Instructions For Form 1120-Pc - 2016 (Page 15 of 23) in pdf

His or her travel is for a bona fide

If an ownership change occurs

Lobbying expenses. Generally,

business purpose and would otherwise be

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

lobbying expenses are not deductible.

deductible by that individual.

of the taxable income of a loss corporation

These expenses include:

that may be offset by the pre-change NOL

Meals and entertainment. Generally,

Amounts paid or incurred in connection

carryovers may be limited. (See section

the corporation can deduct only 50% of

with influencing federal or state legislation

382 and the related regulations.) A loss

the amount otherwise allowable for meals

(but not local legislation) or

corporation must include the information

and entertainment expenses paid or

Amounts paid or incurred in connection

statement as provided in Regulations

incurred in its trade or business. In

with any communication with certain

section 1.382-11(a), with its income tax

addition (subject to exceptions under

federal executive branch officials in an

return for each tax year that it is a loss

section 274(k)(2)):

attempt to influence the official actions or

corporation in which an ownership shift,

Meals must not be lavish or

positions of the officials. See Regulations

equity structures shift, or other transaction

extravagant;

section 1.162-29 for the definition of

described in Temporary Regulations

A bona fide business discussion must

“influencing legislation.”

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

occur during, immediately before, or

Dues and other similar amounts paid to

Regulations section 1.382-6(b) for details

immediately after the meal; and

certain tax-exempt organizations may not

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

An employee of the corporation must

be deductible. See section 162(e)(3). If

election.

be present at the meal.

certain in-house lobbying expenditures do

The limitations under section 382 do

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

not exceed $2,000, they are deductible.

not apply to certain ownership changes

that applies to expenses for meals

Line 32. Total deductions. Insurance

after February 17, 2009, made pursuant to

consumed by individuals subject to the

companies that issue specified insurance

a restructuring plan under the Emergency

hours of service limits of the Department

contracts (as defined in section 848(e)(1))

Economic Stabilization Act of 2008. See

of Transportation.

are generally required to amortize policy

section 382(n).

Membership dues. The corporation

acquisition expenses on a straight-line

For guidance in applying section 382 to

can deduct amounts paid or incurred for

basis over a period of 120 months

loss corporations whose instruments were

membership dues in civic or public service

beginning with the 1st month in the 2nd

acquired by Treasury under certain

organizations, professional organizations

half of the tax year (section 848(a)).

programs under the Emergency Economic

(such as bar and medical associations),

Reduce total deductions on line 32 by the

Stabilization Act of 2008, see Notice

business leagues, trade associations,

amount required to be capitalized under

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

chambers of commerce, boards of trade,

section 848. Attach a statement showing

If a corporation acquires control of

and real estate boards. However, no

all computations. See section 848 and its

another corporation (or acquires its assets

deduction is allowed if a principal purpose

regulations for special rules, definitions,

in a reorganization), the amount of

of the organization is to entertain, or

and exceptions. Also see Schedule G,

pre-acquisition losses that may offset

provide entertainment facilities for,

Form 1120-L, and its instructions for more

recognized built-in gain may be limited

members or their guests. In addition,

information.

(see section 384).

corporations cannot deduct membership

Line 34b. Deduction on account of the

If a corporation elects the alternative tax

dues in any club organized for business,

special income and deduction ac-

on qualifying shipping activities under

pleasure, recreation, or other social

counts. Enter the total of the amounts

section 1354, no deduction is allowed for

purpose. This includes country clubs, golf

required to be added under sections

an NOL attributable to the qualifying

and athletic clubs, airline and hotel clubs,

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

shipping activities to the extent that the

and clubs operated to provide meals

is permitted unless tax and loss bonds are

loss is carried forward from a tax year

under conditions favorable to business

purchased in an amount equal to the tax

preceding the first tax year for which the

discussion.

benefit of the deduction. See section

alternative tax election was made. See

Entertainment facilities. The

832(e).

section 1358(b)(2).

corporation cannot deduct an expense

An NOL cannot be carried to or from

paid or incurred for a facility (such as a

Note. The deduction on account of the

any tax year for which the insurance

yacht or hunting lodge) used for an activity

special income and deduction accounts is

company is not subject to tax under

usually considered entertainment,

limited to taxable income for the tax year

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

amusement, or recreation.

(computed without regard to this

between the tax year from which the loss

Amounts treated as compensation.

deduction or to any carryback of a net

is being carried and such tax year, there is

operating loss).

Generally, the corporation may be able to

an intervening tax year for which the

deduct otherwise nondeductible

insurance company was not subject to tax

Line 36b. Net operating loss deduc-

entertainment, amusement, or recreation

imposed by section 831(a).

tion. A corporation can use the net

expenses if the amounts are treated as

If a corporation has a loss attributable to

operating loss (NOL) incurred in one tax

compensation to the recipient and

a disaster, special rules apply. See the

year to reduce its taxable income in

reported on Form W-2 for an employee or

Instructions for Form 1139.

another tax year.

on Form 1099-MISC for an independent

For more details on the NOL deduction,

Enter on line 36b the total NOL

contractor.

see section 172, section 844, and the

carryovers from other tax years, but do not

However, if the recipient is an officer,

Instructions for Form 1139, Corporation

enter more than the corporation's taxable

director, beneficial owner (directly or

Application for Tentative Refund.

income (after the dividends-received

indirectly), or other “specified individual”

deduction). Attach a statement showing

Line 37. Taxable income. If line 37

(as defined in section 274(e)(2)(B) and

the computation of the NOL deduction.

(figured without regard to the items listed

Regulations section 1.274-9(b)), special

Also complete item 12 on Schedule I.

below under Minimum taxable income) is

rules apply. See section 274(e)(2) and

zero or less, the corporation may have an

The following special rules apply.

Regulations sections 1.274-9 and

NOL that can be carried back or forward

A corporate equity reduction interest

1.274-10.

as a deduction to other tax years.

loss may not be carried back to a tax year

preceding the year of the equity reduction

Generally, a corporation first carries

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

back an NOL 2 tax years. However, the

Instructions for Form 1120-PC (2016)

-15-

Instructions For Form 1120-Pc - 2016 Page 15

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