Instructions For Form 1120-Pc - 2005 (Page 17 of 21) in pdf

count certain days during which the

2. All unearned premiums of a Blue

corporation’s risk of loss was diminished.

Cross or Blue Shield organization to

Schedule E—Premiums

See section 246(c)(4) and Regulations

which section 833 applies.

Earned

section 1.246-5 for more details.

Lines 2b and 4b. Include on lines 2b and

Preferred dividends attributable to periods

4b, 90% of unearned premiums for

totaling less than 367 days are subject to

Definitions

insurance against default in the payment

the 46-day holding period rule above.

Undiscounted unearned premiums

of principal or interest on securities

c. Dividends on any share of stock to

means the unearned premiums shown in

described in section 165(g)(2)(C) (relating

the extent the corporation is under an

the annual statement filed for the year

to worthless securities) with maturities of

obligation (including a short sale) to make

ending with or in the tax year.

more than 5 years.

related payments with respect to positions

Applicable interest rate means the

Lines 2c and 4c. The amount of

in substantially similar or related property.

annual rate determined under section

discounted unearned premiums at the

5. Any other taxable dividend income

846(c)(2) for the calendar year the

end of any tax year must be the present

not properly reported above (including

premiums are received.

value of those premiums (as of such time

distributions under section 936(h)(4)).

and separately with respect to premiums

Applicable statutory premium

received in each calendar year)

recognition pattern means the statutory

Line 18. Dividends received on

determined by using:

premium recognition pattern in effect for

debt-financed stock acquired after July

the calendar year the premiums are

18, 1984, are not entitled to the full 70%

1. The amount of the undiscounted

received, and is based on the statutory

or 80% dividends-received deduction.

unearned premiums at such time;

premium recognition pattern which

The 70% or 80% deduction is reduced by

2. The applicable interest rate; and

applies to premiums received by the

a percentage that is related to the amount

3. The applicable statutory premium

corporation in that calendar year. For

of debt incurred to acquire the stock. See

recognition pattern.

purposes of the preceding sentence,

section 246A. Also, see section 245(a)

Lines 2d and 4d. Include on lines 2d and

premiums received during any calendar

before making this computation for an

4d, 80% of the total of all unearned

year will be treated as received in the

additional limitation that applies to

premiums not reported on lines 2a

middle of such year.

dividends received from foreign

through 2c, or 4a through 4c,

corporations. Attach a schedule showing

Line 1. Enter gross premiums written on

respectively.

how the amount on line 18 was figured.

insurance contracts during the tax year,

A reciprocal or interinsurer required

less return premiums and premiums paid

Line 25, column (b). Generally, line 25,

under state law to reflect unearned

for reinsurance. See Regulations section

column (b), cannot exceed the amount

premiums on its annual statement net of

1.832-4.

from the worksheet below. However, in a

premium acquisition expenses should

Lines 2a and 4a. Include on lines 2a and

year in which an NOL occurs, this

increase its unearned premiums by the

4a:

limitation does not apply even if the loss

amount of such acquisition expenses

is created by the dividends-received

1. All life insurance reserves, as

prior to making the computation on lines

deduction. See sections 172(d) and

defined in section 816(b) (but determined

2d and 4d. See section 832(b)(7)(E).

246(b).

under section 807) and

Line 6. Transitional adjustments apply to

companies which become taxable under

Worksheet for Schedule C, line 25

section 831(a). See section 832(b)(7)(D).

(keep for your records)

1. Refigure the amount from Schedule A, line 35 or Schedule B, line

Schedule F—Losses

19, whichever applies, without any domestic production activities

Incurred

deduction, any adjustment under section 1059, and without any

capital loss carryback to the tax year under section 1212(a)(1) . .

Line 1. Losses paid. Enter the total

2. Enter the sum of the amounts from line 23, column (b) (without

losses paid on insurance contracts during

regard to wholly owned foreign subsidiary dividends) and line 9,

the tax year less salvage and reinsurance

column (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

recovered during the tax year.

3. Subtract line 2 from line 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Lines 2a and 4a. Unpaid losses on life

4. Multiply line 3 by 80% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

insurance contracts. Unpaid losses

5. Add lines 17, 20, 22, and 23 (without regard to FSC dividends),

must be adjusted for recoveries of

column (b), and the portion of the deduction on line 18, column

reinsurance. The amounts of expected

(b), that is attributable to dividends received from

recoveries should be estimated based on

20%-or-more-owned corporations . . . . . . . . . . . . . . . . . . . . . .

the facts in each case and the

6. Enter the smaller of line 4 or line 5. If line 5 is greater than line 4,

corporation’s experience with similar

stop here; enter the amount from line 6 on line 25, column (b),

cases. See Regulations section

and do not complete the rest of this worksheet . . . . . . . . . . . . .

1.832-4(b).

7. Enter the total amount of dividends received from

Lines 2b and 4b. Discounted unpaid

20%-or-more-owned corporations that are included on lines 2, 3,

losses outstanding. Enter all

5, 7, and 8 (without regard to FSC dividends), column (b) . . . . .

discounted unpaid losses as defined in

8. Subtract line 7 from line 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

section 846.

9. Multiply line 8 by 70% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Section 846 provides that the amount

10. Subtract line 5 from line 25, column (b) (without regard to FSC

of discounted unpaid losses must be

dividends) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

computed separately by each line of

11. Enter the smaller of line 9 or line 10 . . . . . . . . . . . . . . . . . . . . .

business (multiple peril lines must be

12. Dividends-received deduction after limitation (section

treated as a single line of business) and

246(b)). Add lines 6 and 11. Enter the result here and on line 25,

by each accident year and must be equal

column (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

to the present value of those losses

determined by using the:

-17-

Instructions for Form 1120-PC

Instructions For Form 1120-Pc - 2005 Page 17

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