Instructions For Form 1120-Ic-Disc - 2007 (Page 10 of 16) in pdf

For more details on the uniform

Line 1. Export Promotion

Line 1k. Pension, Profit-sharing,

capitalization rules, see Regulations

Expenses

etc., Plans

sections 1.263A-1 through 1.263A-3.

Enter export promotion expenses on lines

Enter the deduction for contributions to

Transactions between related

1a through 1m. Export promotion

qualified pension, profit-sharing, or other

taxpayers. Generally, an accrual basis

expenses are an IC-DISC’s ordinary and

funded deferred compensation plans.

taxpayer may only deduct business

necessary expenses paid or incurred to

Employers who maintain such a plan

expenses and interest owed to a related

generally must file one of the forms listed

obtain qualified export receipts. Do not

party in the year the payment is included

below, even if the plan is not a qualified

include income taxes. Enter on lines 2a

in the income of the related party. See

plan under the Internal Revenue Code.

through 2g any part of an expense not

sections 163(e)(3), 163(j), and 267 for

The filing requirement applies even if the

incurred to obtain qualified export

limitations on deductions for unpaid

IC-DISC does not claim a deduction for

receipts.

interest and expenses.

the current tax year. There are penalties

Line 1c. Depreciation

for failure to file these forms on time and

Golden parachute payments. A portion

for overstating the pension plan

of the payments made by a corporation to

Include on line 1c depreciation and the

deduction. See sections 6652(e) and

key personnel that exceeds their usual

part of the cost of certain property that the

6662(f).

compensation may not be deductible.

corporation elected to expense under

This occurs when the corporation has an

section 179. See Form 4562 and its

Form 5500, Annual Return/Report of

agreement (golden parachute) with these

instructions.

Employee Benefit Plan. File this form for

key employees to pay them these excess

a plan that is not a one-participant plan

Line 1d. Salaries and Wages.

amounts if control of the corporation

(see below).

changes. See section 280G and

Enter the total salaries and wages paid

Form 5500-EZ, Annual Return of

Regulations section 1.280G-1.

for the tax year. Do not include salaries

One-Participant (Owners and Their

and wages deductible elsewhere on the

Business start-up and organizational

Spouses) Retirement Plan. File this form

return, such as amounts included in

costs. Business start-up and

for a plan that only covers the owner (or

organizational costs must be capitalized

officers’ compensation, cost of goods

the owner and his or her spouse) but only

unless an election is made to deduct or

sold, elective contributions to a section

if the owner (or the owner and his or her

amortize them. The following rules apply

401(k) cash or deferred arrangement, or

spouse) owns the entire business.

separately to each category of costs.

amounts contributed under a salary

•

Line 1l. Employee Benefit

The IC-DISC may elect to deduct up to

reduction SEP agreement or a SIMPLE

$5,000 of such costs for the year the

Programs

IRA plan.

IC-DISC begins business operations.

Enter contributions to employee benefit

•

If the corporation provided taxable

The $5,000 deduction is reduced (but

programs not claimed elsewhere on the

fringe benefits to its employees,

not below zero) by the amount the total

return (e.g., insurance, health and welfare

such as personal use of a car, do

costs exceed $50,000. If the total costs

CAUTION

programs, etc.) that are not an incidental

not deduct as wages the amount

are $55,000 or more, the deduction is

part of a pension, profit-sharing, etc., plan

allocated for depreciation and other

reduced to zero.

included on line 1k.

•

expenses claimed on lines 1c and 1m.

If the election is made, any costs that

Line 1m. Other Export Promotion

are not deductible must be amortized

Line 1h. Freight

Expenses

ratably over a 180-month period

beginning with the month the IC-DISC

Enter 50% of the freight expenses (except

Enter any other allowable export

begins business operations. For costs

insurance) for shipping export property

promotion expenses not claimed

paid or incurred before October 23, 2004,

aboard U.S. flagships and U.S.-owned

elsewhere on the return.

the IC-DISC may elect to amortize the

and U.S.-operated aircraft in those cases

Note. Do not deduct fines or penalties

costs over a period of 60 months or more.

where you are not required to use U.S.

imposed on the IC-DISC.

ships or aircraft by law or regulations.

For more information, see Pub. 535,

Business Expenses. For more details on

Line 2a. Bad Debts

Line 1i. Compensation of Officers

the election for business start-up costs,

The IC-DISC must use the specific

Enter deductible officers’ compensation

see section 195. For more details on the

chargeoff method of accounting for bad

election for organizational costs, see

on line 1i. Attach a schedule showing the

debts and may only deduct business bad

section 248.

name, social security number, and

debts when they become wholly or

amount of compensation paid to all

partially worthless.

Attach any statement required by

officers. Do not include compensation

Regulations section 1.195-1(b) or

Line 2b. Taxes and Licenses

deductible elsewhere on the return, such

1.248-1(c). Report the deductible amount

as amounts included in cost of goods

Enter taxes paid or accrued during the tax

of these costs and any amortization on

sold, elective contributions to a section

year, but do not include the following:

line 2g of Schedule E. For amortization

401(k) cash or deferred arrangement, or

•

that begins during the 2007 tax year,

Taxes not imposed on the corporation.

amounts contributed under a salary

•

complete and attach Form 4562.

Taxes, including state or local sales

reduction SEP agreement or a SIMPLE

taxes, that are paid or incurred in

Limitations on deductions related to

IRA plan.

connection with an acquisition or

property leased to tax-exempt entities.

disposition of property (these taxes must

If an IC-DISC leases property to a

The IC-DISC determines who is an

be treated as part of the cost of the

governmental or other tax-exempt entity,

officer under the laws of the state where it

acquired property or, in the case of a

it may not claim deductions related to the

is incorporated.

disposition, as a reduction in the amount

property to the extent that they exceed

Line 1j. Repairs and Maintenance

realized on the disposition).

the IC-DISC’s income from the lease

•

Taxes assessed against local benefits

payments (tax exempt use loss). Amounts

Enter the cost of incidental repairs and

that increase the value of the property

disallowed may be carried over to the

maintenance not claimed elsewhere on

assessed (such as for paving, etc.).

next tax year and treated as a deduction

the return, such as labor and supplies,

•

Taxes deducted elsewhere on the

with respect to the property for that tax

that do not add to the value of the

return, such as those reflected in cost of

year. See section 470 for more details

property or appreciably prolong its life.

goods sold.

and exceptions.

New buildings, machinery, or permanent

improvements that increase the value of

Contributions. See the instructions for

See section 164(d) for apportionment

the property are not deductible. They

Line 2d on page 11 for limitations that

of taxes on real property between seller

must be depreciated or amortized.

apply to contributions.

and purchaser.

-10-

Instructions for Form 1120-IC-DISC

Instructions For Form 1120-Ic-Disc - 2007 Page 10

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