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The common parent corporation

divide the amount in each taxable

showing the computation of the tax

directly or indirectly owns stock

income bracket equally among

entered on Schedule J, line 3.

possessing at least 80% of the total

themselves. For example, Controlled

Tax Computation Worksheet for

combined voting power of all classes of

Group AB consists of Cooperative A

Members of a Controlled Group

stock entitled to vote or at least 80% of

and Cooperative B. They do not elect

the total value of shares of all classes

an apportionment plan. Therefore, each

Note. Each member of a controlled group must

of stock of at least one of the other

cooperative is entitled to:

compute its tax using this worksheet.

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corporations, excluding, in computing

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

1. Enter taxable income (line 30,

such voting power or value, stock

2a(1),

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page 1) . . . . . . . . . . . . . . . . .

owned directly by such other

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

corporation.

2a(2), and

2. Enter line 1 or the cooperative’s

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share of the $50,000 taxable

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

Brother-sister group. A brother-sister

income bracket, whichever is

on line 2a(3).

group is two or more corporations if 5

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

Unequal apportionment plan.

or fewer persons who are individuals,

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

Members of a controlled group can

estates, or trusts directly or indirectly

elect an unequal apportionment plan

own stock possessing:

4. Enter line 3 or the cooperative’s

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and divide the taxable income brackets

At least 80% of the total combined

share of the $25,000 taxable

as they want. There is no need for

income bracket, whichever is

voting power of all classes of stock

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

consistency among taxable income

entitled to vote or at least 80% of the

brackets. Any member may be entitled

total value of shares of all classes of

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

to all, some, or none of the taxable

the stock of each corporation, and

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6. Enter line 5 or the cooperative’s

income bracket. However, the total

More than 50% of the total combined

share of the $9,925,000 taxable

amount for all members cannot exceed

voting power of all classes of stock

income bracket, whichever is

the total amount in each taxable

entitled to vote or more than 50% of the

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

income bracket.

total value of shares of all classes of

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

stock of each corporation, taking into

Line 2b. Enter Cooperative’s

account the stock ownership of each

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

such person only to the extent such

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

stock ownership is identical with

Members of a controlled group are

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

respect to each such corporation.

treated as one group to figure the

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

applicability of the additional 5% tax

The definition of brother-sister group

and the additional 3% tax. If an

does not include the first bullet above

12. If the taxable income of the

additional tax applies, each member will

controlled group exceeds

for purposes of the taxable income

pay that tax based on the part of the

$100,000, enter this member’s

brackets, alternative minimum tax

share of the smaller of: 5% of

amount used in each taxable income

exemption amounts, and accumulated

the taxable income in excess of

bracket to reduce that member’s tax.

earnings credit.

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

See section 1561(a). If an additional tax

Combined group. A combined group

instructions for line 2b . . . . . . .

applies, attach a schedule showing the

is three or more corporations each of

13. If the taxable income of the

taxable income of the entire group and

which is a member of a

controlled group exceeds $15

how the cooperative figured its share of

parent-subsidiary group or a

million, enter this member’s

the additional tax.

brother-sister group, and one of which

share of the smaller of: 3% of

Line 2b(1). Enter the cooperative’s

is:

the taxable income in excess of

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share of the additional 5% tax on line

A common parent corporation

$15 million, or $100,000. See

2b(1).

instructions for line 2b . . . . . . .

included in a group of corporations in a

parent-subsidiary group, and also

Line 2b(2). Enter the cooperative’s

14. Add lines 8 through 13. Enter

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Included in a group of corporations in

share of the additional 3% tax on line

here and on Schedule J, line 3.

2b(2).

a brother-sister group.

For more details on controlled

Line 3. Income Tax

groups, see section 1563.

Deferred tax under section 1291. If

Most cooperatives figure their tax by

the cooperative was a shareholder in a

using the Tax Rate Schedule next.

Line 2a. Income Brackets

passive foreign investment company

Exceptions apply to members of a

Members of a controlled group are

(PFIC), and the cooperative received

controlled group (see the worksheet).

entitled to share one $50,000, one

an excess distribution or disposed of its

Tax Rate Schedule

$25,000, and one $9,925,000 taxable

investment in the PFIC during the year,

income bracket amount (in that order).

it must include the total increase in

If taxable income on Form 990-C, line 30, is:

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

When a controlled group adopts or

the amount entered on line 3, Schedule

later amends an apportionment plan,

Of the

J. On the dotted line next to line 3,

each member must attach to its tax

But not

amount

Over —

over —

Tax is:

over —

Schedule J, enter “Section 1291” and

return a copy of its consent to this plan.

the amount.

The copy (or an attached statement)

$50,000

15%

must show the part of the amount in

50,000

75,000

$ 7,500 + 25%

50,000

Do not include on line 3 any interest

75,000

100,000

13,750 + 34%

75,000

each taxable income bracket

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

100,000

335,000

22,250 + 39%

100,000

apportioned to that member. See

show the amount of interest owed in

335,000

10,000,000

113,900 + 34%

335,000

Regulations section 1.1561-3(b) for

the bottom margin of page 1, Form

10,000,000 15,000,000 3,400,000 + 35% 10,000,000

other requirements and for the time and

990-C, and enter “Section 1291

15,000,000 18,333,333 5,150,000 + 38% 15,000,000

manner of making the consent.

18,333,333

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35%

interest.” If the cooperative has a tax

Equal apportionment plan. If no

due, include the interest due in the

payment. If you would otherwise

apportionment plan is adopted,

Members of a controlled group must

receive a refund, reduce the refund by

members of a controlled group must

attach to Form 990-C a statement

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Instructions For Form 990-C - Farmers' Cooperative Association Income Tax Return - Internal Revenue Service - 2005 Page 17

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