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add to the value of the property or

See section 164(d) for the rule on

declaration to the return stating that the

appreciably prolong its life. New

apportionment of taxes on real property

resolution authorizing the contributions

buildings, machinery, or permanent

between the seller and purchaser.

was adopted by the board of directors

improvements that increase the value

during the current tax year. The

Line 18. Interest

of the property are not deductible here.

declaration must include the date the

They must be depreciated or amortized.

resolution was adopted.

Do not offset interest income against

interest expense.

Limitation on deduction. The total

Line 15. Bad Debts

amount claimed may not be more than

Do not deduct the following:

•

10% of taxable income (line 30)

Enter the total debts that became

Interest on indebtedness incurred or

computed without regard to the

worthless in whole or in part during the

continued to purchase or carry

following.

tax year. A cash method taxpayer

obligations if the interest is wholly

•

Any deduction for contributions.

exempt from income tax. For

cannot claim a bad debt deduction

•

The special deductions on line 29b,

unless the amount was previously

exceptions, see section 265(b).

•

Form 990-C.

included in income.

For cash basis taxpayers, prepaid

•

The deduction allowed under section

interest allocable to years following the

249.

Line 16. Rents

current tax year. For example, a cash

•

The deduction allowed under section

basis calendar year taxpayer who in

If the cooperative rented or leased a

199.

2005 prepaid interest allocable to any

vehicle, enter the total annual rent or

•

Any net operating loss (NOL)

period after 2005 can deduct only the

lease expense paid or incurred during

carryback to the tax year under section

amount allocable to 2005.

the year. Also complete Form 4562,

•

172.

Interest and carrying charges on

Depreciation and Amortization, Part V.

•

Any capital loss carryback to the tax

straddles. Generally, these amounts

If the cooperative leased a vehicle for a

year under section 1212(a)(1).

must be capitalized. See section

term of 30 days or more, the deduction

263(g).

Temporary suspension of 10%

for vehicle lease expense may have to

•

Interest paid or incurred on any

limitation. A cooperative may elect to

be reduced by an amount called the

portion of an underpayment of tax that

deduct qualified cash contributions

inclusion amount. The cooperative may

is attributable to an understatement

without regard to the general 10% limit

have an inclusion amount if:

arising from an undisclosed listed

if the contributions were made after

transaction or an undisclosed

August 27, 2005, and before January 1,

And the vehicle’s FMV on

reportable avoidance transaction (other

2006, to a qualified charitable

The lease term

the first day of the lease

began:

exceeded:

than a listed transaction) entered into in

organization (other than certain private

tax years beginning after October 22,

foundations described in section

After 12/31/04 but before 1/1/06

$15,200

2004.

509(a)(3)), for Hurricane Katrina, Rita,

or Wilma relief efforts. The total amount

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

$17,500

Special rules apply to:

•

claimed cannot be more than taxable

Interest on which no tax is imposed

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

$18,000

income as computed above substituting

(see section 163(j)).

If the lease term began before January 1, 2003, see Pub.

•

“100%” for “10%.” Excess qualified

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

Forgone interest on certain

find out if the cooperative has an inclusion amount. The

contributions are carried over to the

below-market-rate loans (see section

inclusion amount for lease terms beginning in 2006 will be

next 5 years. Attach a statement

7872).

published in the Internal Revenue Bulletin in early 2006.

•

substantiating that the contributions are

Original issue discount on certain

for Hurricane Katrina, Rita, or Wilma

high yield discount obligations (see

See Pub. 463 for instructions on

relief efforts and indicating the amount

section 163(e) to figure the disqualified

figuring the inclusion amount.

of qualified contributions for which the

portion).

•

election is made. For more information,

Interest which is allocable to

Line 17. Taxes and Licenses

see section 1400S.

unborrowed policy cash values of life

Enter taxes paid or accrued during the

insurance, endowment, or annuity

Carryover. Charitable contributions

tax year, except the following.

contracts issued after June 8, 1997.

over the 10% limitation cannot be

•

See section 264(f). Attach a statement

deducted for the current tax year but

Federal income taxes.

•

may be carried over to the next 5 tax

showing the computation of the

Foreign or U.S. possession income

years.

deduction.

taxes if a tax credit is claimed

(however, see the Instructions for Form

Special rules apply if the cooperative

Line 19. Charitable

5735 for special rules for possession

has an NOL carryover to the tax year.

Contributions

income taxes).

In figuring the charitable contributions

•

deduction for the tax year, the 10% limit

Taxes not imposed on the

Enter contributions or gifts actually paid

is applied using the taxable income

cooperative.

within the tax year to or for the use of

•

after taking into account any deduction

charitable and governmental

Taxes, including state or local sales

for the NOL.

organizations described in section

taxes, that are paid or incurred in

170(c), and any unused contributions

connection with an acquisition or

To figure the amount of any

carried over from prior years. Special

disposition of property (these taxes are

remaining NOL carryover to later years,

rules and limits apply to contributions to

treated as part of the cost of the

taxable income must be modified (see

organizations conducting lobbying

acquired property, or in the case of a

sections 172(b)). To the extent that

activities. See section 170(f)(9).

disposition, as a reduction in the

contributions are used to reduce

amount realized on the disposition).

taxable income for this purpose and

Cooperatives reporting taxable

•

increase an NOL carryover, a

Taxes assessed against local

income on the accrual method can

contributions carryover is not allowed.

benefits that increase the value of the

elect to treat as paid during the tax year

See section 170(d)(2)(B).

property assessed (such as for paving,

any contributions paid by the 15th day

etc.).

of the 3rd month after the end of the tax

Substantiation requirements.

•

Taxes deducted elsewhere on the

year if the contributions were

Generally, no deduction is allowed for

return, such as those reflected in cost

authorized by the board of directors

any contribution of $250 or more unless

of goods sold.

during the tax year. Attach a

the cooperative gets a written

-9-

Instructions For Form 990-C - Farmers' Cooperative Association Income Tax Return - Internal Revenue Service - 2005 Page 9

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