Instructions For Form 1120-Fsc - 2016 (Page 11 of 14) in pdf

Corporations use Form 8926, Disqualified

Examples of other deductions include:

taxed at a flat rate of 35% on its taxable

Corporate Interest Expense Disallowed

Amortization (see Form 4562).

income. A FSC is a qualified personal

Under Section 163(j) and Related

Insurance premiums.

service corporation if it meets both of the

Information, to figure the amount of any

Legal and professional fees.

following tests:

corporate interest expense disallowed by

Supplies used and consumed in the

Substantially all of the FSC's activities

section 163(j).

business.

involve the performance of services in the

Utilities.

fields of engineering, architecture, or

Golden parachute payments. A portion of

management consulting and

Do not deduct:

the payments made by a FSC to key

At least 95% of the corporation's stock, by

Fines or penalties paid to a government

personnel that exceeds their usual

value, is owned, directly or indirectly, by (1)

for violating any law.

compensation may not be deductible. This

employees performing the services, (2)

Any amount that is allocable to a class of

occurs when the FSC has an agreement

retired employees who had performed the

exempt income. See section 265(b) for

(golden parachute) with these key

services listed above, (3) any estate of the

exceptions.

employees to pay them these excess

employee or retiree described above, or (4)

amounts if control of the FSC changes. See

See Pub. 535 and Pub. 542 for details on

any person who acquired the stock of the

section 280G and Regulations section

other deductions that may apply to

FSC as a result of the death of an employee

1.280G-1. Also, see the instructions for

corporations. Also, see the Instructions for

or retiree (but only for the 2-year period

line 10.

Form 1120.

beginning on the date of the employee's or

Line 1. Enter only foreign direct costs on

retiree's death).

Schedule J

lines 1a through 1e. See section 924(e) and

Note. If the FSC meets these tests, check

Regulations sections 1.924(e)-1(a) through

Line 1

the box on line 2.

(e) for definitions and rules on direct activity

If the FSC is a member of a controlled group,

costs related to foreign trade income.

Line 3

as defined in section 927(d)(4), it must check

Line 5. Salaries and wages. Enter the total

the box on line 1 and complete Schedule O

Alternative minimum tax (AMT). Unless

salaries and wages paid for the tax year. Do

(Form 1120). Members of a controlled group

the FSC is treated as a small corporation

not include salaries and wages deductible

must use Schedule O (Form 1120) to figure

exempt from the AMT, it may owe the AMT if

elsewhere on the return, such as amounts

the tax for the group. See Schedule O and its

it has any of the adjustments and tax

included in officers' compensation, cost of

instructions for more information.

preference items listed on Form 4626,

goods sold, elective contributions to a

Alternative Minimum Tax—Corporations.

Line 2

section 401(k) cash or deferred

The FSC must file Form 4626 if its taxable

arrangement, or amounts contributed under

Most FSCs should figure their tax using the

income (or loss) before the NOL deduction,

a salary reduction SEP agreement or a

Tax Rate Schedule below. Qualified

combined with these adjustments and tax

SIMPLE IRA plan.

personal service corporations should see the

preference items is more than the smaller of

instructions below.

Line 10. Compensation of officers. Enter

$40,000 or the FSC's allowable exemption

deductible officers' compensation on line 10.

amount (from Form 4626). For this purpose,

Tax Rate Schedule

Do not include compensation deductible

taxable income does not include the NOL

elsewhere on the return, such as amounts

deduction.

included in cost of goods sold, elective

If taxable income (Schedule B, line 20) is:

See the Instructions for Form 4626 for

contributions to a section 401(k) cash or

definitions and details on how to figure the

Of the

deferred arrangement, or amounts

But not

amount

tax.

contributed under a salary reduction SEP

Over—

over—

Tax is:

over—

Line 5

agreement or a SIMPLE IRA plan. See the

Instructions for Form 1125-E for more

$50,000

15%

Foreign tax credit. Generally, a FSC may

50,000

75,000

$ 7,500 + 25%

50,000

information on officers' compensation,

not claim a foreign tax credit. It may,

75,000

100,000

13,750 + 34%

75,000

including any special rules and limitations

100,000

335,000

22,250 + 39%

100,000

however, claim a foreign tax credit for any

that may apply. You are not required to

335,000 10,000,000

113,900 + 34%

335,000

foreign taxes imposed on foreign source

complete Form 1125-E or attach it to Form

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

taxable nonforeign trade income

1120-FSC.

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

(Schedule F, Part II) that is treated as

18,333,333

- - - - -

35%

Line 14. Other deductions. Attach a

effectively connected with a U.S. trade or

statement, listing by type and amount, all

business. See Temporary Regulations

allowable deductions that are not deductible

section 1.921-3T(d)(2) for more details.

elsewhere on Form 1120-FSC. Enter the

Qualified personal service corporations.

total on line 14.

A qualified personal service corporation is

Instructions for Form 1120-FSC (Rev. 12-2016)

-11-

Instructions For Form 1120-Fsc - 2016 Page 11

Related Articles

Related forms

Related Categories