Instructions For Form 1120-Pc - 2003 (Page 4 of 20) in pdf

3. Had an acquisition, disposition, or

and Regulations section

Complete every applicable entry space

change in proportional interest in a

1.1502-47(d)(12).

on Form 1120-PC. Do not write “See

foreign partnership that:

Attached” instead of completing the entry

File supporting statements for each

spaces. If more space is needed on the

a. Increased its direct interest to at

corporation included in the consolidated

forms or schedules, attach separate

least 10% or reduced its direct interest of

return. Do not use Form 1120-PC as a

sheets using the same size and format as

at least 10% to less than 10%.

supporting statement. On the supporting

the printed forms. If there are supporting

b. Changed its direct interest by at

statement, use columns to show the

statements and attachments, arrange

least a 10% interest.

following, both before and after

them in the same order as the schedules

4. Contributed property to a foreign

adjustments:

or forms they support and attach them

•

partnership in exchange for a partnership

Items of gross income and deductions.

•

last. Show the totals on the printed forms.

interest if:

A computation of taxable income.

Also, be sure to put the corporation’s

•

Balance sheets as of the beginning and

a. Immediately after the contribution,

name and EIN on each supporting

end of the tax year.

the corporation owned, directly or

•

statement or attachment.

A reconciliation of income per books

indirectly, at least a 10% interest in the

with income per return.

foreign partnership or

•

Accounting Methods

A reconciliation of retained earnings.

b. The fair market value of the

Enter the totals for the consolidated

An accounting method is a set of rules

property the corporation contributed to the

group on Form 1120-PC. Attach

used to determine when and how income

foreign partnership, when added to other

consolidated balance sheets and a

and expenses are reported. Figure

contributions of property made to the

reconciliation of consolidated retained

taxable income using the method of

foreign partnership during the preceding

earnings. For more information on

accounting regularly used in keeping the

12-month period, exceeds $100,000.

consolidated returns, see the regulations

corporation’s books and records.

Also, the domestic corporation may

under section 1502.

Generally, permissible methods include:

have to file Form 8865 to report certain

•

Note. If a nonlife insurance company is a

dispositions by a foreign partnership of

Cash,

•

member of an affiliated group, file Form

property it previously contributed to that

Accrual, or

•

1120-PC as an attachment to the

partnership if it was a partner at the time

Any other method authorized by the

consolidated return in lieu of filing

of the disposition.

Internal Revenue Code.

supporting statements. Across the top of

The gross amounts of underwriting

For more details, including penalties

page 1 of Form 1120-PC, write

and investment income should be

for failing to file Form 8865, see Form

“Supporting Statement to Consolidated

computed on the basis of the underwriting

8865 and its separate instructions.

Return.”

•

and investment exhibit of the NAIC

Form 8883, Asset Allocation Statement

annual statement to the extent not

Under Section 338. Corporations file this

Statements

inconsistent with the Internal Revenue

form to report information about

Code and its Regulations. In all cases,

transactions involving the deemed sale of

NAIC annual statement. Regulations

the method used must clearly show

corporate assets under section 338.

section 1.6012-2(c) requires that the

•

taxable income.

Form 8886, Reportable Transaction

NAIC annual statement be filed with Form

Disclosure Statement. Use this form to

1120-PC. A penalty for the late filing of a

Generally, a corporation must use the

disclose information for each reportable

return may be imposed for not including

accrual method of accounting if its

transaction in which the corporation

the annual statement when the return is

average annual gross receipts exceed $5

participated. Form 8886 must be filed for

filed.

million. See section 448(c).

each tax year that the Federal income tax

Stock ownership in foreign

Under the accrual method, an amount

liability of the corporation is affected by its

corporations. A domestic nonlife

is includible in income when:

participation in the transaction. The

•

insurance company must attach the

All the events have occurred that fix the

following are reportable transactions.

statement required by section 551(c) if it:

right to receive the income, which is the

1. Any transaction that is the same as

earliest of the date (a) the required

1. Owned 5% or more in value of the

or substantially similar to tax avoidance

performance takes place, (b) payment is

outstanding stock of a foreign personal

transactions identified by the IRS.

due, or (c) payment is received and

holding company and

2. Any transaction offered under

•

The amount can be determined with

2. Was required to include in its gross

conditions of confidentiality.

reasonable accuracy.

income any undistributed foreign personal

3. Any transaction for which the

See Regulations section 1.451-1(a) for

holding company income from a foreign

corporation has contractual protection

details.

personal holding company.

against disallowance of the tax benefits.

Generally, an accrual basis taxpayer

4. Any transaction resulting in a loss

Transfers to a corporation controlled

can deduct accrued expenses in the tax

of at least $10 million in any single year or

by the transferor. If a person receives

year when:

$20 million in any combination of years.

stock of a corporation in exchange for

•

All events that determine the liability

5. Any transaction resulting in a

property and no gain or loss is recognized

have occurred,

book-tax difference of more than $10

under section 351, the person (transferor)

•

The amount of the liability can be

million on a gross basis.

and the transferee must each attach to

figured with reasonable accuracy, and

6. Any transaction resulting in a tax

their tax returns the information required

•

Economic performance takes place

credit of more than $250,000, if the

by Regulations section 1.351-3.

with respect to the expense.

corporation held the asset generating the

There are exceptions to the economic

Assembling the Return

credit for 45 days or less.

performance rule for certain items,

To ensure that the corporation’s tax return

including recurring expenses. See section

Consolidated Return

is correctly processed, attach all

461(h) and the related regulations for the

schedules and other forms after page 8,

rules for determining when economic

If an affiliated group of corporations

Form 1120-PC, and in the following order:

performance takes place.

includes one or more domestic life

insurance companies taxed under section

1. Schedule N (Form 1120).

Change in Accounting Method

801, the common parent may elect to

2. Form 8302.

treat those companies as includible

3. Form 4136.

To change its method of accounting used

corporations. The life insurance

4. Form 4626.

to report taxable income (for income as a

companies must have been members of

5. Form 851.

whole or for any material item), the

the group for the 5 tax years immediately

6. Additional schedules in alphabetical

corporation must file Form 3115,

preceding the tax year for which the

order.

Application for Change in Accounting

election is made. See section 1504(c)(2)

7. Additional forms in numerical order.

Method. For more information, see Form

-4-

Instructions for Form 1120-PC

Instructions For Form 1120-Pc - 2003 Page 4

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