Instructions For Form 1120-Pc - 2004 (Page 14 of 21) in pdf

entered is from more than one

consumed by individuals subject to the

For more information on other

partnership, identify the amount from

hours of service limits of the Department

deductions that may apply to

each partnership.

of Transportation.

corporations, see Pub. 535.

•

Extraterritorial income exclusion (from

Membership dues. The corporation

Line 32. Total deductions. Insurance

Form 8873, line 52a or 52b).

can deduct amounts paid or incurred for

companies that issue specified insurance

•

Deduction for clean-fuel vehicle and

membership dues in civic or public

contracts (as defined in section 848(e)(1))

certain refueling property (see Pub. 535).

service organizations, professional

are generally required to amortize policy

•

Dividends paid in cash on stock held by

organizations (such as bar and medical

acquisition expenses on a straight-line

an employee stock ownership plan.

associations), business leagues, trade

basis over a period of 120 months

However, a deduction may only be taken

associations, chambers of commerce,

beginning with the 1st month in the 2nd

if, according to the plan, the dividends

boards of trade, and real estate boards.

half of the tax year (section 848(a)).

are:

However, no deduction is allowed if a

Reduce total deductions on line 32 by the

a. Paid in cash directly to the plan

principal purpose of the organization is to

amount required to be capitalized under

participants or beneficiaries;

entertain, or provide entertainment

section 848. Attach a schedule showing

b. Paid to the plan, which distributes

facilities for, members or their guests. In

all computations. See section 848 and its

them in cash to the plan participants or

addition, corporations may not deduct

regulations for special rules, definitions,

their beneficiaries no later than 90

membership dues in any club organized

and exceptions. Also see Schedule G,

days after the end of the plan year in

for business, pleasure, recreation, or

Form 1120-L, and its instructions for more

which the dividends are paid;

other social purpose. This includes

information.

c. At the election of the participants or

country clubs, golf and athletic clubs,

Line 34b. Deduction on account of the

their beneficiaries; (i) payable as

airline and hotel clubs, and clubs

special income and deduction

provided under a or b above or (ii) paid

operated to provide meals under

accounts. Enter the total of the amounts

to the plan and reinvested in qualifying

conditions favorable to business

required to be added under sections

employer securities; or

discussion.

832(e)(4) and (6). However, no deduction

d. Used to make payments on a loan

Entertainment facilities. The

is permitted unless tax and loss bonds

described in section 404(a)(9).

corporation cannot deduct an expense

are purchased in an amount equal to the

paid or incurred for use of a facility (such

See section 404(k) for more details

tax benefit of the deduction. See section

as a yacht or hunting lodge) for an activity

and the limitation on certain dividends.

832(e).

usually considered entertainment,

Do not deduct fines or penalties

Note. The deduction on account of the

amusement, or recreation.

paid to a government for violating

special income and deduction accounts is

Amounts treated as compensation.

any law.

limited to taxable income for the tax year

CAUTION

Generally, the corporation may be able to

(computed without regard to this

Travel, meals, and entertainment.

deduct otherwise nondeductible meals,

deduction or to any carryback of a net

Subject to limitations and restrictions

travel, and entertainment expenses if the

operating loss).

discussed below, a corporation can

amounts are treated as compensation to

Line 36b. Net operating loss

deduct ordinary and necessary travel,

the recipient and reported on Form W-2

deduction. A corporation can use the net

meals, and entertainment expenses paid

for an employee or on Form 1099-MISC

operating loss (NOL) incurred in one tax

or incurred in its trade or business. Also,

for an independent contractor.

year to reduce its taxable income in

special rules apply to deductions for gifts,

However, if the recipient is an officer,

skybox rentals, luxury water travel,

another tax year.

director, or beneficial owner (directly or

convention expenses, and entertainment

indirectly) of more than 10% of any class

Enter on line 36b the total NOL

tickets. See section 274 and Pub. 463 for

of stock, the deduction for otherwise

carryovers from other tax years, but do

more details.

nondeductible meals, travel, and

not enter more than the corporation’s

Travel. The corporation cannot deduct

entertainment expenses incurred after

taxable income (after the

travel expenses of any individual

October 22, 2004, is limited to the amount

dividends-received deduction). Attach a

accompanying a corporate officer or

treated as compensation. See section

schedule showing the computation of the

employee, including a spouse or

274(e)(2).

NOL deduction. Also complete item 12 on

dependent of the officer or employee,

Schedule I.

Lobbying expenses. Generally,

unless:

lobbying expenses are not deductible.

•

The following special rules apply.

That individual is an employee of the

•

These expenses include:

A corporate equity reduction interest

•

corporation and

Amounts paid or incurred in connection

•

loss may not be carried back to a tax year

His or her travel is for a bona fide

with influencing federal or state legislation

preceding the year of the equity reduction

business purpose and would otherwise be

(but not local legislation) or

transaction (see section 172(b)(1)(E)).

•

deductible by that individual.

•

Amounts paid or incurred in connection

If an ownership change occurs, the

Meals and entertainment. Generally,

with any communication with certain

amount of the taxable income of a loss

the corporation can deduct only 50% of

federal executive branch officials in an

corporation that may be offset by the

the amount otherwise allowable for meals

attempt to influence the official actions or

pre-change NOL carryovers may be

and entertainment expenses paid or

positions of the officials. See Regulations

limited (see section 382 and the related

incurred in its trade or business. In

section 1.162-29 for the definition of

regulations). A loss corporation must file

addition (subject to exceptions under

“influencing legislation.”

an information statement with its income

section 274(k)(2)):

Dues and other similar amounts paid

tax return for each tax year that certain

•

Meals must not be lavish or

to certain tax-exempt organizations may

ownership shifts occur (see Temporary

extravagant;

not be deductible. See section 162(e)(3).

Regulations section 1.382-2T(a)(2)(ii) for

•

A bona fide business discussion must

If certain in-house lobbying expenditures

details). See Regulations section

occur during, immediately before, or

do not exceed $2,000, they are

1.382-6(b) for details on how to make the

immediately after the meal; and

deductible. For information on

closing-of-the-books election.

•

An employee of the corporation must

contributions to charitable organizations

If a corporation acquires control of

be present at the meal.

that conduct lobbying activities, see

another corporation (or acquires its

See section 274(n)(3) for a special rule

section 170(f)(9). For more information on

assets in a reorganization), the amount of

that applies to expenses for meals

lobbying expenses, see section 162(e).

pre-acquisition losses that may offset

-14-

Instructions for Form 1120-PC

Instructions For Form 1120-Pc - 2004 Page 14

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