Instructions For Form 1120-Pc - 2010 (Page 11 of 21) in pdf

a Treasury troubled asset relief program

See Pub. 463 for instructions on

Section 163(j) and Related Information,

is not deductible as compensation if the

figuring the inclusion amount.

and the related instructions.

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payments are made because of a

Interest on which no tax is imposed

Line 19. Taxes and licenses. Enter

severance from employment during an

(see section 163(j)). A corporation that

taxes paid or accrued during the tax year,

applicable tax year. For this purpose, a

owns an interest in a partnership, directly

but do not include the following.

parachute payment is any payment to a

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or indirectly, must treat its distributive

Federal income taxes.

senior executive officer for departure from

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share of the partnership liabilities, interest

Foreign or U.S. possession income

a company for any reason, except for

income, and interest expense as

taxes if a tax credit is claimed.

payments for services performed or

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liabilities, income, and expenses of the

Taxes not imposed on the corporation.

benefits accrued. These limits do not

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corporation for purposes of applying the

Taxes, including state or local sales

apply to a payment already treated as a

earnings stripping rules. For more details,

taxes, that are paid or incurred in

parachute payment. See section 280G(e)

see section 163(j)(8).

connection with an acquisition or

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and Notice 2008-94.

Forgone interest on certain

disposition of property (these taxes must

below-market-rate loans (see section

Line 16. Salaries and wages. Enter the

be treated as a part of the cost of the

7872).

total salaries and wages paid for the tax

acquired property or, in the case of a

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Original issue discount (OID) on certain

year. Do not include salaries and wages

disposition, as a reduction in the amount

high-yield discount obligations. See

deductible elsewhere on the return, such

realized on the disposition).

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section 163(e)(5) to determine the

as amounts included in officers’

Taxes assessed against local benefits

disqualified amount of the deduction for

compensation, elective contributions to a

that increase the value of the property

original issue discount that is deferred

section 401(k) cash or deferred

assessed (such as for paving, etc.).

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and the amount that is disallowed on a

arrangement, or amounts contributed

Taxes deducted elsewhere on the

high-yield discount obligation. The rules

under a salary reduction SEP agreement

return.

under section 163(e)(5) do not apply to

or a SIMPLE IRA plan.

See section 164(d) for information on

certain high-yield discount obligations

the apportionment of taxes on real

If the corporation provided taxable

issued before January 1, 2011. See

property between a seller and a

fringe benefits to its employees,

section 163(e)(5)(F), and Notice 2010-11.

purchaser.

such as the personal use of a car,

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Interest which is allocable to

CAUTION

do not deduct as wages the amount

Line 20a. Interest.

unborrowed policy cash values of life

allocated for depreciation and other

insurance, endowment, or annuity

Note. Do not offset interest income

expenses that are claimed elsewhere on

contracts issued after June 8, 1997. See

against interest expense.

the return (for example, on Schedule A,

section 264(f). Attach a statement

The corporation must make an interest

line 22 or line 31).

showing the computation of the

allocation if the proceeds of a loan were

Employment credits. If the corporation

deduction.

used for more than one purpose (for

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claims a credit on any of the following

Section 108(i) OID deduction. If the

example, to purchase a portfolio

forms, it may need to reduce its deduction

corporation issued a debt instrument with

investment and to acquire an interest in a

for officer’s compensation and salaries

OID that is subject to section 108(i)(2)

passive activity). See Temporary

and wages. See the applicable form for

because of an election to defer the

Regulations section 1.163-8T for the

details.

income from the cancellation of debt

interest allocation rules.

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Form 5884, Work Opportunity Credit;

(COD), the interest deduction for this OID

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Do not deduct the following interest.

Form 8844, Empowerment Zone and

is deferred until the COD is includible in

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Interest on indebtedness incurred or

Renewal Community Employment Credit;

income. The accrued OID is allowed as a

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continued to purchase or carry obligations

Form 8845, Indian Employment Credit;

deduction ratably over the 5-year period

if the interest is wholly exempt from

and

that the income from COD is includible in

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income tax. See section 265(b) for special

Form 8932, Credit for Employer

income. The deduction is limited to the

rules and exceptions for financial

Differential Wage Payments.

amount of COD subject to the section

institutions. Also, see section 265(b)(7)

108(i) election. See section 108(i) for

Line 18. Rents. If the corporation rented

for a temporary de minimis exception for

more details.

or leased a vehicle, enter the total annual

financial institutions for certain tax-exempt

rent or lease expense paid or incurred

Line 20b. Less tax-exempt interest

bonds issued in 2009 and 2010.

during the year. Also complete Part V of

expense. Enter interest paid or accrued

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Interest and carrying charges on

Form 4562, Depreciation and

during the tax year on indebtedness

straddles. Generally, these amounts must

Amortization. If the corporation leased a

incurred or continued to purchase or carry

be capitalized. See section 263(g).

vehicle for a term of 30 days or more, the

obligations if the interest is wholly exempt

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Interest on debt allocable to the

deduction for the vehicle lease expense

from income tax. For exceptions, see

production of designated property by a

may have to be reduced by an amount

section 265(b).

corporation for its own use or for sale.

includible in income called the inclusion

Line 21. Charitable contributions.

The corporation must capitalize this

amount. The corporation may have an

Enter contributions or gifts actually paid

interest. Also capitalize any interest on

inclusion amount if:

within the tax year to or for the use of

debt allocable to an asset used to

And the vehicle’s

charitable and governmental

produce the property. See section 263A(f)

FMV on the first

organizations described in section 170(c)

and Regulations section 1.263A-8

The lease term

day of the lease

and any unused contributions carried over

through 1.263A-15 for definitions and

began:

exceeded:

from prior years. Special rules and limits

more information.

•

apply to contributions to organizations

Interest paid or incurred on any portion

conducting lobbying activities. See

of an underpayment of tax that is

After 12/31/07 but before 1/1/11 . . $18,500

section 170(f)(9).

attributable to an understatement arising

After 12/31/06 but before 1/1/08 . . $15,500

from an undisclosed listed transaction or

Corporations reporting taxable income

an undisclosed reportable avoidance

After 12/31/04 but before 1/1/07 . . $15,200

on the accrual method can elect to treat

transaction (other than a listed

as paid during the tax year any

After 12/31/03 but before 1/1/05 . . $17,500

transaction) entered into in tax years

contributions paid by the 15th day of the

beginning after October 22, 2004.

3rd month after the end of the tax year if

If the lease term began before January 1, 2004,

see Pub. 463, Travel, Entertainment, Gift, and Car

Special rules apply to:

the contributions were authorized by the

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Expenses, to find out if the corporation has an

Disqualified interest on certain

board of directors during the tax year.

inclusion amount. The inclusion amount for lease

indebtedness under section 163(j). See

Attach a declaration to the return stating

terms beginning in 2011 will be published in the

Form 8926, Disqualified Corporate

that the resolution authorizing the

Internal Revenue Bulletin in early 2011.

Interest Expense Disallowed Under

contributions was adopted by the board of

-11-

Instructions for Form 1120-PC (2010)

Instructions For Form 1120-Pc - 2010 Page 11

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