Instructions For Form 1120-Pc - 2003 (Page 13 of 20) in pdf

increase in savings credited to

convention expenses, and entertainment

Lobbying expenses. Generally,

subscriber accounts for the tax year.

tickets. See section 274 and Pub. 463 for

lobbying expenses are not deductible.

more details.

These expenses include:

Savings credited to subscriber

•

Amounts paid or incurred in connection

Travel. The corporation cannot deduct

accounts means the surplus credited to

with influencing Federal or state

travel expenses of any individual

the individual accounts of subscribers

legislation (but not local legislation) or

accompanying a corporate officer or

before the 16th day of the 3rd month

•

Amounts paid or incurred in connection

employee, including a spouse or

following the close of the tax year. This is

with any communication with certain

dependent of the officer or employee,

true only if the corporation would be

Federal executive branch officials in an

unless:

required to pay this amount promptly to a

•

attempt to influence the official actions or

That individual is an employee of the

subscriber if the subscriber ended the

positions of the officials. See Regulations

corporation and

contract when the corporation’s tax year

•

section 1.162-29 for the definition of

His or her travel is for a bona fide

ends. The corporation must notify the

“influencing legislation.”

business purpose and would otherwise be

subscriber as required by Regulations

Dues and other similar amounts paid

deductible by that individual.

section 1.823-6(c)(2)(v). The subscriber

to certain tax-exempt organizations may

Meals and entertainment. Generally,

must treat any savings credited to the

not be deductible. See section 162(e)(3).

the corporation can deduct only 50% of

subscriber’s account as a dividend paid or

If certain in-house lobbying expenditures

the amount otherwise allowable for meals

declared.

do not exceed $2,000, they are

and entertainment expenses paid or

Line 31. Other deductions. Attach a

deductible. For information on

incurred in its trade or business. In

schedule, listing by type and amount, all

contributions to charitable organizations

addition (subject to exceptions under

allowable deductions under sections

that conduct lobbying activities, see the

section 274(k)(2)):

832(c)(1) and (10) (net of the annual

•

instructions for Schedule A, line 21. For

Meals must not be lavish or

statement change in undiscounted unpaid

more information on lobbying expenses,

extravagant;

loss adjustment expenses) that are not

•

see section 162(e).

A bona fide business discussion must

deductible on lines 15 through 30.

Line 32. Total deductions. Insurance

occur during, immediately before, or

Examples of amounts to include are:

companies that issue specified insurance

immediately after the meal; and

•

Legal and professional fees.

•

contracts (as defined in section 848(e)(1))

An employee of the corporation must

•

Supplies used and consumed in the

are generally required to amortize policy

be present at the meal.

business.

acquisition expenses on a straight-line

See section 274(n)(3) for a special rule

•

Utilities.

basis over a period of 120 months

that applies to expenses for meals

•

Ordinary losses from trade or business

beginning with the 1st month in the 2nd

consumed by individuals subject to the

activities of a partnership (from Schedule

half of the tax year (section 848(a)).

hours of service limits of the Department

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

Reduce total deductions on line 32 by the

of Transportation.

ordinary income against ordinary losses.

amount required to be capitalized under

Membership dues. The corporation

Instead, include the income on line 13.

section 848. Attach a schedule showing

may deduct amounts paid or incurred for

Show the partnership’s name, address,

all computations. See section 848 and its

membership dues in civic or public

and EIN on a separate statement

regulations for special rules, definitions,

service organizations, professional

attached to this return. If the amount

and exceptions. Also see Schedule G,

organizations (such as bar and medical

entered is from more than one

Form 1120-L, and its instructions for more

associations), business leagues, trade

partnership, identify the amount from

information.

associations, chambers of commerce,

each partnership.

•

Line 34b. Deduction on account of the

boards of trade, and real estate boards.

Extraterritorial income exclusion (from

special income and deduction

However, no deduction is allowed if a

Form 8873, line 52).

•

accounts. Enter the total of the amounts

principal purpose of the organization is to

Dividends paid in cash on stock held by

required to be added under sections

entertain, or provide entertainment

an employee stock ownership plan.

832(e)(4) and (6). However, no deduction

facilities for, members or their guests. In

However, a deduction may only be taken

is permitted unless tax and loss bonds

addition, corporations may not deduct

if, according to the plan, the dividends

are purchased in an amount equal to the

membership dues in any club organized

are:

tax benefit of the deduction. See section

for business, pleasure, recreation, or

1. Paid in cash directly to the plan

832(e).

other social purpose. This includes

participants or beneficiaries;

country clubs, golf and athletic clubs,

Note. The deduction on account of the

2. Paid to the plan, which distributes

airline and hotel clubs, and clubs

special income and deduction accounts is

them in cash to the plan participants or

operated to provide meals under

limited to taxable income for the tax year

their beneficiaries no later than 90 days

conditions favorable to business

(computed without regard to this

after the end of the plan year in which the

discussion.

deduction or to any carryback of a net

dividends are paid;

operating loss).

3. At the election of the participants or

Entertainment facilities. The

their beneficiaries: (a) payable as

corporation cannot deduct an expense

Line 36b. Net operating loss

provided under 1 or 2 above or (b) paid to

paid or incurred for a facility (such as a

deduction. A corporation may use the

net operating loss (NOL) incurred in one

the plan and reinvested in qualifying

yacht or hunting lodge) used for an

employer securities; or

activity usually considered entertainment,

tax year to reduce its taxable income in

4. Used to make payments on a loan

amusement, or recreation.

another tax year.

described in section 404(a)(9).

Note. The corporation may be able to

Enter on line 36b the total NOL

See section 404(k) for more details

carryovers from other tax years, but do

deduct otherwise nondeductible meals,

and the limitation on certain dividends.

travel, and entertainment expenses if the

not enter more than the corporation’s

amounts are treated as compensation

taxable income (after the

Do not deduct fines or penalties

and reported on Form W-2 for an

dividends-received deduction). Attach a

paid to a government for violating

employee or on Form 1099-MISC for an

schedule showing the computation of the

any law.

CAUTION

NOL deduction. Also complete item 12 on

independent contractor.

Schedule I.

Travel, meals, and entertainment.

Deduction for clean-fuel vehicles

Subject to limitations and restrictions

and certain refueling property. Section

The following special rules apply.

•

discussed below, a corporation can

179A allows a deduction for part of the

A corporate equity reduction interest

deduct ordinary and necessary travel,

cost of qualified clean-fuel vehicle

loss may not be carried back to a tax year

meals, and entertainment expenses paid

property and qualified clean-fuel vehicle

preceding the year of the equity reduction

or incurred in its trade or business. Also,

refueling property placed in service during

transaction (see section 172(b)(1)(E)).

•

special rules apply to deductions for gifts,

the tax year. For more information, see

If an ownership change occurs, the

skybox rentals, luxury water travel,

Pub. 535.

amount of the taxable income of a loss

-13-

Instructions for Form 1120-PC

Instructions For Form 1120-Pc - 2003 Page 13

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