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certain scientific research organizations.

Examples of items to include:

Meals must not be lavish or

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See section 170(e)(4); and

Amortization. See Form 4562.

extravagant;

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Computer technology and equipment

Certain business start-up and

A bona fide business discussion must

for educational purposes. See section

organizational costs that the cooperative

occur during, immediately before, or

170(e)(6).

elects to deduct. See page 9 of the

immediately after the meal; and

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instructions.

An employee must be present at the

Line 20. Depreciation

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Insurance premiums.

meal.

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Include on line 20 depreciation and the

Legal and professional fees.

See section 274(n)(3) for a special rule

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part of the cost of certain property that the

Supplies used and consumed in the

that applies to meal expenses for

cooperative elected to expense under

business.

individuals subject to the hours of service

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section 179. See Form 4562 and its

Utilities.

limits of the Department of

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instructions.

Ordinary losses from trade or business

Transportation.

activities of a partnership (from Schedule

Line 22. Depletion

Membership dues. The cooperative

K-1 (Form 1065 or 1065-B)). Do not offset

See sections 613 and 613A for

can deduct amounts paid or incurred for

ordinary losses against ordinary income.

percentage depletion rates applicable to

membership dues in civic or public

Instead, include the income on line 10.

natural deposits. Also, see section

service organizations, professional

Show the partnership’s name, address,

291(a)(2) for the limitation on the

organizations, business leagues, trade

and EIN on a separate statement

depletion deduction for iron ore and coal

associations, chambers of commerce,

attached to this return. If the amount

(including lignite).

boards of trade, and real estate boards,

entered is from more than one

unless a principal purpose of the

Attach Form T (Timber), Forest

partnership, identify the amount from

organization is to entertain or provide

Activities Schedule, if a deduction for

each partnership.

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entertainment facilities for members or

depletion of timber is taken.

Extraterritorial income exclusion (from

their guest. In addition, cooperatives may

Form 8873, line 52).

Foreign intangible drilling costs and

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not deduct membership dues in any club

Reforestation costs. The cooperative

foreign exploration and development

organized for business, pleasure,

can elect to deduct up to $10,000 of

costs must either be added to the

recreation, or other social purpose. This

qualified reforestation expenses paid or

cooperative’s basis for cost depletion

includes country clubs, golf and athletic

incurred after October 22, 2004, for each

purposes or be deducted ratably over a

clubs, airline and hotel clubs, and clubs

qualifying timber property. The

10-year period. See sections 263(i), 616,

operated to provide meals under

cooperative can elect to amortize over 84

and 617 for details. See Pub. 535 for

conditions favorable to business

months any amount not deducted.

more information on depletion.

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discussion.

Deduction for clean-fuel vehicle and

Line 24. Pension,

certain refueling property. See Pub. 535.

Entertainment facilities. The

Profit-sharing, etc., Plans

cooperative cannot deduct an expense

See section 404(k) for more details

paid or incurred for use of a facility (such

Enter the deduction for contributions to

and the limitation on certain dividends.

as a yacht or hunting lodge) for an activity

qualified pension, profit-sharing, or other

Do not deduct:

that is usually considered entertainment,

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funded deferred compensation plans.

Fines or penalties paid to a government

amusement, or recreation.

Employers who maintain such a plan

for violating any law.

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generally must file one of the forms listed

Travel, meals, and entertainment as

Any amount allocable to a class of

below, even if the plan is not a qualified

compensation. Generally, the

exempt income. See section 265(b) for

plan under the Internal Revenue Code.

cooperative may be able to deduct the

exceptions.

The filing requirement applies even if the

otherwise nondeductible travel, meals,

cooperative does not claim a deduction

Special rules

and entertainment expenses if the

for the current tax year. There are

amounts are treated as compensation to

Travel, meals, and entertainment.

penalties for failure to file these forms

the recipient and reported on Form W-2

Subject to limitations and restrictions

timely and for overstating the pension

for an employee or on Form 1099-MISC

discussed below, a cooperative can

plan deduction. See sections 6652(e) and

for an independent contractor.

deduct ordinary and necessary travel,

6662(f).

However, if the recipient is an officer,

meals, and entertainment expenses paid

Form 5500, Annual Return/Report of

director, or beneficial owner (directly or

or incurred in its trade or business.

Employee Benefit Plan. File this form for

indirectly) of more than 10% of any class

a plan that is not a one-participant plan

For details on rules that apply to

of stock, the deduction for otherwise

(see below).

deductions for gifts, skybox rentals, luxury

nondeductible travel, meals, and

water travel, convention expenses, and

Form 5500-EZ, Annual Return of

entertainment expenses incurred after

entertainment tickets, see section 274

One-Participant (Owners and Their

October 22, 2004, is limited to the amount

and Pub. 463.

Spouses) Retirement Plan. File this form

treated as compensation. See section

for a plan that only covers the owner (or

274(e)(2) and Pub. 535.

Travel. The cooperative cannot

the owner and his or her spouse) but only

deduct travel expenses of any individual

Lobbying expenses. Generally,

if the owner (or the owner and his or her

accompanying a cooperative officer or

lobbying expenses are not deductible.

spouse) owns the entire business.

employee, including a spouse or

These expenses include amounts paid or

dependent of the officer or employee,

Line 25. Employee Benefit

incurred in connection with:

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unless:

Influencing federal or state legislation

Programs

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That individual is an employee of the

(but not local legislation), or

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Enter the contributions to employee

cooperative, and

Any communication with certain federal

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benefit programs not claimed elsewhere

His or her travel is for a bona fide

executive branch officials in an attempt to

on the return (that is, insurance, health

business purpose that would otherwise be

influence the official actions or positions

and welfare programs, etc.) that are not

deductible by that individual.

of the officials. See Regulations section

an incidental part of a pension,

1.162-29 for the definition of “influencing

Meals and entertainment. Generally,

profit-sharing, etc., plan included on line

legislation.”

the cooperative can deduct only 50% of

24.

the amount otherwise allowable for meals

Dues and other similar amounts paid

Line 26. Other Deductions

and entertainment expenses paid or

to certain tax-exempt organizations may

Attach a schedule, listing by type and

incurred in its trade or business. In

not be deductible. See section 162(e)(3).

amount, all allowable deductions that are

addition (subject to exceptions under

If certain in-house expenditures do not

not deductible elsewhere.

section 274(k)(2)):

exceed $2,000, they are deductible. See

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Instructions For Form 990-C - Farmers' Cooperative Association Income Tax Return - Internal Revenue Service - 2004 Page 12

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