Instructions For Form 1120-Pc - 2005 (Page 13 of 21) in pdf

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Line 24. Pension, profit-sharing, etc.,

In the case of a qualified group

Deduction for certain energy efficient

plans. Enter the deduction for

self-insurers fund, the fund’s deduction for

commercial building property placed in

contributions to qualified pension,

policyholder dividends is allowed no

service after December 31, 2005. See

profit-sharing, or other funded deferred

earlier than the date the state regulatory

section 179D.

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compensation plans. Employers who

authority determines the amount of the

Dividends paid in cash on stock held by

maintain such a plan generally must file

policyholder dividend that may be paid.

an employee stock ownership plan.

one of the forms listed below, even if the

See section 6076 of the Technical and

However, a deduction may only be taken

plan is not a qualified plan under the

Miscellaneous Revenue Act of 1988.

for the dividends above if, according to

Internal Revenue Code. The filing

the plan, the dividends are:

Line 30. Mutual interinsurers or

requirement applies even if the

reciprocal underwriters — increase in

a. Paid in cash directly to the plan

corporation does not claim a deduction for

subscriber accounts. A mutual

participants or beneficiaries;

the current tax year. There are penalties

insurance company that is an interinsurer

b. Paid to the plan, which distributes

for failure to file these forms on time and

or reciprocal underwriter may deduct the

them in cash to the plan participants or

for overstating the pension plan

their beneficiaries no later than 90

increase in savings credited to subscriber

deduction. See sections 6652(e) and

days after the end of the plan year in

accounts for the tax year.

6662(f).

which the dividends are paid;

Savings credited to subscriber

c. At the election of the participants or

Form 5500, Annual Return/Report of

accounts means the surplus credited to

their beneficiaries (i) payable as

Employee Benefit Plan. File this form for

the individual accounts of subscribers

provided under a or b above or (ii) paid

a plan that is not a one-participant plan

before the 16th day of the 3rd month

to the plan and reinvested in qualifying

(see below).

following the close of the tax year. This is

employer securities; or

true only if the corporation would be

Form 5500-EZ, Annual Return of

d. Used to make payments on a loan

required to pay this amount promptly to a

One-Participant (Owners and Their

described in section 404(a)(9).

subscriber if the subscriber ended the

Spouses) Retirement Plan. File this form

See section 404(k) for more details

contract when the corporation’s tax year

for a plan that only covers the owner (or

and the limitation on certain dividends.

ends. The corporation must notify the

the owner and his or her spouse) but only

subscriber as required by Regulations

if the owner (or the owner and his or her

Do not deduct fines or penalties

section 1.823-6(c)(2)(v). The subscriber

spouse) owns the entire business.

paid to a government for violating

must treat any savings credited to the

any law.

CAUTION

Line 25. Employee benefit programs.

subscriber’s account as a dividend paid or

Enter contributions to employee benefit

Special rules apply to the following

declared.

programs not claimed elsewhere on the

expenses.

Line 31. Other deductions. Attach a

return (for example, insurance, health and

Travel, meals, and entertainment.

schedule, listing by type and amount, all

welfare programs, etc.) that are not an

Subject to limitations and restrictions

allowable deductions under sections

incidental part of a pension, profit-sharing,

discussed below, a corporation can

832(c)(1) and (10) (net of the annual

etc., plan included on line 24.

deduct ordinary and necessary travel,

statement change in undiscounted unpaid

meals, and entertainment expenses paid

Line 27. Additional deduction. Enter on

loss adjustment expenses) that are not

or incurred in its trade or business. Also,

line 27, the total from Form 8816, Part II,

deductible on lines 15 through 30.

special rules apply to deductions for gifts,

line 5.

See Special rules on this page for

skybox rentals, luxury water travel,

limits on certain other deductions. Also,

Any insurance company taking the

convention expenses, and entertainment

see Pub. 535 for details on other

additional deduction must:

tickets. See section 274 and Pub. 463 for

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deductions that may apply to

Make special estimated tax payments

details.

corporations.

equal to the tax benefit from the

Travel. The corporation cannot deduct

deduction and

Examples of other deductions include

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travel expenses of any individual

Establish and maintain a Special Loss

the following.

accompanying a corporate officer or

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Discount Account. See section 847 and

The domestic production activities

employee, including a spouse or

Form 8816 for more information.

deduction. See Form 8903.

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dependent of the officer or employee,

Certain business start-up and

Line 29. Dividends to policyholders.

unless:

organizational costs that the corporation

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Enter the total dividends and similar

That individual is an employee of the

elects to deduct. See page 10.

distributions paid or declared to

corporation, and

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Legal and professional fees.

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policyholders, as policyholders, except in

His or her travel is for a bona fide

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Supplies used and consumed in the

the case of a mutual fire insurance

business purpose and would otherwise be

business.

company exclusively issuing perpetual

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deductible by that individual.

Utilities.

policies. Whether dividends have been

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Meals and entertainment. Generally,

Ordinary losses from trade or business

paid or declared should be determined

the corporation can deduct only 50% of

activities of a partnership (from Schedule

according to the method of accounting

the amount otherwise allowable for meals

K-1 (Form 1065 or 1065-B)). Do not offset

employed by the insurance company.

and entertainment expenses paid or

ordinary income against ordinary losses.

Dividends and similar distributions

incurred in its trade or business. In

Instead, include the income on line 13.

include amounts returned or credited to

addition (subject to exceptions under

Show the partnership’s name, address,

policyholders on cancellation or expiration

section 274(k)(2)):

and EIN on a separate statement

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of policies issued by a mutual fire or flood

Meals must not be lavish or

attached to this return. If the amount

insurance company:

extravagant;

entered is from more than one

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A bona fide business discussion must

1. Where the premium deposits for

partnership, identify the amount from

occur during, immediately before, or

the policy are the same (regardless of the

each partnership.

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immediately after the meal; and

length of the policy) and

Any extraterritorial income exclusion

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An employee of the corporation must

2. The unabsorbed portion of the

(from Form 8873, line 54).

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be present at the meal.

premium deposits not required for losses,

Deduction for clean-fuel vehicle and

expenses, or establishment of reserves is

certain refueling property placed in

See section 274(n)(3) for a special rule

returned or credited to the policyholder on

service before January 1, 2006. See Pub.

that applies to expenses for meals

cancellation or expiration of the policy.

535.

consumed by individuals subject to the

-13-

Instructions for Form 1120-PC

Instructions For Form 1120-Pc - 2005 Page 13

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