Instructions For Form 1120-Pc - 2010 (Page 14 of 21) in pdf

amount required to be capitalized under

pre-acquisition losses that may offset

Schedule B, Part

section 848. Attach a schedule showing

recognized built-in gain may be limited

all computations. See section 848 and its

(see section 384).

I—Taxable Investment

regulations for special rules, definitions,

•

If a corporation elects the alternative

Income of Electing Small

and exceptions. Also see Schedule G,

tax on qualifying shipping activities under

Form 1120-L, and its instructions for more

section 1354, no deduction is allowed for

Companies

information.

an NOL attributable to the qualifying

Note. (1) Once an election under section

Line 34b. Deduction on account of the

shipping activities to the extent that the

831(b) is made to be taxed only on

special income and deduction

loss is carried forward from a tax year

investment income, it can only be revoked

accounts. Enter the total of the amounts

preceding the first tax year for which the

with the consent of the Secretary, and (2)

required to be added under sections

alternative tax election was made. See

a corporation making this election must

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

section 1358(b)(2).

include on line 8, Gross investment

is permitted unless tax and loss bonds

•

An NOL cannot be carried to or from

income, any amount subtracted from a

are purchased in an amount equal to the

any tax year for which the insurance

protection against loss account.

tax benefit of the deduction. See section

company is not subject to tax under

832(e).

Income

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

Note. The deduction on account of the

between the tax year from which the loss

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

special income and deduction accounts is

is being carried and such tax year, there

Enter the gross amount of interest

limited to taxable income for the tax year

is an intervening tax year for which the

income, including all tax-exempt interest

(computed without regard to this

insurance company was not subject to tax

income.

deduction or to any carryback of a net

imposed by section 831(a).

operating loss).

Line 1b, column (a). Interest exempt

•

If a corporation has a loss attributable

under section 103. Enter the amount of

Line 36b. Net operating loss

to a disaster, special rules apply. See the

interest on state and local bonds that is

deduction. A corporation can use the

Instructions for Form 1139.

exempt from taxation under section 103.

net operating loss (NOL) incurred in one

See the instructions for Schedule A, line

tax year to reduce its taxable income in

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

another tax year.

For more details on the NOL

deduction, see section 172, section 844

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

Enter on line 36b the total NOL

Amortization of premium. Enter on

and the Instructions for Form 1139,

carryovers from other tax years, but do

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

Corporation Application for Tentative

not enter more than the corporation’s

of premium on tax-exempt bonds.

Refund.

taxable income (after the

dividends-received deduction). Attach a

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

schedule showing the computation of the

Line 37. Taxable income. If line 37

amortization of bond premium on

NOL deduction. Also complete item 12 on

tax-exempt bonds.

(figured without regard to the items listed

Schedule I.

below under Minimum taxable income) is

Note. Insurance companies electing to

The following special rules apply.

zero or less, the corporation may have an

amortize discount for tax purposes must

•

A corporate equity reduction interest

NOL that can be carried back or forward

reduce the amortization of premium by

loss may not be carried back to a tax year

as a deduction to other tax years.

any amortization of discount.

preceding the year of the equity reduction

Line 3. Gross rents. Enter the gross

transaction (see section 172(b)(1)(E)).

Generally, a corporation first carries

rents received or accrued during the tax

•

If an ownership change occurs

back an NOL 2 tax years. However, the

year. Deduct rental expenses such as

(described in section 382(g)), the amount

corporation may elect to waive the

repairs, interest, taxes, and depreciation

of the taxable income of a loss

carryback period and instead carry the

on the proper lines in the Deductions

corporation that may be offset by the

NOL forward to future tax years. See the

section.

pre-change NOL carryovers may be

instructions for Schedule I, item 11, on

Line 5. Gross income from a trade or

limited (see section 382 and the related

page 19.

business, other than an insurance

regulations). A loss corporation must

business, and from Form 4797. Enter

include the information statement as

Special rules and exceptions to the

the gross income from a trade or

provided in Regulations section

2-year carryback period apply to certain

business, other than an insurance

1.382-11(a), with its income tax return for

NOLs. See the Instructions for Form 1139

business, carried on by the insurance

each tax year that it is a loss corporation

company or by a partnership of which the

in which an ownership shift, equity

for details, on these special rules and

insurance company is a partner. Include

structures shift, or other transaction

other elections that may be available,

section 1245 and section 1250 gains (as

described in Temporary Regulations

which must be made no later than 6

modified by section 291) and other gains

section 1.382-2T(a)(2)(i) occurs. See

months after the due date (excluding

from Form 4797, Sales of Business

Regulations section 1.382-6(b) for details

extensions) of the corporation’s tax

Property, on investment assets only.

on how to make the closing-of-the-books

return.

election.

Line 6. Income from leases described

The limitations under section 382 do

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

Minimum taxable income. The

not apply to certain ownership changes

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

corporation’s taxable income cannot be

after February 17, 2009, made pursuant

entering into, changing, or ending any

less than the largest of the following

to a restructuring plan under the

lease, mortgage, or other instrument or

amounts.

Emergency Economic Stabilization Act of

agreement from which the company

•

The inversion gain of the corporation

2008. See section 382(n).

earns interest, rents, or royalties.

for the tax year, if the corporation is an

For guidance in applying section 382

Line 8. Gross investment income. If

expatriated entity or a partner in an

to loss corporations whose instruments

gross investment income includes an

expatriated entity. See section 7874.

were acquired by Treasury under certain

amount subtracted from the protection

•

The sum of the corporation’s excess

programs under the Emergency

against loss account, write on the dotted

inclusions from Schedules Q (1066), line

Economic Stabilization Act of 2008, see

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

2c, and the corporation’s taxable income

Notice 2010-2, 2010-2 I.R.B. 251.

Deductions

•

determined solely with respect to its

If a corporation acquires control of

ownership and high-yield interests in

another corporation (or acquires its

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

FASITs. See sections 860E(a) and 860J.

assets in a reorganization), the amount of

the limitation of expenses on real estate

-14-

Instructions for Form 1120-PC (2010)

Instructions For Form 1120-Pc - 2010 Page 14

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