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amortize these costs over a period of 60

section 1.163-8T, which provides rules for

Form 5884, Work Opportunity Credit,

months or more. For costs paid or

allocating interest expense among

line 2,

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incurred after October 22, 2004, the

activities. If a passive activity is also

Form 8844, Empowerment Zone and

following rules apply separately to each

subject to the earnings stripping rules of

Renewal Community Employment Credit,

category of costs.

section 163(j) or the at-risk rules of

line 2,

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The cooperative can elect to deduct up

section 465, those rules apply before the

Form 8845, Indian Employment Credit,

to $5,000 of such costs for the year the

passive loss rules. For more information,

line 4,

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cooperative begins business operations.

see section 469, the related regulations,

Form 8861, Welfare-to-Work Credit,

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The $5,000 deduction is reduced (but

and Pub. 925, Passive Activity and

line 2, and

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not below zero) by the amount the total

At-Risk Rules.

Form 8884, New York Liberty Zone

cost exceeds $50,000. If the total costs

Business Employee Credit, line 2.

Reducing certain expenses for which

are $55,000 or more, the deduction is

credits are allowable. For each credit

Do not include salaries and wages

reduced to zero.

deductible elsewhere on the return, such

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listed below, the cooperative may have to

If the election is made, any costs that

reduce the otherwise allowable

as amounts included in cost of goods

are not deductible must be amortized

deductions for expenses used to figure

sold, elective contributions to a section

ratably over a 180-month period

the credit, by the amount of the current

401(k) cash or deferred arrangement, or

beginning with the month the cooperative

year credit generated by the cooperative.

amounts contributed under a salary

begins business operations.

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reduction SEP agreement or a SIMPLE

Work opportunity credit.

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For more details on the election for

Research credit.

IRA plan.

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business start-up costs, see section 195

Orphan drug credit.

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If the cooperative provided taxable

and attach the statement required by

Disabled access credit.

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fringe benefits to its employees,

Regulations section 1.195-1(b). For more

Enhanced oil recovery credit.

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such as personal use of a car, do

details on the election for organizational

CAUTION

Empowerment zone and renewal

not deduct as wages the amount

costs, see section 248 and attach the

community employment credit.

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allocated for depreciation, and other

statement required by Regulations

Indian employment credit.

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expenses claimed on lines 20 and 26.

section 1.248-1(c). Report the deductible

The employer credit for social security

amount of these costs and any

and Medicare taxes paid on certain

Line 14. Repairs and

amortization on line 26. For amortization

employee tips.

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Maintenance

that begins during the 2004 tax year,

Welfare-to-work credit.

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complete and attach Form 4562.

Enter the cost of incidental repairs, such

Credit for small employer pension plan

as labor and supplies, that do not add to

start-up costs.

Passive activity limitations. Limitations

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the value of the property or appreciably

Credit for employer-provided childcare

on passive activity losses and credits

prolong its life. New buildings, machinery,

facilities and services.

under section 469 apply to closely held

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or permanent improvements that increase

New York Liberty Zone business

cooperatives.

the value of the property are not

employee credit.

A cooperative is a “closely held

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deductible here. They must be

Low sulfur diesel fuel production credit.

cooperative” (as defined at section

depreciated or amortized.

469(j)(1)) if at any time during the last half

If the cooperative has any of these

of the tax year more than 50% in value of

credits, first figure each current year

Line 15. Bad Debts

its outstanding stock is owned, directly or

credit generated by the cooperative, then

Enter the total debts that became

indirectly, by or for not more than 5

figure the remaining deduction for the

worthless in whole or in part during the

individuals. Certain organizations are

expense upon which the credit is based.

tax year. A cash method taxpayer cannot

treated as individuals for purposes of this

claim a bad debt deduction unless the

Line 12. Compensation of

test. See section 542(a)(2). For rules of

amount was previously included in

Officers

determining stock ownership, see section

income.

544 (as modified by section 465(a)(3)).

Enter deductible officer’s compensation

Line 16. Rents

on line 12. Before entering an amount on

Generally, the two kinds of passive

line 12, complete Schedule E if the

activities are:

If the cooperative rented or leased a

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cooperative’s total receipts (line 1a plus

Trade or business activities in which

vehicle, enter the total annual rent or

lines 4 through 10, page 1) are $500,000

the cooperative did not materially

lease expense paid or incurred during the

or more. Do not include compensation

participate, and

year. Also complete Form 4562,

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deductible elsewhere on the return, such

Rental activities, regardless of its

Depreciation and Amortization, Part V. If

as amounts included in cost of goods

participation.

the cooperative leased a vehicle for a

sold, elective contributions to a section

term of 30 days or more, the deduction for

For exceptions, see Form 8810,

401(k) cash or deferred arrangement, or

vehicle lease expense may have to be

Corporate Passive Activity Loss and

amounts contributed under a salary

reduced by an amount called the

Credit Limitations.

reduction SEP agreement or a SIMPLE

inclusion amount. The cooperative may

An activity is a trade or business

IRA plan.

have an inclusion amount if:

activity if it is not a rental activity, and

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Include only the deductible part of

The activity involves the conduct of a

And the vehicle’s FMV on

each officer’s compensation on Schedule

trade or business (deductions from the

The lease term

the first day of the lease

E. Complete Schedule E, line 1, columns

activity would be allowable under section

began:

exceeded:

(a) through (f), for all officers. The

162 if other limitations, such as the

cooperative determines who is an officer

passive loss rules, did not apply), or

After 12/31/03 but before 1/1/05

$17,500

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under the laws of the state where it is

The activity involves research and

After 12/31/02 but before 1/1/04

$18,000

incorporated.

experimental costs that are deductible

After 12/31/98 but before 1/1/03

$15,500

under section 174 (or would be deductible

If a consolidated return is filed, each

If the lease term began before January 1, 1999, see Pub.

if the cooperative chose to deduct rather

member of an affiliated group must

463, Travel, Entertainment, Gift, and Car Expenses, to

than capitalize them).

furnish this information.

find out if the cooperative has an inclusion amount. The

inclusion amount for lease terms beginning in 2005 will be

Cooperatives subject to the passive

Line 13. Salaries and Wages

published in the Internal Revenue Bulletin in early 2005.

activity limitations must complete Form

8810 to compute their allowable passive

Enter the salaries and wages paid for the

activity loss and credit. Before completing

tax year, reduced by the total amount

See Pub. 463 for instructions on

Form 8810, see Temporary Regulations

claimed on:

figuring the inclusion amount.

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Instructions For Form 990-C - Farmers' Cooperative Association Income Tax Return - Internal Revenue Service - 2004 Page 10

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