Instructions For Form 1120-Pc - 2001 (Page 7 of 20) in pdf

Tax Computation and

Unequal apportionment plan.

investment in the PFIC during the year, it

Members of a controlled group may elect

must include the total increase in taxes

Payments

an unequal apportionment plan and divide

due under section 1291(c)(2) in the

the taxable income brackets as they want.

amount entered on line 4. On the dotted

There is no need for consistency among

line next to line 4, write “Section 1291”

taxable income brackets. Any member

and the amount.

Tax Computation Worksheet for

may be entitled to all, some, or none of

Members of a Controlled Group (keep

Do not include on line 4 any interest

the taxable income bracket. However, the

for your records.)

due under section 1291(c)(3). Instead,

total amount for all members cannot be

show the amount of interest owed in the

more than the total amount in each

Note. Each member of a controlled group must

bottom margin of page 1 and write

compute its tax using this worksheet.

taxable income bracket.

“Section 1291 interest.” For details, see

Equal apportionment plan. If no

Form 8621, Return by a Shareholder of a

1. Enter taxable income (line 1 or

apportionment plan is adopted, members

Passive Foreign Investment Company or

line 2, page 1) . . . . . . . . . . . .

of a controlled group must divide the

Qualified Electing Fund.

2. Enter line 1 or the corporation’s

amount in each taxable income bracket

Additional tax under section 197(f). A

share of the $50,000 taxable

equally among themselves. For example,

corporation that elects to pay tax on the

income bracket, whichever is

controlled group AB consists of

less . . . . . . . . . . . . . . . . . . .

gain from the sale of an intangible under

Corporation A and Corporation B. They

the related person exception to the

3. Subtract line 2 from line 1 . . . .

do not elect an apportionment plan.

anti-churning rules should include any

Therefore, each corporation is entitled to:

4. Enter line 3 or the corporation’s

•

additional tax due under section

$25,000 (one-half of $50,000) on line

share of the $25,000 taxable

197(f)(9)(B) in the total for line 4. On the

3a(1),

income bracket, whichever is

•

dotted line next to line 4, write “Section

$12,500 (one-half of $25,000) on line

less . . . . . . . . . . . . . . . . . . .

197” and the amount. For more

3a(2), and

5. Subtract line 4 from line 3 . . . .

•

information, see Pub. 535, Business

$4,962,500 (one-half of $9,925,000) on

Expenses.

6. Enter line 5 or the corporation’s

line 3a(3).

share of the $9,925,000 taxable

Line 5. Enter amount of tax that a

Line 3b. Members of a controlled group

income bracket, whichever is

reciprocal must include. A mutual

are treated as one group to figure the

less . . . . . . . . . . . . . . . . . . .

insurance company which is an

applicability of the additional 5% tax and

interinsurer or reciprocal underwriter may

7. Subtract line 6 from line 5 . . . .

the additional 3% tax. If an additional tax

elect, under section 835, to limit the

8. Multiply line 2 by 15% . . . . . . .

applies, each member will pay that tax

deduction for amounts paid or incurred to

based on the part of the amount used in

9. Multiply line 4 by 25% . . . . . . .

a qualifying attorney-in-fact to the amount

each taxable income bracket to reduce

of the deductions of the attorney-in-fact

10. Multiply line 6 by 34% . . . . . . .

that member’s tax. See section 1561(a). If

allocable to the income received by the

an additional tax applies, attach a

11. Multiply line 7 by 35% . . . . . . .

attorney-in-fact from the reciprocal. If this

schedule showing the taxable income of

12. If the taxable income of the

election is made, any increase in taxable

the entire group and how the corporation

controlled group exceeds

income of a reciprocal as a result of this

figured its share of the additional tax.

$100,000, enter this member’s

limitation is taxed at the highest rate of

share of the smaller of: 5% of the

Line 3b(1). Enter the corporation’s

tax specified in section 11(b).

taxable income in excess of

share of the additional 5% tax on line

Make no entry on line 5 if the mutual

$100,000, or $11,750. See the

3b(1).

insurance company’s taxable income

instructions for line 3b. . . . . . .

Line 3b(2). Enter the corporation’s

before including the section 835(b)

13. If the taxable income of the

share of the additional 3% tax on line

amount is $100,000 or more. Otherwise,

controlled group exceeds $15

3b(2).

this tax is 35% of the section 835(b)

million, enter this member’s

amount. If an entry is made on line 5,

Line 4

share of the smaller of: 3% of the

attach a statement showing how the tax

taxable income in excess of $15

Members of a controlled group must

was computed.

million, or $100,000. See the

attach a statement showing the

instructions for line 3b. . . . . . .

Reciprocal underwriters making the

computation of the tax entered on line 4.

section 835(a) election are allowed a

14. Total. Add lines 8 through 13.

Most corporations figure their tax by

credit on line 14h for the amount of tax

Enter here and on line 4, page 1

using the Tax Rate Schedule below.

paid by the attorney-in-fact that is related

Exceptions apply to members of a

to the income received by the

Line 3

controlled group (see worksheet above).

attorney-in-fact from the reciprocal in the

tax year.

Members of a controlled group. A

Tax Rate Schedule If the amount on line

member of a controlled group, as defined

See section 835 and the related

1 or line 2, Form 1120-PC, page 1 is:

in section 1563, must check the box on

regulations for special rules and

line 3 and complete lines 3a and 3b on

information regarding the statements

Of the

page 1.

But not

amount

required to be attached to the return.

Over —

over —

Tax is:

over —

Line 3a. Members of a controlled group

Line 6. Alternative minimum tax.

$50,000

15%

are entitled to one $50,000, one $25,000,

Unless the corporation is treated as a

50,000

75,000

$ 7,500 + 25%

50,000

and one $9,925,000 taxable income

small corporation exempt from the

bracket amount (in that order) on line 3a.

75,000

100,000

13,750 + 34%

75,000

alternative minimum tax (AMT), it may

100,000

335,000

22,250 + 39%

100,000

When a controlled group adopts or

owe the AMT if it has any of the

335,000 10,000,000

113,900 + 34%

335,000

later amends an apportionment plan,

adjustments and tax preference items

10,000,000 15,000,000

3,400,000 + 35%

10,000,000

each member must attach to its tax return

listed on Form 4626, Alternative Minimum

15,000,000 18,333,333

5,150,000 + 38%

15,000,000

a copy of its consent to this plan. The

Tax – Corporations. The corporation must

18,333,333

- - - - -

35%

copy (or an attached statement) must

file Form 4626 if its taxable income (loss)

show the part of the amount in each

combined with these adjustments and tax

taxable income bracket apportioned to

Deferred tax under section 1291. If the

preference items is more than the smaller

that member. See Regulations section

corporation was a shareholder in a

of:

•

1.1561-3(b) for other requirements and

passive foreign investment company

$40,000, or

•

for the time and manner of making the

(PFIC), and the corporation received an

The corporation’s allowable exemption

consent.

excess distribution or disposed of its

amount (from Form 4626).

-7-

Instructions For Form 1120-Pc - 2001 Page 7

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