Instructions For Form 1120-Ic-Disc - 2004 (Page 3 of 15) in pdf

•

United Parcel Service (UPS): UPS Next

returns the information required by

See Regulations section 1.451-1(a) for

Day Air, UPS Next Day Air Saver, UPS 2nd

Regulations section 1.351-3.

details.

Day Air, UPS 2nd Day Air A.M., UPS

Generally, an accrual basis taxpayer can

Assembling the Return

Worldwide Express Plus, and UPS

deduct accrued expenses in the tax year

Worldwide Express.

when:

To ensure that the corporation’s tax return is

•

The private delivery service can tell you

All events that determine the liability have

correctly processed, attach all schedules

how to get written proof of the mailing date.

occurred,

and other forms after page 6, Form

•

The amount of the liability can be figured

1120-IC-DISC, and in the following order.

Who Must Sign

with reasonable accuracy, and

1. Schedule N (Form 1120).

•

Economic performance takes place with

The return must be signed and dated by:

2. Form 4136.

•

respect to the expense.

The president, vice president, treasurer,

3. Additional schedules in alphabetical

assistant treasurer, chief accounting officer

order.

There are exceptions to the economic

4. Additional forms in numerical order.

performance rule for certain items, including

•

Any other corporate officer (such as tax

recurring expenses. See section 461(h) and

Complete every applicable entry space

officer) authorized to sign.

the related regulations for the rules for

on Form 1120-IC-DISC. Do not enter “See

determining when economic performance

If a return is filed on behalf of a

Attached” instead of completing the entry

takes place.

corporation by a receiver, trustee or

spaces. If more space is needed on the

assignee, the fiduciary must sign the return,

Nonaccrual experience method.

forms or schedules, attach separate sheets

instead of the corporate officer. Returns and

Accrual method corporations are not

using the same size and format as the

forms signed by a receiver or trustee in

required to accrue certain amounts to be

printed forms. If there are supporting

bankruptcy on behalf of a corporation must

received from the performance of certain

statements and attachments, arrange them

be accompanied by a copy of the order or

services that, on the basis of their

in the same order as the schedules or forms

instructions of the court authorizing signing

experience, will not be collected, if the

they support and attach them last. Show the

of the return or form.

corporation’s average annual gross receipts

totals on the printed forms. Also be sure to

for the 3 prior tax years does not exceed $5

If an employee of the corporation

enter the corporation’s name and EIN on

million.

completes Form 1120-IC-DISC, the paid

each supporting statement or attachment.

preparer’s space should remain blank.

This provision does not apply to any

Anyone who prepares Form 1120-IC-DISC

Accounting Methods

amount if interest is required to be paid on

but does not charge the corporation should

the amount or if there is any penalty for

An accounting method is a set of rules used

not complete that section. Generally,

failure to timely pay the amount. For more

to determine when and how income and

anyone who is paid to prepare Form

information, see section 448(d)(5) and

expenses are reported. Figure taxable

1120-IC-DISC must sign it and fill in the

Temporary Regulations section 1.448-2T.

income using the method of accounting

“Paid Preparer’s Use Only” area.

For reporting requirements, see the

regularly used in keeping the IC-DISC’s

The paid preparer must complete the

instructions for Schedule B on page 6.

books and records. In all cases, the method

required preparer information and

Change in accounting method. To

•

used must clearly show taxable income.

Sign the return in the space provided for

change its method of accounting used to

Generally, permissible methods include:

the preparer’s signature.

report taxable income (for income as a

•

Give a copy of the return to the taxpayer.

Cash,

whole or for the treatment of any material

•

Accrual, or

Note. A paid preparer may sign original

item), the IC-DISC must file Form 3115,

•

Any other method authorized by the

returns, amended returns, or requests for

Application for Change in Accounting

Internal Revenue Code.

filing extensions by rubber stamp,

Method. For more information, see Form

mechanical device, or computer software

3115 and Pub. 538, Accounting Periods and

A member of a controlled group cannot

program.

Methods.

use an accounting method that would distort

any group member’s income, including its

Section 481(a) adjustment. The

Other Forms That May Be

own. For example, an IC-DISC acts as a

IC-DISC may have to make an adjustment

commission agent for property sales by a

under section 481(a) to prevent amounts of

Required

related corporation that uses the accrual

income or expense from being duplicated or

For a list of additional forms the IC-DISC

method and pays the IC-DISC its

omitted. This section 481(a) adjustment

may need to file, see Other Forms That May

commission more than 2 months after the

period is generally 1 year for a net negative

Be Required in the Instructions for the

sale. In this case, the IC-DISC should not

adjustment and 4 years for a net positive

Forms 1120 and 1120-A.

use the cash method of accounting because

adjustment. However, an IC-DISC can elect

that method materially distorts its income.

to use a 1-year adjustment period if the net

Schedules

section 481(a) adjustment for the change is

Accrual method. Generally, an IC-DISC

An IC-DISC may have to attach Schedule N

less than $25,000. The IC-DISC must

must use the accrual method of accounting

(Form 1120), Foreign Operations of U.S.

complete the appropriate lines of Form 3115

if its average annual gross receipts exceed

Corporations, to its Form 1120-IC-DISC.

to make the election.

$5 million. See section 448(c).

See Schedule N (Form 1120) for details.

If inventories are required, the accrual

Include any net positive section 481(a)

Statements

method generally must be used for sales

adjustment on page 2, Schedule B, line 2j or

and purchases of merchandise. However,

3f (depending on whether the inventory,

Shareholders who are foreign persons.

when sold, will generate qualified export

qualifying taxpayers and eligible businesses

The corporation should inform shareholders

receipts). If the net section 481(a)

of qualifying small business taxpayers are

who are nonresident alien individuals or

excepted from using the accrual method for

adjustment is negative, report it on page 3,

foreign corporations, trusts, or estates that if

eligible trades or businesses and may

Schedule E, line 2g.

they have gains from disposal of stock in the

account for inventoriable items as materials

IC-DISC, former DISC, or former IC-DISC,

Accounting Periods

and supplies that are not incidental. For

or distributions from accumulated IC-DISC

details, see Cost of Goods Sold on

An IC-DISC must figure its taxable income

income, including deemed distributions, they

page 6.

on the basis of a tax year. A tax year is the

must treat these amounts as effectively

Under the accrual method, an amount is

annual accounting period an IC-DISC uses

connected with the conduct of a trade or

includible in income when:

to keep its records and report its income and

business conducted through a permanent

expenses. Generally, IC-DISCs can use a

1. All the events have occurred that fix

establishment in the United States and

calendar year or a fiscal year.

the right to receive the income, which is the

derived from sources within the United

States.

earliest of the date:

Note. The tax year of an IC-DISC must be

Transfers to a corporation controlled by

a. the required performance takes place,

the same as the tax year of the principal

the transferor. If a person receives stock of

b. payment is due, or

shareholder which, at the beginning of the

a corporation in exchange for property and

c. payment is received and

IC-DISC tax year, has the highest

no gain or loss is recognized under section

percentage of voting power. If two or more

351, the person (transferor) and the

2. The amount can be determined with

shareholders have the highest percentage

transferee must each attach to their tax

reasonable accuracy.

of voting power, the IC-DISC must have a

-3-

Instructions for Form 1120-IC-DISC

Instructions For Form 1120-Ic-Disc - 2004 Page 3

Related Articles

Related forms

Related Categories