Instructions For Form 1120-Pc - 2001 (Page 15 of 20) in pdf

Line 8. Gross investment income. If

section 834(c)(2) when any general

extent that such dividends are attributable

gross investment income includes an

expenses are in part assigned to, or

to prorated amounts (see definition

amount subtracted from the protection

included in, the investment expenses

above).

against loss account, write on the dotted

deducted on Schedule B, Part I, line 17.

In the case of an insurance company

line next to line 8, “PAL” and the amount.

that files a consolidated return, the

Deductions

determination with respect to any

Schedule C—Dividends

dividend paid by a member to another

Note. See section 834(d)(1) regarding

and Special Deductions

member of the affiliated group is made as

the limitation of expenses on real estate

if no consolidated return was filed. See

owned and occupied in part or in whole

Definitions

section 832(g).

by a mutual insurance company.

Line 1. Enter dividends (except those

The acquisition date for investments

Line 9. Real estate taxes. Enter taxes

received on debt-financed stock acquired

acquired by direct purchase, is the trade

paid or accrued on real estate owned by

date rather than the settlement date. For

after July 18, 1984 – see section 246A)

the corporation and deductible under

investments not acquired by direct

that:

section 164.

•

purchase (such as those acquired

Are received from

Line 10. Other real estate expenses.

through transfers among affiliates,

less-than-20%-owned domestic

Enter all ordinary and necessary real

corporations subject to income tax and

tax-free reorganizations, or the liquidation

estate expenses, such as fire insurance,

•

Qualify for the 70% deduction under

of a subsidiary, etc.), the actual

heat, light, and labor. Also enter the cost

section 243(a)(1).

acquisition date should be used

of incidental repairs, such as labor and

regardless of the holding period

Also, include on line 1:

supplies, that do not add to the property’s

•

determined under section 1223.

Taxable distributions from an IC-DISC

value or appreciably prolong its life. Do

or former DISC that are designated as

A special rule applies in determining

not include any amount paid for new

eligible for the 70% deduction and certain

the acquisition date of dividends received

buildings or for permanent improvements

dividends of Federal Home Loan Banks.

from affiliates. This rule provides that the

or betterments made to increase the

See section 246(a)(2).

portion of any 100% dividend which is

value of any property or any amount

•

Dividends (except those received on

related to prorated amounts be treated as

spent on foreclosed property before the

debt-financed stock acquired after July

received with respect to stock acquired on

property is held for rent.

18, 1984) from a regulated investment

the later of:

Line 11. Depreciation. Enter

company (RIC). The amount of dividends

depreciation on assets only to the extent

(a) the date the payor acquired the

eligible for the dividends-received

that the assets are used to produce gross

stock or obligation to which the prorated

deduction under section 243 is limited by

investment income reported on lines 1

amounts are attributable or

section 854(b). The corporation should

through 7 of Schedule B. For more

(b) the first day on which the payor

receive a notice from the RIC specifying

information, see the instructions for line

and payee were members of the same

the amount of dividends that qualify for

22, Schedule A.

affiliated group as defined in section

the deduction.

Line 12. Depletion. Enter any allowable

243(b).

Report so-called dividends or earnings

depletion on royalty income reported on

received from mutual savings banks, etc.,

Also, if the taxpayer is a member of an

line 4, Schedule B. See the instructions

as interest. Do not treat them as

affiliated group filing a consolidated

for line 23, Schedule A, for more

dividends.

return, its determination of dividends

information.

received is made as if the group were not

Line 2. Enter on line 2:

Line 13. Trade or business deductions.

•

filing a consolidated return.

Dividends (except those received on

Enter the total deductions related to any

Prorated amounts means tax-exempt

debt-financed stock acquired after July

trade or business income included in

18, 1984) that are received from

interest and dividends for which a

gross investment income under section

20%-or-more-owned domestic

deduction is allowable under section 243,

834(b)(2). Do not include deductions for

corporations subject to income tax and

244, or 245 (other than 100% dividends).

any insurance business. Do not include

that are subject to the 80% deduction

100% dividend means any dividend if

losses from sales or exchanges of capital

under section 243(c) and

the percentage used for purposes of

assets or property used in the business,

•

Taxable distributions from an IC-DISC

determining the deduction allowable

or from the compulsory or involuntary

or former DISC that are considered

under section 243, 244, or 245(b) is

conversion of property used in the trade

eligible for the 80% deduction.

100%. A special rule applies to certain

or business.

dividends received by a foreign

Line 3. Enter dividends that are:

Line 14. Interest. See the instructions for

•

corporation.

Received on debt-financed stock

lines 20a and 20b, Schedule A.

acquired after July 18, 1984, from

Lines 1 through 23

Line 17. Investment expenses. Enter

domestic and foreign corporations subject

expenses that are properly chargeable as

For purposes of the 20% ownership test

to income tax that would otherwise be

investment expenses. If general

on lines 1 through 7, the percentage of

subject to the dividends-received

expenses are allocated to investment

stock owned by the corporation is based

deduction under section 243(a)(1),

expenses, the total deduction cannot be

on voting power and value of the stock.

243(c), or 245(a). Generally,

more than the amount on Schedule B,

Preferred stock described in section

debt-financed stock is stock that the

Part II, line 39. Attach a schedule showing

1504(a)(4) is not taken into account.

corporation acquired by incurring a debt

the kind and amount of general expenses.

Corporations filing a consolidated return

(e.g., it borrowed money to buy the

Minor items may be grouped together.

should see Regulations sections

stock).

•

1.1502-13, 1.1502-26, and 1.1502-27

See section 267 for the limitation on

Received from a RIC on debt-financed

before completing Schedule C.

deductions for unpaid expenses and

stock. The amount of dividends eligible

interest in transactions between related

for the dividends-received deduction is

Lines 1 through 9, column (a). Enter in

taxpayers.

limited by section 854(b). The corporation

column (a) of the appropriate line those

should receive a notice from the RIC

dividends that are subject to the

specifying the amount of dividends that

provisions of section 832(b)(5)(B).This will

Schedule B, Part II—

qualify for the deduction.

include:

Invested Assets Book

1. All dividends (other than 100%

Line 4. Enter dividends received on the

dividends) received on stock acquired

preferred stock of a less-than-20%-owned

Values

after August 7, 1986 and

public utility that is subject to income tax

Use Schedule B, Part II, to compute the

2. 100% dividends received on stock

and is allowed the deduction provided in

limitation on investment expenses under

acquired after August 7, 1986, to the

section 247 for dividends paid.

-15-

Instructions For Form 1120-Pc - 2001 Page 15

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