Instructions For Form 1120-Ic-Disc - 2003 (Page 10 of 16) in pdf

capitalized and those that may be currently

Line 1i. Compensation of Officers

Line 2b. Taxes and Licenses

deductible.

Attach a schedule showing the name, social

Enter taxes paid or accrued during the tax

Interest expense paid or incurred during

security number, and amount of

year, but do not include the following:

the production period of designated property

compensation paid to all officers. Do not

•

Taxes not imposed on the corporation.

must be capitalized and is governed by

include compensation deductible elsewhere

•

Taxes, including state or local sales

special rules. For more details, see

on the return, such as amounts included in

taxes, that are paid or incurred in connection

Regulations sections 1.263A-8 through

cost of goods sold, elective contributions to

with an acquisition or disposition of property

1.263A-15.

a section 401(k) cash or deferred

(these taxes must be treated as part of the

arrangement, or amounts contributed under

The costs required to be capitalized

cost of the acquired property or, in the case

a salary reduction SEP agreement or a

under section 263A are not deductible until

of a disposition, as a reduction in the

SIMPLE IRA plan.

the property (to which the costs relate) is

amount realized on the disposition).

•

sold, used, or otherwise disposed of by the

The IC-DISC determines who is an

Taxes assessed against local benefits

corporation.

officer under the laws of the state where it is

that increase the value of the property

incorporated.

Exceptions. Section 263A does not apply

assessed (such as for paving, etc.).

•

Taxes deducted elsewhere on the return,

to:

Line 1j. Repairs and Maintenance

•

such as those reflected in cost of goods

Personal property acquired for resale if

Enter the cost of incidental repairs and

the IC-DISC’s average annual gross

sold.

maintenance not claimed elsewhere on the

receipts for the 3 prior tax years were $10

See section 164(d) for apportionment of

return, such as labor and supplies, that do

million or less.

taxes on real property between seller and

•

not add to the value of the property or

Inventoriable items accounted for in the

purchaser.

appreciably prolong its life. New buildings,

same manner as materials and supplies that

machinery, or permanent improvements that

are not incidental. See Cost of Goods Sold

Line 2c. Interest

increase the value of the property are not

on page 7 for details.

Do not deduct the following interest:

deductible. They must be depreciated or

•

For more details on the uniform

Interest on indebtedness incurred or

amortized.

capitalization rules, see Regulations

continued to purchase or carry obligations if

sections 1.263A-1 through 1.263A-3.

Line 1k. Pension, Profit-sharing,

the interest is wholly exempt from income

etc., Plans

tax. For exceptions, see section 265(b).

Transactions between related taxpayers.

•

For cash basis taxpayers, prepaid interest

Generally, an accrual basis taxpayer may

Enter the deduction for contributions to

allocable to years following the current tax

only deduct business expenses and interest

qualified pension, profit-sharing, or other

year (e.g., a cash basis calendar year

owed to a related party in the year the

funded deferred compensation plans.

taxpayer who in 2003 prepaid interest

payment is included in the income of the

Employers who maintain such a plan

allocable to any period after 2003 can

related party. See sections 163(e)(3), 163(j),

generally must file one of the forms listed

deduct only the amount allocable to 2003).

and 267 for limitations on deductions for

below, even if the plan is not a qualified plan

•

Interest on debt allocable to the

unpaid interest and expenses.

under the Internal Revenue Code. The filing

production of designated property by a

Golden parachute payments. A portion of

requirement applies even if the IC-DISC

corporation for its own use. The corporation

the payments made by a corporation to key

does not claim a deduction for the current

must capitalize this interest. Also capitalize

personnel that exceeds their usual

tax year. There are penalties for failure to

any interest on debt allocable to an asset

compensation may not be deductible. This

file these forms on time and for overstating

used to produce the property. See section

occurs when the corporation has an

the pension plan deduction. See sections

263A(f) and Regulations sections 1.263A-8

agreement (golden parachute) with these

6652(e) and 6662(f).

through 1.263A-15 for definitions and more

key employees to pay them these excess

Form 5500, Annual Return/Report of

information.

amounts if control of the corporation

Employee Benefit Plan. File this form for a

changes. See section 280G.

Special rules apply to:

plan that is not a one-participant plan (see

•

Interest on which no tax is imposed (see

Business startup expenses. These

below).

section 163(j)).

expenses must be capitalized unless an

Form 5500-EZ, Annual Return of

•

Forgone interest on certain

election is made to amortize them over a

One-Participant (Owners and Their

below-market-rate loans (see section 7872).

period of 60 months. See section 195 and

Spouses) Retirement Plan. File this form for

•

Original issue discount on certain

Regulations section 1.195-1.

a plan that only covers the owner (or the

high-yield discount obligations. (See section

owner and his or her spouse) but only if the

Line 1. Export Promotion

163(e) to figure the disqualified portion.)

owner (or the owner and his or her spouse)

Expenses

owns the entire business.

Line 2d. Charitable Contributions

Enter export promotion expenses on lines

Enter contributions or gifts paid within the

Line 1l. Employee Benefit

1a through 1m. Export promotion expenses

tax year to or for the use of charitable and

are an IC-DISC’s ordinary and necessary

Programs

governmental organizations described in

expenses paid or incurred to obtain qualified

Enter contributions to employee benefit

section 170(c) and any unused charitable

export receipts. Do not include income

programs not claimed elsewhere on the

contributions carried over from prior years.

taxes. Enter on lines 2a through 2g any part

return (e.g., insurance, health and welfare

of an expense not incurred to obtain

IC-DISCs reporting taxable income on

programs, etc.) that are not an incidental

qualified export receipts.

the accrual method may elect to treat as

part of a pension, profit-sharing, etc., plan

paid during the tax year any contributions

included on line 1k.

Line 1c. Depreciation

paid by the 15th day of the 3rd month after

Besides depreciation, include on line 1c the

Line 1m. Other Export Promotion

the end of the tax year if the contributions

part of the cost that the corporation elected

Expenses

were authorized by the board of directors

to expense under section 179 for certain

during the tax year. Attach a declaration to

Enter any other allowable deduction not

property placed in service during tax year

the return stating that the resolution

claimed elsewhere on the return.

2003 or carried over from 2002. See Form

authorizing the contributions was adopted

Note: Do not deduct fines or penalties

4562 and its instructions.

by the board of directors during the tax year.

imposed on the IC-DISC.

The declaration must include the date the

Line 1h. Freight

resolution was adopted.

Line 2a. Bad Debts

Enter 50% of the freight expenses (except

insurance) for shipping export property

The IC-DISC must use the specific

Limitation on deduction. The total amount

aboard U.S. flagships and U.S.-owned and

chargeoff method of accounting for bad

claimed may not be more than 10% of

U.S.-operated aircraft in those cases where

debts and may only deduct business bad

taxable income (line 7, page 1) computed

you are not required to use U.S. ships or

debts when they become wholly or partially

without regard to the following:

•

aircraft by law or regulations.

worthless.

Any deduction for contributions,

-10-

Instructions for Form 1120-IC-DISC

Instructions For Form 1120-Ic-Disc - 2003 Page 10

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