Instructions For Form 1120-Pc - 2001 (Page 14 of 20) in pdf

activity usually considered entertainment,

An NOL cannot be carried to or from

Line 36b. Net operating loss

amusement, or recreation.

any tax year for which the insurance

deduction. A corporation may use the

net operating loss (NOL) incurred in one

company is not subject to tax under

Note. The corporation may be able to

section 831(a), or to any tax year if

tax year to reduce its taxable income in

deduct otherwise nondeductible meals,

(between the tax year from which the loss

another tax year. Generally, a corporation

travel, and entertainment expenses if the

is being carried and such tax year) there

may carry an NOL back to each of the 2

amounts are treated as compensation

is an intervening tax year for which the

years preceding the year of the loss and

and reported on Form W-2 for an

insurance company was not subject to tax

then carry any remaining amount over to

employee or on Form 1099-MISC for an

imposed by section 831(a).

each of the 20 years (15 years for NOLs

independent contractor.

incurred in tax years beginning before

See section 844 for special loss

Deduction for clean-fuel vehicles and

August 6, 1997) following the year of the

carryover rules for insurance companies.

certain refueling property. Section

loss (but see Waiving the carryback

179A allows a deduction for part of the

period below).

cost of qualified clean-fuel vehicle

Schedule B, Part I—

Enter on line 36b, the total NOL

property and qualified clean-fuel vehicle

carryovers from prior tax years, but do not

Taxable Investment

refueling property placed in service during

enter more than the corporation’s taxable

the tax year. For more information, see

Income of Electing Small

income (after dividends-received

Pub. 535.

deduction). An NOL deduction cannot be

Companies

taken in a year in which the corporation

Lobbying expenses. Generally,

Note. (1) Once an election under section

has negative taxable income. Attach a

lobbying expenses are not deductible.

831(b) is made to be taxed only on

schedule showing the computation of the

These expenses include:

investment income, it can only be revoked

•

NOL deduction. Also complete item 12 on

Amounts paid or incurred in connection

with the consent of the Secretary, and (2)

Schedule I.

with influencing Federal or state

a corporation making this election must

For details on the NOL deduction, see

legislation (but not local legislation), or

include on line 8, gross investment

•

Pub. 542, Corporations.

Amounts paid or incurred in connection

income, any amount subtracted from a

Carryback and carryover rules. To

with any communication with certain

protection against loss account.

carry back the loss and obtain a quick

Federal executive branch officials in an

Income

refund of taxes, use Form 1139,

attempt to influence the official actions or

Corporation Application for Tentative

positions of the officials. See Regulations

Line 1a, column (a). Gross interest.

Refund. Form 1139 must be filed within

section 1.162-29 for the definition of

Enter the gross amount of interest income

12 months after the close of the tax year

“influencing legislation.”

including all tax-exempt interest income.

of the loss. See section 6411 for details.

Dues and other similar amounts paid to

Line 1b, column (a). Interest exempt

For carryback claims filed later than 12

certain tax-exempt organizations may not

under section 103. Enter the amount of

months after the close of the tax year of

be deductible. See section 162(e)(3). If

interest on state and local bonds that is

the loss, file an amended Form 1120-PC

certain in-house expenditures do not

exempt from taxation under section 103.

instead of Form 1139.

exceed $2,000, they are deductible. For

See the instructions for Schedule A, line

information on contributions to charitable

After the corporation applies the NOL

3b, column (a), for more information.

organizations that conduct lobbying

to the first tax year to which it may be

Lines 1a and 1b, column (b).

activities, see the instructions for

carried, the taxable income of that year is

Amortization of premiums. Enter on

Schedule A, line 21. For more information

modified (as described in section 172(b))

line 1a, column (b), the total amortization

on lobbying expenses, see section

to determine how much of the remaining

of premium on tax-exempt bonds.

162(e).

loss may be carried to other years. See

Enter on line 1b, column (b), the

section 172(b) and the related regulations

Line 32. Total deductions. Insurance

amortization of bond premium on

for details.

companies that issue specified insurance

tax-exempt bonds.

Special NOL rules apply when:

contracts (as defined in section 848(e)(1))

•

Note. Insurance companies electing

are generally required to amortize policy

An ownership change occurs (i.e., the

to amortize discount for tax purposes

acquisition expenses on a straight-line

amount of the taxable income of a loss

must reduce the amortization of premium

basis over a period of 120 months

corporation that can be offset by

by any amortization of discount.

beginning with the 1st month in the 2nd

pre-change NOL carryovers is limited).

Line 3. Gross rents. Enter the gross

half of the tax year (section 848(a)).

See section 382 and the related

rents received or accrued during the tax

Reduce total deductions on line 32 by the

regulations. Also see Temporary

year. Deduct rental expenses such as

amount required to be capitalized under

Regulations section 1.382-2T(a)(2)(ii),

repairs, interest, taxes and depreciation

section 848. Attach a schedule showing

which requires that a loss corporation file

on the proper lines in the Deductions

all computations. See section 848 and its

an information statement with its income

section.

regulations for special rules, definitions,

tax return for each tax year that it is a loss

and exceptions. Also see Schedule G,

corporation and certain shifts in

Line 5. Gross income from a trade or

Form 1120-L, and its instructions for more

business, other than an insurance

ownership occurred. See Regulations

information.

section 1.382-6(b) for details on how to

business, and from Form 4797. Enter

make the closing-of-the-books election.

the gross income from a trade or

•

Line 34b. Deduction on account of the

A corporation acquires control of

business, other than an insurance

special income and deduction

another corporation (or acquires its

business, carried on by the insurance

accounts. Enter the total of the amounts

company or by a partnership of which the

assets in a reorganization) and the

required to be added under sections

amount of pre-acquisition losses that may

insurance company is a partner. Include

832(e)(4) and (6). However, no deduction

offset recognized built-in gains is limited.

section 1245 and section 1250 gains (as

is permitted unless tax and loss bonds

See section 384.

modified by section 291), and other gains

are purchased in an amount equal to the

from Form 4797, Sales of Business

Waiving the carryback period. A

tax benefit of the deduction. See section

Property, on investment assets only.

corporation may make an irrevocable

832(e).

election to waive the carryback period

Line 6. Income from leases described

Note. The deduction on account of the

and instead carry the NOL forward to

in sections 834(b)(1)(B) and

special income and deduction accounts is

years following the year of the loss. To

834(b)(1)(C). Enter gross income from

limited to taxable income for the tax year

make this election, check the box in Line

entering into, changing, or ending any

(computed without regard to this

11 on Schedule I. To be valid, the election

lease, mortgage, or other instrument or

deduction or to any carryback of a net

must be made by the due date (including

agreement from which the company

operating loss).

extensions) for filing Form 1120-PC.

earns interest, rents, or royalties.

-14-

Instructions For Form 1120-Pc - 2001 Page 14

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