Instructions For Form 1120-Pc - 2005 (Page 14 of 21) in pdf

hours of service limits of the Department

beginning with the 1st month in the 2nd

alternative tax election was made. See

of Transportation.

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

section 1358(b)(2).

•

Reduce total deductions on line 32 by the

An NOL cannot be carried to or from

Membership dues. The corporation

amount required to be capitalized under

any tax year for which the insurance

can deduct amounts paid or incurred for

section 848. Attach a schedule showing

company is not subject to tax under

membership dues in civic or public

all computations. See section 848 and its

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

service organizations, professional

regulations for special rules, definitions,

between the tax year from which the loss

organizations (such as bar and medical

and exceptions. Also see Schedule G,

is being carried and such tax year, there

associations), business leagues, trade

Form 1120-L, and its instructions for more

is an intervening tax year for which the

associations, chambers of commerce,

information.

insurance company was not subject to tax

boards of trade, and real estate boards.

imposed by section 831(a).

However, no deduction is allowed if a

Line 34b. Deduction on account of the

principal purpose of the organization is to

special income and deduction

For more details on the NOL

entertain, or provide entertainment

accounts. Enter the total of the amounts

deduction, see section 172, section 844,

facilities for, members or their guests. In

required to be added under sections

Form 1139, Corporation Application for

addition, corporations cannot deduct

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

Tentative Refund, and Pub. 542.

membership dues in any club organized

is permitted unless tax and loss bonds

Line 37. Taxable income. If line 37

for business, pleasure, recreation, or

are purchased in an amount equal to the

(figured without regard to the items listed

other social purpose. This includes

tax benefit of the deduction. See section

below under Minimum taxable income) is

country clubs, golf and athletic clubs,

832(e).

zero or less, the corporation may have an

airline and hotel clubs, and clubs

Note. The deduction on account of the

NOL that can be carried back or forward

operated to provide meals under

special income and deduction accounts is

as a deduction to other tax years.

conditions favorable to business

limited to taxable income for the tax year

Generally, a corporation first carries back

discussion.

an NOL 2 tax years. However, the

(computed without regard to this

Entertainment facilities. The

corporation may elect to waive the

deduction or to any carryback of a net

corporation cannot deduct an expense

carryback period and instead carry the

operating loss).

paid or incurred for a facility (such as a

NOL forward to future tax years. To make

Line 36b. Net operating loss

yacht or hunting lodge) used for an

the election, see the instructions for

deduction. A corporation can use the net

activity usually considered entertainment,

Schedule I, item 11, on page 19.

operating loss (NOL) incurred in one tax

amusement, or recreation.

year to reduce its taxable income in

See Form 1139 for details, including

Amounts treated as compensation.

another tax year.

other elections that may be available,

Generally, the corporation may be able to

which must be made no later than 6

Enter on line 36b the total NOL

deduct otherwise nondeductible

months after the due date (excluding

carryovers from other tax years, but do

entertainment, amusement, or recreation

extensions) of the corporation’s tax

not enter more than the corporation’s

expenses if the amounts are treated as

return.

taxable income (after the

compensation to the recipient and

dividends-received deduction). Attach a

Minimum taxable income. The

reported on Form W-2 for an employee or

schedule showing the computation of the

corporation’s taxable income cannot be

on Form 1099-MISC for an independent

NOL deduction. Also complete item 12 on

less than the largest of the following

contractor.

Schedule I.

amounts.

However, if the recipient is an officer,

•

The amount of nondeductible CFC

director, or beneficial owner (directly or

The following special rules apply.

dividends under section 965. This amount

•

indirectly) of more than 10% of any class

A corporate equity reduction interest

is equal to the difference between line

loss may not be carried back to a tax year

of stock, the deductible expense is

10(b) and line 24(b) of Form 1120-PC,

preceding the year of the equity reduction

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

Schedule C.

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

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

•

The inversion gain of the corporation

•

If an ownership change occurs, the

Lobbying expenses. Generally,

for the tax year, if the corporation is an

amount of the taxable income of a loss

lobbying expenses are not deductible.

expatriated entity or a partner in an

corporation that may be offset by the

These expenses include:

expatriated entity. For details, see section

•

pre-change NOL carryovers may be

Amounts paid or incurred in connection

7874.

limited (see section 382 and the related

•

with influencing federal or state legislation

The sum of the corporation’s excess

regulations). A loss corporation must file

(but not local legislation) or

inclusions from Schedules Q (1066), line

•

an information statement with its income

Amounts paid or incurred in connection

2c, and the corporation’s taxable income

tax return for each tax year that certain

with any communication with certain

determined solely with respect to its

ownership shifts occur (see Temporary

federal executive branch officials in an

ownership and high-yield interests in

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

attempt to influence the official actions or

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

details). See Regulations section

positions of the officials. See Regulations

and 860J.

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

section 1.162-29 for the definition of

closing-of-the-books election.

“influencing legislation.”

•

If a corporation acquires control of

Dues and other similar amounts paid

Schedule B, Part I—

another corporation (or acquires its

to certain tax-exempt organizations may

assets in a reorganization), the amount of

Taxable Investment

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

pre-acquisition losses that may offset

If certain in-house lobbying expenditures

Income of Electing Small

recognized built-in gain may be limited

do not exceed $2,000, they are

(see section 384).

Companies

•

deductible.

If a corporation elects the alternative

Line 32. Total deductions. Insurance

tax on qualifying shipping activities under

Note. (1) Once an election under section

companies that issue specified insurance

section 1354, no deduction is allowed for

831(b) is made to be taxed only on

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

an NOL attributable to the qualifying

investment income, it can only be revoked

are generally required to amortize policy

shipping activities to the extent that the

with the consent of the Secretary, and (2)

acquisition expenses on a straight-line

loss is carried forward from a tax year

a corporation making this election must

basis over a period of 120 months

preceding the first tax year for which the

include on line 8, gross investment

-14-

Instructions for Form 1120-PC

Instructions For Form 1120-Pc - 2005 Page 14

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