Instructions For Form 1120-Pc - 2003 (Page 11 of 20) in pdf

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Any New York Liberty Zone business

See section 164(d) for the

Limitation on deduction. The total

employee credit from Form 8884.

apportionment of taxes on real property

amount claimed may not be more than

See the instructions for these forms

between a seller and a purchaser.

10% of taxable income (line 37, Schedule

for more information. Do not include

A) computed without regard to:

Line 20a. Interest.

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salaries and wages deductible elsewhere

Any deduction for contributions,

Note. The deduction for interest is limited

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on the return, such as elective

The deduction for dividends received,

when the corporation is a policyholder or

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contributions to a section 401(k) cash or

Any net operating loss (NOL) carryback

beneficiary with respect to a life

deferred arrangement or amounts

to the tax year under section 172, and

insurance, endowment, or annuity

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contributed under a salary reduction SEP

Any capital loss carryback to the tax

contract issued after June 8, 1997. For

agreement or a SIMPLE IRA plan.

year under section 1212(a)(1).

details, see section 264(f). Attach a

Carryover. Charitable contributions

statement showing the computation of the

If the corporation provided taxable

over the 10% limitation may not be

deduction.

fringe benefits to its employees,

deducted for the tax year but may be

such as the personal use of a car,

CAUTION

The corporation must make an interest

carried over to the next 5 tax years.

do not deduct as wages the amount

allocation if the proceeds of a loan were

allocated for depreciation and other

Special rules apply if the corporation

used for more than one purpose (e.g., to

has an NOL carryover to the tax year. In

expenses that are claimed elsewhere on

purchase a portfolio investment and to

the return (e.g., Schedule A, line 22 or

figuring the charitable contributions

acquire an interest in a passive activity).

deduction for the tax year, the 10% limit is

line 31).

See Temporary Regulations section

applied using taxable income after taking

Line 18. Rents. If the corporation rented

1.163-8T for the interest allocation rules.

into account any deduction for the NOL.

or leased a vehicle, enter the total annual

Do not deduct the following interest:

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rent or lease expense paid or incurred

To figure the amount of any remaining

Interest on indebtedness incurred or

during the year. Also complete Part V of

NOL carryover to later years, taxable

continued to purchase or carry obligations

Form 4562, Depreciation and

income must be modified (see section

if the interest is wholly exempt from

Amortization. If the corporation leased a

172(b)). To the extent that contributions

income tax. For exceptions, see section

vehicle for a term of 30 days or more, the

are used to reduce taxable income for this

265(b).

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deduction for the vehicle lease expense

purpose and increase an NOL carryover,

Interest and carrying charges on

may have to be reduced by an amount

a contributions carryover is not allowed.

straddles. Generally, these amounts must

called the inclusion amount. The

See section 172(d)(2)(B).

be capitalized. See section 263(g).

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corporation may have an inclusion

Substantiation requirements.

Interest on debt allocable to the

amount if:

production of designated property by a

Generally, no deduction is allowed for any

corporation for its own use or for sale.

contribution of $250 or more unless the

And the vehicle’s

corporation obtains a written

The corporation must capitalize this

FMV on the first

interest. Also capitalize any interest on

acknowledgment from the donee

The lease term

day of the lease

organization that shows the amount of

debt allocable to an asset used to

began:

exceeded:

produce the property. See section 263A(f)

cash contributed, describes any property

and Regulations section 1.263A-8

contributed, and, either gives a

After 12/31/02 and before 1/1/04 . . $18,000

description and a good faith estimate of

through 1.263A-15 for definitions and

more information.

the value of any goods or services

After 12/31/98 but before 1/1/03 . . $15,500

provided in return for the contribution or

Special rules apply to:

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Interest on which no tax is imposed

states that no goods or services were

After 12/31/96 but before 1/1/99 . . $15,800

(see section 163(j)).

provided in return for the contribution. The

After 12/31/94 but before 1/1/97 . . $15,500

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acknowledgment must be obtained by the

Foregone interest on certain

below-market-rate loans (see section

due date (including extensions) of the

After 12/31/93 but before 1/1/95 . . $14,600

corporation’s return, or, if earlier, the date

7872).

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If the lease term began before January 1, 1994,

Original issue discount on certain

the return is filed. Do not attach the

see Pub. 463, Travel, Entertainment, Gift, and Car

acknowledgment to the tax return, but

high-yield discount obligations. (See

Expenses, to find out if the corporation has an

keep it with the corporation’s records.

section 163(e) to figure the disqualified

inclusion amount. The inclusion amount for lease

portion.)

These rules apply in addition to the filing

terms beginning in 2004 will be published in the

requirements for Form 8283, Noncash

Internal Revenue Bulletin in early 2004.

Line 20b. Less tax-exempt interest

Charitable Contributions, described on

expense. Enter interest paid or accrued

page 12.

during the tax year on indebtedness

See Pub. 463 for instructions on

incurred or continued to purchase or carry

For more information on substantiation

figuring the inclusion amount.

obligations if the interest is wholly exempt

and recordkeeping requirements, see the

Line 19. Taxes and licenses. Enter

from income tax. For exceptions, see

regulations under section 170 and Pub.

taxes paid or accrued during the tax year,

section 265(b).

526, Charitable Contributions.

but do not include the following.

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Line 21. Charitable contributions.

Contributions to organizations

Federal income taxes.

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Enter contributions or gifts actually paid

conducting lobbying activities.

Foreign or U.S. possession income

within the tax year to or for the use of

Contributions made to an organization

taxes if a tax credit is claimed (however,

charitable and governmental

that conducts lobbying activities are not

see the Instructions for Form 5735 for

organizations described in section 170(c)

deductible if:

special rules for possession income

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and any unused contributions carried over

The lobbying activities relate to matters

taxes).

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from prior years.

of direct financial interest to the donor’s

Taxes not imposed on the corporation.

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trade or business and

Taxes, including state or local sales

Corporations reporting taxable income

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The principal purpose of the

taxes, that are paid or incurred in

on the accrual method may elect to treat

contribution was to avoid Federal income

connection with an acquisition or

as paid during the tax year any

tax by obtaining a deduction for activities

disposition of property. (These taxes must

contributions paid by the 15th day of the

that would have been nondeductible

be treated as a part of the cost of the

3rd month after the end of the tax year if

under the lobbying expense rules if

acquired property or, in the case of a

the contributions were authorized by the

conducted directly by the donor.

disposition, as a reduction in the amount

board of directors during the tax year.

realized on the disposition.)

Attach a declaration to the return stating

Contributions of property other than

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Taxes assessed against local benefits

that the resolution authorizing the

cash. If a corporation contributes

that increase the value of the property

contributions was adopted by the board of

property other than cash and claims over

assessed (such as for paving, etc.).

directors during the tax year. The

a $500 deduction for the property, it must

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Taxes deducted elsewhere on the

declaration must include the date the

attach a schedule to the return describing

return.

resolution was adopted.

the kind of property contributed and the

-11-

Instructions for Form 1120-PC

Instructions For Form 1120-Pc - 2003 Page 11

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