Instructions For Form 1120-Ic-Disc - 2002 (Page 10 of 16) in pdf

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trust in which the dividends are paid,

Contributions to pension, stock bonus,

Line 1h. Freight

qualifies under sections 856 through 860.

and certain profit-sharing, annuity, or

Enter 50% of the freight expenses (except

deferred compensation plans.

4. Dividends not eligible for a

insurance) for shipping export property

Regulations section 1.263A-1(e)(3)

dividends-received deduction because of

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

specifies other indirect costs that relate to

the holding period of the stock or an

U.S.-operated aircraft in those cases where

production or resale activities that must be

obligation to make corresponding payments

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

capitalized and those that may be currently

with respect to similar stock.

aircraft by law or regulations.

deductible.

Two situations in which the

Line 1i. Compensation of Officers

dividends-received deduction will not be

Interest expense paid or incurred during

Attach a schedule showing the name, social

allowed on any share of stock are:

the production period of designated property

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security number, and amount of

If the IC-DISC held it less than 46 days

must be capitalized and is governed by

compensation paid to all officers. Do not

during the 90-day period beginning 45 days

special rules. For more details, see

include compensation deductible elsewhere

before the stock became ex-dividend with

Regulations sections 1.263A-8 through

on the return, such as amounts included in

respect to the dividend (see section 246

1.263A-15.

cost of goods sold, elective contributions to

(c)(1)(A)) or

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The costs required to be capitalized

a section 401(k) cash or deferred

To the extent the IC-DISC is under an

under section 263A are not deductible until

arrangement, or amounts contributed under

obligation to make related payments for

the property (to which the costs relate) is

a salary reduction SEP agreement or a

substantially similar or related property.

sold, used, or otherwise disposed of by the

SIMPLE IRA plan.

5. Any other taxable dividend income

corporation.

The IC-DISC determines who is an

not properly reported above (including

officer under the laws of the state where it is

distributions under section 936(h)(4)).

Exceptions. Section 263A does not apply

incorporated.

to:

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Personal property acquired for resale if

Line 1j. Repairs and Maintenance

Line 15, Column (a)

the IC-DISC’s average annual gross

Qualified dividends are dividends that

Enter the cost of incidental repairs and

receipts for the 3 prior tax years are $10

maintenance not claimed elsewhere on the

qualify as qualified export receipts. They

million or less.

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return, such as labor and supplies, that do

include all dividends (or amounts) includible

Inventoriable items accounted for in the

in gross income (under section 951) that are

not add to the value of the property or

same manner as materials and supplies that

appreciably prolong its life. New buildings,

attributable to stock of related foreign export

are not incidental. See Cost of Goods Sold

machinery, or permanent improvements that

corporations. See item 6 under Qualified

on page 7 for details.

increase the value of the property are not

export receipts on page 5 and A related

For more details on the uniform

deductible. They must be depreciated or

foreign export corporation on page 6 for

capitalization rules, see Regulations

amortized.

more details.

sections 1.263A-1 through 1.263A-3.

Line 1k. Pension, Profit-sharing,

Transactions between related taxpayers.

Schedule E

etc., Plans

Generally, an accrual basis taxpayer may

only deduct business expenses and interest

Enter the deduction for contributions to

Deductions

qualified pension, profit-sharing, or other

owed to a related party in the year the

funded deferred compensation plans.

payment is included in the income of the

Limitations on Deductions

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

Employers who maintain such a plan

generally must file one of the forms listed

and 267 for limitations on deductions for

Section 263A uniform capitalization

below, even if the plan is not a qualified plan

unpaid interest and expenses.

rules. The uniform capitalization rules of

under the Internal Revenue Code. The filing

section 263A require corporations to

Golden parachute payments. A portion of

requirement applies even if the IC-DISC

capitalize, or include in inventory, certain

the payments made by a corporation to key

does not claim a deduction for the current

costs incurred in connection with:

personnel that exceeds their usual

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tax year. There are penalties for failure to

Personal property (tangible and certain

compensation may not be deductible. This

file these forms on time and for overstating

intangible property) acquired for resale.

occurs when the corporation has an

the pension plan deduction. See sections

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The production of real property and

agreement (golden parachute) with these

6652(e) and 6662(f).

tangible personal property produced by a

key employees to pay them these excess

Form 5500, Annual Return/Report of

corporation for use in its trade or business

amounts if control of the corporation

Employee Benefit Plan. File this form for a

or in an activity engaged in for profit.

changes. See section 280G.

plan that is not a one-participant plan (see

Tangible personal property produced

Business startup expenses. These must

below).

by a corporation includes a film, sound

be capitalized unless an election is made to

Form 5500-EZ, Annual Return of

recording, videotape, book, or similar

amortize them over a period of 60 months.

One-Participant (Owners and Their

property.

See section 195 and Regulations section

Spouses) Retirement Plan. File this form for

1.195-1.

IC-DISCs subject to the section 263A

a plan that only covers the owner (or the

uniform capitalization rules are required to

owner and his or her spouse) but only if the

Line 1. Export Promotion

capitalize:

owner (or the owner and his or her spouse)

Expenses

owns the entire business.

1. Direct costs and

Enter export promotion expenses on lines

2. An allocable part of most indirect

Line 1l. Employee Benefit

1a through 1m. Export promotion expenses

costs (including taxes) that (a) benefit the

Programs

are an IC-DISC’s ordinary and necessary

assets produced or acquired for resale or

Enter contributions to employee benefit

expenses paid or incurred to obtain qualified

(b) are incurred by reason of the

programs not claimed elsewhere on the

export receipts. Do not include income

performance of production or resale

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

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

activities.

programs, etc.) that are not an incidental

of an expense not incurred to obtain

For inventory, some of the indirect

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

qualified export receipts.

expenses that must be capitalized are:

included on line 1k.

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Administration expenses.

Line 1c. Depreciation

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Line 1m. Other Export Promotion

Taxes.

Besides depreciation, include on line 1c the

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Expenses

Depreciation.

part of the cost that the corporation elected

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Enter any other allowable deduction not

Insurance.

to expense under section 179 for certain

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claimed elsewhere on the return.

Compensation paid to officers attributable

tangible property placed in service during

to services.

tax year 2002 or carried over from 2001.

Note: Do not deduct fines or penalties

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Rework labor.

See Form 4562 and its instructions.

imposed on the IC-DISC.

-10-

Instructions for Form 1120-IC-DISC

Instructions For Form 1120-Ic-Disc - 2002 Page 10

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