Instructions For Form 1120-Pc - 2006 (Page 13 of 20) in pdf

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indirectly) of more than 10% of any class

If an ownership change occurs, the

less than the largest of the following

of stock, the deductible expense is

amount of the taxable income of a loss

amounts.

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limited. See section 274(e)(2) and Notice

corporation that may be offset by the

The inversion gain of the corporation

2005-45, 2005-24 I.R.B. 1228.

pre-change NOL carryovers may be

for the tax year, if the corporation is an

limited (see section 382 and the related

expatriated entity or a partner in an

Lobbying expenses. Generally,

regulations). A loss corporation must

expatriated entity. For details, see section

lobbying expenses are not deductible.

include the information statement as

7874.

These expenses include:

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provided in Temporary Regulations

The sum of the corporation’s excess

Amounts paid or incurred in connection

section 1.382-11T(a), with its income tax

inclusions from Schedules Q (1066), line

with influencing federal or state legislation

return for each tax year that certain

2c, and the corporation’s taxable income

(but not local legislation) or

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ownership shifts described in Temporary

determined solely with respect to its

Amounts paid or incurred in connection

Regulations section 1.382-2T(a)(2)(ii)

ownership and high-yield interests in

with any communication with certain

occur. See Regulations section

FASITs. For details, see sections 860E(a)

federal executive branch officials in an

1.382-6(b) for details on how to make the

and 860J.

attempt to influence the official actions or

closing-of-the-books election.

positions of the officials. See Regulations

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If a corporation acquires control of

section 1.162-29 for the definition of

Schedule B, Part I—

another corporation (or acquires its

“influencing legislation.”

assets in a reorganization), the amount of

Taxable Investment

Dues and other similar amounts paid

pre-acquisition losses that may offset

to certain tax-exempt organizations may

Income of Electing Small

recognized built-in gain may be limited

not be deductible. See section 162(e)(3).

(see section 384).

Companies

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If certain in-house lobbying expenditures

If a corporation elects the alternative

do not exceed $2,000, they are

tax on qualifying shipping activities under

Note. (1) Once an election under section

deductible.

section 1354, no deduction is allowed for

831(b) is made to be taxed only on

an NOL attributable to the qualifying

investment income, it can only be revoked

Line 32. Total deductions. Insurance

shipping activities to the extent that the

with the consent of the Secretary, and (2)

companies that issue specified insurance

loss is carried forward from a tax year

a corporation making this election must

contracts (as defined in section 848(e)(1))

preceding the first tax year for which the

include on line 8, Gross investment

are generally required to amortize policy

alternative tax election was made. See

income, any amount subtracted from a

acquisition expenses on a straight-line

section 1358(b)(2).

protection against loss account.

basis over a period of 120 months

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Certain qualified GO Zone losses are

beginning with the 1st month in the 2nd

Income

eligible for a special 5-year carryback

half of the tax year (section 848(a)).

period. See section 1400N(k).

Reduce total deductions on line 32 by the

Line 1a, column (a). Gross interest.

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A corporation may elect to treat any

amount required to be capitalized under

Enter the gross amount of interest

GO Zone public utility casualty loss as a

section 848. Attach a schedule showing

income, including all tax-exempt interest

specified liability loss to which the 10-year

all computations. See section 848 and its

income.

carryback period applies. See the

regulations for special rules, definitions,

Line 1b, column (a). Interest exempt

Instructions for Form 1139.

and exceptions. Also see Schedule G,

under section 103. Enter the amount of

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An NOL cannot be carried to or from

Form 1120-L, and its instructions for more

interest on state and local bonds that is

any tax year for which the insurance

information.

exempt from taxation under section 103.

company is not subject to tax under

See the instructions for Schedule A, line

Line 34b. Deduction on account of the

section 831(a), or to any tax year if,

3b, column (a), for more information.

special income and deduction

between the tax year from which the loss

accounts. Enter the total of the amounts

Lines 1a and 1b, column (b).

is being carried and such tax year, there

required to be added under sections

Amortization of premium. Enter on line

is an intervening tax year for which the

832(e)(4) and (6). However, no deduction

1a, column (b), the total amortization of

insurance company was not subject to tax

is permitted unless tax and loss bonds

premium on tax-exempt bonds.

imposed by section 831(a).

are purchased in an amount equal to the

Enter on line 1b, column (b), the

tax benefit of the deduction. See section

For more details on the NOL

amortization of bond premium on

832(e).

deduction, see section 172, section 844,

tax-exempt bonds.

the Instructions for Form 1139,

Note. The deduction on account of the

Note. Insurance companies electing to

Corporation Application for Tentative

special income and deduction accounts is

amortize discount for tax purposes must

Refund, and Pub. 542.

limited to taxable income for the tax year

reduce the amortization of premium by

(computed without regard to this

Line 37. Taxable income. If line 37

any amortization of discount.

deduction or to any carryback of a net

(figured without regard to the items listed

Line 3. Gross rents. Enter the gross

operating loss).

below under Minimum taxable income) is

rents received or accrued during the tax

zero or less, the corporation may have an

Line 36b. Net operating loss

year. Deduct rental expenses such as

NOL that can be carried back or forward

deduction. A corporation can use the net

repairs, interest, taxes, and depreciation

as a deduction to other tax years.

operating loss (NOL) incurred in one tax

on the proper lines in the Deductions

Generally, a corporation first carries back

year to reduce its taxable income in

section.

an NOL 2 tax years. However, the

another tax year.

Line 5. Gross income from a trade or

corporation may elect to waive the

Enter on line 36b the total NOL

business, other than an insurance

carryback period and instead carry the

carryovers from other tax years, but do

business, and from Form 4797. Enter

NOL forward to future tax years. To make

not enter more than the corporation’s

the gross income from a trade or

the election, see the instructions for

taxable income (after the

business, other than an insurance

Schedule I, item 11, on page 18.

dividends-received deduction). Attach a

business, carried on by the insurance

See Form 1139 for details, including

schedule showing the computation of the

company or by a partnership of which the

other elections that may be available,

NOL deduction. Also complete item 12 on

insurance company is a partner. Include

which must be made no later than 6

Schedule I.

section 1245 and section 1250 gains (as

months after the due date (excluding

modified by section 291) and other gains

The following special rules apply.

extensions) of the corporation’s tax

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from Form 4797, Sales of Business

A corporate equity reduction interest

return.

Property, on investment assets only.

loss may not be carried back to a tax year

preceding the year of the equity reduction

Minimum taxable income. The

Line 6. Income from leases described

transaction (see section 172(b)(1)(E)).

corporation’s taxable income cannot be

in sections 834(b)(1)(B) and

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Instructions for Form 1120-PC

Instructions For Form 1120-Pc - 2006 Page 13

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