Instructions For Form 1120-Pc - 2003 (Page 17 of 20) in pdf

•

Unpaid losses related to disability

election, check the “Yes” column for

Schedule H—Special

insurance (other than credit disability

question 7 in Schedule I, Other

insurance),

Information. For more information, see

Deduction and Ending

•

Noncancelable accident and health

section 846(e), Regulations section

insurance,

1.846-2, and Rev. Proc. 92-76, 1992-2

Adjusted Surplus for

•

Cancelable accident and health

C.B. 453.

Section 833 Organizations

insurance, and

Note. There is a special application of

•

International and reinsurance lines of

Line 5. Beginning adjusted surplus. If

the “Fresh Start” provision for an

business.

the corporation was a section 833

insurance company that is not subject to

With regard to the special rules for

tax under section 831(a) for its first tax

organization in 2002, it should enter the

discounting unpaid losses on accident

year beginning after December 31, 1986,

amount from Schedule H, line 10, of its

and health insurance (other than disability

because (1) it is described in section

2002 Form 1120-PC.

income insurance), unpaid losses are

501(c) or (2) it is subject to tax under

assumed to be paid in the middle of the

Generally, the adjusted surplus as of

section 831(b) on its investment income.

year following the accident year.

the beginning of any tax year is an

If the insurance company later

Generally, the amount of undiscounted

amount equal to the adjusted surplus as

becomes subject to tax under section

unpaid losses means the unpaid losses

of the beginning of the preceding tax

831(a), the rules relating to the Fresh

and unpaid loss adjustment expenses

year:

Start under the discounting provisions are

shown in the annual statement. However,

1. Increased by the amount of any

applied by treating the last tax year before

see Regulations section 1.846-1(a)(1)

adjusted taxable income for the preceding

the year in which the insurance company

referring to Regulations section

tax year or

becomes subject to tax under section

1.832-4(b) relating to the determination of

831(a) as the insurance company’s last

2. Decreased by the amount of any

unpaid losses.

tax year beginning before 1987. See

adjusted net operating loss for the

Under section 832(b)(5)(A), unpaid

section 1010(e) of the Act of 1988 and

preceding tax year.

losses must be adjusted to take into

Notice 88-100, 1988-2 C.B. 439.

If 2003 is the first tax year the taxpayer

account estimated recoveries due to

Lines 6 and 7. Estimated salvage and

qualifies as a section 833 organization,

salvage and reinsurance for those losses.

reinsurance recoverable. Enter on lines

see section 833(c)(3)(C) to determine the

If the amounts shown in the annual

6 and 7 the amount of estimated salvage

adjusted surplus as of the beginning of

statement were determined on a

and reinsurance recoverable. The amount

the 2003 tax year.

discounted basis and if the extent to

of estimated salvage recoverable must be

which these losses were discounted can

determined on a discounted basis. The

For purposes of the computation of the

be determined on the basis of information

estimated salvage discount factors for

adjusted surplus, the terms “adjusted

disclosed on or with the annual

2002 are published in Rev. Proc.

taxable income” and “adjusted net

statement, the amount of the

2003-18, 2003-6 I.R.B. 439. The 2003

operating loss” mean the taxable income

undiscounted unpaid losses must be

estimated salvage and reinsurance rates

or the net operating loss, respectively,

recomputed to eliminate any reduction

will be published in the Internal Revenue

determined with the following

caused by such discounting. In no event

Bulletin when available. Also see

modifications:

can the amount of discounted unpaid

Regulations section 1.832-4.

1. Without regard to the deduction

losses with respect to any line of business

determined under section 833(b)(1);

for an accident year exceed the total

Line 9. Tax-exempt interest subject to

amount of unpaid losses with respect to

section 832(b)(5)(B). Enter the amount

2. Without regard to any carryover or

any line of business for an accident year

carryback to that tax year; and

of tax-exempt interest received or

as reported on the annual statement. Also

accrued during the tax year on

3. By increasing gross income by an

see Regulations section 1.832-4(d)

investments made after August 7, 1986.

amount equal to the net exempt income

regarding increasing unpaid losses shown

For information regarding the

for the tax year.

on the annual statement by salvage

determination of the acquisition date of an

recoverable. Also see Rev. Proc. 92-77,

investment, see the instructions for

Line 6. Special deduction. The

1992-2 C.B. 454.

Schedule C.

deduction for any tax year is limited to

The applicable interest rate for each

taxable income for that tax year

calendar year and the applicable loss

determined without regard to this

Schedule G—Other

payment pattern for each accident year

deduction.

for each line of business are determined

Capital Losses

by the IRS. The applicable interest rate

Note. Under section 833(b)(4), any

Capital assets are considered sold or

and loss payment patterns for 2003 will

determination under section 833(b) must

exchanged to provide funds to meet

be published in the Internal Revenue

be made by only taking into account items

abnormal insurance losses and to pay

Bulletin when available. The applicable

from the health-related business of the

dividends and make similar distributions

interest rates and loss payment pattern

corporation.

to policyholders to the extent that the

for 2001 and 2002 are published in Rev.

Line 8a. Adjusted tax-exempt income.

gross receipts from their sale or exchange

Proc. 2001-60, 2001-53 I.R.B. 643, and

Reduce the total tax-exempt interest

are not more than the amount by which

Rev. Proc. 2003-17, 2003-6 I.R.B. 427,

received or accrued during the tax year

the sum of dividends and similar

respectively.

by any amount (not otherwise deductible)

distributions paid to policyholders, losses

which would have been allowable as a

Corporations having sufficient

paid, and expenses paid for the tax year

historical experience to determine a loss

deduction for the tax year if such interest

is more than the total on line 9, Schedule

payment pattern may, under certain

were not tax-exempt. Enter the result on

circumstances, elect under section 846(e)

line 8a.

to use their own historical experience

Total gross receipts from sales of

Line 8b. Adjusted dividends-received

(instead of the loss payment patterns

capital assets (line 12, column (c)) must

deduction. Reduce the total amount

determined by the IRS). If this election is

not be more than line 10. If necessary,

allowed as a deduction under sections

made, the loss payment patterns will be

the corporation may report part of the

243, 244, and 245 by the amount of any

based on the most recent calendar year

gross receipts from a particular sale of a

decrease in deductions allowable for the

for which an annual statement was filed

capital asset on this schedule and the rest

tax year because of section 832(b)(5)(B)

before the beginning of the accident year.

on Schedule D (Form 1120). Otherwise,

when the decrease is caused by the

The election will not apply to any

do not include on Schedule D (Form

deductions under sections 243, 244, and

international or reinsurance line of

1120) any sales reported on this

245. Enter the result on line 8b.

business. If the corporation makes this

schedule.

-17-

Instructions for Form 1120-PC

Instructions For Form 1120-Pc - 2003 Page 17

Related Articles

Related forms

Related Categories