Instructions For Form 1120-Pc - 2008 (Page 17 of 20) in pdf

2. Applicable interest rate, and

before the beginning of the accident year.

capital asset on this schedule and the rest

3. Applicable loss payment pattern.

The election will not apply to any

on Schedule D (Form 1120). Otherwise,

international or reinsurance line of

do not include on Schedule D (Form

Special rules apply with respect to:

business. If the corporation makes this

1120) any sales reported on this

•

Unpaid losses related to disability

election, check the “Yes” column for

schedule.

insurance (other than credit disability

question 7 in Schedule I, Other

insurance),

Information. For more information, see

•

Noncancelable accident and health

Schedule H—Special

section 846(e), Regulations section

insurance,

1.846-2, and Rev. Proc. 92-76, 1992-2

•

Deduction and Ending

Cancelable accident and health

C.B. 453.

insurance, and

Adjusted Surplus for

Note. There is a special application of

•

International and reinsurance lines of

the “fresh start” provision for an insurance

Section 833 Organizations

business.

company that is not subject to tax under

With regard to the special rules for

section 831(a) for its first tax year

Line 5. Beginning adjusted surplus. If

discounting unpaid losses on accident

beginning after December 31, 1986,

the corporation was a section 833

and health insurance (other than disability

because (1) it is described in section

organization in 2007, it should enter the

income insurance), unpaid losses are

501(c) or (2) it is subject to tax under

amount from Schedule H, line 10, of its

assumed to be paid in the middle of the

section 831(b) on its investment income.

2007 Form 1120-PC.

year following the accident year.

If the insurance company later

Generally, the adjusted surplus as of

Generally, the amount of undiscounted

becomes subject to tax under section

the beginning of any tax year is an

unpaid losses means the unpaid losses

831(a), the rules relating to the fresh start

amount equal to the adjusted surplus as

and unpaid loss adjustment expenses

under the discounting provisions are

of the beginning of the preceding tax

shown in the annual statement. However,

applied by treating the last tax year before

year:

see Regulations section 1.846-1(a)(1)

the year in which the insurance company

1. Increased by the amount of any

referring to Regulations section

becomes subject to tax under section

adjusted taxable income for the preceding

1.832-4(b) relating to the determination of

831(a) as the insurance company’s last

tax year or

unpaid losses.

tax year beginning before 1987. See

2. Decreased by the amount of any

section 1010(e) of the Technical and

Under section 832(b)(5)(A), unpaid

adjusted net operating loss for the

Miscellaneous Revenue Act of 1988 and

losses must be adjusted to take into

preceding tax year.

Notice 88-100, 1988-2 C.B. 439.

account estimated recoveries due to

salvage and reinsurance for those losses.

Lines 6 and 7. Estimated salvage and

If 2008 is the first tax year the taxpayer

If the amounts shown in the annual

reinsurance recoverable. Enter on

qualifies as a section 833 organization,

statement were determined on a

lines 6 and 7 the amount of estimated

see section 833(c)(3)(C) to determine the

discounted basis and if the extent to

salvage and reinsurance recoverable.

adjusted surplus as of the beginning of

which these losses were discounted can

The amount of estimated salvage

the 2008 tax year.

be determined on the basis of information

recoverable must be determined on a

For purposes of the computation of the

disclosed on or with the annual

discounted basis. The salvage discount

adjusted surplus, the terms “adjusted

statement, the amount of the

factors for 2008 are published in Rev.

taxable income” and “adjusted net

undiscounted unpaid losses must be

Proc. 2008-71, 2008-49 I.R.B. 1251. The

operating loss” mean the taxable income

recomputed to eliminate any reduction

salvage discount factors for 2009 will be

or the net operating loss, respectively,

caused by such discounting. In no event

published in the Internal Revenue Bulletin

determined with the following

can the amount of discounted unpaid

when available. Also see Regulations

modifications:

losses with respect to any line of business

section 1.832-4.

1. Without regard to the deduction

for an accident year exceed the total

Line 9. Tax-exempt interest subject to

determined under section 833(b)(1);

amount of unpaid losses with respect to

section 832(b)(5)(B). Enter the amount

2. Without regard to any carryover or

any line of business for an accident year

of tax-exempt interest received or

carryback to that tax year; and

as reported on the annual statement. Also

accrued during the tax year on

3. By increasing gross income by an

see Regulations section 1.832-4(d)

investments made after August 7, 1986.

amount equal to the net exempt income

regarding increasing unpaid losses shown

For information regarding the

for the tax year.

on the annual statement by salvage

determination of the acquisition date of an

recoverable. Also see Rev. Proc. 92-77,

investment, see the instructions for

Line 6. Special deduction. The

1992-2 C.B. 454.

Schedule C.

deduction for any tax year is limited to

The applicable interest rate for each

taxable income for that tax year

calendar year and the applicable loss

determined without regard to this

Schedule G—Other

payment pattern for each accident year

deduction.

for each line of business are determined

Capital Losses

Note. Under section 833(b)(4), any

by the IRS. The applicable interest rate

determination under section 833(b) must

and loss payment patterns for 2008 are

Capital assets are considered sold or

be made by only taking into account items

published in Rev. Proc. 2008-70, 2008-49

exchanged to provide funds to meet

from the health-related business of the

I.R.B. 1240. The applicable interest rate

abnormal insurance losses and to pay

corporation.

and loss payment patterns for 2006 and

dividends and make similar distributions

2007 are published in Rev. Proc. 2007-9,

Line 8a. Adjusted tax-exempt income.

to policyholders to the extent that the

2007-3 I.R.B. 278, and 2008-10, 2008-3

Reduce the total tax-exempt interest

gross receipts from their sale or exchange

I.R.B. 290, respectively.

received or accrued during the tax year

are not more than the amount by which

by any amount (not otherwise deductible)

the sum of dividends and similar

Corporations having sufficient

which would have been allowable as a

distributions paid to policyholders, losses

historical experience to determine a loss

deduction for the tax year if such interest

paid, and expenses paid for the tax year

payment pattern may, under certain

were not tax-exempt. Enter the result on

is more than the total on line 9, Schedule

circumstances, elect under section 846(e)

line 8a.

to use their own historical experience

(instead of the loss payment patterns

Total gross receipts from sales of

Line 8b. Adjusted dividends-received

determined by the IRS). If this election is

capital assets (line 12, column (c)) must

deduction. Reduce the total amount

made, the loss payment patterns will be

not be more than line 10. If necessary,

allowed as a deduction under sections

based on the most recent calendar year

the corporation may report part of the

243, 244, and 245 by the amount of any

for which an annual statement was filed

gross receipts from a particular sale of a

decrease in deductions allowable for the

-17-

Instructions for Form 1120-PC

Instructions For Form 1120-Pc - 2008 Page 17

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