Instructions For Form 1120-Pc - 2002 (Page 7 of 20) in pdf

Taxable Income

Line 3a. Members of a controlled group

Tax Rate Schedule If the amount on line

are entitled to one $50,000, one $25,000,

1 or line 2, Form 1120-PC, page 1 is:

Line 1, Taxable income, and line 2,

and one $9,925,000 taxable income

Taxable investment income. If the

bracket amount (in that order) on line 3a.

Of the

corporation is a small company as

But not

amount

defined in section 831(b)(2) and elects

When a controlled group adopts or

Over —

over —

Tax is:

over —

under section 831(b)(2)(A)(ii) to be taxed

later amends an apportionment plan,

$50,000

15%

on taxable investment income, complete

each member must attach to its tax return

50,000

75,000

$ 7,500 + 25%

50,000

Schedule B (ignore Schedule A) and

a copy of its consent to this plan. The

75,000

100,000

13,750 + 34%

75,000

enter the amount from Schedule B, line

copy (or an attached statement) must

100,000

335,000

22,250 + 39%

100,000

21, on line 2, page 1. All other

show the part of the amount in each

335,000 10,000,000

113,900 + 34%

335,000

corporations should complete Schedule A

taxable income bracket apportioned to

10,000,000 15,000,000

3,400,000 + 35%

10,000,000

(ignore Schedule B) and enter on line 1,

that member. See Regulations section

15,000,000 18,333,333

5,150,000 + 38%

15,000,000

page 1, the amount from Schedule A, line

1.1561-3(b) for other requirements and

37.

18,333,333

- - - - -

35%

for the time and manner of making the

consent.

Deferred tax under section 1291. If the

Tax Computation and

corporation was a shareholder in a

Unequal apportionment plan.

Payments

passive foreign investment company

Members of a controlled group may elect

(PFIC), and the corporation received an

an unequal apportionment plan and divide

excess distribution or disposed of its

the taxable income brackets as they want.

investment in the PFIC during the year, it

Tax Computation Worksheet for

There is no need for consistency among

must include the total increase in taxes

Members of a Controlled Group (keep

taxable income brackets. Any member

due under section 1291(c)(2) in the

for your records.)

may be entitled to all, some, or none of

amount entered on line 4. On the dotted

the taxable income bracket. However, the

line next to line 4, write “Section 1291”

Note. Each member of a controlled group must

total amount for all members cannot be

and the amount.

compute its tax using this worksheet.

more than the total amount in each

Do not include on line 4 any interest

1. Enter taxable income (line 1 or

taxable income bracket.

due under section 1291(c)(3). Instead,

line 2, page 1) . . . . . . . . . . . .

show the amount of interest owed in the

Equal apportionment plan. If no

2. Enter line 1 or the corporation’s

bottom margin of page 1 and write

apportionment plan is adopted, members

share of the $50,000 taxable

“Section 1291 interest.” For details, see

of a controlled group must divide the

income bracket, whichever is

Form 8621, Return by a Shareholder of a

less . . . . . . . . . . . . . . . . . . .

amount in each taxable income bracket

Passive Foreign Investment Company or

equally among themselves. For example,

3. Subtract line 2 from line 1 . . . .

Qualified Electing Fund.

controlled group AB consists of

4. Enter line 3 or the corporation’s

Additional tax under section 197(f). A

Corporation A and Corporation B. They

share of the $25,000 taxable

corporation that elects to pay tax on the

do not elect an apportionment plan.

income bracket, whichever is

gain from the sale of an intangible under

Therefore, each corporation is entitled to:

less . . . . . . . . . . . . . . . . . . .

the related person exception to the

•

$25,000 (one-half of $50,000) on line

anti-churning rules should include any

5. Subtract line 4 from line 3 . . . .

3a(1),

additional tax due under section

•

6. Enter line 5 or the corporation’s

$12,500 (one-half of $25,000) on line

197(f)(9)(B) in the total for line 4. On the

share of the $9,925,000 taxable

3a(2), and

dotted line next to line 4, write “Section

income bracket, whichever is

•

197” and the amount. For more

$4,962,500 (one-half of $9,925,000) on

less . . . . . . . . . . . . . . . . . . .

information, see Pub. 535, Business

line 3a(3).

7. Subtract line 6 from line 5 . . . .

Expenses.

8. Multiply line 2 by 15% . . . . . . .

Line 3b. Members of a controlled group

Line 5. Enter amount of tax that a

are treated as one group to figure the

reciprocal must include. A mutual

9. Multiply line 4 by 25% . . . . . . .

applicability of the additional 5% tax and

insurance company which is an

10. Multiply line 6 by 34% . . . . . . .

the additional 3% tax. If an additional tax

interinsurer or reciprocal underwriter may

11. Multiply line 7 by 35% . . . . . . .

applies, each member will pay that tax

elect, under section 835, to limit the

based on the part of the amount used in

deduction for amounts paid or incurred to

12. If the taxable income of the

each taxable income bracket to reduce

a qualifying attorney-in-fact to the amount

controlled group exceeds

that member’s tax. See section 1561(a). If

of the deductions of the attorney-in-fact

$100,000, enter this member’s

allocable to the income received by the

share of the smaller of: 5% of the

an additional tax applies, attach a

taxable income in excess of

attorney-in-fact from the reciprocal. If this

schedule showing the taxable income of

$100,000, or $11,750. See the

election is made, any increase in taxable

the entire group and how the corporation

instructions for line 3b. . . . . . .

income of a reciprocal as a result of this

figured its share of the additional tax.

limitation is taxed at the highest rate of

13. If the taxable income of the

tax specified in section 11(b).

Line 3b(1). Enter the corporation’s

controlled group exceeds $15

share of the additional 5% tax on line

million, enter this member’s

Make no entry on line 5 if the mutual

share of the smaller of: 3% of the

3b(1).

insurance company’s taxable income

taxable income in excess of $15

before including the section 835(b)

Line 3b(2). Enter the corporation’s

million, or $100,000. See the

amount is $100,000 or more. Otherwise,

instructions for line 3b. . . . . . .

share of the additional 3% tax on line

this tax is 35% of the section 835(b)

3b(2).

14. Total. Add lines 8 through 13.

amount. If an entry is made on line 5,

Enter here and on line 4, page 1

attach a statement showing how the tax

Line 4

was computed.

Most corporations figure their tax by using

Reciprocal underwriters making the

Line 3

the Tax Rate Schedule below. Exceptions

section 835(a) election are allowed a

apply to members of a controlled group

Members of a controlled group. A

credit on line 14h for the amount of tax

(see worksheet above). Members of a

member of a controlled group, as defined

paid by the attorney-in-fact that is related

controlled group must attach a statement

in section 1563, must check the box on

to the income received by the

showing the computation of the tax

line 3 and complete lines 3a and 3b on

attorney-in-fact from the reciprocal in the

entered on line 4.

page 1.

tax year.

-7-

Instructions for Form 1120-PC

Instructions For Form 1120-Pc - 2002 Page 7

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