Instructions For Form 1120-Pc - 2003 (Page 15 of 20) in pdf

return, its determination of dividends

Line 2. Enter on line 2:

Line 8. Enter dividends received from

•

received is made as if the group were not

Dividends (except those received on

wholly owned foreign subsidiaries that are

filing a consolidated return.

debt-financed stock acquired after July

eligible for the 100% deduction provided

18, 1984) that are received from

in section 245(b).

Prorated amounts means tax-exempt

20%-or-more-owned domestic

In general, the deduction under

interest and dividends for which a

corporations subject to income tax and

section 245(b) applies to dividends paid

deduction is allowable under section 243,

that are subject to the 80% deduction

out of the earnings and profits of a foreign

244, or 245 (other than 100% dividends).

under section 243(c) and

corporation for a tax year during which:

•

100% dividend means any dividend if

•

Taxable distributions from an IC-DISC

All of its outstanding stock is owned

the percentage used for purposes of

or former DISC that are considered

(directly or indirectly) by the domestic

determining the deduction allowable

eligible for the 80% deduction.

corporation receiving the dividends and

under section 243, 244, or 245(b) is

•

All of its gross income from all sources

Line 3. Enter dividends that are:

100%. A special rule applies to certain

•

is effectively connected with the conduct

Received on debt-financed stock

dividends received by a foreign

of a trade or business within the United

acquired after July 18, 1984, from

corporation.

States.

domestic and foreign corporations subject

Lines 1 through 23

Also, include on line 8 dividends from

to income tax that would otherwise be

FSCs that are attributable to foreign trade

For purposes of the 20% ownership test

subject to the dividends-received

income and that are eligible for the 100%

on lines 1 through 7, the percentage of

deduction under section 243(a)(1),

deduction provided in section

stock owned by the corporation is based

243(c), or 245(a). Generally,

245(c)(1)(A).

on voting power and value of the stock.

debt-financed stock is stock that the

Preferred stock described in section

Line 9. Enter only those dividends that

corporation acquired by incurring a debt

1504(a)(4) is not taken into account.

qualify under section 243(b) for the 100%

(e.g., it borrowed money to buy the

Corporations filing a consolidated return

dividends-received deduction described in

stock).

•

should see Regulations sections

section 243(a)(3). Corporations taking this

Received from a RIC on debt-financed

1.1502-13, 1.1502-26, and 1.1502-27

deduction are subject to the provisions of

stock. The amount of dividends eligible

before completing Schedule C.

section 1561.

for the dividends-received deduction is

Lines 1 through 9, column (a). Enter in

limited by section 854(b). The corporation

The 100% deduction does not apply to

should receive a notice from the RIC

column (a) of the appropriate line those

affiliated group members that are joining

specifying the amount of dividends that

dividends that are subject to the

in the filing of a consolidated return.

provisions of section 832(b)(5)(B).This will

qualify for the deduction.

Line 10, column (b). Enter foreign

include:

dividends not reportable on lines 3, 6, 7,

Line 4. Enter dividends received on the

1. All dividends (other than 100%

and 8, column (b). Include on line 10 the

preferred stock of a less-than-20%-owned

dividends) received on stock acquired

corporation’s share of the ordinary

public utility that is subject to income tax

after August 7, 1986, and

earnings of a qualified electing fund from

and is allowed the deduction provided in

2. 100% dividends received on stock

Form 8621, line 1c. Exclude distributions

section 247 for dividends paid.

acquired after August 7, 1986, to the

of amounts constructively taxed in the

Line 5. Enter dividends received on

extent that such dividends are attributable

current year or in prior years under

preferred stock of a 20%-or-more-owned

to prorated amounts (see definition

subpart F (sections 951 through 964).

public utility that is subject to income tax

above).

Line 11, column (b). Include income

and is allowed the deduction provided in

constructively received from controlled

In the case of an insurance company

section 247 for dividends paid.

foreign corporations under subpart F. This

that files a consolidated return, the

amount should equal the total subpart F

Line 6. Enter the U.S.-source portion of

determination with respect to any

dividends that:

income reported on Schedule I of Form

dividend paid by a member to another

•

Are received from

5471.

member of the affiliated group is made as

less-than-20%-owned foreign

if no consolidated return was filed. See

Line 12, column (b). Enter the taxes

corporations and

section 832(g).

deemed paid under sections 902 and

•

Qualify for the 70% deduction under

960.

Line 1. Enter dividends (except those

section 245(a). To qualify for the 70%

received on debt-financed stock acquired

Line 13, column (b). Include the

deduction, the corporation must own at

after July 18, 1984 – see section 246A)

following:

least 10% of the foreign corporation by

that:

1. Dividends (other than capital gain

•

vote and value.

Are received from

distributions reported on Schedule D

Also include dividends received from a

less-than-20%-owned domestic

(Form 1120) and exempt-interest

less-than-20%-owned foreign sales

corporations subject to income tax and

dividends) that are received from RICs

•

corporation (FSC) that:

Qualify for the 70% deduction under

•

and that are not subject to the 70%

Are attributable to income treated as

section 243(a)(1).

deduction.

effectively connected with the conduct of

Also, include on line 1:

2. Dividends from tax-exempt

a trade or business within the United

•

Taxable distributions from an IC-DISC

organizations.

States (excluding foreign trade income)

or former DISC that are designated as

and

3. Dividends (other than capital gain

eligible for the 70% deduction and certain

•

Qualify for the 70% deduction provided

dividends) received from a real estate

dividends of Federal Home Loan Banks.

in section 245(c)(1)(B).

investment trust (REIT) that, for the tax

See section 246(a)(2).

year of the trust in which the dividends

•

Dividends (except those received on

Line 7. Enter the U.S.-source portion of

are paid, qualifies under sections 856

debt-financed stock acquired after July

dividends that are received from

through 860.

18, 1984) from a regulated investment

20%-or-more-owned foreign corporations

4. Dividends not eligible for a

company (RIC). The amount of dividends

and that qualify for the 80% deduction

dividends-received deduction because of

eligible for the dividends-received

under section 245(a). Also include

the holding period of the stock or an

deduction under section 243 is limited by

dividends received from a

obligation to make corresponding

section 854(b). The corporation should

20%-or-more-owned FSC that:

•

payments with respect to similar stock.

receive a notice from the RIC specifying

Are attributable to income treated as

the amount of dividends that qualify for

effectively connected with the conduct of

Two situations in which the

the deduction.

a trade or business within the United

dividends-received deduction will not be

Report so-called dividends or earnings

States (excluding foreign trade income)

allowed on any share of stock are:

•

received from mutual savings banks, etc.,

and

If the corporation held it less than 46

•

as interest. Do not treat them as

Qualify for the 80% deduction provided

days during the 90-day period beginning

dividends.

in section 245(c)(1)(B).

45 days before the stock became

-15-

Instructions for Form 1120-PC

Instructions For Form 1120-Pc - 2003 Page 15

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