, and 2c the principal business 1260(b)). 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 4a or 4b, complete and attach new 

### Question 3 and the type of tax or interest. Schedule G (Form 1120), Information on Check the “Yes” box for question 3 if: Certain Persons Owning the 

### •The corporation is a subsidiary in an 

### Line 10 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 

### •The corporation is a subsidiary in a 

### Constructive Ownership of Other electing fund in the amount entered on parent-subsidiary controlled group. For a line 10. See Form 8621, Part V, andHow 

### 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 corporation’s constructive ownership of O (Form 1120). 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 LIFOrecapture 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, 

### -19- **Instructions for Form 1120**

## Page 20 of 25 Instructions for Form 1120 16:40 - 27-JAN-2011 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

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, 

### Item 9 end of the tax year, owned directly 20% indirectly, through Partnership B, a 35% or more, or owned, directly or indirectly, Show any tax-exempt interest received or interest (50% of 70%) in the profit, loss, or 50% or more of the total voting power of accrued. Include any exempt-interest capital of Partnership C and owns, all classes of stock entitled to vote. dividends received as a shareholder in a indirectly, 35% of the voting stock of Indicate the name of the corporation, EIN mutual fund or other RIC. Also, if Corporation D. Corporation A owns, (if any), country of incorporation, and the required, include the same amount on directly or indirectly, a 50% interest in the percentage interest owned, directly or Schedule M-1, line 7 (or Schedule M-3, profit, loss, or capital of Partnership C indirectly, in the total voting power. List Part II, line 13, if applicable). (15% directly and 35% indirectly), and the parent corporation of an affiliated owns, directly or indirectly, 50% of the 

### Item 11 group of corporations filing a consolidated voting stock of Corporation D (15% tax return rather than the subsidiary If the corporation has an NOL, it generally directly and 35% indirectly). 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 owns, directly or indirectly, 50% of the 

### Question 5b election is irrevocable. profit, loss, or capital of Partnership C. List each foreign or domestic partnership Corporations filing a consolidated in which the corporation, at the end of the 

### Question 7 return that elects to waive the entire tax year, owned directly an interest of Check the “Yes” box if one foreign person carryback period for the group must also 20% or more, or owned, directly or 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 the election will not be valid. partnership. List each trust in which the value of all classes of stock of the corporation, at the end of the tax year, 

### Item 12 corporation. owned directly an interest of 20% or Enter the amount of the NOL carryover to The constructive ownership rules of more, or owned, directly or indirectly, an the tax year from prior years, even if section 318 apply in determining if a interest of 50% or more in the trust some of the loss is used to offset income corporation is foreign owned. See section beneficial interest. Indicate the name, EIN on this return. The amount to enter is the 6038A(c)(5) and the related regulations. (if any), country of organization, and the total of all NOLs generated in prior years maximum percentage interest owned, 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 

### Question 14 25%-or-more foreign owner, complete 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. positions that must be reported on meaning of section 7701(a)(31), or If the partnership agreement does not Schedule UTP. 

### •A foreign government (or one of its express the partner’s share of profit, loss, agencies or instrumentalities) to the Attach Schedule UTP to the and capital as fixed percentages, use a extent that it is engaged in the conduct of corporation’s income tax return. Do not reasonable method in arriving at the a commercial activity as described in file it separately. A taxpayer that files a percentage items for the purposes of section 892. protective Form 1120 must also file completing question 5b. Such method Schedule UTP if it satisfies the **Owner’s country.** For individuals, the must be consistent with the partnership requirements set forth above. term “owner’s country” means the country agreement. The method used to compute of residence. For all others, it is the a percentage share of profit, loss, and For details, see the Instructions for country where incorporated, organized, capital must be applied consistently from Schedule UTP. created, or administered. year to year. Maintain records to support 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 

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

## Page 21 of 25 Instructions for Form 1120 16:40 - 27-JAN-2011 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

Corporations with total receipts (line 1a filing Form 1120 that is not required to file 

### Line 26 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 

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

### Line 5c adjustments. required to complete Schedule L, include Include any of the following. 

### •The excess of additional pension total assets reported on Schedule L, line liability over unrecognized prior service 15, column (d), on page 1, item D. 

### • Meal and entertainment expenses not cost. deductible under section 274(n). 

### • Guarantees of employee stock (ESOP) 

### • Expenses for the use of an Corporations with total assets debt. entertainment facility. non-consolidated (or consolidated for all corporations included within the tax 

### •The part of business gifts over $25. 

### • Compensation related to employee 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 If the total adjustment to be entered on complete Schedule M-3 (Form 1120) cruise ships. line 26 is a negative amount, enter the instead of Schedule M-1. See the 

### • Employee achievement awards over amount in parentheses. separate Instructions for Schedule M-3 $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 

### •The cost of skyboxes over the face 

## Reconciliation of Income 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. SeeConsolidated expenses not deductible under section 

## Income per Return Return on page 6 of these instructions. 274(m). Corporations with total receipts (line 1a 

### • Expenses for travel as a form of plus lines 4 through 10 on page 1)**and** 

### Line 1 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 For more information, see Pub. 542. 13, is checked. 

### Line 5 Include on this line: Corporations with total assets 

### Line 7 **•** State and local government obligations, non-consolidated (or consolidated for all the interest on which is excludable from Report any tax exempt interest received corporations included within the tax gross income under section 103(a), and or accrued, including any exempt-interest consolidation group) of $10 million or dividends received as a shareholder in a 

### • Stock in a mutual fund or other RIC that more on the last day of the tax year must mutual fund or other RIC. Also report this distributed exempt-interest dividends complete Schedule M-3 (Form 1120) same amount on Schedule K, item 9. during the tax year of the corporation. instead of Schedule M-1. A corporation **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, seeWhere To File on page 3. 

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

## Page 22 of 25 Instructions for Form 1120 16:40 - 27-JAN-2011 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

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

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

### Codes receipts is defined as the sum of gross receipts or number, enter 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 produce the finished product, but retains title to the principal product or service of the company on Form engaged to facilitate the administration of the product, the company is considered a manufacturer 1120, Schedule K, line 2c. Internal Revenue Code. These principal business and must use one of the manufacturing codes activity codes are based on the North American (311110-339900). Industry Classification System. Code Code Code Code **Heavy and Civil Engineering Wood Product Manufacturing**  332810 Coating, Engraving, Heat **Agriculture, Forestry, Fishing Construction**  Treating, & Allied Activities 321110 Sawmills & Wood **and Hunting** 237100 Utility System Construction Preservation 332900 Other Fabricated Metal **Crop Production** Product Mfg 237210 Land Subdivision 321210 Veneer, Plywood, & 111100 Oilseed & Grain Farming Engineered Wood Product **Machinery Manufacturing** 237310 Highway, Street, & Bridge 111210 Vegetable & Melon Farming Mfg Construction 333100 Agriculture, Construction, & (including potatoes & yams) 321900 Other Wood Product Mfg Mining Machinery Mfg 237990 Other Heavy & Civil 111300 Fruit & Tree Nut Farming Engineering Construction **Paper Manufacturing** 333200 Industrial Machinery Mfg 111400 Greenhouse, Nursery, & **Specialty Trade Contractors** 322100 Pulp, Paper, & Paperboard 333310 Commercial & Service Floriculture Production Mills Industry Machinery Mfg 238100 Foundation, Structure, & 111900 Other Crop Farming Building Exterior Contractors 322200 Converted Paper Product Mfg 333410 Ventilation, Heating, (including tobacco, cotton, (including framing carpentry, Air-Conditioning, & **Printing and Related Support** sugarcane, hay, peanut, masonry, glass, roofing, & Commercial Refrigeration **Activities** sugar beet & all other crop siding) Equipment Mfg 323100 Printing & Related Support farming) 238210 Electrical Contractors 333510 Metalworking Machinery Mfg Activities **Animal Production** 238220 Plumbing, Heating, & 333610 Engine, Turbine & Power **Petroleum and Coal Products** 112111 Beef Cattle Ranching & Air-Conditioning Contractors Transmission Equipment Mfg **Manufacturing** Farming 238290 Other Building Equipment 333900 Other General Purpose 324110 Petroleum Refineries 112112 Cattle Feedlots Contractors Machinery Mfg (including integrated) 112120 Dairy Cattle & Milk 238300 Building Finishing **Computer and Electronic Product** 324120 Asphalt Paving, Roofing, & Production Contractors (including **Manufacturing** Saturated Materials Mfg 112210 Hog & Pig Farming drywall, insulation, painting, 334110 Computer & Peripheral 324190 Other Petroleum & Coal 112300 Poultry & Egg Production wallcovering, flooring, tile, & Equipment Mfg Products Mfg finish carpentry) 112400 Sheep & Goat Farming 334200 Communications Equipment **Chemical Manufacturing** 238900 Other Specialty Trade 112510 Aquaculture (including Mfg 325100 Basic Chemical Mfg Contractors (including site shellfish & finfish farms & 334310 Audio & Video Equipment 325200 Resin, Synthetic Rubber, & preparation) hatcheries) Mfg Artificial & Synthetic Fibers & 112900 Other Animal Production 334410 Semiconductor & Other Filaments Mfg **Manufacturing Forestry and Logging**  Electronic Component Mfg 325300 Pesticide, Fertilizer, & Other **Food Manufacturing** 113110 Timber Tract Operations 334500 Navigational, Measuring, Agricultural Chemical Mfg 311110 Animal Food Mfg Electromedical, & Control 113210 Forest Nurseries & Gathering 325410 Pharmaceutical & Medicine Instruments Mfg of Forest Products 311200 Grain & Oilseed Milling Mfg 334610 Manufacturing & 113310 Logging 311300 Sugar & Confectionery 325500 Paint, Coating, & Adhesive Reproducing Magnetic & Product Mfg **Fishing, Hunting and Trapping** Mfg Optical Media 311400 Fruit & Vegetable Preserving 114110 Fishing 325600 Soap, Cleaning Compound, & **Electrical Equipment, Appliance, and** & Specialty Food Mfg Toilet Preparation Mfg 114210 Hunting & Trapping **Component Manufacturing** 311500 Dairy Product Mfg 325900 Other Chemical Product & **Support Activities for Agriculture** 335100 Electric Lighting Equipment 311610 Animal Slaughtering and Preparation Mfg **and Forestry** Mfg Processing **Plastics and Rubber Products** 115110 Support Activities for Crop 335200 Household Appliance Mfg 311710 Seafood Product Preparation **Manufacturing** Production (including cotton 335310 Electrical Equipment Mfg & Packaging ginning, soil preparation, 326100 Plastics Product Mfg 335900 Other Electrical Equipment & 311800 Bakeries & Tortilla Mfg planting, & cultivating) 326200 Rubber Product Mfg Component Mfg 311900 Other Food Mfg (including 115210 Support Activities for Animal **Nonmetallic Mineral Product** coffee, tea, flavorings & **Transportation Equipment** Production **Manufacturing** seasonings) **Manufacturing** 115310 Support Activities For 327100 Clay Product & Refractory 336100 Motor Vehicle Mfg **Beverage and Tobacco Product** Forestry Mfg **Manufacturing** 336210 Motor Vehicle Body & Trailer 327210 Glass & Glass Product Mfg Mfg 312110 Soft Drink & Ice Mfg **Mining** 327300 Cement & Concrete Product 336300 Motor Vehicle Parts Mfg 312120 Breweries 211110 Oil & Gas Extraction Mfg 336410 Aerospace Product & Parts 312130 Wineries 212110 Coal Mining 327400 Lime & Gypsum Product Mfg Mfg 312140 Distilleries 212200 Metal Ore Mining 327900 Other Nonmetallic Mineral 336510 Railroad Rolling Stock Mfg 312200 Tobacco Manufacturing 212310 Stone Mining & Quarrying Product Mfg 336610 Ship & Boat Building **Textile Mills and Textile Product** 212320 Sand, Gravel, Clay, & **Primary Metal Manufacturing** 336990 Other Transportation **Mills** Ceramic & Refractory 331110 Iron & Steel Mills & Ferroalloy Equipment Mfg Minerals Mining & Quarrying 313000 Textile Mills Mfg **Furniture and Related Product** 212390 Other Nonmetallic Mineral 314000 Textile Product Mills 331200 Steel Product Mfg from **Manufacturing** Mining & Quarrying **Apparel Manufacturing** Purchased Steel 337000 Furniture & Related Product 213110 Support Activities for Mining 315100 Apparel Knitting Mills 331310 Alumina & Aluminum Manufacturing Production & Processing 315210 Cut & Sew Apparel **Miscellaneous Manufacturing Utilities**  Contractors 331400 Nonferrous Metal (except 339110 Medical Equipment & 221100 Electric Power Generation, Aluminum) Production & 315220 Men’s & Boys’ Cut & Sew Supplies Mfg Transmission & Distribution Processing Apparel Mfg 339900 Other Miscellaneous 221210 Natural Gas Distribution 331500 Foundries 315230 Women’s & Girls’ Cut & Sew Manufacturing 221300 Water, Sewage & Other Apparel Mfg **Fabricated Metal Product** Systems **Manufacturing** 315290 Other Cut & Sew Apparel Mfg **Wholesale Trade** 221500 Combination Gas & Electric 332110 Forging & Stamping 315990 Apparel Accessories & Other **Merchant Wholesalers, Durable** Apparel Mfg 332210 Cutlery & Handtool Mfg **Goods Construction**  **Leather and Allied Product** 332300 Architectural & Structural 423100 Motor Vehicle & Motor **Manufacturing** Metals Mfg **Construction of Buildings** Vehicle Parts & Supplies 316110 Leather & Hide Tanning & 332400 Boiler, Tank, & Shipping 236110 Residential Building 423200 Furniture & Home Finishing Container Mfg Construction Furnishings 316210 Footwear Mfg (including 332510 Hardware Mfg 236200 Nonresidential Building 423300 Lumber & Other Construction rubber & plastics) Construction 332610 Spring & Wire Product Mfg Materials 316990 Other Leather & Allied 332700 Machine Shops; Turned 423400 Professional & Commercial Product Mfg Product; & Screw, Nut, & Bolt Equipment & Supplies Mfg 

### -22-

## Page 23 of 25 Instructions for Form 1120 16:40 - 27-JAN-2011 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

**Principal Business Activity Codes**(continued) Code Code Code Code 423500 Metal & Mineral (except 445120 Convenience Stores **Truck Transportation Finance and Insurance**  Petroleum) 445210 Meat Markets 484110 General Freight Trucking, **Depository Credit Intermediation** 423600 Electrical & Electronic Goods Local 445220 Fish & Seafood Markets 522110 Commercial Banking 423700 Hardware, & Plumbing & 484120 General Freight Trucking, 445230 Fruit & Vegetable Markets 522120 Savings Institutions Heating Equipment & Long-distance 445291 Baked Goods Stores 522130 Credit Unions Supplies 484200 Specialized Freight Trucking 445292 Confectionery & Nut Stores 522190 Other Depository Credit 423800 Machinery, Equipment, & **Transit and Ground Passenger** 445299 All Other Specialty Food Intermediation Supplies **Transportation** Stores **Nondepository Credit Intermediation** 423910 Sporting & Recreational 485110 Urban Transit Systems 445310 Beer, Wine, & Liquor Stores 522210 Credit Card Issuing Goods & Supplies 485210 Interurban & Rural Bus **Health and Personal Care Stores** 522220 Sales Financing 423920 Toy & Hobby Goods & Transportation 446110 Pharmacies & Drug Stores Supplies 522291 Consumer Lending 485310 Taxi Service 446120 Cosmetics, Beauty Supplies, 423930 Recyclable Materials 522292 Real Estate Credit (including 485320 Limousine Service & Perfume Stores mortgage bankers & 423940 Jewelry, Watch, Precious 485410 School & Employee Bus 446130 Optical Goods Stores originators) Stone, & Precious Metals Transportation 446190 Other Health & Personal 522293 International Trade Financing 423990 Other Miscellaneous Durable 485510 Charter Bus Industry Care Stores Goods 522294 Secondary Market Financing 485990 Other Transit & Ground **Gasoline Stations Merchant Wholesalers, Nondurable**  522298 All Other Nondepository Passenger Transportation **Goods** 447100 Gasoline Stations (including Credit Intermediation **Pipeline Transportation** convenience stores with gas) 424100 Paper & Paper Products **Activities Related to Credit** 486000 Pipeline Transportation **Clothing and Clothing Accessories Intermediation**  424210 Drugs & Druggists’ Sundries **Scenic & Sightseeing Transportation Stores**  522300 Activities Related to Credit 424300 Apparel, Piece Goods, & 487000 Scenic & Sightseeing 448110 Men’s Clothing Stores Intermediation (including loan Notions Transportation brokers, check clearing, & 448120 Women’s Clothing Stores 424400 Grocery & Related Products money transmitting) **Support Activities for Transportation** 448130 Children’s & Infants’ Clothing 424500 Farm Product Raw Materials 488100 Support Activities for Air **Securities, Commodity Contracts,** Stores 424600 Chemical & Allied Products Transportation **and Other Financial Investments and** 448140 Family Clothing Stores 424700 Petroleum & Petroleum **Related Activities** 488210 Support Activities for Rail 448150 Clothing Accessories Stores Products Transportation 523110 Investment Banking & 448190 Other Clothing Stores 424800 Beer, Wine, & Distilled Securities Dealing 488300 Support Activities for Water Alcoholic Beverages 448210 Shoe Stores Transportation 523120 Securities Brokerage 424910 Farm Supplies 448310 Jewelry Stores 488410 Motor Vehicle Towing 523130 Commodity Contracts 424920 Book, Periodical, & 448320 Luggage & Leather Goods Dealing 488490 Other Support Activities for Newspapers Stores Road Transportation 523140 Commodity Contracts 424930 Flower, Nursery Stock, & **Sporting Goods, Hobby, Book, and** Brokerage 488510 Freight Transportation Florists’ Supplies **Music Stores** Arrangement 523210 Securities & Commodity 424940 Tobacco & Tobacco Products 451110 Sporting Goods Stores Exchanges 488990 Other Support Activities for 424950 Paint, Varnish, & Supplies 451120 Hobby, Toy, & Game Stores Transportation 523900 Other Financial Investment 424990 Other Miscellaneous 451130 Sewing, Needlework, & Piece Activities (including portfolio **Couriers and Messengers** Nondurable Goods Goods Stores management & investment 492110 Couriers advice) **Wholesale Electronic Markets and** 451140 Musical Instrument & 492210 Local Messengers & Local **Agents and Brokers** Supplies Stores **Insurance Carriers and Related** Delivery 425110 Business to Business **Activities** 451211 Book Stores **Warehousing and Storage** Electronic Markets 524140 Direct Life, Health, & Medical 451212 News Dealers & Newsstands 493100 Warehousing & Storage 425120 Wholesale Trade Agents & Insurance & Reinsurance 451220 Prerecorded Tape, Compact (except lessors of Brokers Carriers Disc, & Record Stores miniwarehouses & 524150 Direct Insurance & **General Merchandise Stores** self-storage units) Reinsurance (except Life, **Retail Trade** 452110 Department Stores Health & Medical) Carriers **Motor Vehicle and Parts Dealers** 452900 Other General Merchandise **Information** 524210 Insurance Agencies & 441110 New Car Dealers Stores **Publishing Industries (except** Brokerages 441120 Used Car Dealers **Miscellaneous Store Retailers Internet)**  524290 Other Insurance Related 441210 Recreational Vehicle Dealers 453110 Florists 511110 Newspaper Publishers Activities (including 441221 Motorcycle Dealers 453210 Office Supplies & Stationery 511120 Periodical Publishers third-party administration of 441222 Boat Dealers Stores insurance and pension funds) 511130 Book Publishers 441229 All Other Motor Vehicle 453220 Gift, Novelty, & Souvenir **Funds, Trusts, and Other Financial** 511140 Directory & Mailing List Dealers Stores **Vehicles** Publishers 441300 Automotive Parts, 453310 Used Merchandise Stores 525100 Insurance & Employee 511190 Other Publishers Accessories, & Tire Stores Benefit Funds 453910 Pet & Pet Supplies Stores 511210 Software Publishers **Furniture and Home Furnishings** 525910 Open-End Investment Funds 453920 Art Dealers **Motion Picture and Sound Stores**  (Form 1120-RIC) 453930 Manufactured (Mobile) Home **Recording Industries** 442110 Furniture Stores 525920 Trusts, Estates, & Agency Dealers 512100 Motion Picture & Video Accounts 442210 Floor Covering Stores 453990 All Other Miscellaneous Store Industries (except video 525990 Other Financial Vehicles Retailers (including tobacco, 442291 Window Treatment Stores rental) (including mortgage REITs & candle, & trophy shops) 442299 All Other Home Furnishings 512200 Sound Recording Industries closed-end investment funds) Stores **Nonstore Retailers Broadcasting (except Internet)**  “Offices of Bank Holding Companies” 454110 Electronic Shopping & **Electronics and Appliance Stores** 515100 Radio & Television and “Offices of Other Holding Mail-Order Houses 443111 Household Appliance Stores Broadcasting Companies” are located under 454210 Vending Machine Operators 443112 Radio, Television, & Other 515210 Cable & Other Subscription **Management of Companies (Holding** 454311 Heating Oil Dealers Electronics Stores Programming **Companies)**on page 25. 454312 Liquefied Petroleum Gas 443120 Computer & Software Stores **Telecommunications** (Bottled Gas) Dealers 443130 Camera & Photographic 517000 Telecommunications **Real Estate and Rental and** 454319 Other Fuel Dealers Supplies Stores (including paging, cellular, **Leasing** satellite, cable & other 454390 Other Direct Selling **Building Material and Garden Real Estate**  program distribution, Establishments (including **Equipment and Supplies Dealers** resellers, other 531110 Lessors of Residential door-to-door retailing, frozen 444110 Home Centers telecommunications, & Buildings & Dwellings food plan providers, party 444120 Paint & Wallpaper Stores Internet service providers) (including equity REITs) plan merchandisers, & 444130 Hardware Stores coffee-break service 531114 Cooperative Housing **Data Processing Services** 444190 Other Building Material providers) (including equity REITs) 518210 Data Processing, Hosting, & Dealers 531120 Lessors of Nonresidential Related Services 444200 Lawn & Garden Equipment & **Transportation and** Buildings (except **Other Information Services** Supplies Stores Miniwarehouses) (including **Warehousing** 519100 Other Information Services **Food and Beverage Stores** equity REITs) **Air, Rail, and Water Transportation** (including news syndicates, 445110 Supermarkets and Other 531130 Lessors of Miniwarehouses & libraries, Internet publishing & 481000 Air Transportation Grocery (except Self-Storage Units (including broadcasting) 482110 Rail Transportation Convenience) Stores equity REITs) 483000 Water Transportation 

### -23-

## Page 24 of 25 Instructions for Form 1120 16:40 - 27-JAN-2011 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

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



### -24-

## Page 25 of 25 Instructions for Form 1120 16:40 - 27-JAN-2011 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.



### Index
**A E**  Limited liability companies
..... 2 **R** Accounting methods
........... 5 Electronic filing
................ 2 Lobbying expenses, Recapture taxes
.............. 18 nondeductibility
............ 13 Accounting period (Tax Employee benefit Reconciliation of income
......21

Year)
....................... 5 programs .................. 12 Recordkeeping
................ 5 Address change
............... 7 Employer identification number Refundable credits
........... 14 **M** (EIN)
....................... 7 Affiliated group
............... 19 Related party transactions
..... 9 Merchant Marine capital Estimated tax: Amended return
............... 5 Rents (expense)
.............. 11 construction fund: Penalty
.................... 15 Amortization
.................. 9 Deduction for Rents (income)
................ 8 Extension of time to file
........ 3 contributions
............. 14 Assembling the return
......... 4 Repairs and maintenance
..... 10 Tax on nonqualified At-risk rules
.................. 13 withdrawal
............... 19 **F S**  Minimum tax: Farming, corporations engaged **B** Salaries and wages
........... 10 Alternative
................. 18 in
........................... 2 Backup withholding
........... 15 Schedule: Prior year, credit for
........ 18 Final return
.................... 7 Bad debts
.................... 11 A
.......................... 15 Mutual savings banks conducting Financial asset securitization C
.......................... 16 Balance sheets
...............20 life insurance business
..... 18 investment trust (FASIT)
..... 2 J
.......................... 17 Business startup expenses
..... 9 Foreign person (defined)
......20 K
.......................... 19 **N** Foreign tax credit
............. 18 L
..........................20 **C** Name change
................. 7 M-1
........................21 Forms and publications, how to Capital construction fund (See M-3
......................7,21 Net operating loss
........ 14,20 get
......................... 1 Merchant Marine capital O
.......................... 17 Nonaccrual experience construction fund) Section 263A costs
.........9,15 method
..................... 8 **G** Closely held corporations
..... 10 Shareholders’ equity General business credit
....... 18 Compensation of officers
...... 10 adjustments
................21 **O** Golden parachute Consolidated return
.........6,20 Signature
..................... 3 Other deductions
............. 12 payments
................... 9 Contributions to reduce debt held Special returns for certain Other income
................. 8 Gross receipts
................. 7 by the public
................ 1 organizations
............... 2 Other taxes
.................. 18 Contributions, charitable
...... 11 Overpaid estimated tax
....... 14 **I** Controlled group
............. 17 **T** Installment sales
.............. 7 Cost of goods sold
..........8,15 Tax issues, unresolved
........ 1 **P** Interest due: Credits against tax
............ 18 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 **W** Personal holding company Depreciation
................. 12 Tax-exempt
............ 20,21 When to file
................... 3 tax
........................ 18 Direct deposit of refund
.....1,15 Inventory: Where to file
.................. 3 Personal service Disclosure statement
.......... 5 Section 263A uniform Who must file
................. 2 corporation
................. 7 Dividend income
.............. 8 capitalization rules
.....9,15 Who must sign
................ 3 Preparer, tax return
............ 3 Valuation methods
......... 15 Dividends-received Worksheets
.................. 17 Private delivery services
....... 3 deduction
...............16-17 Schedule C
................ 17 Dues, membership and **L Q** 

other
...................... 13 

### ■ LIFO recapture: Qualified personal service

Tax on
..................... 19 corporation
................ 18 Limitations on deductions
......9, 12



### -25-