Instructions For Form 1120-Pc - 2006 (Page 10 of 20) in pdf

•

The corporation determines who is an

Form 8845, Indian Employment Credit;

if the interest is wholly exempt from

officer under the laws of the state where it

and

income tax. For exceptions, see section

•

is incorporated.

Form 8861, Welfare-to-Work Credit.

265(b).

•

Interest and carrying charges on

Line 18. Rents. If the corporation rented

If a consolidated return is filed, each

straddles. Generally, these amounts must

or leased a vehicle, enter the total annual

member of an affiliated group must

be capitalized. See section 263(g).

rent or lease expense paid or incurred

furnish this information.

•

Interest on debt allocable to the

during the year. Also complete Part V of

Disallowance of deduction for

production of designated property by a

Form 4562, Depreciation and

employee compensation in excess of

corporation for its own use or for sale.

Amortization. If the corporation leased a

$1 million. Publicly held corporations

The corporation must capitalize this

vehicle for a term of 30 days or more, the

cannot deduct compensation to a

interest. Also capitalize any interest on

deduction for the vehicle lease expense

“covered employee” to the extent that the

debt allocable to an asset used to

may have to be reduced by an amount

compensation exceeds $1 million.

produce the property. See section 263A(f)

called the inclusion amount. The

Generally, a covered employee is:

and Regulations section 1.263A-8

corporation may have an inclusion

•

The chief executive officer of the

through 1.263A-15 for definitions and

amount if:

corporation (or an individual acting in that

more information.

•

capacity) as of the end of the tax year or

Interest paid or incurred on any portion

•

And the vehicle’s

An employee whose total

of an underpayment of tax that is

FMV on the first

compensation must be reported to

attributable to an understatement arising

The lease term

day of the lease

shareholders under the Securities

from an undisclosed listed transaction or

began:

exceeded:

Exchange Act of 1934 because the

an undisclosed reportable avoidance

employee is among the four highest

transaction (other than a listed

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

compensated officers for that tax year

transaction) entered into in tax years

(other than the chief executive officer).

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

beginning after October 22, 2004.

For this purpose, compensation does

Special rules apply to:

After 12/31/02 but before 1/1/04 . . $18,000

•

not include the following.

Interest on which no tax is imposed

•

Income from certain employee trusts,

After 12/31/98 but before 1/1/03 . . $15,500

(see section 163(j)). For tax years

annuity plans, or pensions.

beginning after May 16, 2006, a

•

If the lease term began before January 1, 1999,

Any benefit paid to an employee that is

corporation that owns an interest in a

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

excluded from the employee’s income.

partnership, directly or indirectly, must

Expenses, to find out if the corporation has an

treat its distributive share of the

The deduction limit does not apply to:

inclusion amount. The inclusion amount for lease

•

terms beginning in 2007 will be published in the

partnership liabilities, interest income, and

Commissions based on individual

Internal Revenue Bulletin in early 2007.

interest expense as liabilities, income,

performance,

•

and expenses of the corporation for

Qualified performance-based

purposes of applying the earnings

compensation, and

See Pub. 463 for instructions on

•

stripping rules. For more details, see

Income payable under a written,

figuring the inclusion amount.

section 163(j)(8).

binding contract in effect on February 17,

Line 19. Taxes and licenses. Enter

•

Foregone interest on certain

1993.

taxes paid or accrued during the tax year,

below-market-rate loans (see section

The $1 million limit is reduced by

but do not include the following.

•

7872).

amounts disallowed as excess parachute

Federal income taxes.

•

Original issue discount on certain

payments under section 280G.

Foreign or U.S. possession income

high-yield discount obligations. (See

taxes if a tax credit is claimed.

For details, see section 162(m) and

section 163(e) to figure the disqualified

•

Taxes not imposed on the corporation.

Regulations section 1.162-27.

•

portion.)

Taxes, including state or local sales

•

Line 16. Salaries and wages. Enter the

Interest which is allocable to

taxes, that are paid or incurred in

total salaries and wages paid for the tax

unborrowed policy cash values of life

connection with an acquisition or

year. Do not include salaries and wages

insurance, endowment, or annuity

disposition of property (these taxes must

deductible elsewhere on the return, such

contracts issued after June 8, 1997. See

be treated as a part of the cost of the

as amounts included in officers’

section 264(f). Attach a statement

acquired property or, in the case of a

compensation, elective contributions to a

showing the computation of the

disposition, as a reduction in the amount

section 401(k) cash or deferred

deduction.

realized on the disposition).

arrangement, or amounts contributed

•

Line 20b. Less tax-exempt interest

Taxes assessed against local benefits

under a salary reduction SEP agreement

expense. Enter interest paid or accrued

that increase the value of the property

or a SIMPLE IRA plan.

during the tax year on indebtedness

assessed (such as for paving, etc.).

•

incurred or continued to purchase or carry

Taxes deducted elsewhere on the

If the corporation provided taxable

obligations if the interest is wholly exempt

return.

fringe benefits to its employees,

from income tax. For exceptions, see

such as the personal use of a car,

See section 164(d) for details on the

CAUTION

section 265(b).

do not deduct as wages the amount

apportionment of taxes on real property

allocated for depreciation and other

Line 21. Charitable contributions.

between a seller and a purchaser.

expenses that are claimed elsewhere on

Enter contributions or gifts actually paid

Line 20a. Interest.

the return (for example, on Schedule A,

within the tax year to or for the use of

Note. Do not offset interest income

line 22 or line 31).

charitable and governmental

against interest expense.

organizations described in section 170(c)

Employment credits. If the corporation

The corporation must make an interest

and any unused contributions carried over

claims a credit on any of the following

allocation if the proceeds of a loan were

from prior years. Special rules and limits

forms, it may need to reduce its deduction

used for more than one purpose (for

apply to contributions to organizations

for officer’s compensation and salaries

example, to purchase a portfolio

conducting lobbying activities. See

and wages. See the applicable form for

investment and to acquire an interest in a

section 170(f)(9).

details.

•

passive activity). See Temporary

Form 5884, Work Opportunity Credit;

Corporations reporting taxable income

•

Regulations section 1.163-8T for the

Form 5884-A, Credits for Employers

on the accrual method can elect to treat

interest allocation rules.

Affected by Hurricane Katrina, Rita, or

as paid during the tax year any

Wilma;

Do not deduct the following interest.

contributions paid by the 15th day of the

•

Form 8844, Empowerment Zone and

Interest on indebtedness incurred or

3rd month after the end of the tax year if

Renewal Community Employment Credit;

continued to purchase or carry obligations

the contributions were authorized by the

-10-

Instructions for Form 1120-PC

Instructions For Form 1120-Pc - 2006 Page 10

Related Articles

Related forms

Related Categories