Instructions For Form 1120-Pc - 2003 (Page 10 of 20) in pdf

deposits are the same (regardless of the

allowable deduction for clean-fuel vehicle

before figuring the deduction for

length of the term the policies are written

property (or clean-fuel vehicle refueling

expenses on which the credit is based.

for) and (2) under which the unabsorbed

property) if the property later ceases to

Line 15. Compensation of officers.

portion of such premium deposits not

qualify. See Regulations section 1.179A-1

Enter deductible officers’ compensation

required for losses, expenses, or

for details.

on line 15. Do not include compensation

•

establishment of reserves is returned or

Ordinary income from trade or business

deductible elsewhere on the return, such

credited to the policyholder on

activities of a partnership (from Schedule

as elective contributions to a section

cancellation or expiration of the policy,

K-1 (Form 1065 or Form 1065-B)). Do not

401(k) cash or deferred arrangement or

must include in income an amount equal

offset ordinary losses against ordinary

amounts contributed under a salary

to 2% of the premiums earned on

income. Instead, include the losses on

reduction SEP agreement or a SIMPLE

insurance contracts during the tax year

line 31. Show the partnership’s name,

IRA plan.

with respect to such policies after

address, and EIN on a separate

Include only the deductible part of

deduction of premium deposits returned

statement attached to this return. If the

each officer’s compensation on line 15.

or credited during the same tax year. See

amount entered is from more than one

(See Disallowance of deduction for

section 832(b)(1)(D).

partnership, identify the amount from

employee compensation in excess of

each partnership.

Line 9. Income on account of special

$1 million below.) Attach a schedule for

income and deduction accounts.

Deductions

all officers using the following columns:

Corporations which write the kinds of

1. Name of officer.

insurance below must maintain the

Limitations on Deductions

2. Social security number.

following special accounts. A corporation

3. Percentage of time devoted to

Section 263A uniform capitalization

which writes:

business.

rules. The uniform capitalization rules of

1. Mortgage guaranty insurance, must

4. Amount of compensation.

section 263A require corporations to

maintain a mortgage guaranty account;

capitalize certain costs.

If a consolidated return is filed, each

2. Lease guaranty insurance, must

member of an affiliated group must

For details on the uniform

maintain a lease guaranty account; and

furnish this information.

capitalization rules, see Regulations

3. Insurance on obligations the

sections 1.263A-1 through 1.263A-3.

interest on which is excludable from gross

Disallowance of deduction for

income under section 103, must maintain

employee compensation in excess of

Transactions between related

an account with respect to insurance on

$1 million. Publicly-held corporations

taxpayers. Generally, an accrual basis

state and local obligations.

may not deduct compensation to a

taxpayer may only deduct business

“covered employee” to the extent that the

expenses and interest owed to a related

Amounts required to be subtracted

compensation exceeds $1 million.

party in the year the payment is included

from these accounts under sections

Generally, a covered employee is:

in the income of the related party. See

832(e)(5) and 832(e)(6) must be reported

•

The chief executive officer of the

sections 163(e)(3), 163(j), and 267 for

as income on line 9. See section 832(e)

corporation (or an individual acting in that

limitations on deductions for unpaid

for more information.

capacity) as of the end of the tax year or

interest and expenses.

•

Line 10. Income from protection

An employee whose total

Section 291 limitations. Corporations

against loss account. Although section

compensation must be reported to

may be required to adjust certain

1024 of P.L. 99-514 repealed section 824

shareholders under the Securities

deductions. See section 291 to determine

relating to the protection against loss

Exchange Act of 1934 because the

the amount of the adjustment. Also, see

(PAL) account, PAL account balances are

employee is among the four highest

section 43.

includible in income as though section

compensated officers for that tax year

824 were still in effect. Attach a schedule

Golden parachute payments. A portion

(other than the chief executive officer).

showing the computation.

of the payments made by a corporation to

For this purpose, compensation does

key personnel that exceeds their usual

not include the following:

Line 11. Mutual interinsurers or

•

compensation may not be deductible.

Income from certain employee trusts,

reciprocal underwriters — decrease in

This occurs when the corporation has an

annuity plans, or pensions and

subscriber accounts. Enter the

•

agreement (golden parachute) with these

Any benefit paid to an employee that is

decrease for the tax year in savings

key employees to pay them these excess

excluded from the employee’s income.

credited to subscriber accounts of a

amounts if control of the corporation

The deduction limit does not apply to:

mutual insurance company that is an

•

changes. See section 280G.

Commissions based on individual

interinsurer or reciprocal underwriter.

performance,

Business startup expenses. Business

Line 12. Income from a special loss

•

Qualified performance-based

startup expenses must be capitalized

discount account. Enter the amount

compensation, and

unless an election is made to amortize

from Form 8816, Part II, line 6.

•

Income payable under a written,

them over a period of 60 months. See

Line 13. Other Income. Enter any other

binding contract in effect on February 17,

section 195 and Regulations section

taxable income not reported on lines 1

1993.

1.195-1.

through 12. List the type and amount of

The $1 million limit is reduced by

income on an attached schedule. If the

Reducing certain expenses for which

amounts disallowed as excess parachute

corporation has only one item of other

credits are allowable. For each credit

payments under section 280G.

income, describe it in parentheses on line

listed below, the corporation must reduce

For details, see section 162(m) and

13. Examples of other income to report on

the otherwise allowable deductions for

Regulations section 1.162-27.

line 13 are:

expenses used to figure the credit by the

•

The amount of credit for alcohol used

amount of the current year credit.

Line 16. Salaries and wages. Enter the

•

as fuel (determined without regard to the

Work opportunity credit.

amount of salaries and wages paid for the

•

limitation based on tax) entered on Form

Research credit.

tax year, reduced by the current year

•

6478, Credit for Alcohol Used as Fuel.

Enhanced oil recovery credit.

credits claimed for:

•

Refunds of taxes deducted in prior

Disabled access credit.

Any work opportunity credit from Form

•

years to the extent they reduced income

Empowerment zone and renewal

5884,

•

subject to tax in the year deducted (see

community employment credit.

Any empowerment zone and renewal

•

section 111). Do not offset current year

Indian employment credit.

community employment credit from Form

•

taxes against tax refunds.

Welfare-to-work credit.

8844,

•

The amount of any deduction

New York Liberty Zone business

Any Indian employment credit from

previously taken under section 179A that

employee credit.

Form 8845,

•

is subject to recapture. The corporation

If the corporation has any of these

Any welfare-to-work credit from Form

must recapture the benefit of any

credits, figure each current year credit

8861, and

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Instructions for Form 1120-PC

Instructions For Form 1120-Pc - 2003 Page 10

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