Instructions For Form 1120-Pc - 2009 (Page 17 of 21) in pdf

Lines 2a and 4a. Unpaid losses on life

dividends are paid, qualifies under

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

insurance contracts. Unpaid losses

sections 856 through 860.

premiums are received.

must be adjusted for recoveries of

4. Dividends not eligible for a

Applicable statutory premium

reinsurance. The amounts of expected

dividends-received deduction, which

recognition pattern means the statutory

recoveries should be estimated based on

include the following.

premium recognition pattern in effect for

the facts in each case and the

a. Dividends received on any share of

the calendar year the premiums are

corporation’s experience with similar

stock held for less than 46 days during

received, and is based on the statutory

cases. See Regulations section

the 91-day period beginning 45 days

premium recognition pattern which

1.832-4(b).

before the ex-dividend date. When

applies to premiums received by the

counting the number of days the

corporation in that calendar year. For

Lines 2b and 4b. Discounted unpaid

corporation held the stock, you cannot

purposes of the preceding sentence,

losses outstanding. Enter all

count certain days during which the

premiums received during any calendar

discounted unpaid losses as defined in

corporation’s risk of loss was diminished.

year will be treated as received in the

section 846.

See section 246(c)(4) and Regulations

middle of such year.

Section 846 provides that the amount

section 1.246-5 for more details.

Line 1. Enter gross premiums written on

of discounted unpaid losses must be

b. Dividends attributable to periods

insurance contracts during the tax year,

figured separately by each line of

totaling more than 366 days that the

less return premiums and premiums paid

business (multiple peril lines must be

corporation received on any share of

for reinsurance. See Regulations section

treated as a single line of business) and

preferred stock held for less than 91 days

1.832-4.

by each accident year and must be equal

during the 181-day period that began 90

to the present value of those losses

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

days before the ex-dividend date. When

determined by using the:

and 4a:

counting the number of days the

1. Amount of the undiscounted unpaid

1. All life insurance reserves, as

corporation held the stock, you cannot

losses,

defined in section 816(b) (but determined

count certain days during which the

2. Applicable interest rate, and

under section 807) and

corporation’s risk of loss was diminished.

3. Applicable loss payment pattern.

2. All unearned premiums of a Blue

See section 246(c)(4) and Regulations

Cross or Blue Shield organization to

section 1.246-5 for more details.

Special rules apply with respect to:

which section 833 applies.

Preferred dividends attributable to periods

•

Unpaid losses related to disability

totaling less than 367 days are subject to

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

insurance (other than credit disability

the 46-day holding period rule above.

and 4b, 90% of unearned premiums for

insurance),

c. Dividends on any share of stock to

•

insurance against default in the payment

Noncancelable accident and health

the extent the corporation is under an

of principal or interest on securities

insurance,

obligation (including a short sale) to make

•

Cancelable accident and health

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

related payments with respect to positions

insurance, and

to worthless securities) with maturities of

in substantially similar or related property.

•

International and reinsurance lines of

more than 5 years.

5. Any other taxable dividend income

business.

Lines 2c and 4c. The amount of

not properly reported elsewhere on

Schedule C.

discounted unearned premiums at the

With regard to the special rules for

end of any tax year must be the present

discounting unpaid losses on accident

value of those premiums (as of such time

and health insurance (other than disability

Line 17. Dividends received on

and separately with respect to premiums

income insurance), unpaid losses are

debt-financed stock acquired after July

received in each calendar year)

assumed to be paid in the middle of the

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

determined by using:

year following the accident year.

or 80% dividends-received deduction.

The 70% or 80% deduction is reduced by

1. The amount of the undiscounted

Generally, the amount of undiscounted

a percentage that is related to the amount

unearned premiums at such time;

unpaid losses means the unpaid losses

of debt incurred to acquire the stock. See

2. The applicable interest rate; and

and unpaid loss adjustment expenses

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

3. The applicable statutory premium

shown in the annual statement. However,

before making this computation for an

recognition pattern.

see Regulations section 1.846-1(a)(1)

additional limitation that applies to

referring to Regulations section

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

dividends received from foreign

1.832-4(b) relating to the determination of

and 4d, 80% of the total of all unearned

corporations. Attach a schedule showing

unpaid losses.

premiums not reported on lines 2a

how the amount on line 17 was figured.

Under section 832(b)(5)(A), unpaid

through 2c, or 4a through 4c,

Line 23, column (b). Generally, line 23,

losses must be adjusted to take into

respectively.

column (b), cannot exceed the amount

account estimated recoveries due to

A reciprocal or interinsurer required

from the worksheet on page 16. However,

salvage and reinsurance for those losses.

under state law to reflect unearned

in a year in which an NOL occurs, this

If the amounts shown in the annual

premiums on its annual statement net of

limitation does not apply even if the loss

statement were determined on a

premium acquisition expenses should

is created by the dividends-received

discounted basis and if the extent to

increase its unearned premiums by the

deduction. See sections 172(d) and

which these losses were discounted can

amount of such acquisition expenses

246(b).

be determined on the basis of information

prior to making the computation on lines

disclosed on or with the annual

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

statement, the amount of the

Line 6. Transitional adjustments apply to

Schedule E—Premiums

undiscounted unpaid losses must be

companies which become taxable under

recomputed to eliminate any reduction

Earned

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

caused by such discounting. In no event

can the amount of discounted unpaid

Definitions

losses with respect to any line of business

Schedule F—Losses

for an accident year exceed the total

Undiscounted unearned premiums

amount of unpaid losses with respect to

Incurred

means the unearned premiums shown in

any line of business for an accident year

the annual statement filed for the year

Line 1. Losses paid. Enter the total

as reported on the annual statement. Also

ending with or in the tax year.

losses paid on insurance contracts during

see Regulations section 1.832-4(d)

Applicable interest rate means the

the tax year less salvage and reinsurance

regarding increasing unpaid losses shown

annual rate determined under section

recovered during the tax year.

on the annual statement by salvage

-17-

Instructions for Form 1120-PC (2009)

Instructions For Form 1120-Pc - 2009 Page 17

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