Instructions For Form 1120-Ic-Disc - 2012 (Page 9 of 16) in pdf

attributable to periods totaling less than

Regulations section 1.263A-1(e)(3)

4. Enter the smaller of line 2 or

367 days are subject to the 46-day holding

specifies other indirect costs that relate to

line 3. If line 3 is larger than

line 2, do not complete the rest of

period rule in item 1.

production or resale activities that must be

this worksheet. Instead, enter the

capitalized and those that may be

3. Dividends on any share of stock to

amount from line 4 in the margin

currently deductible.

the extent the IC-DISC is under an

next to line 9 of Schedule C and

obligation (including a short sale) to make

Interest expense paid or incurred

on line 6b, page 1, Form

related payments with respect to positions

during the production period of designated

1120-IC-DISC

. . . . . . . . .

in substantially similar or related property.

property must be capitalized and is

5. Enter the total amount of

dividends received from

Any other taxable dividend income not

governed by special rules. For more

20%-or-more-owned

properly reported elsewhere on

details, see Regulations sections

corporations that are included on

Schedule C.

1.263A-8 through 1.263A-15.

lines 2, 3, 5, 7, and 8 of column

The costs required to be capitalized

(a)

. . . . . . . . . . . . . . .

Line 15, Column (a)

under section 263A are not deductible

6. Subtract line 5 from line 1

. .

until the property (to which the costs

7. Multiply line 6 by 70%

Qualified dividends are dividends that

relate) is sold, used, or otherwise

(0.70)

. . . . . . . . . . . . .

qualify as qualified export receipts. They

disposed of by the corporation.

8. Subtract line 3 above from

include all dividends (or amounts)

column (c) of line 9

. . . . . .

includible in gross income (under section

Exceptions. Section 263A does not

9. Enter the smaller of line 7 or

951) that are attributable to stock of

apply to the following.

line 8

. . . . . . . . . . . . . .

related foreign export corporations. See

Personal property acquired for resale if

10. Dividends-received deduction

Qualified export receipts

and

A related

the IC-DISC's average annual gross

after limitation. Add lines 4 and

foreign export corporation

under

Section

9. (If this is less than line 9 of

receipts for the 3 prior tax years were $10

Schedule C, enter the smaller

993, earlier, for more details.

million or less.

amount on line 6b, page 1, Form

Inventoriable items accounted for in the

Schedule E

1120-IC-DISC, and in the margin

same manner as materials and supplies

next to line 9 of

that are not incidental. See

Cost of Goods

Schedule C.)

Deductions

. . . . . . . . .

Sold, earlier, for details.

Limitations on Deductions

For more details on the uniform

Line 13, Column (a)

capitalization rules, see Regulations

Section 263A uniform capitalization

sections 1.263A-1 through 1.263A-3.

Include the following.

rules. The uniform capitalization rules of

Dividends (other than capital gain

Transactions between related taxpay-

section 263A generally require

distributions reported on Schedule D

ers. Generally, an accrual basis taxpayer

corporations to capitalize, or include in

(Form 1120) and exempt-interest

may only deduct business expenses and

inventory, certain costs incurred in

dividends) that are received from RICs

interest owed to a related party in the year

connection with the following.

and that are not subject to the 70%

the payment is included in the income of

Personal property (tangible and certain

deduction.

the related party. See sections 163(e)(3),

intangible property) acquired for resale.

Dividends from tax-exempt

163(j), and 267 for limitations on

The production of real property and

organizations.

deductions for unpaid interest and

tangible personal property by a

Dividends (other than capital gain

expenses.

corporation for use in its trade or business

distributions) received from a real estate

or in an activity engaged in for profit.

Corporations use Form 8926,

investment trust that, for the tax year of the

Disqualified Corporate Interest Expense

Tangible personal property produced

trust in which the dividends are paid,

Under Section 163(j) and Related

by a corporation includes a film, sound

qualifies under sections 856 through 860.

Information, to figure the amount of any

recording, videotape, book, or similar

Dividends not eligible for a

corporate interest disallowed by section

property.

dividends-received deduction, which

163(j).

IC-DISCs subject to the section 263A

include the following.

Golden parachute payments. A portion

uniform capitalization rules are required to

1. Dividends received on any share of

of the payments made by a corporation to

capitalize:

stock held for less than 46 days during the

key personnel that exceeds their usual

1. Direct costs, and

91-day period beginning 45 days before

compensation may not be deductible. This

the ex-dividend date. When counting the

2. An allocable part of most indirect

occurs when the corporation has an

number of days the corporation held the

costs (including taxes) that (a) benefit the

agreement (golden parachute) with these

stock, you may not count certain days

assets produced or acquired for resale, or

key employees to pay them these excess

during which the corporation's risk of loss

(b) are incurred by reason of the

amounts if control of the corporation

was diminished. See section 246(c)(4)

performance of production or resale

changes. See section 280G and

and Regulations section 1.246-5 for more

activities.

Regulations section 1.280G-1. Also, see

details.

the

instructions for line

1i, later.

For inventory, some of the indirect

2. Dividends attributable to periods

expenses that must be capitalized are:

Business start-up and organizational

totaling more than 366 days that the

Administration expenses;

costs. Business start-up and

IC-DISC received on any share of

Taxes;

organizational costs must be capitalized

preferred stock held for less than 91 days

Depreciation;

unless an election is made to deduct or

during the 181-day period that began 90

Insurance;

amortize them. The following rules apply

days before the ex-dividend date. When

Compensation paid to officers

separately to each category of costs.

counting the number of days the IC-DISC

attributable to services;

The IC-DISC may elect to deduct up to

held the stock, you may not count certain

Rework labor; and

$5,000 of such costs for the year the

days during which the IC-DISC's risk of

Contributions to pension, stock bonus,

IC-DISC begins business operations.

loss was diminished. See section 246(c)

and certain profit-sharing, annuity, or

The $5,000 deduction is reduced (but

(4) and Regulations section 1.246-5 for

deferred compensation plans.

not below zero) by the amount the total

more details. Preferred dividends

Instructions for Form 1120-IC-DISC (Rev. 9-2017)

-9-

Instructions For Form 1120-Ic-Disc - 2012 Page 9

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