Instructions For Form 1120-Pc - 2008 (Page 10 of 20) in pdf

Limitations on tax benefits for

from the lease payments (tax-exempt use

called the inclusion amount. The

executive compensation under a

loss). Amounts disallowed may be carried

corporation may have an inclusion

Treasury troubled asset relief program.

over to the next tax year and treated as a

amount if:

The $1 million compensation limit is

deduction with respect to the property for

reduced to $500,000 for executive

that tax year. See section 470 for more

And the vehicle’s

details and exceptions.

remuneration and deferred deduction

FMV on the first

executive remuneration paid to covered

The lease term

day of the lease

Line 15. Compensation of officers.

executives during an applicable tax year

began:

exceeded:

Enter deductible officers’ compensation

by an applicable employer under a

on line 15. See Employment credits below

troubled asset relief program. The

After 12/31/07 but before 1/1/09 . . $18,500

for a list of employment credits that may

$500,000 is reduced by any amounts

reduce your deduction for officers’

After 12/31/06 but before 1/1/08 . . $15,500

disallowed as excess parachute

compensation. Do not include

payments. See section 162(m)(5) for

compensation deductible elsewhere on

After 12/31/04 but before 1/1/07 . . $15,200

definitions and other special rules. Also

the return, such as elective contributions

After 12/31/03 but before 1/1/05 . . $17,500

see Notice 2008-94, 2008-44 I.R.B. 1070,

to a section 401(k) cash or deferred

for additional guidance.

arrangement, or amounts contributed

If the lease term began before January 1, 2004,

under a salary reduction SEP agreement

see Pub. 463, Travel, Entertainment, Gift, and Car

In addition, a portion of any parachute

or a SIMPLE IRA plan.

Expenses, to find out if the corporation has an

payments made to a covered executive

inclusion amount. The inclusion amount for lease

by an applicable employer participating in

Include only the deductible part of

terms beginning in 2009 will be published in the

a Treasury troubled asset relief program

each officer’s compensation on line 15.

Internal Revenue Bulletin in early 2009.

is not deductible as compensation if the

(See Disallowance of deduction for

payments are made because of a

employee compensation in excess of $1

See Pub. 463 for instructions on

severance from employment during an

million below.) Attach a schedule for all

figuring the inclusion amount.

applicable tax year. For this purpose

officers using the following columns:

applicable employer, covered executive,

Line 19. Taxes and licenses. Enter

1. Name of officer.

and applicable tax year have the same

taxes paid or accrued during the tax year,

2. Social security number.

meaning as under section 162(m)(5).

but do not include the following.

3. Percentage of time devoted to

•

These limits do not apply to a payment

Federal income taxes.

business.

•

already treated as a parachute payment.

Foreign or U.S. possession income

4. Amount of compensation.

See section 280G(e) and Notice 2008-94.

taxes if a tax credit is claimed.

•

The corporation determines who is an

Taxes not imposed on the corporation.

Line 16. Salaries and wages. Enter the

•

officer under the laws of the state where it

Taxes, including state or local sales

total salaries and wages paid for the tax

is incorporated.

taxes, that are paid or incurred in

year. Do not include salaries and wages

connection with an acquisition or

deductible elsewhere on the return, such

If a consolidated return is filed, each

disposition of property (these taxes must

as amounts included in officers’

member of an affiliated group must

be treated as a part of the cost of the

compensation, elective contributions to a

furnish this information.

acquired property or, in the case of a

section 401(k) cash or deferred

Disallowance of deduction for

disposition, as a reduction in the amount

arrangement, or amounts contributed

employee compensation in excess of

realized on the disposition).

under a salary reduction SEP agreement

$1 million. Publicly held corporations

•

Taxes assessed against local benefits

or a SIMPLE IRA plan.

cannot deduct compensation to a

that increase the value of the property

“covered employee” to the extent that the

If the corporation provided taxable

assessed (such as for paving, etc.).

compensation exceeds $1 million.

•

fringe benefits to its employees,

Taxes deducted elsewhere on the

Generally, a covered employee is:

such as the personal use of a car,

return.

CAUTION

•

The principal executive officer of the

do not deduct as wages the amount

See section 164(d) for details on the

corporation (or an individual acting in that

allocated for depreciation and other

apportionment of taxes on real property

capacity) as of the end of the tax year or

expenses that are claimed elsewhere on

•

between a seller and a purchaser.

An employee whose total

the return (for example, on Schedule A,

compensation must be reported to

Line 20a. Interest.

line 22 or line 31).

shareholders under the Securities

Note. Do not offset interest income

Employment credits. If the corporation

Exchange Act of 1934 because the

against interest expense.

claims a credit on any of the following

employee is among the three highest

forms, it may need to reduce its deduction

The corporation must make an interest

compensated officers for that tax year

for officer’s compensation and salaries

allocation if the proceeds of a loan were

(other than the principal executive officer).

and wages. See the applicable form for

used for more than one purpose (for

For this purpose, compensation does

details.

example, to purchase a portfolio

not include the following.

•

Form 5884, Work Opportunity Credit;

investment and to acquire an interest in a

•

Income from certain employee trusts,

•

Form 5884-A, Credits for Affected

passive activity). See Temporary

annuity plans, or pensions.

Midwestern Disaster Area Employers;

Regulations section 1.163-8T for the

•

Any benefit paid to an employee that is

•

Form 8844, Empowerment Zone and

interest allocation rules.

excluded from the employee’s income.

Renewal Community Employment Credit;

Do not deduct the following interest.

•

The deduction limit does not apply to:

•

Form 8845, Indian Employment Credit;

•

Interest on indebtedness incurred or

•

Commissions based on individual

Form 8861, Welfare-to-Work Credit;

continued to purchase or carry obligations

performance,

and

•

if the interest is wholly exempt from

•

Qualified performance-based

Form 8932, Credit for Employer

income tax. For exceptions, see section

compensation, and

Differential Wage Payments.

•

265(b).

Income payable under a written,

•

Line 18. Rents. If the corporation rented

Interest and carrying charges on

binding contract in effect on February 17,

or leased a vehicle, enter the total annual

straddles. Generally, these amounts must

1993.

rent or lease expense paid or incurred

be capitalized. See section 263(g).

•

The $1 million limit is reduced by

during the year. Also complete Part V of

Interest on debt allocable to the

amounts disallowed as excess parachute

Form 4562, Depreciation and

production of designated property by a

payments under section 280G.

Amortization. If the corporation leased a

corporation for its own use or for sale.

See section 162(m) and Regulations

vehicle for a term of 30 days or more, the

The corporation must capitalize this

section 1.162-27. Also see Notice

deduction for the vehicle lease expense

interest. Also capitalize any interest on

2007-49, 2007-25 I.R.B. 1429.

may have to be reduced by an amount

debt allocable to an asset used to

-10-

Instructions for Form 1120-PC

Instructions For Form 1120-Pc - 2008 Page 10

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