Instructions For Form 1120-Pc - 2006 (Page 18 of 20) in pdf

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corporation is foreign owned. See section

Item 12

Guarantees of employee stock (ESOP)

6038A(c)(5) and the related regulations.

debt.

Enter the amount of the NOL carryover to

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Compensation related to employee

Enter on line 6a the percentage owned

the tax year from prior years, even if

stock award plans.

by the foreign person specified in

some of the loss is used to offset income

question 6. On line 6b, enter the name of

If the total adjustment to be entered on

on this return. The amount to enter is the

the owner’s country.

line 27 is a negative amount, enter the

total of all NOLs generated in prior years

amount in parentheses.

Note. If there is more than one

but not used to offset income (either as a

carryback or carryover) to a tax year prior

25%-or-more foreign owner, complete

to 2006. Do not reduce the amount by

lines 6a and 6b for the foreign person with

Schedule M-1—

any NOL deduction reported on Schedule

the highest percentage of ownership.

A, line 36b.

Reconciliation of Income

Foreign person. The term “foreign

person” means:

(Loss) per Books With

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A foreign citizen or nonresident alien,

Schedule L—Balance

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Income per Return

An individual who is a citizen of a U.S.

Sheet per Books

possession (but who is not a U.S. citizen

All insurance companies required to file

or resident),

Note. All insurance companies required

Form 1120-PC, with total assets

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A foreign partnership,

to file Form 1120-PC must complete

(non-consolidated or consolidated for all

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A foreign corporation,

Schedule L.

corporations included within the tax

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Any foreign estate or trust within the

consolidation group) of $10 million or

The balance sheet should agree with

meaning of section 7701(a)(31), or

more on the last day of the tax year must

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the corporation’s books and records.

A foreign government (or one of its

complete Schedule M-3 (Form 1120-PC)

agencies or instrumentalities) to the

If filing a consolidated return, report

instead of Schedule M-1. See Schedule

extent that it is engaged in the conduct of

total consolidated assets, liabilities, and

M-3 (Form 1120-PC) on page 5. A

a commercial activity as described in

shareholder’s equity for all corporations

corporation filing Form 1120-PC that is

section 892.

joining in the return. See Consolidated

not required to file Schedule M-3 (Form

Return on page 5.

Owner’s country. For individuals, the

1120-PC) may voluntarily file Schedule

term “owner’s country” means the country

Corporations with total assets

M-3 (Form 1120-PC) instead of Schedule

of residence. For all others, it is the

(non-consolidated or consolidated for all

M-1. See the Instructions for Schedule

country where incorporated, organized,

corporations included within the tax

M-3 (Form 1120-PC) for more

created, or administered.

consolidation group) of $10 million or

information.

more on the last day of the tax year must

Requirement to file Form 5472. If the

Line 5c. Travel and entertainment.

complete Schedule M-3 (Form 1120-PC)

corporation checked “Yes”, it may have to

Include on line 5c any of the following.

instead of Schedule M-1. See the

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file Form 5472. Generally, a 25%

Meals and entertainment expenses not

separate instructions for Schedule M-3

foreign-owned corporation that had a

deductible under section 274(n).

(Form 1120-PC) for provisions also

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reportable transaction with a foreign or

Expenses for the use of an

affecting Schedule L.

domestic related party during the tax year

entertainment facility.

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must file Form 5472. See Form 5472 for

Line 1. Cash. Include certificates of

The part of business gifts over $25.

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filing instructions and penalties for failure

deposit as cash on this line.

Expenses of an individual over $2,000

to file.

Line 5. Tax-exempt securities. Include

which are allocable to conventions on

on this line:

cruise ships.

Item 10

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State and local government obligations,

Employee achievement awards over

Show any tax-exempt interest received or

the interest on which is excludable from

$400.

accrued. Include any exempt-interest

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gross income under section 103(a) and

The cost of entertainment tickets over

dividends received as a shareholder in a

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Stock in a mutual fund or other RIC that

face value (also subject to 50% limit

mutual fund or other RIC.

distributed exempt-interest dividends

under section 274(n)).

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Item 11

during the tax year of the corporation.

The cost of skyboxes over the face

value of nonluxury box seat tickets.

Line 18. Insurance liabilities. Include

If the corporation has an NOL for its 2006

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The part of luxury water travel

on this line:

tax year, it can elect under section

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expenses not deductible under section

Undiscounted unpaid losses.

172(b)(3) to waive the entire carryback

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274(m).

Loss adjustment expenses.

period for the NOL and instead carry the

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Expenses for travel as a form of

Unearned premiums.

NOL forward to future tax years. To do

education.

so, check the box on line 11 and file the

See section 846 for more information.

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Other nondeductible travel and

tax return by its due date, including

Line 27. Adjustments to shareholders’

entertainment expenses.

extensions. Do not attach the statement

equity. Some examples of adjustments

described in Temporary Regulations

For more information, see Pub. 542.

to report on this line include:

section 301.9100-12T. Once made, the

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Line 7a. Tax-exempt interest. Report

Unrealized gains and losses on

election is irrevocable. See Pub. 542,

any tax-exempt interest received or

securities held “available for sale.”

section 172, and Form 1139 for more

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accrued, including any exempt-interest

Foreign currency translation

details.

dividends received as a shareholder in a

adjustments.

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Corporations filing a consolidated

mutual fund or other RIC. Also report this

The excess of additional pension

return must also attach the statement

same amount on Schedule I, item 10.

liability over unrecognized prior service

required by Regulations section

cost.

1.1502-21(b)(3).

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Instructions for Form 1120-PC

Instructions For Form 1120-Pc - 2006 Page 18

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