Instructions For Form 1120-Pc - 2008 (Page 9 of 20) in pdf

or credited during the same tax year. See

return. If the amount entered is from more

For business start-up and

section 832(b)(1)(D).

than one partnership, identify the amount

organizational costs paid after October

from each partnership.

22, 2004, and before September 9, 2008,

Line 9. Income on account of special

6. Part or all of the proceeds received

a corporation can elect to deduct up to

income and deduction accounts.

from certain corporate-owned life

$5,000 of such costs for the year it begins

Corporations which write the kinds of

insurance contracts issued after August

business (otherwise the corporation must

insurance below must maintain the

17, 2006. See section 101(j).

capitalize all such costs). The $5,000

following special accounts. A corporation

deduction is reduced by the amount the

which writes:

total costs exceed $50,000. If the total

Deductions

1. Mortgage guaranty insurance, must

costs are $55,000 or more, the deduction

maintain a mortgage guaranty account;

is reduced to zero. Any costs not

Limitations on Deductions

2. Lease guaranty insurance, must

deducted must be amortized ratably over

maintain a lease guaranty account; and

Section 263A uniform capitalization

a 180-month period, beginning with the

3. Insurance on obligations the

rules. The uniform capitalization rules of

month the corporation begins business. If

interest on which is excludable from gross

section 263A require corporations to

the election is made, the corporation must

income under section 103, must maintain

capitalize certain costs.

attach any statement required by

an account with respect to insurance on

Regulations sections 1.195-1(b) and

See Regulations sections 1.263A-1

state and local obligations.

1.248-1(c). However, the corporation can

through 1.263A-3.

apply the provisions of Temporary

Amounts required to be subtracted

Transactions between related

Regulations sections 1.195-1T and

from these accounts under sections

taxpayers. Generally, an accrual basis

1.248-1T to all expenses paid or incurred

832(e)(5) and 832(e)(6) must be reported

taxpayer can only deduct business

after October 22, 2004, provided the

as income on line 9. See section 832(e)

expenses and interest owed to a related

period of limitations on assessment has

for more information.

party in the year the payment is included

not expired for the year of the election.

in the income of the related party. See

Line 10. Income from protection

Otherwise the provisions under

sections 163(e)(3), 163(j), and 267 for

against loss account. Although section

Regulations sections 1.195-1(b) and

limitations on deductions for unpaid

1024 of P.L. 99-514 repealed section 824

1.248-1(c) will apply.

interest and expenses.

relating to the protection against loss

For business start-up and

(PAL) account, PAL account balances are

Corporations use Form 8926,

organizational costs paid or incurred

includible in income as though section

Disqualified Corporate Interest Expense

before October 23, 2004, a corporation

824 were still in effect. Attach a schedule

Disallowed Under Section 163(j) and

can elect to amortize such costs over a

showing the computation.

Related Information, to figure the amount

period of 60 months or more.

of any corporate interest expense

Line 11. Mutual interinsurers or

Report the deductible amount of such

disallowed by section 163(j).

reciprocal underwriters — decrease in

costs and any amortization on line 31. For

subscriber accounts. Enter the

Section 291 limitations. Corporations

amortization that begins during the 2008

decrease for the tax year in savings

may be required to adjust certain

tax year, complete and attach Form 4562.

credited to subscriber accounts of a

deductions. See section 291 to determine

For more details on business start-up and

mutual insurance company that is an

the amount of the adjustment. Also, see

organizational costs, see Pub. 535,

interinsurer or reciprocal underwriter.

section 43.

Business Expenses.

Line 12. Income from a special loss

Golden parachute payments. A portion

Reducing certain expenses for which

discount account. Enter the amount

credits are allowable. If the corporation

of the payments made by a corporation to

from Form 8816, Part II, line 6.

claims any of the following credits, it may

key personnel that exceeds their usual

need to reduce the otherwise allowable

compensation may not be deductible.

Line 13. Other Income. Enter any other

deductions for expenses used to figure

This occurs when the corporation has an

taxable income not reported on lines 1

the credit.

agreement (golden parachute) with these

through 12. List the type and amount of

•

Employment credits. See Employment

key employees to pay them these excess

income on an attached schedule. If the

credits on page 10.

amounts if control of the corporation

corporation has only one item of other

•

Research credit.

changes. See section 280G and

income, describe it in parentheses on line

•

Orphan drug credit.

Regulations section 1.280G-1. Also see

13. Examples of other income to report on

•

Disabled access credit.

the instructions for line 15.

line 13 include the following.

•

Employer credit for social security and

1. The amount included in income

Business start-up and organizational

Medicare taxes paid on certain employee

from Form 6478, Alcohol and Cellulosic

costs. For business start-up and

tips.

Biofuel Fuels Credit.

organizational costs paid or incurred after

•

Credit for small employer pension plan

2. The amount included in income

September 8, 2008, a corporation can

startup costs.

from Form 8864, Biodiesel and

deduct up to $5,000 of such cost for the

•

Credit for employer-provided childcare

Renewable Diesel Fuels Credit.

year it begins business (unless the

facilities and services.

3. Refunds of taxes deducted in prior

corporation elects to capitalize all such

If the corporation has any of these

years to the extent they reduced income

costs). The $5,000 deduction is reduced

credits, figure each current year credit

subject to tax in the year deducted (see

by the amount the total costs exceed

before figuring the deduction for

section 111). Do not offset current year

$50,000. If the total costs are $55,000 or

expenses on which the credit is based. If

taxes against tax refunds.

more, the deduction is reduced to zero.

the corporation capitalized any costs on

4. Any recapture amount under

Any cost not deducted must be amortized

which it figured the credit, reduce the

section 179A for certain clean-fuel vehicle

ratably over a 180-month period,

amount capitalized by the credit

property (or clean-fuel vehicle refueling

beginning with the month the corporation

attributable to these costs. See the

property) that ceases to qualify. See

begins business. The corporation is not

instructions for the applicable form used

Regulations section 1.179A-1.

required to attach a statement or

to figure the credit.

5. Ordinary income from trade or

specifically identify the amount deducted

business activities of a partnership (from

in order for the election to be effective.

Limitations on deductions related to

Schedule K-1 (Form 1065 or Form

The corporation can choose to forgo the

property leased to tax-exempt entities.

1065-B)). Do not offset ordinary losses

deduction and instead elect to capitalize

If a corporation leases property to a

against ordinary income. Instead, include

all such costs. The election to deduct or

governmental or other tax-exempt entity,

the losses on line 31. Show the

capitalize costs is irrevocable. See

the corporation cannot claim deductions

partnership’s name, address, and EIN on

Temporary Regulations sections 1.195-1T

related to the property to the extent that

a separate statement attached to this

and 1.248-1T.

they exceed the corporation’s income

-9-

Instructions for Form 1120-PC

Instructions For Form 1120-Pc - 2008 Page 9

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