Instructions For Form 1120-Pc - 2001 (Page 13 of 20) in pdf

Dividends and similar distributions

tax year 2001 or carried over from 2000.

after the end of the plan year in which the

include amounts returned or credited to

See Form 4562 and its instructions.

dividends are paid; or

policyholders on cancellation or expiration

3. Used to make payments on a loan

Line 23. Depletion. See sections 613

of policies issued by a mutual fire or flood

described in section 404(a)(9).

and 613A for percentage depletion rates

insurance company:

See section 404(k) for more details

applicable to natural deposits. Also, see

1. Where the premium deposits for

and the limitation on certain dividends.

section 291 for the limitation on the

the policy are the same (regardless of the

depletion deduction for iron ore and coal

•

Do not deduct fines or penalties paid

length of the policy) and

(including lignite).

to a government for violating any law.

2. The unabsorbed portion of the

Attach Form T (Timber), Forest

Travel, meals, and entertainment.

premium deposits not required for losses,

Activities Schedules, if a deduction for

Subject to limitations and restrictions

expenses, or establishment of reserves is

depletion of timber is taken.

discussed below, a corporation can

returned or credited to the policyholder on

deduct ordinary and necessary travel,

Foreign intangible drilling costs and

cancellation or expiration of the policy.

meal, and entertainment expenses paid

foreign exploration and development

In the case of a qualified group

or incurred in its trade or business. Also,

costs must either be added to the

self-insurers fund, the fund’s deduction for

special rules apply to deductions for gifts,

corporation’s basis for cost depletion

policyholder dividends is allowed no

skybox rentals, luxury water travel,

purposes or be deducted ratably over a

earlier than the date the state regulatory

convention expenses, and entertainment

10-year period. See sections 263(i), 616,

authority determines the amount of the

tickets. See section 274 and Pub. 463 for

and 617 for details.

policyholder dividend that may be paid.

more details.

Line 24. Pension, profit-sharing, etc.,

See section 6076 of the Technical and

Travel. The corporation cannot deduct

plans. Enter the deduction for

Miscellaneous Revenue Act of 1988 (“Act

travel expenses of any individual

contributions to qualified pension,

of 1988”).

accompanying a corporate officer or

profit-sharing, or other funded deferred

employee, including a spouse or

compensation plans. Employers who

Line 30. Mutual interinsurers or

dependent of the officer or employee,

maintain such a plan generally must file

reciprocal underwriters — increase in

unless:

one of the forms listed below, even if the

subscriber accounts. A mutual

•

That individual is an employee of the

plan is not a qualified plan under the

insurance company that is an interinsurer

corporation and

Internal Revenue Code. The filing

or reciprocal underwriter may deduct the

•

His or her travel is for a bona fide

requirement applies even if the

increase in savings credited to

business purpose and would otherwise be

corporation does not claim a deduction for

subscriber accounts for the tax year.

deductible by that individual.

the current tax year. There are penalties

Savings credited to subscriber

for failure to file these forms on time and

Meals and entertainment. Generally,

accounts means the surplus credited to

for overstating the pension plan

the corporation can deduct only 50% of

the individual accounts of subscribers

deduction. See sections 6652(e) and

the amount otherwise allowable for meals

before the 16th day of the 3rd month

6662(f).

and entertainment expenses paid or

following the close of the tax year. This is

incurred in its trade or business. In

Form 5500, Annual Return/Report of

true only if the corporation would be

addition (subject to exceptions under

Employee Benefit Plan. File this form for

required to pay this amount promptly to a

section 274(k)(2)):

a plan that is not a one-participant plan

subscriber if the subscriber ended the

•

Meals must not be lavish or

(see below).

contract when the corporation’s tax year

extravagant;

Form 5500-EZ, Annual Return of

ends. The corporation must notify the

•

A bona fide business discussion must

One-Participant (Owners and Their

subscriber as required by Regulations

occur during, immediately before, or

Spouses) Retirement Plan. File this form

section 1.823-6(c)(2)(v). The subscriber

immediately after the meal; and

for a plan that only covers the owner (or

must treat any savings credited to the

•

An employee of the corporation must

the owner and his or her spouse) but only

subscriber’s account as a dividend paid or

be present at the meal.

if the owner (or the owner and his or her

declared.

See section 274(n)(3) for a special rule

spouse) owns the entire business.

that applies to expenses for meals

Line 31. Other deductions. Attach a

Line 25. Employee benefit programs.

consumed by individuals subject to the

schedule listing by type and amount, all

Enter contributions to employee benefit

hours of service limits of the Department

allowable deductions under sections

programs not claimed elsewhere on the

of Transportation.

832(c)(1) and (10) (net of the annual

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

statement change in undiscounted unpaid

Membership dues. The corporation

programs etc.) that are not an incidental

loss adjustment expenses) that are not

may deduct amounts paid or incurred for

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

deductible on lines 15 through 30.

membership dues in civic or public

included on line 24.

Examples of amounts to include are:

service organizations, professional

•

Line 27. Additional deduction. Enter on

Ordinary losses from trade or business

organizations (such as bar and medical

line 27, the total from Form 8816, Part II,

activities of a partnership (from Schedule

associations), business leagues, trade

line 5.

K-1 (Form 1065 or 1065-B)). Do not offset

associations, chambers of commerce,

ordinary income against ordinary losses.

boards of trade, and real estate boards.

Any insurance company taking the

Instead, include the income on line 13.

However, no deduction is allowed if a

additional deduction must:

•

Show the partnership’s name, address,

principal purpose of the organization is to

Make special estimated tax payments

and EIN on a separate statement

equal to the tax benefit from the

entertain, or provide entertainment

attached to this return. If the amount

deduction and

facilities for, members and their guests. In

•

entered is from more than one

Establish and maintain a Special Loss

addition, corporations may not deduct

partnership, identify the amount from

Discount Account. See section 847 and

membership dues in any club organized

each partnership.

for business, pleasure, recreation, or

Form 8816 for more information.

•

Dividends paid in cash on stock held by

other social purpose. This includes

Line 29. Dividends to policyholders.

an employee stock ownership plan.

country clubs, golf and athletic clubs,

Enter the total dividends and similar

airline and hotel clubs, and clubs

However, a deduction may only be

distributions paid or declared to

operated to provide meals under

taken if, according to the plan, the

policyholders, as policyholders, except in

conditions favorable to business

dividends are:

the case of a mutual fire insurance

discussion.

company exclusively issuing perpetual

1. Paid in cash directly to the plan

policies. Whether dividends have been

participants or beneficiaries;

Entertainment facilities. The

paid or declared should be determined

2. Paid to the plan which distributes

corporation cannot deduct an expense

according to the method of accounting

them in cash to the plan participants or

paid or incurred for a facility (such as a

employed by the insurance company.

their beneficiaries no later than 90 days

yacht or hunting lodge) used for an

-13-

Instructions For Form 1120-Pc - 2001 Page 13

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