Instructions For Form 1120-Pc - 2009 (Page 18 of 21) in pdf

recoverable. Also see Rev. Proc. 92-77,

For information regarding the

3. By increasing gross income by an

1992-2 C.B. 454.

determination of the acquisition date of an

amount equal to the net exempt income

investment, see the instructions for

for the tax year.

The applicable interest rate for each

Schedule C.

calendar year and the applicable loss

Line 6. Special deduction. The

payment pattern for each accident year

deduction for any tax year is limited to

for each line of business are determined

taxable income for that tax year

Schedule G—Other

by the IRS. The applicable interest rate

determined without regard to this

and loss payment patterns for 2009 are

Capital Losses

deduction.

published in Rev. Proc. 2009-55, 2009-52

Note. Under section 833(b)(4), any

Capital assets are considered sold or

I.R.B. 982. The applicable interest rate

determination under section 833(b) must

exchanged to provide funds to meet

and loss payment patterns for 2007 and

be made by only taking into account items

abnormal insurance losses and to pay

2008 are published in Rev. Proc.

from the health-related business of the

dividends and make similar distributions

2008-10, 2008-3 I.R.B. 290, and Rev.

corporation.

to policyholders to the extent that the

Proc. 2008-70, 2008-49 I.R.B. 1240,

gross receipts from their sale or exchange

respectively.

Line 8a. Adjusted tax-exempt income.

are not more than the amount by which

Reduce the total tax-exempt interest

Corporations having sufficient

the sum of dividends and similar

received or accrued during the tax year

historical experience to determine a loss

distributions paid to policyholders, losses

by any amount (not otherwise deductible)

payment pattern may, under certain

paid, and expenses paid for the tax year

which would have been allowable as a

circumstances, elect under section 846(e)

is more than the total on line 9, Schedule

deduction for the tax year if such interest

to use their own historical experience

were not tax-exempt. Enter the result on

(instead of the loss payment patterns

line 8a.

determined by the IRS). If this election is

Total gross receipts from sales of

made, the loss payment patterns will be

capital assets (line 12, column (c)) must

Line 8b. Adjusted dividends-received

based on the most recent calendar year

not be more than line 10. If necessary,

deduction. Reduce the total amount

for which an annual statement was filed

the corporation may report part of the

allowed as a deduction under sections

before the beginning of the accident year.

gross receipts from a particular sale of a

243, 244, and 245 by the amount of any

The election will not apply to any

capital asset on this schedule and the rest

decrease in deductions allowable for the

international or reinsurance line of

on Schedule D (Form 1120). Otherwise,

tax year because of section 832(b)(5)(B)

business. If the corporation makes this

do not include on Schedule D (Form

when the decrease is caused by the

election, check the “Yes” column for

1120) any sales reported on this

deductions under sections 243, 244, and

question 7 in Schedule I, Other

schedule.

245. Enter the result on line 8b.

Information. For more information, see

section 846(e), Regulations section

1.846-2, and Rev. Proc. 92-76, 1992-2

Schedule I—Other

Schedule H—Special

C.B. 453.

Information

Deduction and Ending

Note. There is a special application of

The following instructions apply to page 7,

the “fresh start” provision for an insurance

Adjusted Surplus for

Form 1120-PC. Complete all items that

company that is not subject to tax under

Section 833 Organizations

apply to the corporation.

section 831(a) for its first tax year

beginning after December 31, 1986,

Line 5. Beginning adjusted surplus. If

Question 4

because (1) it is described in section

the corporation was a section 833

Check the “Yes” box if:

501(c) or (2) it is subject to tax under

•

organization in 2008, it should enter the

The corporation is a subsidiary in an

section 831(b) on its investment income.

amount from Schedule H, line 10, of its

affiliated group (defined below), but is not

If the insurance company later

2008 Form 1120-PC.

filing a consolidated return for the tax year

becomes subject to tax under section

with that group, or

Generally, the adjusted surplus as of

831(a), the rules relating to the fresh start

•

The corporation is a subsidiary in a

the beginning of any tax year is an

under the discounting provisions are

parent-subsidiary controlled group. For a

amount equal to the adjusted surplus as

applied by treating the last tax year before

definition of parent-subsidiary controlled

of the beginning of the preceding tax

the year in which the insurance company

group, see the instructions for Schedule

year:

becomes subject to tax under section

O (Form 1120).

1. Increased by the amount of any

831(a) as the insurance company’s last

Any corporation that meets either of

adjusted taxable income for the preceding

tax year beginning before 1987. See

the requirements above should check the

tax year or

section 1010(e) of the Technical and

“Yes” box. This applies even if the

2. Decreased by the amount of any

Miscellaneous Revenue Act of 1988 and

corporation is a subsidiary member of one

adjusted net operating loss for the

Notice 88-100, 1988-2 C.B. 439.

group and the parent corporation of

preceding tax year.

Lines 6 and 7. Estimated salvage and

another.

reinsurance recoverable. Enter on

If 2009 is the first tax year the taxpayer

Note. If the corporation is an “excluded

lines 6 and 7 the amount of estimated

qualifies as a section 833 organization,

member” of a controlled group (see

salvage and reinsurance recoverable.

see section 833(c)(3)(C) to determine the

definition in the Instructions for Schedule

The amount of estimated salvage

adjusted surplus as of the beginning of

O (Form 1120)), it is still considered a

recoverable must be determined on a

the 2009 tax year.

member of a controlled group for this

discounted basis. The salvage discount

purpose.

factors for 2009 are published in Rev.

For purposes of the computation of the

Proc. 2009-56, 2009-52 I.R.B. 993. The

adjusted surplus, the terms “adjusted

Affiliated group. An affiliated group is

salvage discount factors for 2010 will be

taxable income” and “adjusted net

one or more chains of includible

published in the Internal Revenue Bulletin

operating loss” mean the taxable income

corporations (section 1504(a)) connected

when available. Also see Regulations

or the net operating loss, respectively,

through stock ownership with a common

section 1.832-4.

determined with the following

parent corporation. The common parent

modifications:

must be an includible corporation and the

Line 9. Tax-exempt interest subject to

following requirements must be met.

section 832(b)(5)(B). Enter the amount

1. Without regard to the deduction

of tax-exempt interest received or

determined under section 833(b)(1);

1. The common parent must own

accrued during the tax year on

2. Without regard to any carryover or

directly stock that represents at least 80%

investments made after August 7, 1986.

carryback to that tax year; and

of the total voting power and at least 80%

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Instructions for Form 1120-PC (2009)

Instructions For Form 1120-Pc - 2009 Page 18

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