Instructions For Form 1120-Pc - 2016 (Page 16 of 23) in pdf

corporation may elect to waive the

repairs, interest, taxes, and depreciation

any insurance business. Do not include

carryback period and instead carry the

on the proper lines in the Deductions

losses from sales or exchanges of capital

NOL forward to future tax years. See the

section.

assets or property used in the business, or

instructions for Schedule I, item 11, later.

from the compulsory or involuntary

Line 5. Gross income from a trade or

conversion of property used in the trade or

Special rules and exceptions to the

business, other than an insurance

business.

2-year carryback period apply to certain

business, and from Form 4797. Enter

NOLs. See the Instructions for Form 1139

the gross income from a trade or

Line 14. Interest. See the instructions for

for details, on these special rules and

business, other than an insurance

lines 20a and 20b, Schedule A.

other elections that may be available.

business, carried on by the insurance

Line 17. Investment expenses. Enter

company or by a partnership of which the

Minimum taxable income. The

expenses that are properly chargeable as

insurance company is a partner. Include

corporation's taxable income cannot be

investment expenses. If general expenses

section 1245 and section 1250 gains (as

less than the largest of the following

are allocated to investment expenses, the

modified by section 291) and other gains

amounts.

total deduction cannot be more than the

from Form 4797, Sales of Business

The inversion gain of the corporation for

amount on Schedule B, Part II, line 39.

Property, on investment assets only.

the tax year, if the corporation is an

Attach a statement showing the kind and

expatriated entity or a partner in an

Line 6. Income from leases described

amount of general expenses. Minor items

expatriated entity. See section 7874(a).

in sections 834(b)(1)(B) and 834(b)(1)

may be grouped together.

The sum of the corporation's excess

(C). Enter gross income from entering

See section 267 for the limitation on

inclusions from its residual interest in a

into, changing, or ending any lease,

deductions for unpaid expenses and

REMIC from Schedules Q (Form 1066),

mortgage, or other instrument or

interest in transactions between related

line 2c, and the corporation's taxable

agreement from which the company earns

taxpayers.

income determined solely with respect to

interest, rents, or royalties.

its ownership and high-yield interests in

Line 8. Gross investment income. If

Schedule B, Part

FASITs. See sections 860E(a) and 860J

gross investment income includes an

(repealed).

II—Invested Assets Book

amount subtracted from the protection

Values

against loss account, write on the dotted

Schedule B, Part

line next to line 8, “PAL” and the amount.

Use Schedule B, Part II, to compute the

I—Taxable Investment

Deductions

limitation on investment expenses under

Income of Electing Small

section 834(c)(2) when any general

Note. See section 834(d)(1) regarding

expenses are in part assigned to, or

the limitation of expenses on real estate

Companies

included in, the investment expenses

owned and occupied in part or in whole by

deducted on Schedule B, Part I, line 17.

a mutual insurance company.

Note. (1) Once an election under section

Line 9. Real estate taxes. Enter taxes

831(b) is made to be taxed only on

Schedule C—Dividends

paid or accrued on real estate owned by

investment income, it can only be revoked

the corporation and deductible under

with the consent of the Secretary, and (2)

and Special Deductions

section 164.

a corporation making this election must

Definitions

include on line 8, Gross investment

Line 10. Other real estate expenses.

income, any amount subtracted from a

Enter all ordinary and necessary real

The acquisition date for investments

protection against loss account.

estate expenses, such as fire insurance,

acquired by direct purchase is the trade

heat, light, and labor. Also enter the cost

Income

date rather than the settlement date. For

of incidental repairs, such as labor and

investments not acquired by direct

Line 1a, column (a). Gross interest.

supplies, that do not add to the property's

purchase (such as those acquired through

Enter the gross amount of interest income,

value or appreciably prolong its life. Do not

transfers among affiliates, tax-free

including all tax-exempt interest income.

include any amount paid for new buildings

reorganizations, or the liquidation of a

or for permanent improvements or

subsidiary, etc.), the actual acquisition

Line 1b, column (a). Interest exempt

betterments made to increase the value of

date should be used regardless of the

under section 103. Enter the amount of

any property or any amount spent on

holding period determined under section

interest on state and local bonds that is

foreclosed property before the property is

1223.

exempt from taxation under section 103.

held for rent.

See the instructions for Schedule A,

A special rule applies in determining

line 3b, column (a), for more information.

Line 11. Depreciation. Enter

the acquisition date of dividends received

depreciation on assets only to the extent

Lines 1a and 1b, column (b). Amortiza-

from affiliates. This rule provides that the

that the assets are used to produce gross

portion of any 100% dividend which is

tion of premium. Enter on line 1a,

investment income reported on

related to prorated amounts be treated as

column (b), the total amortization of

Schedule B, lines 1 through 7. For more

premium on tax-exempt bonds.

received with respect to stock acquired on

information, see the instructions for

the later of:

Enter on line 1b, column (b), the

line 22, Schedule A.

amortization of bond premium on

(a) the date the payor acquired the

Line 12. Depletion. Enter any allowable

tax-exempt bonds.

stock or obligation to which the prorated

depletion on royalty income reported on

amounts are attributable or

line 4, Schedule B. See the instructions for

Note. Insurance companies electing to

amortize discount for tax purposes must

line 23, Schedule A, for more information.

(b) the first day on which the payor and

reduce the amortization of premium by

payee were members of the same

Line 13. Trade or business deductions.

any amortization of discount.

affiliated group as defined in section

Enter the total deductions related to any

243(b).

Line 3. Gross rents. Enter the gross

trade or business income included in

gross investment income under section

rents received or accrued during the tax

Also, if the taxpayer is a member of an

834(b)(2). Do not include deductions for

year. Deduct rental expenses such as

affiliated group filing a consolidated return,

Instructions for Form 1120-PC (2016)

-16-

Instructions For Form 1120-Pc - 2016 Page 16

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