Instructions For Form 1120-Pc - 2003 (Page 7 of 20) in pdf

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$12,500 (one-half of $25,000) on line

3a(2), and

Tax Computation Worksheet for Members of a Controlled Group

•

$4,962,500 (one-half of $9,925,000) on

(keep for your records)

line 3a(3).

Line 3b. Members of a controlled group

Note. Each member of a controlled group must compute its tax using this worksheet.

are treated as one group to figure the

1. Enter taxable income (line 1 or line 2, page 1) . . . . . . . . . . . . .

applicability of the additional 5% tax and

the additional 3% tax. If an additional tax

2. Enter line 1 or the corporation’s share of the $50,000 taxable

applies, each member will pay that tax

income bracket, whichever is less . . . . . . . . . . . . . . . . . . . . . .

based on the part of the amount used in

3. Subtract line 2 from line 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

each taxable income bracket to reduce

4. Enter line 3 or the corporation’s share of the $25,000 taxable

that member’s tax. See section 1561(a). If

income bracket, whichever is less . . . . . . . . . . . . . . . . . . . . . .

an additional tax applies, attach a

5. Subtract line 4 from line 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

schedule showing the taxable income of

6. Enter line 5 or the corporation’s share of the $9,925,000 taxable

the entire group and how the corporation

figured its share of the additional tax.

income bracket, whichever is less . . . . . . . . . . . . . . . . . . . . . .

7. Subtract line 6 from line 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Line 3b(1). Enter the corporation’s

share of the additional 5% tax on line

8. Multiply line 2 by 15% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3b(1).

9. Multiply line 4 by 25% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Line 3b(2). Enter the corporation’s

10. Multiply line 6 by 34% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

share of the additional 3% tax on line

11. Multiply line 7 by 35% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3b(2).

12. If the taxable income of the controlled group exceeds $100,000,

Line 4

enter this member’s share of the smaller of: 5% of the taxable

income in excess of $100,000, or $11,750. See the instructions

Most corporations figure their tax by using

for line 3b. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

the Tax Rate Schedule below. Exceptions

13. If the taxable income of the controlled group exceeds $15

apply to members of a controlled group.

See the Tax Computation Worksheet for

million, enter this member’s share of the smaller of: 3% of the

Members of a Controlled Group on this

taxable income in excess of $15 million, or $100,000. See the

page. Members of a controlled group

instructions for line 3b. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

must attach a statement showing the

14. Total. Add lines 8 through 13. Enter here and on line 4, page 1

computation of the tax entered on line 4.

Tax Rate Schedule

197” and the amount. For more

if it claims certain credits, even though it

information, see Pub. 535, Business

does not owe any AMT. See Form 4626

If the amount on line 1 or line 2, Form 1120-PC,

page 1 is:

Expenses.

for details.

Line 5. Enter amount of tax that a

Of the

Unless the corporation is treated as a

reciprocal must include. A mutual

But not

amount

small corporation exempt from the AMT, it

Over —

over —

Tax is:

over —

insurance company that is an interinsurer

may owe the AMT if it has any of the

or reciprocal underwriter may elect, under

$50,000

15%

adjustments and tax preference items

section 835, to limit the deduction for

50,000

75,000

$ 7,500 + 25%

50,000

listed on Form 4626. The corporation

75,000

100,000

13,750 + 34%

75,000

amounts paid or incurred to a qualifying

100,000

335,000

22,250 + 39%

100,000

must file Form 4626 if its taxable income

attorney-in-fact to the amount of the

335,000

10,000,000

113,900 + 34%

335,000

(or loss) before the NOL deduction,

deductions of the attorney-in-fact

10,000,000

15,000,000

3,400,000 + 35% 10,000,000

combined with these adjustments and tax

allocable to the income received by the

15,000,000

18,333,333

5,150,000 + 38% 15,000,000

preference items, is more than the

attorney-in-fact from the reciprocal. If this

18,333,333

- - - - -

35%

smaller of $40,000 or the corporation’s

election is made, any increase in taxable

allowable exemption amount (from Form

income of a reciprocal as a result of this

Deferred tax under section 1291. If the

4626).

limitation is taxed at the highest rate of

corporation was a shareholder in a

tax specified in section 11(b).

passive foreign investment company

For this purpose, taxable income does

(PFIC) and received an excess

Make no entry on line 5 if the mutual

not include the NOL deduction. See Form

distribution or disposed of its investment

insurance company’s taxable income

4626 for details.

in the PFIC during the year, it must

before including the section 835(b)

include the total increase in taxes due

Exemption for small corporation. A

amount is $100,000 or more. Otherwise,

under section 1291(c)(2) in the amount

corporation is treated as a small

this tax is 35% of the section 835(b)

entered on line 4. On the dotted line next

corporation exempt from the AMT for its

amount. If an entry is made on line 5,

to line 4, write “Section 1291” and the

tax year beginning in 2003 if that year is

attach a statement showing how the tax

amount.

the corporation’s first tax year in

was computed.

existence (regardless of its gross

Do not include on line 4 any interest

Reciprocal underwriters making the

receipts) or:

due under section 1291(c)(3). Instead,

section 835(a) election are allowed a

show the amount of interest owed in the

1. It was treated as a small

credit on line 14h for the amount of tax

bottom margin of page 1 and write

corporation exempt from the AMT for all

paid by the attorney-in-fact that is related

“Section 1291 interest.” For details, see

prior tax years beginning after 1997 and

to the income received by the

Form 8621, Return by a Shareholder of a

2. Its average annual gross receipts

attorney-in-fact from the reciprocal in the

Passive Foreign Investment Company or

for the 3-tax-year-period (or portion

tax year.

Qualified Electing Fund.

thereof during which the corporation was

See section 835 and the related

in existence) ending before its tax year

Additional tax under section 197(f). A

regulations for special rules and

beginning in 2003 did not exceed $7.5

corporation that elects to pay tax on the

information regarding the statements

million ($5 million if the corporation had

gain from the sale of an intangible under

required to be attached to the return.

only 1 prior tax year).

the related person exception to the

Line 6. Alternative minimum tax (AMT).

anti-churning rules should include any

additional tax due under section

Note: A corporation that is not a small

Line 8a. Foreign tax credit. To find out

197(f)(9)(B) in the total for line 4. On the

corporation exempt from the AMT (see

when a corporation can take the credit for

payment of income tax to a foreign

dotted line next to line 4, write “Section

below) may be required to file Form 4626

-7-

Instructions for Form 1120-PC

Instructions For Form 1120-Pc - 2003 Page 7

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