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IRS Instructions for Form 1120 - 2010

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IRS Instructions for Form 1120 - 2010 Powered By Docstoc
					2010                                                                                                                 Department of the Treasury
                                                                                                                     Internal Revenue Service

Instructions for Form 1120
U.S. Corporation Income Tax Return
Section references are to the Internal                     1120-L, and 1120-PC with assets that           IRS whose employees assist taxpayers
Revenue Code unless otherwise noted.                       equal or exceed $100 million must file         who are experiencing economic harm,
Contents                                           Page    new Schedule UTP (Form 1120) to report         who are seeking help in resolving tax
Photographs of Missing Children . . . . 1                  uncertain tax positions. See Schedule K        problems that have not been resolved
                                                           Question 14 , on page 20.                      through normal channels, or who believe
Unresolved Tax Issues . . . . . . . . . . . . 1
                                                           Federal tax deposits must be made by           that an IRS system or procedure is not
Direct Deposit of Refund . . . . . . . . . . . 1                                                          working as it should. The service is free,
How To Make a Contribution To                              electronic funds transfer. Beginning
                                                           January 1, 2011, corporations must use         confidential, tailored to meet your needs,
   Reduce Debt Held by the                                                                                and is available for businesses, as well as
   Public . . . . . . . . . . . . . . . . . . . . . . 1    electronic funds transfers to make all
                                                           federal tax deposits (such as deposits of      individuals.
How To Get Forms and
                                                           employment tax, excise tax, and                    The corporation can contact the TAS
   Publications . . . . . . . . . . . . . . . . . . 1
                                                           corporate income tax). Forms 8109 and          as follows.
General Instructions . . . . . . . . . . . . . 2
Purpose of Form . . . . . . . . . . . . . . . . 2
                                                           8109-B, Federal Tax Coupon, cannot be          • Call the TAS toll-free line at
                                                           used after December 31, 2010. See              1-877-777-4778 or TTY/TDD
Who Must File . . . . . . . . . . . . . . . . . . 2        Electronic Deposit Requirement on page         1-800-829-4059 to see if the corporation
Electronic Filing . . . . . . . . . . . . . . . . . 2      4.                                             is eligible for assistance.
When To File . . . . . . . . . . . . . . . . . . . 3                                                      • Call or write the corporation’s local
                                                           Special rules for eligible small
Where To File . . . . . . . . . . . . . . . . . . 3                                                       taxpayer advocate, whose phone number
                                                           business credits. For tax years
Who Must Sign . . . . . . . . . . . . . . . . . 3          beginning in 2010, if the corporation is an    and address are listed in the local
Paid Preparer Authorization . . . . . . . . 3              eligible small business, eligible small        telephone directory and in Pub. 1546,
Assembling the Return . . . . . . . . . . . . 4            business credits are not subject to the        Taxpayer Advocate Service – Your Voice
Tax Payments . . . . . . . . . . . . . . . . . . 4         alternative minimum tax (AMT). In              at the IRS.
Estimated Tax Payments . . . . . . . . . . 4               addition, eligible small business credits      • File Form 911, Request for Taxpayer
Interest and Penalties . . . . . . . . . . . . . 4         can be carried back five years and will not    Advocate Service Assistance (And
Accounting Methods . . . . . . . . . . . . . . 5           be subject to AMT in the carryback years.      Application for Taxpayer Assistance
Accounting Period . . . . . . . . . . . . . . . 5          For more information, see the instructions     Order), or ask an IRS employee to
Rounding Off to Whole Dollars . . . . . . 5                for Form 3800.                                 complete it on the corporation’s behalf.
Recordkeeping . . . . . . . . . . . . . . . . . . 5        Special rule for 2010 start-up costs.              For more information, go to www.irs.
Other Forms and Statements                                 For tax years beginning in 2010, a             gov/advocate.
   That May Be Required . . . . . . . . . . 5              corporation can elect to deduct up to
Specific Instructions . . . . . . . . . . . . 6            $10,000 of start-up costs. See section         Direct Deposit of Refund
Period Covered . . . . . . . . . . . . . . . . . 6         195(b)(3). Also see Business start-up and      To request a direct deposit of the
Name and Address . . . . . . . . . . . . . . 6             organizational costs on page 9.                corporation’s income tax refund into an
Identifying Information . . . . . . . . . . . . 6          Extension of election to accelerate the        account at a U.S. bank or other financial
Employer Identification Number                             AMT credit in lieu of bonus                    institution, attach Form 8050, Direct
   (EIN) . . . . . . . . . . . . . . . . . . . . . . . 7   depreciation. A corporation can elect to       Deposit of Corporate Tax Refund. See
Total Assets . . . . . . . . . . . . . . . . . . . 7       increase the minimum tax credit limitation     the instructions for line 36.
Initial Return, Final Return,                              in lieu of bonus depreciation on certain
   Name Change, Address                                    “round two” extension property placed in       How To Make a
   Change . . . . . . . . . . . . . . . . . . . . . 7      service after December 31, 2010, in tax
Income . . . . . . . . . . . . . . . . . . . . . . . 7     years ending after such date. See section      Contribution To Reduce
Deductions . . . . . . . . . . . . . . . . . . . . 9       168(k)(4)(D)(iii). Also see the instructions   Debt Held by the Public
Tax and Payments . . . . . . . . . . . . . . 14            for line 32g on page 14.                       To help reduce debt held by the public,
Schedule A. Cost of Goods Sold . . . 15                        For the latest information, see www.irs.   make a check payable to “Bureau of the
Schedule C. Dividends and                                  gov/formspubs.                                 Public Debt.” Send it to: Bureau of the
   Special Deductions . . . . . . . . . . . . 16                                                          Public Debt, Department G, P.O. Box
Worksheet for Schedule C . . . . . . . . 17                Photographs of                                 2188, Parkersburg, WV 26106-2188. Or,
Schedule J. Tax Computation . . . . . . 17                                                                enclose a check with the income tax
Schedule K. Other Information . . . . . 19                 Missing Children                               return. Do not add the contributions to
Schedule L. Balance Sheets per                             The Internal Revenue Service is a proud        any tax the corporation may owe.
   Books . . . . . . . . . . . . . . . . . . . . . 20      partner with the National Center for           Contributions to reduce debt held by the
Schedule M-1. Reconciliation of                            Missing and Exploited Children.                public are deductible subject to the rules
   Income . . . . . . . . . . . . . . . . . . . . . 21     Photographs of missing children selected       and limitations for charitable
Principal Business Activity                                by the Center may appear in instructions       contributions.
   Codes . . . . . . . . . . . . . . . . . . . . . 22      on pages that would otherwise be blank.
Index . . . . . . . . . . . . . . . . . . . . . . . . 25
                                                           You can help bring these children home
                                                           by looking at the photographs and calling
                                                                                                          How To Get Forms
                                                           1-800-THE-LOST (1-800-843-5678) if you         and Publications
What’s New                                                 recognize a child.                             Internet. You can access the IRS
                                                                                                          website 24 hours a day, 7 days a week, at
New Schedule UTP (Form 1120),                              Unresolved Tax Issues                          IRS.gov to:
Uncertain Tax Position Statement.                          The Taxpayer Advocate Service (TAS) is         • Download forms, instructions, and
Certain filers of Forms 1120, 1120-F,                      an independent organization within the         publications;

                                                                         Cat. No. 11455T
• Order IRS products online;                   of Form 8832 to Form 1120 (or the               of the above exceptions applies. See
• Research your tax questions online;          applicable return) for the year of the          Regulations section 301.6011-5.
• Search publications online by topic or       election. For more information, see Form        However, these corporations can request
keyword;                                       8832 and its instructions.                      a waiver of the electronic filing
• View Internal Revenue Bulletins (IRBs)       Limited liability companies. If an entity       requirements. See Notice 2010-13,
published in recent years; and                 with more than one owner was formed as          2010-4 I.R.B. 327.
• Sign up to receive local and national        an LLC under state law, it generally is
tax news by email.                             treated as a partnership for federal               Visit www.irs.gov/efile for more
IRS Tax Products DVD. You can order            income tax purposes and files Form 1065,        information.
Pub. 1796, IRS Tax Products DVD, and           U.S. Return of Partnership Income.
obtain the following.                          Generally, a single-member LLC is               Special Returns for
• Current-year forms, instructions, and        disregarded as an entity separate from its      Certain Organizations
publications.                                  owner and reports its income and
                                               deductions on its owner’s federal income        Instead of filing Form 1120, certain
• Prior-year forms, instructions, and                                                          organizations, as shown below, file
publications.                                  tax return. The LLC can file a Form 1120
                                               only if it has filed Form 8832 to elect to be   special returns.
• Tax Map: an electronic research tool
and finding aid.                               treated as an association taxable as a
• Tax law frequently asked questions           corporation. For more information about           If the organization is a:        File Form
(FAQs).                                        LLCs, see Pub. 3402, Tax Issues for
• Tax Topics from the IRS telephone            Limited Liability Companies.
response system.                               Corporations engaged in farming. A              Exempt organization with
• Internal Revenue Code – Title 26 of          corporation (other than a corporation that      unrelated trade or business             990-T
the U.S. Code.                                 is a subchapter T cooperative) that             income
• Fill-in, print, and save features for most   engages in farming should use Form
tax forms.                                     1120 to report the income (loss) from           Religious or apostolic
• Internal Revenue Bulletins.                  such activities. Enter the income and
                                                                                               organization exempt under                1065
• Toll-free and email technical support.       deductions of the corporation according to
                                                                                               section 501(d)
• Two releases during the year.                the instructions for lines 1 through 10 and
– The first release will ship early in         12 through 29.
January.                                                                                       Entity formed as a limited
                                               Ownership interest in a Financial               liability company under state
– The final release will ship early in         Asset Securitization Investment Trust
March.                                         (FASIT). Special rules apply to a FASIT         law and treated as a                     1065
                                               in existence on October 22, 2004, to the        partnership for federal
   Buy the DVD from the National
Technical Information Service (NTIS) at        extent that regular interests issued by the     income tax purposes
www.irs.gov/cdorders for $30 (no               FASIT before October 22, 2004, continue
handling fee) or call 1-877-233-6767 toll      to remain outstanding in accordance with        Subchapter T cooperative
free to buy the DVD for $30 (plus a $6         their original terms.                           association (including a               1120-C
handling fee).                                     If a corporation holds an ownership         farmers’ cooperative)
By phone and in person. You can                interest in a FASIT to which these special
order forms and publications by calling        rules apply, it must report all items of        Entity that elects to be treated
1-800-TAX-FORM (1-800-829-3676). You           income, gain, deductions, losses, and           as a real estate mortgage
                                                                                                                                        1066
can also get most forms and publications       credits on the corporation’s income tax         investment conduit (REMIC)
at your local IRS office.                      return (except as provided in section           under section 860D
                                               860H). Show a breakdown of the items on
                                               an attached schedule. For more                  Interest charge domestic
General Instructions                           information, see sections 860H and 860L.        international sales
                                                                                               corporation (section 992)
                                                                                                                                  1120-IC-DISC
                                               Electronic Filing
Purpose of Form                                Corporations can generally electronically
                                                                                               Foreign corporation (other
Use Form 1120, U.S. Corporation Income         file (e-file) Form 1120, related forms,
                                               schedules, and attachments, Form 7004,          than life and property and
Tax Return, to report the income, gains,
losses, deductions, credits, and to figure     Form 940 and Form 941 employment tax            casualty insurance company             1120-F
the income tax liability of a corporation.     returns. If there is a balance due, the         filing Form 1120-L or Form
                                               corporation can authorize an electronic         1120-PC)
Who Must File                                  funds withdrawal while e-filing. Form 1099
Unless exempt under section 501, all           and other information returns can also be       Foreign sales corporation
                                                                                                                                   1120-FSC
domestic corporations (including               electronically filed.                           (section 922)
corporations in bankruptcy) must file an       Exceptions. The option to e-file
income tax return whether or not they          generally does not apply to certain             Condominium management,
have taxable income. Domestic                  returns, including:                             residential real estate
corporations must file Form 1120 unless        • Returns with precomputed penalty and          management, or timeshare
                                                                                                                                      1120-H
they are required to file a special return.    interest,                                       association that elects to be
See Special Returns for Certain                • Returns with reasonable cause for             treated as a homeowners
Organizations below.                           failing to file timely,                         association under section 528
Entities electing to be taxed as               • Returns with reasonable cause for
corporations. A domestic entity                failing to pay timely, and                      Life insurance company
electing to be classified as an association    • Returns with requests for                      (section 801)
                                                                                                                                      1120-L
taxable as a corporation must file Form        overpayments to be applied to another
1120 unless it is required to file a special   account.
                                                                                               Fund set up to pay for
return listed under Special Returns for        Required e-filers. Certain corporations         nuclear decommissioning              1120-ND
Certain Organizations, below. The entity       with total assets of $10 million or more        costs (section 468A)
must also file Form 8832, Entity               that file at least 250 returns a year are
Classification Election, and attach a copy     required to e-file Form 1120, even if any
                                                                   -2-                                       Instructions for Form 1120
                                               • The president, vice president,                 Paid Preparer
Property and casualty                          treasurer, assistant treasurer, chief
insurance company                 1120-PC      accounting officer; or                           Authorization
 (section 831)                                 • Any other corporate officer (such as tax       If the corporation wants to allow the IRS
                                               officer) authorized to sign.                     to discuss its 2010 tax return with the paid
Political organization                                                                          preparer who signed it, check the “Yes”
                                 1120-POL          If a return is filed on behalf of a
(section 527)                                                                                   box in the signature area of the return.
                                               corporation by a receiver, trustee, or           This authorization applies only to the
Real estate investment trust                   assignee, the fiduciary must sign the            individual whose signature appears in the
                                1120-REIT      return, instead of the corporate officer.        “Paid Preparer Use Only” section of the
(section 856)
                                               Returns and forms signed by a receiver or        return. It does not apply to the firm, if any,
                                               trustee in bankruptcy on behalf of a             shown in that section.
Regulated investment                           corporation must be accompanied by a
                                 1120-RIC                                                           If the “Yes” box is checked, the
company (section 851)                          copy of the order or instructions of the
                                               court authorizing signing of the return or       corporation is authorizing the IRS to call
S corporation (section 1361)         1120S     form.                                            the paid preparer to answer any
                                                                                                questions that may arise during the
                                                  If an employee of the corporation             processing of its return. The corporation
Settlement fund                                completes Form 1120, the paid preparer           is also authorizing the paid preparer to:
                                   1120-SF
(section 468B)                                 space should remain blank. Anyone who            • Give the IRS any information that is
                                               prepares Form 1120 but does not charge           missing from the return,
                                               the corporation should not complete that         • Call the IRS for information about the
When To File                                   section. Generally, anyone who is paid to        processing of the return or the status of
Generally, a corporation must file its         prepare the return must sign it and fill in      any related refund or payment(s), and
income tax return by the 15th day of the       the “Paid Preparer Use Only” area.               • Respond to certain IRS notices about
3rd month after the end of its tax year. A                                                      math errors, offsets, and return
new corporation filing a short-period              The paid preparer must complete the          preparation.
return must generally file by the 15th day     required preparer information and:
                                               • Sign the return in the space provided              The corporation is not authorizing the
of the 3rd month after the short period                                                         paid preparer to receive any refund
ends. A corporation that has dissolved         for the preparer’s signature.
                                                                                                check, bind the corporation to anything
must generally file by the 15th day of the     • Give a copy of the return to the               (including any additional tax liability), or
3rd month after the date it dissolved.         taxpayer.
                                                                                                otherwise represent the corporation
    If the due date falls on a Saturday,       Note. A paid preparer may sign original          before the IRS.
Sunday, or legal holiday, the corporation      or amended returns by rubber stamp,                  The authorization will automatically
can file on the next business day.             mechanical device, or computer software          end no later than the due date (excluding
                                               program.                                         extensions) for filing the corporation’s
Private Delivery Services
Corporations can use certain private
delivery services designated by the IRS to
meet the “timely mailing as timely filing”     Where To File
rule for tax returns. These private delivery
services include only the following.              File the corporation’s return at the applicable IRS address listed below.
• DHL Express (DHL): DHL Same Day               If the corporation’s principal And the total assets at
Service.                                        business, office, or agency the end of the tax year
• Federal Express (FedEx): FedEx                is located in:                 are:                         Use the following address:
Priority Overnight, FedEx Standard
Overnight, FedEx 2Day, FedEx                    Connecticut, Delaware, District Less than $10 million and    Department of the Treasury
International Priority, and FedEx               of Columbia, Georgia, Illinois, Schedule M-3 is not filed    Internal Revenue Service Center
                                                Indiana, Kentucky, Maine,                                    Cincinnati, OH 45999-0012
International First.
                                                Maryland, Massachusetts,
• United Parcel Service (UPS): UPS Next         Michigan, New Hampshire,
Day Air, UPS Next Day Air Saver, UPS            New Jersey, New York, North
2nd Day Air, UPS 2nd Day Air A.M., UPS          Carolina, Ohio, Pennsylvania,
Worldwide Express Plus, and UPS                 Rhode Island, South Carolina,     $10 million or more or     Department of the Treasury
Worldwide Express.                              Tennessee, Vermont, Virginia, less than $10 million and      Internal Revenue Service Center
                                                West Virginia, Wisconsin          Schedule M-3 is filed      Ogden, UT 84201-0012
   The private delivery service can tell
you how to get written proof of the mailing     Alabama, Alaska, Arizona,
date.                                           Arkansas, California, Colorado,
        Private delivery services cannot        Florida, Hawaii, Idaho, Iowa,
  !     deliver items to P.O. boxes. You        Kansas, Louisiana, Minnesota,
                                                                                                             Department of the Treasury
        must use the U.S. Postal Service        Mississippi, Missouri, Montana,
CAUTION
                                                                                      Any amount             Internal Revenue Service Center
to mail any item to an IRS P.O. box             Nebraska, Nevada, New
                                                                                                             Ogden, UT 84201-0012
                                                Mexico, North Dakota,
address.
                                                Oklahoma, Oregon, South
Extension of Time To File                       Dakota, Texas, Utah,
                                                Washington, Wyoming
File Form 7004, Application for Automatic
Extension of Time To File Certain                                                                            Internal Revenue Service Center
Business Income Tax, Information, and           A foreign country or U.S.             Any amount             P.O. Box 409101
Other Returns, to request a 6-month             possession                                                   Ogden, UT 84409
extension of time to file. Generally, the
corporation must file Form 7004 by the             A group of corporations with members located in more than one service center area
regular due date of the return.                will often keep all the books and records at the principal office of the managing
                                               corporation. In this case, the tax returns of the corporations may be filed with the
Who Must Sign                                  service center for the area in which the principal office of the managing corporation is
The return must be signed and dated by:        located.
Instructions for Form 1120                                           -3-
2011 tax return. If the corporation wants      time the day before the date the deposit is      Instructions for Form 2220 for the
to expand the paid preparer’s                  due. If the corporation uses a third party       definition of a large corporation.
authorization or revoke the authorization      to make deposits on its behalf, they may         Also, see the instructions for line 33.
before it ends, see Pub. 947, Practice         have different cutoff times.
Before the IRS and Power of Attorney.          Same-day wire payment option. If the             Interest and Penalties
                                               corporation fails to initiate a deposit          Interest. Interest is charged on taxes
Assembling the Return                          transaction on EFTPS by 8 p.m. Eastern           paid late even if an extension of time to
To ensure that the corporation’s tax return    time the day before the date a deposit is        file is granted. Interest is also charged on
is correctly processed, attach all             due, it can still make the deposit on time       penalties imposed for failure to file,
schedules and other forms after page 5 of      by using the Federal Tax Application             negligence, fraud, substantial valuation
Form 1120 in the following order.              (FTA). Before using the same-day wire            misstatements, substantial
    1. Schedule N (Form 1120).                 payment option, the corporation will need        understatements of tax, and reportable
    2. Schedule O (Form 1120).                 to make arrangements with its financial          transaction understatements from the due
    3. Form 4626.                              institution ahead of time. Please check          date (including extensions) to the date of
    4. Form 8050.                              with the financial institution regarding         payment. The interest charge is figured at
    5. Form 4136.                              availability, deadlines, and costs. To learn     a rate determined under section 6621.
    6. Form 8941.                              more about making a same-day wire
                                               payment and download the Same-Day                Late filing of return. A corporation that
    7. Form 851.                                                                                does not file its tax return by the due date,
    8. Additional schedules in alphabetical    Payment Worksheet, visit www.eftps.gov.
                                                                                                including extensions, may be penalized
order.                                         Estimated Tax Payments                           5% of the unpaid tax for each month or
    9. Additional forms in numerical order.    Generally, the following rules apply to the      part of a month the return is late, up to a
   Complete every applicable entry space       corporation’s payments of estimated tax.         maximum of 25% of the unpaid tax. The
on Form 1120. Do not enter “See                • The corporation must make installment          minimum penalty for a return that is over
Attached ” or “Available Upon Request”         payments of estimated tax if it expects its      60 days late is the smaller of the tax due
instead of completing the entry spaces. If     total tax for the year (less applicable          or $135. The penalty will not be imposed
more space is needed on the forms or           credits) to be $500 or more.                     if the corporation can show that the failure
schedules, attach separate sheets using        • The installments are due by the 15th           to file on time was due to reasonable
the same size and format as the printed        day of the 4th, 6th, 9th, and 12th months        cause. Corporations that file late should
forms. If there are supporting statements      of the tax year. If any date falls on a          attach a statement explaining the
and attachments, arrange them in the           Saturday, Sunday, or legal holiday, the          reasonable cause.
same order as the schedules or forms           installment is due on the next regular           Late payment of tax. A corporation that
they support and attach them last. Show        business day.                                    does not pay the tax when due generally
the totals on the printed forms. Enter the     • The corporation must use electronic            may be penalized 1/2 of 1% of the unpaid
corporation’s name and EIN on each             funds transfers to make installment              tax for each month or part of a month the
supporting statement or attachment.            payments of estimated tax.                       tax is not paid, up to a maximum of 25%
                                               • Use Form 1120-W, Estimated Tax for             of the unpaid tax. The penalty will not be
                                               Corporations, as a worksheet to compute
Tax Payments                                   estimated tax.
                                                                                                imposed if the corporation can show that
                                                                                                the failure to pay on time was due to
The corporation must pay any tax due in        • If the corporation overpaid estimated          reasonable cause.
full no later than the 15th day of the 3rd     tax, it may be able to get a quick refund
month after the end of the tax year.                                                            Trust fund recovery penalty. This
                                               by filing Form 4466, Corporation
                                                                                                penalty may apply if certain excise,
Electronic Deposit Requirement                 Application for Quick Refund of
                                                                                                income, social security, and Medicare
                                               Overpayment of Estimated Tax.
Beginning January 1, 2011, corporations                                                         taxes that must be collected or withheld
must use electronic funds transfers to             See the instructions for lines 32b and       are not collected or withheld, or these
make all federal tax deposits (such as         32c.                                             taxes are not paid. These taxes are
deposits of employment, excise, and            Estimated tax penalty. A corporation             generally reported on:
corporate income tax). Forms 8109 and          that does not make estimated tax                 • Form 720, Quarterly Federal Excise
8109-B, Federal Tax Coupon, cannot be          payments when due may be subject to an           Tax Return;
used after December 31, 2010. Generally,       underpayment penalty for the period of           • Form 941, Employer’s QUARTERLY
electronic funds transfers are made using      underpayment. Generally, a corporation is        Federal Tax Return;
the Electronic Federal Tax Payment             subject to the penalty if its tax liability is   • Form 943, Employer’s Annual Federal
System (EFTPS). However, if the                $500 or more and it did not timely pay the       Tax Return for Agricultural Employees;
corporation does not want to use EFTPS,        smaller of:                                      • Form 944, Employer’s ANNUAL
it can arrange for its tax professional,       • Its tax liability for 2010 or                  Federal Tax Return; or
financial institution, payroll service, or     • Its prior year’s tax.                          • Form 945, Annual Return of Withheld
other trusted third party to make deposits         See section 6655 for details and             Federal Income Tax.
on its behalf. Also, it may arrange for its    exceptions, including special rules for              The trust fund recovery penalty may
financial institution to initiate a same-day   large corporations.                              be imposed on all persons who are
tax wire payment (discussed below) on its                                                       determined by the IRS to have been
behalf. EFTPS is a free service provided           Use Form 2220, Underpayment of
                                               Estimated Tax by Corporations, to see if         responsible for collecting, accounting for,
by the Department of the Treasury.                                                              and paying over these taxes, and who
Services provided by a tax professional,       the corporation owes a penalty and to
                                               figure the amount of the penalty.                acted willfully in not doing so. The penalty
financial institution, payroll service, or                                                      is equal to the full amount of the unpaid
other third party may have a fee.              Generally, the corporation does not have
                                               to file this form because the IRS can            trust fund tax. See the Instructions for
    To get more information about EFTPS        figure the amount of any penalty and bill        Form 720, Pub. 15 (Circular E), or Pub.
or to enroll in EFTPS, visit www.eftps.gov,    the corporation for it. However, even if the     51 (Circular A), Agricultural Employer’s
or call 1-800-555-4477. Additional             corporation does not owe the penalty,            Tax Guide, for details, including the
information about EFTPS is also available      complete and attach Form 2220 if:                definition of responsible persons.
in Pub. 966, The Secure Way to Pay Your        • The annualized income or adjusted              Other penalties. Other penalties can be
Federal Taxes.                                 seasonal installment method is used, or          imposed for negligence, substantial
Depositing on time. For deposits made          • The corporation is a large corporation         understatement of tax, reportable
by EFTPS to be on time, the corporation        computing its first required installment         transaction understatements, and fraud.
must initiate the deposit by 8 p.m. Eastern    based on the prior year’s tax. See the           See sections 6662, 6662A, and 6663.
                                                                    -4-                                       Instructions for Form 1120
Accounting Methods                            corporation, must get the consent of the       corporation (or a related party) paid an
                                              IRS before changing its tax year by filing     advisor a fee of at least $250,000.
Figure taxable income using the method
                                              Form 1128, Application To Adopt,                   3. Certain transactions for which the
of accounting regularly used in keeping
                                              Change, or Retain a Tax Year. However,         corporation (or a related party) has
the corporation’s books and records. In all
                                              under certain conditions, a corporation        contractual protection against
cases, the method used must clearly
                                              can change its tax year without getting        disallowance of the tax benefits.
show taxable income. Permissible
                                              consent.                                           4. Certain transactions resulting in a
methods include cash, accrual, or any
                                                 See the Instructions for Form 1128          loss of at least $10 million in any single
other method authorized by the Internal
                                              and Pub. 538 for more information on           year or $20 million in any combination of
Revenue Code.
                                              accounting periods and tax years.              years.
    Generally, the following rules apply.                                                        5. Any transaction identified by the
• A corporation (other than a qualified                                                      IRS by notice, regulation, or other
personal service corporation) must use        Rounding Off to                                published guidance as a “transaction of
the accrual method of accounting if its
average annual gross receipts exceed $5
                                              Whole Dollars                                  interest.” See Notice 2009-55, 2009-31
                                              The corporation can round off cents to         I.R.B. 170.
million. However, see Nonaccrual
experience method on page 8.                  whole dollars on its return and schedules.         For more information, see Regulations
• Unless it is a qualifying taxpayer or a     If the corporation does round to whole         section 1.6011-4. Also see the
qualifying small business taxpayer, a         dollars, it must round all amounts. To         Instructions for Form 8886.
corporation must use the accrual method       round, drop amounts under 50 cents and
                                              increase amounts from 50 to 99 cents to            Penalties. The corporation may have
for sales and purchases of inventory                                                         to pay a penalty if it is required to disclose
items. See Schedule A. Cost of Goods          the next dollar. For example, $1.39
                                              becomes $1 and $2.50 becomes $3.               a reportable transaction under section
Sold on page 15.                                                                             6011 and fails to properly complete and
• A corporation engaged in farming must           If two or more amounts must be added       file Form 8886. Penalties may also apply
use the accrual method. For exceptions,       to figure the amount to enter on a line,       under section 6707A if the corporation
see section 447.                              include cents when adding the amounts          fails to file Form 8886 with its corporate
• Special rules apply to long-term            and round off only the total.                  return, fails to provide a copy of Form
contracts. See section 460.                                                                  8886 to the Office of Tax Shelter Analysis
• Dealers in securities must use the          Recordkeeping                                  (OTSA), or files a form that fails to include
mark-to-market accounting method.                                                            all the information required (or includes
                                              Keep the corporation’s records for as long
Dealers in commodities and traders in                                                        incorrect information). Other penalties,
                                              as they may be needed for the
securities and commodities can elect to                                                      such as an accuracy-related penalty
                                              administration of any provision of the
use the mark-to-market accounting                                                            under section 6662A, may also apply.
                                              Internal Revenue Code. Usually, records
method. See section 475.                                                                     See the Instructions for Form 8886 for
                                              that support an item of income, deduction,
Change in accounting method.                  or credit on the return must be kept for 3     details on these and other penalties.
Generally, the corporation must get IRS       years from the date the return is due or       Reportable transactions by material
consent to change the method of               filed, whichever is later. Keep records that   advisors. Material advisors to any
accounting used to report taxable income      verify the corporation’s basis in property     reportable transaction must disclose
(for income as a whole or for the             for as long as they are needed to figure       certain information about the reportable
treatment of any material item). To do so,    the basis of the original or replacement       transaction by filing Form 8918, Material
the corporation generally must file Form      property.                                      Advisor Disclosure Statement, with the
3115, Application for Change in
                                                  The corporation should keep copies of      IRS. For details, see the Instructions for
Accounting Method. See Form 3115, the
                                              all filed returns. They help in preparing      Form 8918.
Instructions for Form 3115, and Pub. 538,
Accounting Periods and Methods, for           future and amended returns.                    Transfers to a corporation controlled
more information.                                                                            by the transferor. Every significant
    There are some instances when the         Other Forms and                                transferor (as defined in Regulations
                                                                                             section 1.351-3(d)) that receives stock of
corporation can obtain automatic consent      Statements That May Be                         a corporation in exchange for property in
from the IRS to change to certain
accounting methods. See Rev. Proc.            Required                                       a nonrecognition event must include the
2008-52, 2008-36 I.R.B. 587, as                                                              statement required by Regulations
                                              Amended return. Use Form 1120X,                section 1.351-3(a) on or with the
amplified, clarified and modified by Rev.     Amended U.S. Corporation Income Tax
Proc. 2009-39, 2009-38 I.R.B. 371. Also                                                      transferor’s tax return for the tax year of
                                              Return, to correct a previously filed Form     the exchange. The transferee corporation
see the Instructions for Form 3115.           1120.                                          must include the statement required by
Note. If the corporation is filing an         Reportable transaction disclosure              Regulations section 1.351-3(b) on or with
application for a change in accounting        statement. Disclose information for each       its return for the tax year of the exchange,
method filed on or after January 10, 2011     reportable transaction in which the            unless all the required information is
for a year of change ending on or after       corporation participated. Form 8886,           included in any statement(s) provided by
April 30, 2010, see Rev. Proc. 2011-14,       Reportable Transaction Disclosure              a significant transferor that is attached to
2011-4 I.R.B. 330.                            Statement, must be filed for each tax year     the same return for the same section 351
                                              that the federal income tax liability of the   exchange. If the transferor or transferee
Accounting Period                             corporation is affected by its participation   corporation is a controlled foreign
A corporation must figure its taxable         in the transaction. The following are          corporation, each U.S. shareholder
income on the basis of a tax year. A tax      reportable transactions.                       (within the meaning of section 951(b))
year is the annual accounting period a            1. Any listed transaction, which is a      must include the required statement on or
corporation uses to keep its records and      transaction that is the same as or             with its return.
report its income and expenses.               substantially similar to one of the types of   Distributions under section 355. Every
Generally, corporations can use a             transactions that the IRS has determined       corporation that makes a distribution of
calendar year or a fiscal year. Personal      to be a tax avoidance transaction and          stock or securities of a controlled
service corporations, however, must use       identified by notice, regulation, or other     corporation, as described in section 355
a calendar year unless they meet one of       published guidance as a listed                 (or so much of section 356 as it relates to
the exceptions discussed on page 7.           transaction.                                   section 355), must include the statement
Change of tax year. Generally, a                  2. Any transaction offered under           required by Regulations section 1.355-5
corporation, including a personal service     conditions of confidentiality for which the    on or with its return for the year of the
Instructions for Form 1120                                        -5-
distribution. If the distributing corporation       6. Any deferred OID deduction that           Item A. Identifying
is a controlled foreign corporation, each       has not been deducted in the current or
U.S. shareholder (within the meaning of         prior tax years.                                 Information
section 951(b)), must include the
statement on or with its return.                                                                 Consolidated Return
                                                   In addition, include a copy of the
                                                election statement filed to make the             Corporations filing a consolidated return
Dual consolidated losses. If a                                                                   must check Item A, box 1a, and attach
domestic corporation incurs a dual              election to defer cancellation of debt. For
                                                more information on making the election,         Form 851, Affiliations Schedule, and other
consolidated loss (as defined in                                                                 supporting statements to the return. Also,
Regulations section 1.1503-2(c)(5)), the        see the instructions for line 10. For more
                                                information regarding the annual                 for the first year a subsidiary corporation
corporation (or consolidated group) may                                                          is being included in a consolidated return,
need to attach an elective relief               information statement, see Rev. Proc.
                                                2009-37, 2009-36 I.R.B. 309.                     attach Form 1122, Authorization and
agreement and/or an annual certification                                                         Consent of Subsidiary Corporation To Be
as provided in Regulations section                                                               Included in a Consolidated Income Tax
1.1503-2(g)(2).                                 Other forms and statements. See Pub.
                                                542 for a list of other forms and                Return, to the parent’s consolidated
Election to reduce basis under section          statements a corporation may need to file        return. Attach a separate Form 1122 for
362(e)(2)(C). The transferor may make           in addition to the forms and statements          each subsidiary being included in the
an election under section 362(e)(2)(C) to       discussed throughout these instructions.         consolidated return.
limit the transferor’s basis in the stock
received instead of the transferor’s basis                                                           File supporting statements for each
in the transferred property. The transferor                                                      corporation included in the consolidated
                                                                                                 return. Do not use Form 1120 as a
can make the election by including the
certification provided in Notice 2005-70,
                                                Specific Instructions                            supporting statement. On the supporting
2005-41 I.R.B. 694 on or with its tax                                                            statement, use columns to show the
return filed by the due date (including         Period Covered                                   following, both before and after
extensions) for the tax year in which the                                                        adjustments.
                                                File the 2010 return for calendar year
transaction occurred. If the transferor is a    2010 and fiscal years that begin in 2010             1. Items of gross income and
controlled foreign corporation, its             and end in 2011. For a fiscal or short tax       deductions.
controlling U.S. shareholder(s) can make        year return, fill in the tax year space at the       2. A computation of taxable income.
the election. The common parent of a            top of the form.                                     3. Balance sheets as of the beginning
consolidated group can make the election                                                         and end of the tax year.
for the group.                                       The 2010 Form 1120 can also be                  4. A reconciliation of income per
                                                used if:                                         books with income per return.
   If the election is made as described                                                              5. A reconciliation of retained
above, no election need be made by the
                                                • The corporation has a tax year of less
                                                than 12 months that begins and ends in           earnings.
transferee (or any controlling U.S.
shareholder thereof).                           2011, and
                                                • The 2011 Form 1120 is not available at            Enter on Form 1120 the totals for each
  Once made, the election is irrevocable.       the time the corporation is required to file     item of income, gain, loss, expense, or
See section 362(e)(2)(C) and Notice             its return.                                      deduction, net of eliminating entries for
2005-70.                                                                                         intercompany transactions between
                                                   The corporation must show its 2011            corporations within the consolidated
Annual information statement for                tax year on the 2010 Form 1120 and take          group. Attach consolidated balance
elections under section 108(i). If the          into account any tax law changes that are        sheets and a reconciliation of
corporation made an election under              effective for tax years beginning after          consolidated retained earnings.
section 108(i) to defer income from             December 31, 2010.
cancellation of debt (COD) for applicable                                                                The corporation does not have to
debt instruments, the corporation must                                                            TIP provide the information requested
attach a statement to its return beginning      Name and Address                                         in (3), (4), and (5) above, if its total
with the tax year following the tax year for    Enter the corporation’s true name (as set        receipts (line 1a plus lines 4 through 10
which the corporation made the election,        forth in the charter or other legal              on page 1 of the return) and its total
and ending the first tax year all income        document creating it), address, and EIN          assets at the end of the tax year are less
deferred has been included in income.           on the appropriate lines. Enter the              than $250,000. See Schedule K, question
The statement must be labeled “Section          address of the corporation’s principal           13.
108(i) Information Statement” and must          office or place of business. Include the
clearly identify, for each applicable debt                                                          For more information on consolidated
                                                suite, room, or other unit number after the      returns, see the regulations under section
instrument to which an election under           street address. If the post office does not
section 108(i) applies, the following.                                                           1502.
                                                deliver mail to the street address and the
    1. Any deferred COD income that is          corporation has a P.O. box, show the box         Life-Nonlife Consolidated
included in income in the current tax year.     number instead.
    2. Any deferred COD income that has                                                          Return
been accelerated because of an event            Note. Do not use the address of the              If Item A, box 1a, is checked and the
described in section 108(i)(5)(D) and           registered agent for the state in which the      corporation is the common parent of a
must be included in income in the current       corporation is incorporated. For example,        consolidated group that includes a
tax year. Include a description and the         if a business is incorporated in Delaware        life-nonlife insurance company, also
date of the acceleration event.                 or Nevada and the corporation’s principal        check box 1b. See Regulations section
    3. Any deferred COD income that has         office is located in Little Rock, AR, the        1.1502-47(s) for the filing requirements of
not been included in income in the current      corporation should enter the Little Rock         a life-nonlife consolidated return.
or prior tax years.                             address.
    4. Any deferred OID deduction                                                                Personal Holding Company
allowed as a deduction in the current tax           If the corporation receives its mail in      A personal holding company must check
year.                                           care of a third party (such as an                item A, box 2 and attach a Schedule PH
    5. Any deferred OID deduction that is       accountant or an attorney), enter on the         (Form 1120), U.S. Personal Holding
allowed as a deduction in the current tax       street address line “C/O” followed by the        Company (PHC) Tax. See the
year because of an accelerated event            third party’s name and street address or         Instructions for Schedule PH (Form 1120)
described in section 108(i)(5)(D).              P.O. box.                                        for details.
                                                                     -6-                                        Instructions for Form 1120
Personal Service Corporation                   issued immediately once the application         Income
If the corporation is a personal service       information is validated.
                                                                                               Except as otherwise provided in the
corporation, check item A, box 3. A            • By telephone at 1-800-829-4933 from           Internal Revenue Code, gross income
personal service corporation is a              7:00 a.m. to 10:00 p.m. in the
                                                                                               includes all income from whatever source
corporation whose principal activity for the   corporation’s local time zone.
                                                                                               derived.
testing period (generally the prior tax year   • By faxing or mailing Form SS-4,
                                               Application for Employer Identification         Income from qualifying shipping
unless the corporation has just been                                                           activities. Gross income does not
formed) for tax year is the performance of     Number.
                                                                                               include income from qualifying shipping
personal services. Personal services           Note. Only corporations located in the          activities if the corporation makes an
include any activity performed in the fields   United States or U.S. possessions can           election under section 1354 to be taxed
of accounting, actuarial science,              use the online application. Foreign             on its notional shipping income (as
architecture, consulting, engineering,         corporations must use one of the other          defined in section 1353) at the highest
health, law, and the performing arts. The      methods to apply.                               corporate tax rate (35%). If the election is
services must be substantially performed                                                       made, the corporation generally may not
by employee-owners.                            EIN applied for, but not received. If the
                                               corporation has not received its EIN by         claim any loss, deduction, or credit with
    A personal service corporation must        the time the return is due, enter “Applied      respect to qualifying shipping activities. A
use a calendar tax year unless:                For” and the date the corporation applied       corporation making this election also may
• It elects to use a 52-53-week tax year       in the space for the EIN. However, if the       elect to defer gain on the disposition of a
that ends with reference to the calendar       corporation is filing its return                qualifying vessel.
year or tax year elected under section         electronically, an EIN is required at the          Use Form 8902, Alternative Tax on
444;                                           time the return is filed. An exception          Qualifying Shipping Activities, to figure
• It can establish a business purpose for      applies to subsidiaries of corporations         the tax. Include the alternative tax on
a different tax year and obtains the           whose returns are filed with the parent’s       Schedule J, line 9.
approval of the IRS (see the Instructions      electronically filed consolidated Form
for Form 1128 and Pub. 538); or                1120. These subsidiaries should enter           Line 1. Gross Receipts or Sales
• It elects under section 444 to have a        “Applied For” in the space for the EIN on       Enter gross receipts or sales from all
tax year other than a calendar year. To        their returns. The subsidiaries’ returns are    business operations except those that
make the election, use Form 8716,              identified under the parent corporation’s       must be reported on lines 4 through 10.
Election To Have a Tax Year Other Than         EIN.                                            Advance payments. In general,
a Required Tax Year.                                                                           advance payments are reported in the
                                                  For more information, see the
   If a corporation makes the section 444      Instructions for Form SS-4.                     year of receipt. There are exceptions to
election, its deduction for certain amounts                                                    this general rule for corporations that use
paid to employee-owners may be limited.                                                        the accrual method of accounting.
See Schedule H (Form 1120), Section            Item D. Total Assets                            • To report income from long-term
280H Limitations for a Personal Service        Enter the corporation’s total assets (as        contracts, see section 460.
Corporation (PSC), to figure the               determined by the accounting method             • For special rules for reporting certain
maximum deduction.                             regularly used in keeping the                   advance payments for goods and
  If a section 444 election is terminated      corporation’s books and records) at the         long-term contracts, see Regulations
and the termination results in a short tax     end of the tax year. If there are no assets     section 1.451-5.
year, type or print at the top of the first    at the end of the tax year, enter -0-.          • For rules that allow a limited deferral of
page of Form 1120 for the short tax year                                                       advance payments beyond the current tax
                                                   If the corporation is required to           year, see Rev. Proc. 2004-34, 2004-22
“SECTION 444 ELECTION                          complete Schedule L, enter total assets
TERMINATED.” See Temporary                                                                     I.R.B. 991, as modified and clarified by
                                               from Schedule L, line 15, column (d) on         Rev. Proc. 2011-18, 2011-5 I.R.B. 443,
Regulations section 1.444-1T(a)(5) for         page 1, item D. If filing a consolidated
more information.                                                                              for advance payments from the sale of
                                               return, report total consolidated assets for    certain gift cards.
                                               all corporations joining in the return.         • For information on adopting or
Schedule M-3 (Form 1120)
A corporation with total assets                                                                changing to a permissible method for
(non-consolidated or consolidated for all
                                               Item E. Initial Return, Final                   reporting advance payments for services
corporations included within a tax             Return, Name Change, or                         and certain goods by an accrual method
consolidation group) of $10 million or                                                         corporation, see the Instructions for Form
more on the last day of the tax year must      Address Change                                  3115.
complete Schedule M-3 (Form 1120), Net         • If this is the corporation’s first return,    Installment sales. Generally, the
Income (Loss) Reconciliation for               check the “Initial return” box.                 installment method cannot be used for
Corporations With Total Assets of $10          • If this is the corporation’s final return     dealer dispositions of property. A “dealer
Million or More, instead of Schedule M-1.      and it will no longer exist, check the “Final   disposition” is any disposition of: (a)
A corporation filing Form 1120 that is not     return” box.                                    personal property by a person who
required to file Schedule M-3 may              • If the corporation changed its name           regularly sells or otherwise disposes of
voluntarily file Schedule M-3 instead of       since it last filed a return, check the         personal property of the same type on the
Schedule M-1.                                  “Name change” box. Generally, a                 installment plan or (b) real property held
                                               corporation also must have amended its          for sale to customers in the ordinary
   If you are filing Schedule M-3, check       articles of incorporation and filed the         course of the taxpayer’s trade or
Item A, box 4, to indicate that Schedule       amendment with the state in which it was        business.
M-3 is attached. See the Instructions for      incorporated.
Schedule M-3 for more details.                                                                     These restrictions on using the
                                               • If the corporation has changed its            installment method do not apply to
                                               address since it last filed a return            dispositions of property used or produced
Item B. Employer                               (including a change to an “in care of”          in a farming business or sales of
Identification Number (EIN)                    address), check the “Address change”
                                               box.
                                                                                               timeshares and residential lots for which
Enter the corporation’s EIN. If the                                                            the corporation elects to pay interest
corporation does not have an EIN, it must      Note. If a change in address occurs after       under section 453(l)(3).
apply for one. An EIN can be applied for:      the return is filed, use Form 8822,                 For sales of timeshares and residential
• Online — Click on the EIN link at www.       Change of Address, to notify the IRS of         lots reported under the installment
irs.gov/businesses/small. The EIN is           the new address.                                method, the corporation’s income tax is
Instructions for Form 1120                                           -7-
increased by the interest payable under         Note. Report tax-exempt interest income           if (b) above applies). For more
section 453(l)(3). Report this addition to      on Schedule K, item 9. Also, if required,         information, see Regulations section
the tax on Schedule J, line 9.                  include the same amount on Schedule               1.1363-2 and Rev. Proc. 94-61, 1994-2
                                                M-1, line 7, or Schedule M-3 (Form 1120),         C.B. 775. Also see the instructions for
   Enter on line 1 (and carry to line 3), the   Part II, line 13, if applicable.                  Schedule J, line 10.
gross profit on collections from installment                                                      • Any net positive section 481(a)
sales for any of the following.                 Line 6. Gross Rents                               adjustment. The corporation may have to
• Dealer dispositions of property before        Enter the gross amount received for the           make an adjustment under section 481(a)
March 1, 1986.                                  rental of property. Deduct expenses such          to prevent amounts of income or expense
• Dispositions of property used or              as repairs, interest, taxes, and                  from being duplicated or omitted. The
produced in the trade or business of            depreciation on the proper lines for              section 481(a) adjustment period is
farming.                                        deductions. A rental activity held by a           generally 1 year for a net negative
• Certain dispositions of timeshares and        closely held corporation or a personal            adjustment and 4 years for a net positive
residential lots reported under the             service corporation may be subject to the         adjustment. However, a corporation can
installment method.                             passive activity loss rules. See Passive          elect to use a 1-year adjustment period if
    Attach a schedule showing the               activity limitations on page 9.                   the net section 481(a) adjustment for the
following information for the current and       Line 10. Other Income                             change is less than $25,000. The
the 3 preceding years: (a) gross sales, (b)                                                       corporation must complete the
cost of goods sold, (c) gross profits, (d)      Enter any other taxable income not                appropriate lines of Form 3115 to make
percentage of gross profits to gross sales,     reported on lines 1 through 9. List the           this election. Also, under certain other
(e) amount collected, and (f) gross profit      type and amount of income on an                   conditions, the corporation can modify the
on the amount collected.                        attached schedule. If the corporation has         period for taking into account a net
                                                only one item of other income, describe it        positive section 481 adjustment. See Rev.
Nonaccrual experience method.                   in parentheses on line 10.                        Proc. 2008-52 and Rev. Proc. 2009-39. If
Accrual method corporations are not                 Examples of other income to report on         the net section 481(a) adjustment is
required to accrue certain amounts to be        line 10 include the following.                    negative, report it on line 26.
received from the performance of                • Recoveries of bad debts deducted in             • Part or all of the proceeds received
services that, on the basis of their            prior years under the specific charge-off         from certain corporate-owned life
experience, will not be collected, if:          method.                                           insurance contracts issued after August
• The services are in the fields of health,     • The amount included in income from              17, 2006. Corporations that own one or
law, engineering, architecture,                 Form 6478, Alcohol and Cellulosic Biofuel         more employer-owned life insurance
accounting, actuarial science, performing       Fuels Credit.                                     contracts issued after this date must file
arts, or consulting, or                         • The amount included in income from              Form 8925, Report of Employer-Owned
• The corporation’s average annual              Form 8864, Biodiesel and Renewable                Life Insurance Contracts. See section
gross receipts have not exceeded $5             Diesel Fuels Credit.                              101(j) for details.
million for any prior 3-tax-year period. For    • Refunds of taxes deducted in prior              • Income from cancellation of debt
more detail, see Regulations sections           years to the extent they reduced income           (COD) for the repurchase of a debt
1.448-2(a)(2) and 1.448-1T(f)(2).               subject to tax in the year deducted (see          instrument for less than its adjusted issue
                                                section 111). Do not offset current year          price. However, for a reacquisition of an
    This provision does not apply to any        taxes against tax refunds.
amount if interest is required to be paid                                                         applicable debt instrument after
on the amount or if there is any penalty
                                                • Any recapture amount under section              December 31, 2008, and before January
                                                179A for qualified clean-fuel vehicle             1, 2011, a corporation can elect, under
for failure to timely pay the amount. For       refueling property if, at any time before
more information, see Regulations                                                                 section 108(i), to defer the income from
                                                the end of the recovery period, the               COD in connection with the election. If the
section 1.448-2.                                property ceases to qualify.                       corporation makes the election, the
   Corporations that qualify to use the         • Ordinary income from trade or business          income is deferred and ratably included in
nonaccrual experience method should             activities of a partnership (from Schedule        income over the 5-year period beginning
attach a schedule showing total gross           K-1 (Form 1065 or 1065-B)). Do not offset         with:
receipts, the amount not accrued as a           ordinary losses against ordinary income.               1. For a reacquisition occurring in
result of the application of section            Instead, include the losses on line 26.           2009, the fifth tax year following the tax
448(d)(5), and the net amount accrued.          Show the partnership’s name, address,             year in which the reacquisition occurs,
Enter the net amount on line 1a.                and EIN on a separate statement                   and
                                                attached to this return. If the amount                 2. For a reacquisition occurring in
Line 2. Cost of Goods Sold                      entered is from more than one                     2010, the fourth tax year following the tax
Enter the cost of goods sold on line 2,         partnership, identify the amount from             year in which the reacquisition occurs.
page 1. Before making this entry,               each partnership.
complete Schedule A on page 2 of Form           • Any LIFO recapture amount under                     To make the election for a 2010
1120. See the instructions for Schedule         section 1363(d). The corporation may              reacquisition, attach a statement to the
A.                                              have to include a LIFO recapture amount           corporation’s 2010 tax return. The
                                                in income if it:                                  statement must clearly identify the
Line 4. Dividends                                   1. Used the LIFO inventory method             applicable instrument and include the
See the instructions for Schedule C.            for its last tax year before the first tax year   amount of income to which the election
Then, complete Schedule C and enter on          for which it elected to become an S               applies. Once made, the election is
line 4 the amount from Schedule C, line         corporation or                                    irrevocable and the exclusions for COD
19.                                                 2. Transferred LIFO inventory assets          income under section 108(a)(1)(A), (B),
                                                to an S corporation in a nonrecognition           (C), and (D) do not apply for the tax year
Line 5. Interest                                transaction in which those assets were            of the election or any later tax year. See
Enter taxable interest on U.S. obligations      transferred basis property.                       page 6 for the annual information
and on loans, notes, mortgages, bonds,              The LIFO recapture amount is the              statement that is required.
bank deposits, corporate bonds, tax             amount by which the C corporation’s                  For more information, see section
refunds, etc. Do not offset interest            inventory under the FIFO method                   108(i) and Rev. Proc. 2009-37. If the
expense against interest income. Special        exceeds the inventory amount under the            corporation is a direct or indirect partner
rules apply to interest income from certain     LIFO method at the close of the                   in a partnership, other special rules apply.
below-market-rate loans. See section            corporation’s last tax year as a C                See Temporary Regulations section
7872 for details.                               corporation (or for the year of the transfer,     1.108(i)-2T.
                                                                     -8-                                        Instructions for Form 1120
Deductions                                      • Certain property produced in a farming        $10,000 deduction is reduced (but not
                                                business.                                       below zero) by the amount such start-up
Limitations on Deductions                       • Research and experimental costs               costs exceed $60,000. Any remaining
                                                under section 174.                              costs must be amortized. See section
Section 263A uniform capitalization             • Geological and geophysical costs              195(b)(3).
rules. The uniform capitalization rules of      amortized under section 167(h).
section 263A generally require                                                                      Time for making an election. The
                                                • Capital costs incurred to comply with         corporation generally elects to deduct
corporations to capitalize, or include in       EPA sulfur regulations.
inventory, certain costs incurred in                                                            start-up or organizational costs by
                                                • Intangible drilling costs for oil, gas, and   claiming the deduction on its income tax
connection with the following.                  geothermal property.
• The production of real property and                                                           return filed by the due date (including
                                                • Mining exploration and development            extensions) for the tax year in which the
tangible personal property held in              costs.
inventory or held for sale in the ordinary                                                      active trade or business begins. However,
                                                • Inventoriable items accounted for in the      for start-up or organizational costs paid or
course of business.                             same manner as materials and supplies
• Real property or personal property                                                            incurred before September 9, 2008, the
                                                that are not incidental. See Cost of Goods      corporation may be required to attach a
(tangible and intangible) acquired for          Sold on page 15.
resale.                                                                                         statement to its return to elect to deduct
• The production of real property and               For more details on the uniform             such costs. See Temporary Regulations
tangible personal property by a                 capitalization rules, see Regulations           sections 1.195-1T and 1.248-1T for
corporation for use in its trade or business    sections 1.263A-1 through 1.263A-3. See         details.
or in an activity engaged in for profit.        Regulations section 1.263A-4 for rules for          If the corporation timely filed its return
                                                property produced in a farming business.        for the year without making an election, it
    Tangible personal property produced
by a corporation includes a film, sound         Transactions between related                    can still make an election by filing an
recording, videotape, book, or similar          taxpayers. Generally, an accrual basis          amended return within 6 months of the
property.                                       taxpayer can only deduct business               due date of the return (excluding
                                                expenses and interest owed to a related         extensions). Clearly indicate the election
    Corporations subject to the section         party in the year the payment is included       on the amended return and write “Filed
263A uniform capitalization rules are           in the income of the related party. See         pursuant to section 301.9100-2” at the top
required to capitalize:                         sections 163(e)(3),163(j), and 267 for          of the amended return. File the amended
    1. Direct costs and                         limitations on deductions for unpaid            return at the same address the
    2. An allocable part of most indirect       interest and expenses.                          corporation filed its original return. The
costs (including taxes) that (a) benefit the                                                    election applies when figuring taxable
assets produced or acquired for resale or           Corporations use Form 8926,
                                                Disqualified Corporate Interest Expense         income for the current tax year and all
(b) are incurred because of the                                                                 subsequent years.
performance of production or resale             Disallowed Under Section 163(j) and
                                                Related Information, to figure the amount       Note. The corporation can choose to
activities.                                                                                     forgo the elections above by clearly
                                                of any corporate interest expense
    For inventory, some of the indirect         disallowed by section 163(j).                   electing to capitalize its start-up or
expenses that must be capitalized are:                                                          organizational costs on an income tax
                                                Section 291 limitations. Corporations           return filed by the due date (including
• Administration expenses;                      may be required to adjust deductions for        extensions) for the tax year in which the
• Taxes;                                        depletion of iron ore and coal, intangible      active trade or business begins.
• Depreciation;                                 drilling and exploration and development
• Insurance;                                    costs, certain deductions for financial             Report the deductible amount of
• Compensation paid to officers                 institutions, and the amortizable basis of      start-up and organizational costs and any
attributable to services;                       pollution control facilities. See section 291   amortization on line 26. For amortization
• Rework labor; and                             to determine the amount of the                  that begins during the 2010 tax year,
• Contributions to pension, stock bonus,        adjustment. Also see section 43.                complete and attach Form 4562. See the
and certain profit-sharing, annuity, or         Golden parachute payments. A portion            instructions for Form 4562.
deferred compensation plans.                    of the payments made by a corporation to            For more details on business start-up
    Regulations section 1.263A-1(e)(3)          key personnel that exceeds their usual          and organizational costs, see Pub. 535,
specifies other indirect costs that relate to   compensation may not be deductible.             Business Expenses.
production or resale activities that must       This occurs when the corporation has an         Passive activity limitations. Limitations
be capitalized and those that may be            agreement (golden parachute) with these         on passive activity losses and credits
currently deductible.                           key employees to pay them these excess          under section 469 apply to personal
    Interest expense paid or incurred           amounts if control of the corporation           service corporations (defined on page 7)
during the production period of                 changes. See section 280G and                   and closely held corporations (defined
designated property must be capitalized         Regulations section 1.280G-1. Also see          later).
and is governed by special rules. For           the instructions for line 12.                       Generally, the two kinds of passive
more details, see Regulations sections          Business start-up and organizational            activities are:
1.263A-8 through 1.263A-15.                     costs. A corporation can elect to deduct        • Trade or business activities in which
    The costs required to be capitalized        up to $5,000 of business start-up and up        the corporation did not materially
under section 263A are not deductible           to $5,000 of organizational costs paid or       participate for the tax year; and
until the property (to which the costs          incurred after October 22, 2004. Any            • Rental activities, regardless of its
relate) is sold, used, or otherwise             remaining costs must be amortized. The          participation.
disposed of by the corporation.                 $5,000 deduction is reduced (but not            For exceptions, see Form 8810,
Exceptions. Section 263A does not               below zero) by the amount the total costs       Corporate Passive Activity Loss and
apply to the following.                         exceed $50,000. If the total costs are          Credit Limitations.
• Personal property acquired for resale if      $55,000 or more, the deduction is                   Corporations subject to the passive
the corporation’s (or any of its                reduced to zero. See sections 195(b) and        activity limitations must complete Form
predecessors) average annual gross              248(a).                                         8810 to compute their allowable passive
receipts for the 3 prior tax years were $10         Special rule for 2010 start-up costs.       activity loss and credit. Before completing
million or less.                                For a tax year beginning in 2010, a             Form 8810, see Temporary Regulations
• Timber.                                       corporation can elect to deduct up to           section 1.163-8T, which provides rules for
• Most property produced under a                $10,000 of business start-up costs paid or      allocating interest expense among
long-term contract.                             incurred after December 31, 2009. The           activities. If a passive activity is also
Instructions for Form 1120                                          -9-
subject to the earnings stripping rules of         See the instructions for the form used      • Income payable under a written,
section 163(j), the at-risk rules of section   to figure the applicable credit for more        binding contract in effect on February 17,
465, or the tax-exempt use loss rules of       details.                                        1993.
section 470, those rules apply before the                                                          The $1 million limit is reduced by
passive loss rules.                            Limitations on deductions related to
                                               property leased to tax-exempt entities.         amounts disallowed as excess parachute
   For more information, see section 469,      If a corporation leases property to a           payments under section 280G.
the related regulations, and Pub. 925,         governmental or other tax-exempt entity,            See section 162(m) and Regulations
Passive Activity and At-Risk Rules.            the corporation cannot claim deductions         section 1.162-27. Also see Notice
                                               related to the property to the extent that      2007-49, 2007-25 I.R.B. 1429.
    Closely held corporations. A               they exceed the corporation’s income            Limitations on tax benefits for
corporation is a closely held corporation      from the lease payments. This disallowed        executive compensation under the
if:                                            tax-exempt use loss can be carried over         Treasury Troubled Asset Relief
• At any time during the last half of the      to the next tax year and treated as a           Program (TARP). The $1 million
tax year more than 50% in value of its         deduction with respect to the property for      compensation limit is reduced to
outstanding stock is directly or indirectly    that tax year. See section 470 for more         $500,000 for executive remuneration and
owned by or for not more than five             details and exceptions.                         deferred deduction executive
individuals, and                                                                               remuneration paid to covered executives
• The corporation is not a personal            Line 12. Compensation of                        by any entity that receives or has
service corporation.                           Officers                                        received financial assistance under
    Certain organizations are treated as       Enter deductible officers’ compensation         TARP. The limit applies for each period in
individuals for purposes of this test. See     on line 12. Do not include compensation         which obligations arising from financial
section 542(a)(2). For rules for               deductible elsewhere on the return, such        assistance under TARP remain
determining stock ownership, see section       as amounts included in cost of goods            outstanding. The $500,000 is reduced by
544 (as modified by section 465(a)(3)).        sold, elective contributions to a section       any amounts disallowed as excess
                                               401(k) cash or deferred arrangement, or         parachute payments. See section
Reducing certain expenses for which            amounts contributed under a salary              162(m)(5) for definitions and other special
credits are allowable. If the corporation      reduction SEP agreement or a SIMPLE             rules. Also see Notice 2008-94, 2008-44
claims any of the following credits, it may    IRA plan.                                       I.R.B. 1070, for additional guidance.
need to reduce the otherwise allowable                                                             In addition, a portion of any parachute
deductions for expenses used to figure             Complete Schedule E if the total            payments made to a covered executive
the credit.                                    receipts (line 1a, plus lines 4 through 10)     by an applicable employer participating in
• Work opportunity credit (Form 5884).         are $500,000 or more. Include only the          a Treasury troubled asset relief program
• Credit for Increasing research activities    deductible part of each officer’s               is not deductible as compensation if the
(Form 6765).                                   compensation on Schedule E. See                 payments are made because of a
• Orphan drug credit (Form 8820).              Disallowance of deduction for employee          severance from employment during an
• Disabled access credit (Form 8826).          compensation in excess of $1 million            applicable tax year. For this purpose, a
• Empowerment zone and renewal                 below. Complete Schedule E, line 1,             parachute payment is any payment to a
community employment credit (Form              columns (a) through (f), for all officers.      senior executive officer for departure from
8844).                                         The corporation determines who is an            a company for any reason, except for
• Indian employment credit (Form 8845).        officer under the laws of the state where it    payments for services performed or
• Employer credit for social security and      is incorporated.                                benefits accrued. These limits do not
Medicare taxes paid on certain employee                                                        apply to a payment already treated as a
tips (Form 8846).                                 If a consolidated return is filed, each
                                               member of an affiliated group must              parachute payment. See section 280G(e)
• Credit for small employer pension plan       furnish this information.                       and Notice 2008-94.
start-up costs (Form 8881).
• Credit for employer-provided childcare       Disallowance of deduction for                   Line 13. Salaries and Wages
facilities and services (Form 8882).           employee compensation in excess of              Enter the total salaries and wages paid
• Low sulfur diesel fuel production credit     $1 million. Publicly held corporations          for the tax year. Do not include salaries
(Form 8896).                                   cannot deduct compensation to a                 and wages deductible elsewhere on the
• Mine rescue team training credit (Form       “covered employee” to the extent that the       return, such as amounts included in
8923).                                         compensation exceeds $1 million.                officers’ compensation, cost of goods
• Agricultural chemicals security credit       Generally, a covered employee is:               sold, elective contributions to a section
(Form 8931).                                   • The principal executive officer of the        401(k) cash or deferred arrangement, or
• Credit for employer differential wage        corporation (or an individual acting in that    amounts contributed under a salary
payments (Form 8932).                          capacity) as of the end of the tax year or      reduction SEP agreement or a SIMPLE
• Credit for small employer health             • An employee whose total                       IRA plan.
insurance premiums (Form 8941).                compensation must be reported to                    If the corporation claims a credit for
                                               shareholders under the Securities               any wages paid or incurred, it may need
   If the corporation has any of these         Exchange Act of 1934 because the
credits, figure the current year credit                                                        to reduce its deduction for officer’s
                                               employee is among the three highest             compensation and salaries and wages.
before figuring the deduction for              compensated officers for that tax year
expenses on which the credit is based. If                                                      See Reducing certain expenses for which
                                               (other than the principal executive officer).   credits are allowable above.
the corporation capitalized any costs on
which it figured the credit, it may need to       For this purpose, compensation does              If the corporation provided taxable
reduce the amount capitalized by the           not include the following.                      fringe benefits to its employees, such as
credit attributable to these costs.            • Income from certain employee trusts,          personal use of a car, do not deduct as
                                               annuity plans, or pensions.                     wages the amount allocated for
   If the corporation has qualified            • Any benefit paid to an employee that is       depreciation and other expenses claimed
investment taken into account in               excluded from the employee’s income.            on lines 20 and 26.
determining the qualified therapeutic
discovery project credit or grant, it may         The deduction limit does not apply to:       Line 14. Repairs and
need to reduce the otherwise allowable         • Commissions based on individual               Maintenance
deductions for such qualified investment.      performance,                                    Enter the cost of incidental repairs and
See section 280C(g) and Notice 2010-45,        • Qualified performance-based                   maintenance not claimed elsewhere on
2010-23 I.R.B. 734.                            compensation, and                               the return, such as labor and supplies,
                                                                   -10-                                      Instructions for Form 1120
that do not add to the value of the                      See section 164(d) for information on         earnings stripping rules. For more details,
property or appreciably prolong its life.             apportionment of taxes on real property          see section 163(j)(8).
New buildings, machinery, or permanent                between seller and purchaser.                    • Forgone interest on certain
improvements that increase the value of                                                                below-market-rate loans (see section
the property are not deductible. They                 Line 18. Interest                                7872).
must be depreciated or amortized.                     Note. Do not offset interest income              • Original issue discount (OID) on certain
                                                      against interest expense.                        high-yield discount obligations. See
Line 15. Bad Debts                                        The corporation must make an interest        section 163(e)(5) to determine the
Enter the total debts that became                     allocation if the proceeds of a loan were        amount of the deduction for original issue
worthless in whole or in part during the              used for more than one purpose (for              discount that is deferred and the amount
tax year. A small bank or thrift institution          example, to purchase a portfolio                 that is disallowed on a high-yield discount
using the reserve method of section 585               investment and to acquire an interest in a       obligation. The rules under section
should attach a schedule showing how it               passive activity). See Temporary                 163(e)(5) do not apply to certain
figured the current year’s provision. A               Regulations section 1.163-8T for the             high-yield discount obligations issued
corporation that uses the cash method of              interest allocation rules.                       after August 31, 2008 and before January
accounting cannot claim a bad debt                                                                     1, 2011. See section 163(e)(5)(F). Also
                                                          Mutual savings banks, building and           see Notice 2010-11, 2010-4 I.R.B. 326.
deduction unless the amount was
                                                      loan associations, and cooperative banks         • Interest which is allocable to
previously included in income.
                                                      can deduct the amounts paid or credited          unborrowed policy cash values of life
Line 16. Rents                                        to the accounts of depositors as                 insurance, endowment, or annuity
                                                      dividends, interest, or earnings. See            contracts issued after June 8, 1997. See
If the corporation rented or leased a                 section 591.
vehicle, enter the total annual rent or                                                                section 264(f). Attach a statement
lease expense paid or incurred during the                 Do not deduct the following interest.        showing the computation of the
year. Also complete Part V of Form 4562,              • Interest on indebtedness incurred or           deduction.
Depreciation and Amortization. If the                 continued to purchase or carry obligations       • Section 108(i) OID deduction. If the
corporation leased a vehicle for a term of            if the interest is wholly exempt from            corporation issued a debt instrument with
30 days or more, the deduction for vehicle            income tax. See section 265(b) for special       OID that is subject to section 108(i)(2)
lease expense may have to be reduced                  rules and exceptions for financial               because of an election to defer the
by an amount includible in income called              institutions. Also see section 265(b)(7) for     income from the cancellation of debt
the inclusion amount. The corporation                 a de minimis exception for financial             (COD), the interest deduction for this OID
may have an inclusion amount if:                      institutions for certain tax-exempt bonds        is deferred until the COD is includible in
                                                      issued in 2009 and 2010.                         income. The accrued OID is allowed as a
                                          And the     • For cash basis taxpayers, prepaid              deduction ratably over the 5-year period
                                         vehicle’s    interest allocable to years following the        that the income from COD is includible in
                                          FMV on      current tax year. For example, a cash            income. The deduction is limited to the
                                          the first   basis calendar year taxpayer who in 2010         amount of COD subject to the section
                                           day of     prepaid interest allocable to any period         108(i) election. See section 108(i) for
                                         the lease    after 2010 can deduct only the amount            more details. Also see page 6 of the
The lease term began:                    exceeded:    allocable to 2010.                               instructions for the annual information
                                                      • Interest and carrying charges on               statement that is required if the election
After 12/31/07 but before 1/1/11 . . $18,500          straddles. Generally, these amounts must         under section 108(i) is made.
After 12/31/06 but before 1/1/08 . . $15,500          be capitalized. See section 263(g).
                                                      • Interest on debt allocable to the              Line 19. Charitable
After 12/31/04 but before 1/1/07 . . $15,200          production of designated property by a           Contributions
After 12/31/03 but before 1/1/05 . . $17,500          corporation for its own use or for sale.         Enter contributions or gifts actually paid
If the lease term began before January 1, 2004, see   The corporation must capitalize this             within the tax year to or for the use of
Pub. 463, Travel, Entertainment, Gift, and Car        interest. Also capitalize any interest on        charitable and governmental
Expenses, to find out if the corporation has an       debt allocable to an asset used to
inclusion amount. The inclusion amount for lease                                                       organizations described in section 170(c)
terms beginning in 2011 will be published in the
                                                      produce the property. See section 263A(f)        and any unused contributions carried over
Internal Revenue Bulletin in early 2011.              and Regulations sections 1.263A-8                from prior years. Special rules and limits
                                                      through 1.263A-15 for definitions and            apply to contributions to organizations
   See Pub. 463 for instructions on                   more information.                                conducting lobbying activities. See
figuring the inclusion amount.                        • Interest paid or incurred on any portion       section 170(f)(9).
                                                      of an underpayment of tax that is
Line 17. Taxes and Licenses                           attributable to an understatement arising           Corporations reporting taxable income
                                                      from an undisclosed listed transaction or        on the accrual method can elect to treat
Enter taxes paid or accrued during the tax                                                             as paid during the tax year any
year, but do not include the following.               an undisclosed reportable avoidance
                                                      transaction (other than a listed                 contributions paid by the 15th day of the
• Federal income taxes.                                                                                3rd month after the end of the tax year if
• Foreign or U.S. possession income                   transaction) entered into in tax years
                                                      beginning after October 22, 2004.                the contributions were authorized by the
taxes if a foreign tax credit is claimed.                                                              board of directors during the tax year.
• Taxes not imposed on the corporation.                   Special rules apply to:                      Attach a declaration to the return stating
• Taxes, including state or local sales               • Disqualified interest on certain               that the resolution authorizing the
taxes, that are paid or incurred in                   indebtedness under section 163(j). See           contributions was adopted by the board of
connection with an acquisition or                     Form 8926, Disqualified Corporate                directors during the tax year. The
disposition of property (these taxes must             Interest Expense Disallowed Under                declaration must include the date the
be treated as a part of the cost of the               Section 163(j) and Related Information,          resolution was adopted. See Regulations
acquired property or, in the case of a                and the related Instructions.                    section 1.170A-11.
disposition, as a reduction in the amount             • Interest on which no tax is imposed
realized on the disposition).                         (see section 163(j)). A corporation that                  If the corporation contributed
• Taxes assessed against local benefits               owns an interest in a partnership, directly        !      money for the relief of victims in
that increase the value of the property               or indirectly, must treat its distributive        CAUTION
                                                                                                                areas affected by the January 12,
assessed (such as for paving, etc.).                  share of the partnership liabilities, interest   2010 earthquake in Haiti and chose to
• Taxes deducted elsewhere on the                     income, and interest expense as                  deduct those amounts on its 2009 return
return, such as those reflected in cost of            liabilities, income, and expenses of the         instead of its 2010 return, do not include
goods sold.                                           corporation for purposes of applying the         those amounts again on line 19.
Instructions for Form 1120                                                -11-
Limitation on deduction. The total             due date (including extensions) of the           Line 21. Depletion
amount claimed cannot be more than             corporation’s return, or, if earlier, the date   See sections 613 and 613A for
10% of taxable income (line 30)                the return is filed. Do not attach the           percentage depletion rates applicable to
computed without regard to the following.      acknowledgment to the tax return, but            natural deposits. Also see section 291 for
• Any deduction for contributions.             keep it with the corporation’s records.          the limitation on the depletion deduction
• The special deductions on line 29b.                                                           for iron ore and coal (including lignite).
• The limitation under section 249 on the      Contributions of property other than
deduction for bond premium.                    cash. If a corporation (other than a                 Attach Form T (Timber), Forest
• The domestic production activities           closely held or personal service                 Activities Schedule, if a deduction for
deduction under section 199.                   corporation) contributes property other          depletion of timber is taken.
• Any net operating loss (NOL) carryback       than cash and claims over a $500                     Foreign intangible drilling costs and
to the tax year under section 172.             deduction for the property, it must attach       foreign exploration and development
• Any capital loss carryback to the tax        a schedule to the return describing the          costs must either be added to the
year under section 1212(a)(1).                 kind of property contributed and the             corporation’s basis for cost depletion
                                               method used to determine its fair market         purposes or be deducted ratably over a
    Suspension of 10% limitation for           value (FMV). Closely held corporations
farmers and ranchers. A corporation                                                             10-year period. See sections 263(i), 616,
                                               and personal service corporations must           and 617 for details.
that is a qualified farmer or rancher (as      complete Form 8283, Noncash Charitable
defined in section 170(b)(1)(E)) that does                                                          See Pub. 535 for more information on
                                               Contributions, and attach it to their
not have publicly traded stock, can deduct                                                      depletion.
                                               returns. All other corporations generally
contributions of qualified conservation
property without regard to the general
                                               must complete and attach Form 8283 to            Line 23. Pension,
10% limit. The total amount of the
                                               their returns for contributions of property      Profit-Sharing, etc., Plans
                                               (other than money) if the total claimed          Enter the deduction for contributions to
contribution claimed for the qualified
                                               deduction for all property contributed was       qualified pension, profit-sharing, or other
conservation property cannot exceed
                                               more than $5,000. Special rules apply to         funded deferred compensation plans.
100% of the excess of the corporation’s
                                               the contribution of certain property. See        Employers who maintain such a plan
taxable income (as computed above
substituting “100%” for “10%”) over all        the Instructions for Form 8283.                  generally must file one of the forms listed
other allowable charitable contributions.         Qualified conservation                        below unless exempt from filing under
Any excess qualified conservation              contributions. Special rules apply to            regulations or other applicable guidance,
contributions can be carried over to the       qualified conservation contributions,            even if the plan is not a qualified plan
next 15 years, subject to the 100%             including contributions of certain               under the Internal Revenue Code. The
limitation. See section 170(b)(2)(B).          easements on buildings located in a              filing requirement applies even if the
Carryover. Charitable contributions over       registered historic district. See section        corporation does not claim a deduction for
the 10% limitation cannot be deducted for      170(h) and Pub. 526, Charitable                  the current tax year. There are penalties
the tax year but can be carried over to the    Contributions.                                   for failure to file these forms on time and
next 5 tax years.                                                                               for overstating the pension plan
                                                  Other special rules. The corporation          deduction. See sections 6652(e) and
    Special rules apply if the corporation     must reduce its deduction for                    6662(f). Also see the instructions for the
has an NOL carryover to the tax year. In       contributions of certain capital gain            applicable form.
figuring the charitable contributions          property. See sections 170(e)(1) and             Form 5500, Annual Return/Report of
deduction for the current tax year, the        170(e)(5).                                       Employee Benefit Plan.
10% limit is applied using the taxable
income after taking into account any               A larger deduction is allowed for            Form 5500-SF Short Form Annual
deduction for the NOL.                         certain contributions of:                        Return/Report of Small Employee Benefit
    To figure the amount of any remaining      • Inventory and other property to certain        Plan, instead of Form 5500, generally if
                                               organizations for use in the care of the ill,    under 100 participants at the beginning of
NOL carryover to later years, taxable                                                           the plan year.
income must be modified (see section           needy, or infants (see section 170(e)(3)),
172(b)). To the extent that contributions      including contributions of “apparently           Note. Form 5500 and Form 5500-SF
are used to reduce taxable income for this     wholesome food” (see section                     must be filed electronically under the
purpose and increase an NOL carryover,         170(e)(3)(C)), and contributions of              computerized ERISA Filing Acceptance
a contributions carryover is not allowed.      qualified book inventory to public schools       System (EFAST2). For more information,
See section 170(d)(2)(B).                      (see section 170(e)(3)(D));                      see the EFAST2 website at
                                               • Scientific equipment used for research         www.efast.dol.gov.
Cash contributions. For contributions          to institutions of higher learning or to
of cash, check, or other monetary gifts                                                         Form 5500-EZ, Annual Return of
                                               certain scientific research organizations        One-Participant (Owners and Their
(regardless of the amount), the                (other than by personal holding
corporation must maintain a bank record,                                                        Spouses) Retirement Plan. File this form
                                               companies and service organizations              for a plan that only covers the owner (or
or a receipt, letter, or other written         (section 170(e)(4)); and
communication from the donee                                                                    the owner and his or her spouse) but only
                                               • Computer technology and equipment              if the owner (or the owner and his or her
organization indicating the name of the        for educational purposes (section
organization, the date of the contribution,                                                     spouse) owns the entire business.
                                               170(e)(6)).
and the amount of the contribution.                                                             Line 24. Employee Benefit
Contributions of $250 or more. A                  For more information on charitable            Programs
corporation can deduct a contribution of       contributions, including substantiation and      Enter contributions to employee benefit
$250 or more only if it gets a written         recordkeeping requirements, see section          programs not claimed elsewhere on the
acknowledgment from the donee                  170 and the related regulations and Pub.         return (for example, insurance, health and
organization that shows the amount of          526. For other special rules that apply to       welfare programs, etc.) that are not an
cash contributed, describes any property       corporations, see Pub. 542.                      incidental part of a pension, profit-sharing,
contributed, and, either gives a                                                                etc., plan included on line 23.
description and a good faith estimate of       Line 20. Depreciation
the value of any goods or services             Include on line 20 depreciation and the          Line 26. Other Deductions
provided in return for the contribution or     cost of certain property that the                Attach a schedule, listing by type and
states that no goods or services were          corporation elected to expense under             amount, all allowable deductions that are
provided in return for the contribution. The   section 179. See Form 4562 and the               not deductible elsewhere on Form 1120.
acknowledgment must be obtained by the         Instructions for Form 4562.                      Enter the total on line 26.
                                                                   -12-                                       Instructions for Form 1120
    Examples of other deductions include      See section 404(k) for more details and            Entertainment facilities. The
the following. See Pub. 535 and Pub. 542      the limitation on certain dividends.           corporation cannot deduct an expense
for details on other deductions that may                                                     paid or incurred for a facility (such as a
apply to corporations.                           Do not deduct the following.                yacht or hunting lodge) used for an
• Amortization. See Part VI of Form           • Fines or penalties paid to a government      activity usually considered entertainment,
                                              for violating any law.                         amusement, or recreation.
4562.                                         • Any amount that is allocable to a class
• Certain costs of qualified film or          of exempt income. See section 265(b) for           Amounts treated as compensation.
television productions that the corporation   exceptions.                                    Generally, the corporation may be able to
elects to deduct. See section 181 and         • Lobbying expenses. However, see              deduct otherwise nondeductible
Temporary Regulations section 1.181-1T.       exceptions (discussed below).                  entertainment, amusement, or recreation
• Certain business start-up and                                                              expenses if the amounts are treated as
organizational costs. See page 9 of the       Travel, meals, and entertainment.              compensation to the recipient and
instructions.                                 Subject to limitations and restrictions        reported on Form W-2 for an employee or
• Certain environmental remediation           discussed below, a corporation can             on Form 1099-MISC for an independent
costs that the corporation elects to          deduct ordinary and necessary travel,          contractor.
deduct. See section 198.                      meals, and entertainment expenses paid
                                              or incurred in its trade or business. Also,        However, if the recipient is an officer,
• Certain qualified disaster expenses that                                                   director, or beneficial owner (directly or
the corporation elects to deduct. See         special rules apply to deductions for gifts,
                                              skybox rentals, luxury water travel,           indirectly) of more than 10% of any class
section 198A.                                                                                of stock, the deductible expense is
                                              convention expenses, and entertainment
• Reforestation costs. The corporation        tickets. See section 274 and Pub. 463 for      limited. See section 274(e)(2) and Notice
can elect to deduct up to $10,000 of                                                         2005-45, 2005-24 I.R.B. 1228.
                                              details.
qualifying reforestation expenses for each
                                                                                             Lobbying expenses. Generally,
qualified timber property. The corporation       Travel. The corporation cannot
                                                                                             lobbying expenses are not deductible.
can elect to amortize over 84 months any      deduct travel expenses of any individual
                                                                                             These expenses include:
amount not deducted. See Pub. 535.            accompanying a corporate officer or
                                                                                             • Amounts paid or incurred in connection
• Insurance premiums.                         employee, including a spouse or
                                                                                             with influencing federal or state legislation
• Legal and professional fees.                dependent of the officer or employee,
                                                                                             (but not local legislation) or
• Supplies used and consumed in the           unless:
                                              • That individual is an employee of the        • Amounts paid or incurred in connection
business.                                                                                    with any communication with certain
• Travel, meals, and entertainment            corporation, and
                                                                                             federal executive branch officials in an
expenses. Special rules apply (discussed      • His or her travel is for a bona fide         attempt to influence the official actions or
below).                                       business purpose and would otherwise be
                                                                                             positions of the officials. See Regulations
• Utilities.                                  deductible by that individual.
                                                                                             section 1.162-29 for the definition of
• Ordinary losses from trade or business         Meals and entertainment. Generally,         “influencing legislation.”
activities of a partnership (from Schedule    the corporation can deduct only 50% of              Dues and other similar amounts paid
K-1 (Form 1065 or 1065-B)). Do not offset     the amount otherwise allowable for meals       to certain tax-exempt organizations may
ordinary income against ordinary losses.      and entertainment expenses paid or             not be deductible. See section 162(e)(3).
Instead, include the income on line 10.       incurred in its trade or business. In          If certain in-house lobbying expenditures
Show the partnership’s name, address,         addition (subject to exceptions under          do not exceed $2,000, they are
and EIN on a separate statement               section 274(k)(2)):                            deductible.
attached to this return. If the amount is     • Meals must not be lavish or
from more than one partnership, identify      extravagant;                                   Line 28. Taxable Income Before
the amount from each partnership.             • A bona fide business discussion must         NOL Deduction and Special
• Any extraterritorial income exclusion       occur during, immediately before, or           Deductions
(from Form 8873, line 52).                    immediately after the meal; and
• Any negative net section 481(a)             • An employee of the corporation must          At-risk rules. Generally, special at-risk
adjustment. See the instructions for line     be present at the meal.                        rules under section 465 apply to closely
10.                                                                                          held corporations (see Passive activity
                                                 See section 274(n)(3) for a special rule    limitations on page 9) engaged in any
• Deduction for certain energy efficient      that applies to expenses for meals             activity as a trade or business or for the
commercial building property placed in        consumed by individuals subject to the
service during the tax year. See section                                                     production of income. These corporations
                                              hours of service limits of the Department      may have to adjust the amount on line 28.
179D, Notice 2008-40, 2008-14 I.R.B.          of Transportation.
725, and Notice 2006-52, 2006-26 I.R.B.                                                      (See below.)
1175.                                             Membership dues. The corporation               The at-risk rules do not apply to:
• Dividends paid in cash on stock held by     can deduct amounts paid or incurred for        • Holding real property placed in service
an employee stock ownership plan.             membership dues in civic or public             by the taxpayer before 1987;
However, a deduction can only be taken        service organizations, professional            • Equipment leasing under sections
for the dividends above if, according to      organizations (such as bar and medical         465(c)(4), (5), and (6); or
the plan, the dividends are:                  associations), business leagues, trade         • Any qualifying business of a qualified
                                              associations, chambers of commerce,            corporation under section 465(c)(7).
    1. Paid in cash directly to the plan      boards of trade, and real estate boards.
participants or beneficiaries;                However, no deduction is allowed if a              However, the at-risk rules do apply to
    2. Paid to the plan, which distributes    principal purpose of the organization is to    the holding of mineral property.
them in cash to the plan participants or      entertain, or provide entertainment                If the at-risk rules apply, adjust the
their beneficiaries no later than 90 days     facilities for, members or their guests. In    amount on this line for any section 465(d)
after the end of the plan year in which the   addition, corporations cannot deduct           losses. These losses are limited to the
dividends are paid;                           membership dues in any club organized          amount for which the corporation is at risk
    3. At the election of such participants   for business, pleasure, recreation, or         for each separate activity at the close of
or their beneficiaries (a) payable as         other social purpose. This includes            the tax year. If the corporation is involved
provided under 1or 2 above or (b) paid to     country clubs, golf and athletic clubs,        in one or more activities, any of which
the plan and reinvested in qualifying         airline and hotel clubs, and clubs             incurs a loss for the year, report the
employer securities; or                       operated to provide meals under                losses for each activity separately. Attach
    4. Used to make payments on a loan        conditions favorable to business               Form 6198, At-Risk Limitations, showing
described in section 404(a)(9).               discussion.                                    the amount at risk and gross income and
Instructions for Form 1120                                        -13-
deductions for the activities with the            • If a corporation elects the alternative      Beneficiaries of trusts. If the
losses.                                           tax on qualifying shipping activities under    corporation is the beneficiary of a trust,
    If the corporation sells or otherwise         section 1354, no deduction is allowed for      and the trust makes a section 643(g)
disposes of an asset or its interest (either      an NOL attributable to the qualifying          election to credit its estimated tax
total or partial) in an activity to which the     shipping activities to the extent that the     payments to its beneficiaries, include the
at-risk rules apply, determine the net            loss is carried forward from a tax year        corporation’s share of the payment in the
profit or loss from the activity by               preceding the first tax year for which the     total for line 32b. Enter “T” and the
combining the gain or loss on the sale or         alternative tax election was made. See         amount on the dotted line next to the
disposition with the profit or loss from the      section 1358(b)(2).                            entry space.
activity. If the corporation has a net loss, it   • If a corporation has a loss attributable     Special estimated tax payments for
may be limited because of the at-risk             to a disaster, special rules apply. See the
                                                                                                 certain life insurance companies. If
rules.                                            Instructions for Form 1139.
                                                                                                 the corporation is required to make or
    Treat any loss from an activity not              For more details on the NOL                 apply special estimated tax payments
allowed for the tax year as a deduction           deduction, see section 172 and the             (SETP) under section 847 in addition to
allocable to the activity in the next tax         Instructions for Form 1139.                    its regular estimated tax payments, enter
year.                                             Line 29b. Special Deductions                   on line 32b, the corporation’s total
                                                                                                 estimated tax payments. In the margin
Line 29a. Net Operating Loss                      See the instructions for Schedule C.           near line 32b, enter “Form 8816” and the
Deduction                                         Tax and Payments                               amount. Attach a schedule showing your
A corporation can use the NOL incurred                                                           computation of estimated tax payments.
in one tax year to reduce its taxable             Line 30. Taxable Income                        See sections 847(2) and 847(8) and Form
income in another tax year. Enter on line                                                        8816, Special Loss Discount Account and
29a the total NOL carryovers from other           Minimum taxable income. The                    Special Estimated Tax Payments for
tax years, but do not enter more than the         corporation’s taxable income cannot be         Insurance Companies, for more
corporation’s taxable income (after               less than the largest of the following         information.
special deductions). Attach a schedule            amounts.
showing the computation of the NOL                • The inversion gain of the corporation        Line 32c. Overpaid Estimated
deduction. Complete item 12 on Schedule           for the tax year, if the corporation is an     Tax
K.                                                expatriated entity or a partner in an
                                                  expatriated entity. For details, see section   If the corporation overpaid estimated tax,
    The following special rules apply.            7874.                                          it may be able to get a quick refund by
• A personal service corporation may not          • The sum of the corporation’s excess          filing Form 4466. The overpayment must
carry back an NOL to or from any tax year         inclusions from Schedules Q (Form              be at least 10% of the corporation’s
to which an election under section 444 to         1066), line 2c, and the corporation’s          expected income tax liability and at least
have a tax year other than a required tax         taxable income determined solely with          $500. File Form 4466 after the end of the
year applies.                                     respect to its ownership and high-yield        corporation’s tax year, and no later than
• A corporate equity reduction interest           interests in FASITs. For details, see          the 15th day of the third month after the
loss may not be carried back to a tax year        sections 860E(a) and 860J.                     end of the tax year. Form 4466 must be
preceding the year of the equity reduction                                                       filed before the corporation files its tax
transaction (see section 172(b)(1)(E)).           Net operating loss (NOL). If line 30           return.
• If an ownership change (described in            (figured without regard to the items listed
section 382(g)) occurs, the amount of the         above under minimum taxable income), is        Line 32f
taxable income of a loss corporation that         zero or less, the corporation may have an
                                                  NOL that can be carried back or forward        Credit from Form 2439. Enter any
may be offset by the pre-change NOL                                                              credit from Form 2439, Notice to
carryovers may be limited. See section            as a deduction to other tax years.
                                                                                                 Shareholder of Undistributed Long-Term
382 and the related regulations. A loss               Generally, a corporation first carries     Capital Gains, for the corporation’s share
corporation must include the information          back an NOL 2 tax years. However, the          of the tax paid by a regulated investment
statement as provided in Regulations              corporation can elect to waive the             company (RIC) or a real estate
section 1.382-11(a), with its income tax          carryback period and instead carry the         investment trust (REIT) on undistributed
return for each tax year that it is a loss        NOL forward to future tax years. See the       long-term capital gains included in the
corporation in which an ownership shift,          instructions for Schedule K, item 11 on        corporation’s income. Attach Form 2439
equity structures shift, or other transaction     page 20.                                       to Form 1120.
described in Temporary Regulations                    Special rules and exceptions to the
section 1.382-2T(a)(2)(i) occur. If the           2-year carryback period apply to certain       Credit for federal tax on fuels. Enter
corporation makes the                             NOLs. See the Instructions for Form 1139       the total income tax credit claimed on
closing-of-the-books election, see                for details on these special rules and         Form 4136, Credit for Federal Tax Paid
Regulations section 1.382-6(b).                   other elections that may be available,         on Fuels. Attach Form 4136 to Form
    The limitations under section 382 do          which must be made no later than 6             1120.
not apply to certain ownership changes            months after the due date (excluding           Credit for tax on ozone-depleting
after February 17, 2009, made pursuant            extensions) of the corporation’s tax           chemicals. Include on line 32f any credit
to a restructuring plan under the                 return.                                        the corporation is claiming under section
Emergency Economic Stabilization Act of           Merchant Marine capital construction           4682(g)(2) for tax on ozone-depleting
2008. See section 382(n).                         fund. To take a deduction for amounts          chemicals. Enter “ODC” next to the entry
    For guidance in applying section 382          contributed to a capital construction fund     space.
to loss corporations whose instruments            (CCF), reduce the amount that would
were acquired by Treasury under certain           otherwise be entered on line 30 by the         Line 32g. Refundable Credits
programs under the Emergency                      amount of the deduction. On the dotted         From Forms 3800 and 8827
Economic Stabilization Act of 2008, see           line next to the entry space, enter “CCF”      If the corporation elected to claim certain
Notice 2010-2, 2010-2 I.R.B. 251.                 and the amount of the deduction. For           unused research or minimum tax credits
• If a corporation acquires control of            more information, see section 7518.            instead of claiming any additional
another corporation (or acquires its                                                             first-year special depreciation allowance
assets in a reorganization), the amount of        Line 32b. Estimated Tax                        for eligible property, see the instructions
pre-acquisition losses that may offset            Payments                                       for Forms 3800 and 8827. Enter on line
recognized built-in gain may be limited           Enter any estimated tax payments the           32g the amounts from line 19c of Form
(see section 384).                                corporation made for the tax year.             3800 and line 8c of Form 8827, if
                                                                     -14-                                      Instructions for Form 1120
applicable. See the instructions for these     items, see Pub. 538 and the Instructions      costs to be included in ending inventory. If
forms.                                         for Form 3115.                                the corporation accounts for inventoriable
                                                   Corporations that account for             items in the same manner as materials
Line 32h. Total Payments                       inventoriable items in the same manner        and supplies that are not incidental, enter
Add the amounts on lines 32d through           as materials and supplies that are not        on line 7 the portion of its raw materials
32g and enter the total on line 32h.           incidental can currently deduct               and merchandise purchased for resale
Backup withholding. If the corporation         expenditures for direct labor and all         that is included on line 6 and was not sold
had federal income tax withheld from any       indirect costs that would otherwise be        during the year.
payments it received because, for              included in inventory costs.                  Lines 9a Through 9f.
example, it failed to give the payer its           Enter amounts paid for all raw            Inventory Valuation Methods
correct EIN, include the amount withheld       materials and merchandise during the tax
in the total for line 32h. Enter the amount    year on line 2. The amount the                Inventories can be valued at:
withheld and the words “Backup                 corporation can deduct for the tax year is    • Cost,
Withholding” in the blank space above          figured on line 8.                            • Cost or market value (whichever is
line 32h.                                                                                    lower), or
                                                   All filers not using the cash method of   • Any other method approved by the IRS
Line 33. Estimated Tax Penalty                 accounting should see Section 263A            that conforms to the requirements of the
                                               uniform capitalization rules on page 9        applicable regulations cited on page 16.
If Form 2220 is attached, check the box        before completing Schedule A.
on line 33, and enter any penalty on this                                                        However, if the corporation is using the
line. See Estimated tax penalty on page        Line 1. Inventory at Beginning                cash method of accounting, it is required
4.                                             of Year                                       to use cost.
Line 36                                        If the corporation is changing its method         Generally, a rolling average method
                                               of accounting for the current tax year, it    that is used to value inventories for
Direct deposit of refund. If the               must refigure last year’s closing inventory   financial accounting purposes does not
corporation wants its refund directly          using its new method of accounting and        clearly reflect income for federal income
deposited into its checking or savings         enter the result on line 1. If there is a     tax purposes. However, if a corporation
account at any U.S. bank or other              difference between last year’s closing        uses the average cost method for
financial institution instead of having a      inventory and the refigured amount,           financial accounting purposes, there are
check sent to the corporation, complete        attach an explanation and take it into        two safe harbors under which this method
Form 8050 and attach it to the                 account when figuring the corporation’s       will be deemed to clearly reflect income
corporation’s tax return.                      section 481(a) adjustment.                    for federal income tax purposes. See
                                               Line 4. Additional Section 263A               Rev. Proc. 2008-43, 2008-30 I.R.B.186
                                                                                             and Rev. Proc. 2008-52, 2008-36 I.R.B.
Schedule A.                                    Costs                                         587, or its successor, for details.
                                               An entry is required on this line only for
Cost of Goods Sold                             corporations that have elected a
                                                                                                 Corporations that use erroneous
                                                                                             valuation methods must change to a
                                               simplified method of accounting.
Generally, inventories are required at the                                                   method permitted for federal income tax
                                                   For corporations that have elected the    purposes. Use Form 3115 to make this
beginning and end of each tax year if the      simplified production method, additional
production, purchase, or sale of                                                             change.
                                               section 263A costs are generally those
merchandise is an income-producing             costs, other than interest, that were not         On line 9a, check the method(s) used
factor.                                        capitalized under the corporation’s           for valuing inventories. Under lower of
    However, if the corporation is a           method of accounting immediately prior to     cost or market, the term “market” (for
qualifying taxpayer or a qualifying small      the effective date of section 263A but are    normal goods) means the current bid
business taxpayer, it can adopt or change      now required to be capitalized under          price prevailing on the inventory valuation
its accounting method to account for           section 263A. For details, see                date for the particular merchandise in the
inventoriable items in the same manner         Regulations section 1.263A-2(b).              volume usually purchased by the
as materials and supplies that are not                                                       taxpayer. For a manufacturer, market
                                                   For corporations that have elected the    applies to the basic elements of
incidental, unless its business is a tax       simplified resale method, additional
shelter as defined in section 448(d)(3).                                                     cost — raw materials, labor, and burden. If
                                               section 263A costs are generally those        section 263A applies to the taxpayer, the
   A qualifying taxpayer is a taxpayer         costs incurred with respect to the            basic elements of cost must reflect the
that, for each prior tax year ending after     following categories.                         current bid price of all direct costs and all
December 16, 1998, has average annual          • Off-site storage or warehousing.            indirect costs properly allocable to goods
gross receipts of $1 million or less for the   • Purchasing.                                 on hand at the inventory date.
3 prior tax years.                             • Handling, such as processing,
                                               assembling, repackaging, and                      Inventory may be valued below cost
    A qualifying small business taxpayer is    transporting.                                 when the merchandise is unsalable at
a taxpayer (a) that, for each prior tax year   • General and administrative costs            normal prices or unusable in the normal
ending on or after December 31, 2000,          (mixed service costs).                        way because the goods are subnormal
has average annual gross receipts of $10                                                     due to damage, imperfections, shopwear,
million or less for the 3 prior tax years,         For details, see Regulations section      etc., within the meaning of Regulations
and (b) whose principal business activity      1.263A-3(d).                                  section 1.471-2(c). The goods may be
is not an ineligible activity.                     Enter on line 4 the balance of section    valued at the bona fide selling price,
                                               263A costs paid or incurred during the tax    minus the direct cost of disposition (but
    Under this accounting method,              year not includible on lines 2, 3, and 5.
inventory costs for raw materials                                                            not less than scrap value). Bona fide
purchased for use in producing finished        Line 5. Other Costs                           selling price means actual offering of
goods and merchandise purchased for                                                          goods during a period ending not later
                                               Enter on line 5 any costs paid or incurred    than 30 days after inventory date.
resale are deductible in the year the          during the tax year not entered on lines 2
finished goods or merchandise are sold         through 4.                                        If this is the first year the Last-in,
(but not before the year the corporation                                                     First-out (LIFO) inventory method was
paid for the raw materials or                  Line 7. Inventory at End of Year              either adopted or extended to inventory
merchandise, if it is also using the cash      See Regulations sections 1.263A-1             goods not previously valued under the
method). For additional guidance on this       through 1.263A-3 for details on figuring      LIFO method provided in section 472,
method of accounting for inventoriable         the amount of additional section 263A         attach Form 970, Application To Use
Instructions for Form 1120                                        -15-
LIFO Inventory Method, or a statement         receive a notice from the RIC specifying       • Are received from
with the information required by Form         the amount of dividends that qualify for       less-than-20%-owned foreign
970. Also check the LIFO box on line 9c.      the deduction.                                 corporations, and
On line 9d, enter the amount or the              Report so-called dividends or earnings      • Qualify for the 70% deduction under
percent of total closing inventories          received from mutual savings banks, etc.,      section 245(a). To qualify for the 70%
covered under section 472. Estimates are      as interest. Do not treat them as              deduction, the corporation must own at
acceptable.                                   dividends.                                     least 10% of the stock of the foreign
    If the corporation changed or extended                                                   corporation by vote and value.
its inventory method to LIFO and had to       Line 2, Column (a)                                 Also include dividends received from
write up the opening inventory to cost in     Enter on line 2:                               a less-than-20%-owned FSC that:
the year of election, report the effect of    • Dividends (except those received on          • Are attributable to income treated as
the write-up as other income (line 10,        debt-financed stock acquired after July        effectively connected with the conduct of
page 1), proportionately over a 3-year        18, 1984) that are received from               a trade or business within the United
period that begins with the year of the       20%-or-more-owned domestic                     States (excluding foreign trade income),
LIFO election (section 472(d)).               corporations subject to income tax and         and
Note. Corporations using the LIFO             that are subject to the 80% deduction          • Qualify for the 70% deduction under
method that make an S corporation             under section 243(c), and                      section 245(c)(1)(B).
election or transfer LIFO inventory to an S   • Taxable distributions from an IC-DISC
corporation in a nonrecognition               or former DISC that are considered             Line 7, Column (a)
transaction may be subject to an              eligible for the 80% deduction.                Enter the U.S.-source portion of dividends
additional tax attributable to the LIFO       Line 3, Column (a)                             that:
recapture amount. See the instructions for                                                   • Are received from 20%-or-more-owned
                                              Enter the following.                           foreign corporations, and
Schedule J, line 10, on page 19, and line     • Dividends received on debt-financed
10, Other Income, on page 8.                                                                 • Qualify for the 80% deduction under
                                              stock acquired after July 18, 1984, from       section 245(a).
    For more information on inventory         domestic and foreign corporations subject
valuation methods, see Pub. 538. For          to income tax that would otherwise be              Also include dividends received from a
more information on changes in the            subject to the dividends-received              20%-or-more-owned FSC that:
method of accounting for inventory, see       deduction under section 243(a)(1),             • Are attributable to income treated as
Form 3115 and the Instructions for Form       243(c), or 245(a). Generally,                  effectively connected with the conduct of
3115.                                         debt-financed stock is stock that the          a trade or business within the United
                                              corporation acquired by incurring a debt       States (excluding foreign trade income),
Schedule C. Dividends                         (for example, it borrowed money to buy         and
and Special Deductions                        the stock).                                    • Qualify for the 80% deduction under
                                              • Dividends received from a RIC on             section 245(c)(1)(B).
For purposes of the 20% ownership test        debt-financed stock. The amount of
on lines 1 through 7, the percentage of       dividends eligible for the                     Line 8, Column (a)
stock owned by the corporation is based       dividends-received deduction is limited by     Enter dividends received from wholly
on voting power and value of the stock.       section 854(b). The corporation should         owned foreign subsidiaries that are
Preferred stock described in section          receive a notice from the RIC specifying       eligible for the 100% deduction under
1504(a)(4) is not taken into account.         the amount of dividends that qualify for       section 245(b).
Corporations filing a consolidated return     the deduction.
should see Regulations sections                                                                  In general, the deduction under section
1.1502-13, 1.1502-26, and 1.1502-27           Line 3, Columns (b) and (c)                    245(b) applies to dividends paid out of the
before completing Schedule C.                 Dividends received on debt-financed            earnings and profits of a foreign
                                              stock acquired after July 18, 1984, are not    corporation for a tax year during which:
   Corporations filing a consolidated                                                        • All of its outstanding stock is directly or
return must not report as dividends on        entitled to the full 70% or 80%
                                              dividends-received deduction. The 70%          indirectly owned by the domestic
Schedule C any amounts received from                                                         corporation receiving the dividends, and
corporations within the tax consolidation     or 80% deduction is reduced by a
                                              percentage that is related to the amount       • All of its gross income from all sources
group. Such dividends are eliminated in                                                      is effectively connected with the conduct
consolidation rather than offset by the       of debt incurred to acquire the stock. See
                                              section 246A. Also see section 245(a)          of a trade or business within the United
dividends-received deduction.                                                                States.
                                              before making this computation for an
Line 1, Column (a)                            additional limitation that applies to          Line 9, Column (c)
Enter dividends (except those received on     dividends received from foreign
                                              corporations. Attach a schedule to Form        Generally, line 9, column (c), cannot
debt-financed stock acquired after July                                                      exceed the amount from the worksheet
18, 1984 – see section 246A) that are:        1120 showing how the amount on line 3,
                                                                                             below. However, in a year in which an
• Received from less-than-20%-owned           column (c), was figured.
                                                                                             NOL occurs, this limitation does not apply
domestic corporations subject to income       Line 4, Column (a)                             even if the loss is created by the
tax, and                                                                                     dividends-received deduction. See
• Qualified for the 70% deduction under       Enter dividends received on preferred
                                              stock of a less-than-20%-owned public          sections 172(d) and 246(b).
section 243(a)(1).
                                              utility that is subject to income tax and is   Line 10, Columns (a) and (c)
    Also include on line 1 the following.     allowed the deduction provided in section
• Taxable distributions from an IC-DISC       247 for dividends paid.                        Small business investment companies
or former DISC that are designated as                                                        operating under the Small Business
eligible for the 70% deduction and certain    Line 5, Column (a)                             Investment Act of 1958 (see 15 U.S.C.
dividends of Federal Home Loan Banks.         Enter dividends received on preferred          661 and following) must enter dividends
See section 246(a)(2).                        stock of a 20%-or-more-owned public            that are received from domestic
• Dividends (except those received on         utility that is subject to income tax and is   corporations subject to income tax even
debt-financed stock acquired after July       allowed the deduction provided in section      though a deduction is allowed for the
18, 1984) from a regulated investment         247 for dividends paid.                        entire amount of those dividends. To
company (RIC). The amount of dividends                                                       claim the 100% deduction on line 10,
eligible for the dividends-received           Line 6, Column (a)                             column (c), the company must file with its
deduction under section 243 is limited by     Enter the U.S.-source portion of dividends     return a statement that it was a federal
section 854(b). The corporation should        that:                                          licensee under the Small Business
                                                                  -16-                                     Instructions for Form 1120
Investment Act of 1958 at the time it                                                                                     b. Dividends attributable to periods
received the dividends.                                       Line 16, Column (a)                                     totaling more than 366 days that the
                                                              Enter taxable distributions from an                     corporation received on any share of
Line 11, Columns (a) and (c)                                  IC-DISC or former DISC that are                         preferred stock held for less than 91 days
Enter only dividends that qualify under                       designated as not eligible for a                        during the 181-day period that began 90
section 243(b) for the 100%                                   dividends-received deduction.                           days before the ex-dividend date. When
dividends-received deduction described in                                                                             counting the number of days the
section 243(a)(3). Corporations taking this                      No deduction is allowed under section                corporation held the stock, you cannot
deduction are subject to the provisions of                    243 for a dividend from an IC-DISC or                   count certain days during which the
section 1561.                                                 former DISC (as defined in section                      corporation’s risk of loss was diminished.
                                                              992(a)) to the extent the dividend:                     See section 246(c)(4) and Regulations
    The 100% deduction does not apply to                      • Is paid out of the corporation’s                      section 1.246-5 for more details.
affiliated group members that are joining                     accumulated IC-DISC income or                           Preferred dividends attributable to periods
in the filing of a consolidated return.                       previously taxed income, or                             totaling less than 367 days are subject to
Line 12, Column (a)                                           • Is a deemed distribution under section                the 46-day holding period rule above.
                                                              995(b)(1).                                                  c. Dividends on any share of stock to
Enter dividends from FSCs that are                                                                                    the extent the corporation is under an
attributable to foreign trade income and                      Line 17, Column (a)                                     obligation (including a short sale) to make
that are eligible for the 100% deduction
provided in section 245(c)(1)(A).                             Include the following.                                  related payments with respect to positions
                                                                  1. Dividends (other than capital gain               in substantially similar or related property.
Line 13, Column (a)                                           distributions reported on Schedule D                        5. Any other taxable dividend income
Enter foreign dividends not reportable on                     (Form 1120) and exempt-interest                         not properly reported elsewhere on
lines 3, 6, 7, 8, 11, or 12 of column (a).                    dividends) that are received from RICs                  Schedule C.
Include on line 13 the corporation’s share                    and that are not subject to the 70%
of the ordinary earnings of a qualified                       deduction.
                                                                  2. Dividends from tax-exempt                           If patronage dividends or per-unit
electing fund from line 1c of Form 8621,                                                                              retain allocations are included on line 17,
Return by a Shareholder of a Passive                          organizations.
                                                                                                                      identify the total of these amounts in a
Foreign Investment Company or                                     3. Dividends (other than capital gain               schedule attached to Form 1120.
Qualifying Electing Fund. Exclude                             distributions) received from a REIT that,
distributions of amounts constructively                       for the tax year of the trust in which the
taxed in the current year or in prior years                   dividends are paid, qualifies under                     Line 18, Column (c)
under subpart F (sections 951 through                         sections 856 through 860.                               Section 247 allows public utilities a
964).                                                             4. Dividends not eligible for a                     deduction of 40% of the smaller of
                                                              dividends-received deduction, which                     (a) dividends paid on their preferred stock
Line 14, Column (a)                                           include the following.                                  during the tax year, or (b) taxable income
Include income constructively received                            a. Dividends received on any share of               computed without regard to this
from CFCs under subpart F. This amount                        stock held for less than 46 days during                 deduction. In a year in which an NOL
should equal the total subpart F income                       the 91-day period beginning 45 days                     occurs, compute the deduction without
reported on Schedule I of Form 5471,                          before the ex-dividend date. When                       regard to section 247(a)(1)(B). See
Information Return of U.S. Persons With                       counting the number of days the                         section 172(d).
Respect to Certain Foreign Corporations.                      corporation held the stock, you cannot
                                                              count certain days during which the
Line 15, Column (a)                                           corporation’s risk of loss was diminished.              Schedule J.
Include gross-up for taxes deemed paid                        See section 246(c)(4) and Regulations
under sections 902 and 960.                                   section 1.246-5 for more details.                       Tax Computation
                                                                                                                      Line 1
                                                                                                      Keep for Your   If the corporation is a member of a
             Worksheet for Schedule C, line 9                                                            Records      controlled group, check the box on line 1.
                                                                                                                      Complete and attach Schedule O (Form
   1. Refigure line 28, page 1, Form 1120, without any domestic                                                       1120), Consent Plan and Apportionment
      production activities deduction, any adjustment under section 1059,                                             Schedule for a Controlled Group.
      and without any capital loss carryback to the tax year under section                                            Component members of a controlled
      1212(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     1.                   group must use Schedule O to report the
   2. Complete lines 10, 11, and 12, column (c), and enter the total here                        2.                   apportionment of taxable income, income
   3. Subtract line 2 from line 1 . . . . . . . . . . . . . . . . . . . . . . . . . . .          3.                   tax, and certain tax benefits between the
   4. Multiply line 3 by 80% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         4.                   members of the group. See Schedule O
   5. Add lines 2, 5, 7, and 8, column (c), and the part of the deduction                                             and the Instructions for Schedule O for
      on line 3, column (c), that is attributable to dividends from                                                   more information.
      20%-or-more-owned corporations . . . . . . . . . . . . . . . . . . . . . .                 5.
   6. Enter the smaller of line 4 or 5. If line 5 is greater than line 4, stop
      here; enter the amount from line 6 on line 9, column (c), and do not                                            Line 2
      complete the rest of this worksheet . . . . . . . . . . . . . . . . . . . . .              6.                   If the corporation is a member of a
   7. Enter the total amount of dividends from 20%-or-more-owned                                                      controlled group and is filing Schedule O
      corporations that are included on lines 2, 3, 5, 7, and 8, column (a)                      7.                   (Form 1120), enter the corporation’s tax
   8. Subtract line 7 from line 3 . . . . . . . . . . . . . . . . . . . . . . . . . . .          8.                   from Part III of Schedule O. Most
   9. Multiply line 8 by 70% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         9.                   corporations that are not members of a
  10. Subtract line 5 above from line 9, column (c) . . . . . . . . . . . . . . .               10.                   controlled group and not filing a
  11. Enter the smaller of line 9 or line 10 . . . . . . . . . . . . . . . . . . . . .          11.                   consolidated return figure their tax by
  12. Dividends-received deduction after limitation (sec. 246(b)). Add                                                using the Tax Rate Schedule below.
      lines 6 and 11. Enter the result here and on line 9, column (c) . . .                     12.                   Qualified personal service corporations
                                                                                                                      should see the instructions on page 18.
Instructions for Form 1120                                                               -17-
             Tax Rate Schedule                      combined tax on line 2. Attach Form              Form 1118, Foreign Tax Credit –
                                                    1120-L as a schedule (and identify it as         Corporations.
If taxable income (line 30, Form 1120) on page 1    such), together with the annual
is:
                                                    statements and schedules required to be          Line 5b
                                                    filed with Form 1120-L. See Regulations          Enter any qualified electric vehicle
                                           Of the                                                    passive activity credits from prior years
             But not                      amount    section 1.6012-2(c)(1)(ii).
  Over —     over —          Tax is:      over —                                                     allowed for the current tax year from Form
                                                        Exception for insurance companies            8834, Qualified Plug-in Electric and
                                                    filing their Federal income tax returns          Electric Vehicle Credit, line 29. Also
       $0     $50,000             15%        $0
   50,000      75,000   $ 7,500 + 25%    50,000
                                                    electronically. If an insurance company          include on line 5b any credits from Form
   75,000     100,000    13,750 + 34%    75,000     files its income tax return electronically, it   5735, American Samoa Economic
  100,000     335,000    22,250 + 39% 100,000       should not include the annual statements         Development Credit. See the Instructions
  335,000 10,000,000    113,900 + 34% 335,000       and schedules required to be filed with          for Form 5735.
10,000,000 15,000,000 3,400,000 + 35% 10,000,000    Form 1120-L. However, such statements
15,000,000 18,333,333 5,150,000 + 38% 15,000,000    must be available at all times for               Line 5c
18,333,333     -----              35%         0     inspection by the IRS and retained for so        Enter on line 5c the allowable credit from
                                                    long as such statements may be material          Form 3800, Part II, line 32.
Qualified personal service corporation.             in the administration of any internal
                                                    revenue law.                                        The corporation is required to file Form
  A qualified personal service corporation                                                           3800, General Business Credit, to claim
is taxed at a flat rate of 35% on taxable           Deferred tax under section 1291. If the          most business credits. See the
income. If the corporation is a qualified           corporation was a shareholder in a               Instructions for Form 3800 for exceptions.
personal service corporation, check the             passive foreign investment company               For a list of allowable credits, see Form
box on line 2 even if the corporation has           (PFIC) and received an excess                    3800. Also, see the applicable credit form
no tax liability.                                   distribution or disposed of its investment       and its instructions.
    A corporation is a qualified personal           in the PFIC during the year, it must
service corporation if it meets both of the         include the increase in taxes due under          Line 5d
following tests.                                    section 1291(c)(2) in the total for line 2.      To figure the minimum tax credit and any
    1. Substantially all of the corporation’s       On the dotted line next to line 2, enter         carryforward of that credit, use Form
activities involve the performance of               “Section 1291” and the amount.                   8827, Credit for Prior Year Minimum
services in the fields of health, law,                 Do not include on line 2 any interest         Tax — Corporations.
engineering, architecture, accounting,              due under section 1291(c)(3). Instead,           Line 5e
actuarial science, performing arts, or              show the amount of interest owed in the          Enter the allowable credits from Form
consulting.                                         bottom margin of page 1, Form 1120, and          8912, Credit to Holders of Tax Credit
    2. At least 95% of the corporation’s            enter “Section 1291 interest.” For details,      Bonds, line 18.
stock, by value, is directly or indirectly          see Form 8621.
owned by                                            Additional tax under section 197(f). A           Line 8
    a. Employees performing the                     corporation that elects to pay tax on the        A corporation is taxed as a personal
services,                                           gain from the sale of an intangible under        holding company under section 542 if:
    b. Retired employees who had                    the related person exception to the              • At least 60% of its adjusted ordinary
performed the services listed above,                anti-churning rules should include any           gross income for the tax year is personal
    c. Any estate of an employee or                 additional tax due under section                 holding company income, and
retiree described above, or                         197(f)(9)(B) in the total for line 2. On the     • At any time during the last half of the
    d. Any person who acquired the stock            dotted line next to line 2, enter “Section       tax year more than 50% in value of its
of the corporation as a result of the death         197” and the amount.                             outstanding stock is directly or indirectly
of an employee or retiree (but only for the                                                          owned by five or fewer individuals.
2-year period beginning on the date of the          Line 3                                              See Schedule PH (Form 1120) for
employee’s or retiree’s death).
                                                                                                     definitions and details on how to figure
                                                              A corporation that is not a small      the tax.
Alternative tax on qualified timber
gain. If the corporation is a partner in a            !       corporation exempt from the AMT
                                                                                                     Line 9
                                                     CAUTION
                                                              may be required to file Form 4626,
partnership and had net capital gain and            Alternative Minimum Tax — Corporations,
a distributive share of a qualified timber                                                           Include any of the following taxes and
                                                    if it claims certain credits, even though it     interest in the total on line 9. Check the
gain (as defined in section 1201(b)(2))             does not owe any AMT. See Form 4626
from the partnership for the period that                                                             appropriate box(es) for the form, if any,
                                                    for details.                                     used to compute the total.
began before May 23, 2009, the
corporation may be eligible for an                      Unless the corporation is treated as a       Recapture of investment credit. If the
alternative tax under section 1201(b)(1)            small corporation exempt from the AMT, it        corporation disposed of investment credit
on the portion of its taxable income                may owe the AMT if it has any of the             property or changed its use before the
attributable to the qualified timber gain.          adjustments and tax preference items             end of its useful life or recovery period, or
Enter the alternative tax, if any, on               listed on Form 4626. The corporation             is required to recapture a qualifying
Schedule J, line 2. Attach a statement              must file Form 4626 if its taxable income        therapeutic discovery project grant, enter
showing the computation of the tax. You             (or loss) before the NOL deduction,              the increase in tax from Form 4255,
may use Part IV of the 2009 Schedule D              combined with these adjustments and tax          Recapture of Investment Credit.
(Form 1120) as a guide. See section                 preference items is more than the smaller        Recapture of low-income housing
1201(b).                                            of $40,000 or the corporation’s allowable        credit. If the corporation disposed of
Mutual savings bank conducting life                 exemption amount (from Form 4626). For           property (or there was a reduction in the
insurance business. The tax under                   this purpose, taxable income does not            qualified basis of the property) for which it
section 594 consists of the sum of (a) a            include the NOL deduction.                       took the low-income housing credit, it may
partial tax computed on Form 1120 on the               See Form 4626 for definitions and             owe a tax. See Form 8611, Recapture of
taxable income of the bank determined               details on how to figure the tax.                Low-Income Housing Credit.
without regard to income or deductions                                                               Interest due under the look-back
allocable to the life insurance department,         Line 5a                                          methods. If the corporation used the
and (b) a partial tax on the taxable                To find out when a corporation can take          look-back method for certain long-term
income computed on Form 1120-L of the               the credit for payment of income tax to a        contracts, see Form 8697, Interest
life insurance department. Enter the                foreign country or U.S. possession, see          Computation Under the Look-Back
                                                                        -18-                                       Instructions for Form 1120
Method for Completed Long-Term                    tax and the deferred amount. Also see the       member of a controlled group for this
Contracts, for information on figuring the        instructions regarding LIFO recapture           purpose.
interest the corporation may have to              amount on page 8 under Line 10. Other
                                                                                                  Affiliated group. An affiliated group is
include.                                          Income.
                                                                                                  one or more chains of includible
   The corporation may also have to                   Step 1. Figure the tax on the               corporations (section 1504(a)) connected
include interest due under the look-back          corporation’s income including the LIFO         through stock ownership with a common
method for property depreciated under             recapture amount. (Complete Schedule J          parent corporation. The common parent
the income forecast method. See Form              through line 9, but do not enter a total on     must be an includible corporation and the
8866, Interest Computation Under the              line 10 yet.)                                   following requirements must be met.
Look-Back Method for Property                         Step 2. Using a separate worksheet,             1. The common parent must own
Depreciated Under the Income Forecast             complete Schedule J again, but do not           directly stock that represents at least 80%
Method.                                           include the LIFO recapture amount in the        of the total voting power and at least 80%
Alternative tax on qualifying shipping            corporation’s taxable income.                   of the total value of the stock of at least
activities. Enter any alternative tax on                                                          one of the other includible corporations.
qualifying shipping activities from Form              Step 3. Compare the tax in Step 2 to
                                                  the tax in Step 1. (The difference between          2. Stock that represents at least 80%
8902. Check the box for Form 8902.                                                                of the total voting power and at least 80%
                                                  the two is the LIFO recapture tax.)
Other. Additional taxes and interest                                                              of the total value of the stock of each of
amounts can be included in the total                  Step 4. Multiply the amount figured in      the other corporations (except for the
entered on line 9. Check the box for              Step 3 by 75%. (The result is the deferred      common parent) must be owned directly
“Other” if the corporation includes any           LIFO recapture tax.)                            by one or more of the other includible
additional taxes and interest such as the         How to report. Attach a schedule                corporations.
items discussed below. See How to report          showing the computation of each item
below for details on reporting these              included in, or subtracted from, the total          For this purpose, the term “stock”
amounts on an attached schedule.                  for line 10. On the dotted line next to line    generally does not include any stock that
• Recapture of Indian employment credit.          10, specify (a) the applicable Code             (a) is nonvoting, (b) is nonconvertible,
Generally, if an employer terminates the          section, (b) the type of tax, and (c) enter     (c) is limited and preferred as to dividends
employment of a qualified employee less           the amount of tax. For example, if the          and does not participate significantly in
than 1 year after the date of initial             corporation is deferring a $100 LIFO            corporate growth, and (d) has redemption
employment, any Indian employment                 recapture tax, subtract this amount from        and liquidation rights that do not exceed
credit allowed for a prior tax year because       the total on line 10, then enter “Section       the issue price of the stock (except for a
of wages paid or incurred to that                 1363-Deferred Tax-$100” on the dotted           reasonable redemption or liquidation
employee must be recaptured. For                  line next to line 10.                           premium). See section 1504(a)(4).
details, see Form 8845 and section 45A.
• Recapture of new markets credit (see                                                            Question 4
Form 8874).                                       Schedule K.                                     Constructive Ownership of the
• Recapture of employer-provided
childcare facilities and services credit          Other Information                               Corporation
(see Form 8882).                                  Complete all items that apply to the            Note. For supplemental information and
• Tax and interest on a nonqualified              corporation.                                    examples of reasonable methods for
withdrawal from a capital construction                                                            determining the percentage interest
fund (section 7518(g)).                           Question 2                                      owned in a partnership for purposes of
• Interest on deferred tax attributable to        See the list of Principal Business Activity     Question 4 and Question 5, go to www.
(a) installment sales of certain timeshares       Codes beginning on page 22 of the               irs.gov. Click on “Businesses”, click on
and residential lots (section 453(l)(3)) and      instructions. Using the list of codes and       “Partnerships”, and click on “Form 1065
(b) certain nondealer installment                 activities, determine from which activity       Frequently Asked Questions.”
obligations (section 453A(c)).                    the corporation derives the highest
                                                                                                     For purposes of question 4, the
• Interest due on deferred gain (section          percentage of its total receipts. Enter on
                                                                                                  constructive ownership rules of section
1260(b)).                                         lines 2a, 2b, and 2c the principal business
                                                  activity code number, the corporation’s         267(c) (excluding section 267(c)(3)) apply
   How to report. If the corporation                                                              to ownership of interests in corporate
checked the “Other” box, attach a                 business activity, and a description of the
                                                  principal product or service of the             stock and ownership of interests in the
schedule showing the computation of                                                               profit, loss, or capital of a partnership. If
each item included in the total for line 9        corporation.
                                                                                                  the corporation checked “Yes” to question
and identify the applicable Code section          Question 3                                      4a or 4b, complete and attach new
and the type of tax or interest.                  Check the “Yes” box for question 3 if:          Schedule G (Form 1120), Information on
Line 10                                           • The corporation is a subsidiary in an         Certain Persons Owning the
                                                  affiliated group (defined below), but is not    Corporation’s Voting Stock.
Include any deferred tax on the
termination of a section 1294 election            filing a consolidated return for the tax year   Question 5
applicable to shareholders in a qualified         with that group, or
electing fund in the amount entered on            • The corporation is a subsidiary in a          Constructive Ownership of Other
line 10. See Form 8621, Part V, and How           parent-subsidiary controlled group. For a       Entities
to report, below.                                 definition of a parent-subsidiary controlled
                                                  group, see the Instructions for Schedule        For purposes of determining the
    Subtract the following amounts from           O (Form 1120).                                  corporation’s constructive ownership of
the total for line 10.                                                                            other entities, the constructive ownership
• Deferred tax on the corporation’s share              Any corporation that meets either of       rules of section 267(c) (excluding section
of undistributed earnings of a qualified          the requirements above should check the         267(c)(3)) apply to ownership of interests
electing fund (see Form 8621, Part II).           “Yes” box. This applies even if the             in partnerships and trusts as well as
• Deferred LIFO recapture tax (section            corporation is a subsidiary member of one       corporate stock. Generally, if an entity (a
1363(d)). This tax is the part of the LIFO        group and the parent corporation of             corporation, partnership, or trust) is
recapture tax that will be deferred and           another.                                        owned, directly or indirectly, by or for
paid with Form 1120S in the future. To            Note. If the corporation is an “excluded        another entity (corporation, partnership,
figure the deferred tax, first figure the total   member” of a controlled group (see              estate, or trust), the owned entity is
LIFO recapture tax. Follow the steps              definition in the Instructions for Schedule     considered to be owned proportionately
below to figure the total LIFO recapture          O (Form 1120)), it is still considered a        by or for the owners (shareholders,
Instructions for Form 1120                                            -19-
partners, or beneficiaries) of the owning         profit, loss, or capital of Partnership C and    foreign-owned corporation that had a
entity.                                           owns, directly, 15% of the voting stock of       reportable transaction with a foreign or
                                                  Corporation D. Partnership B owns,               domestic related party during the tax year
Question 5a                                       directly, a 70% interest in the profit, loss,    must file Form 5472. See Form 5472 for
List each foreign or domestic corporation         or capital of Partnership C and owns,            filing instructions and penalties for failure
not included on Form 851, Affiliations            directly, 70% of the voting stock of             to file.
Schedule, in which the corporation, at the        Corporation D. Corporation A owns,
end of the tax year, owned directly 20%           indirectly, through Partnership B, a 35%         Item 9
or more, or owned, directly or indirectly,        interest (50% of 70%) in the profit, loss, or    Show any tax-exempt interest received or
50% or more of the total voting power of          capital of Partnership C and owns,               accrued. Include any exempt-interest
all classes of stock entitled to vote.            indirectly, 35% of the voting stock of           dividends received as a shareholder in a
Indicate the name of the corporation, EIN         Corporation D. Corporation A owns,               mutual fund or other RIC. Also, if
(if any), country of incorporation, and the       directly or indirectly, a 50% interest in the    required, include the same amount on
percentage interest owned, directly or            profit, loss, or capital of Partnership C        Schedule M-1, line 7 (or Schedule M-3,
indirectly, in the total voting power. List       (15% directly and 35% indirectly), and           Part II, line 13, if applicable).
the parent corporation of an affiliated           owns, directly or indirectly, 50% of the
group of corporations filing a consolidated       voting stock of Corporation D (15%               Item 11
tax return rather than the subsidiary             directly and 35% indirectly).                    If the corporation has an NOL, it generally
members except for subsidiary members                                                              can elect to waive the entire carryback
in which an interest is owned, directly or             Corporation A reports in its answer to
                                                  question 5a that it owns, directly or            period for the NOL and instead carry the
indirectly, independent of the interest                                                            NOL forward to future tax years. To do
owned, directly or indirectly, in the parent      indirectly, 50% of the voting stock of
                                                  Corporation D. Corporation A reports in          so, check the box on line 11 and file the
corporation. List a corporation owned                                                              tax return by its due date, including
through a disregarded entity rather than          its answer to question 5b that it owns,
                                                  directly, an interest of 50% in the profit,      extensions. Do not attach the statement
the disregarded entity.                                                                            described in Temporary Regulations
                                                  loss, or capital of Partnership B and
Question 5b                                       owns, directly or indirectly, 50% of the         section 301.9100-12T. Once made, the
                                                  profit, loss, or capital of Partnership C.       election is irrevocable.
List each foreign or domestic partnership
in which the corporation, at the end of the                                                            Corporations filing a consolidated
                                                  Question 7                                       return that elects to waive the entire
tax year, owned directly an interest of
20% or more, or owned, directly or                Check the “Yes” box if one foreign person        carryback period for the group must also
indirectly, an interest of 50% or more in         owned at least 25% of (a) the total voting       attach the statement required by
the profit, loss, or capital of the               power of all classes of stock of the             Regulations section 1.1502-21(b)(3) or
partnership. List each trust in which the         corporation entitled to vote, or (b) the total   the election will not be valid.
corporation, at the end of the tax year,          value of all classes of stock of the
owned directly an interest of 20% or              corporation.                                     Item 12
more, or owned, directly or indirectly, an            The constructive ownership rules of          Enter the amount of the NOL carryover to
interest of 50% or more in the trust              section 318 apply in determining if a            the tax year from prior years, even if
beneficial interest. Indicate the name, EIN       corporation is foreign owned. See section        some of the loss is used to offset income
(if any), country of organization, and the        6038A(c)(5) and the related regulations.         on this return. The amount to enter is the
maximum percentage interest owned,                                                                 total of all NOLs generated in prior years
                                                      Enter on line 7a the percentage owned        but not used to offset income (either as a
directly or indirectly, in the profit, loss, or   by the foreign person specified in
capital of the partnership at the end of the                                                       carryback or carryover) to a tax year prior
                                                  question 7. On line 7b, enter the name of        to 2010. Do not reduce the amount by
partnership tax year, or, for a trust, the        the owner’s country.
percentage interest owned in the trust                                                             any NOL deduction reported on line 29a.
beneficial interest. List a partnership or        Note. If there is more than one
trust owned through a disregarded entity          25%-or-more foreign owner, complete              Question 14
rather than the disregarded entity.               lines 7a and 7b for the foreign person with      A corporation that files Form 1120 must
                                                  the highest percentage of ownership.             file Schedule UTP (Form 1120) with its
Maximum percentage owned in                                                                        income tax return if:
partnership profit, loss, or capital. For         Foreign person. The term “foreign
                                                  person” means:                                   • The corporation has assets that equal
the purposes of question 5b, the term                                                              or exceed $100 million;
“maximum percentage owned” means the              • A foreign citizen or nonresident alien,
                                                  • An individual who is a citizen of a U.S.       • The corporation or a related party
highest percentage of interest in a                                                                issued audited financial statements
partnership’s profit, loss, or capital as of      possession (but who is not a U.S. citizen
                                                  or resident),                                    reporting all or a portion of the
the end of the partnership’s tax year, as                                                          corporation’s operations for all or a
determined under the partnership                  • A foreign partnership,
                                                  • A foreign corporation,                         portion of the corporation’s tax year; and
agreement, when taking into account the                                                            • The corporation has one or more tax
constructive ownership rules on page 19.          • Any foreign estate or trust within the
                                                  meaning of section 7701(a)(31), or               positions that must be reported on
If the partnership agreement does not                                                              Schedule UTP.
express the partner’s share of profit, loss,      • A foreign government (or one of its
and capital as fixed percentages, use a           agencies or instrumentalities) to the                Attach Schedule UTP to the
reasonable method in arriving at the              extent that it is engaged in the conduct of      corporation’s income tax return. Do not
percentage items for the purposes of              a commercial activity as described in            file it separately. A taxpayer that files a
completing question 5b. Such method               section 892.                                     protective Form 1120 must also file
must be consistent with the partnership           Owner’s country. For individuals, the            Schedule UTP if it satisfies the
agreement. The method used to compute             term “owner’s country” means the country         requirements set forth above.
a percentage share of profit, loss, and           of residence. For all others, it is the              For details, see the Instructions for
capital must be applied consistently from         country where incorporated, organized,           Schedule UTP.
year to year. Maintain records to support         created, or administered.
the determination of the share of profits,        Requirement to file Form 5472. If the
losses, and share of capital.                     corporation checked “Yes” it may have to         Schedule L.
    Example. Corporation A owns,                  file Form 5472, Information Return of a
directly, a 50% interest in the profit, loss,     25% Foreign Owned U.S. Corporation or            Balance Sheets per Books
or capital of Partnership B. Corporation A        a Foreign Corporation Engaged in a U.S.          The balance sheets should agree with the
also owns, directly, a 15% interest in the        Trade or Business. Generally, a 25%              corporation’s books and records.
                                                                      -20-                                       Instructions for Form 1120
   Corporations with total receipts (line 1a      Line 26                                           filing Form 1120 that is not required to file
plus lines 4 through 10 on page 1) and            Some examples of adjustments to report            Schedule M-3 may voluntarily file
total assets at the end of the tax year less      on this line include:                             Schedule M-3 instead of Schedule M-1.
than $250,000 are not required to                                                                   See the Instructions for Schedule M-3
complete Schedules L, M-1, and M-2 if             • Unrealized gains and losses on                  (Form 1120) for more information.
the “Yes” box on Schedule K, question             securities held “available for sale.”
13, is checked. If the corporation is             • Foreign currency translation
required to complete Schedule L, include          adjustments.                                      Line 5c
total assets reported on Schedule L, line         • The excess of additional pension                Include any of the following.
15, column (d), on page 1, item D.                liability over unrecognized prior service         • Meal and entertainment expenses not
                                                  cost.                                             deductible under section 274(n).
   Corporations with total assets                 • Guarantees of employee stock (ESOP)             • Expenses for the use of an
non-consolidated (or consolidated for all         debt.                                             entertainment facility.
corporations included within the tax              • Compensation related to employee                • The part of business gifts over $25.
consolidation group) of $10 million or            stock award plans.                                • Expenses of an individual over $2,000,
more on the last day of the tax year must                                                           which are allocable to conventions on
complete Schedule M-3 (Form 1120)                     If the total adjustment to be entered on      cruise ships.
instead of Schedule M-1. See the                  line 26 is a negative amount, enter the
                                                  amount in parentheses.                            • Employee achievement awards over
separate Instructions for Schedule M-3                                                              $400.
(Form 1120) for provisions that also affect
Schedule L.                                                                                         • The cost of entertainment tickets over
                                                                                                    face value (also subject to 50% limit
                                                  Schedule M-1.                                     under section 274(n)).
    If filing a consolidated return, report                                                         • The cost of skyboxes over the face
total consolidated assets, liabilities, and       Reconciliation of Income
                                                                                                    value of nonluxury box seat tickets.
shareholder’s equity for all corporations         (Loss) per Books With                             • The part of luxury water travel
joining in the return. See Consolidated
Return on page 6 of these instructions.           Income per Return                                 expenses not deductible under section
                                                                                                    274(m).
                                                  Corporations with total receipts (line 1a         • Expenses for travel as a form of
Line 1                                            plus lines 4 through 10 on page 1) and            education.
                                                  total assets at the end of the tax year less
Include certificates of deposit as cash on        than $250,000 are not required to                 • Other nondeductible travel and
this line.                                        complete Schedules L, M-1, and M-2 if             entertainment expenses.
                                                  the “Yes” box on Schedule K, question
Line 5                                            13, is checked.                                       For more information, see Pub. 542.
Include on this line:                                Corporations with total assets
• State and local government obligations,         non-consolidated (or consolidated for all         Line 7
the interest on which is excludable from          corporations included within the tax              Report any tax exempt interest received
gross income under section 103(a), and            consolidation group) of $10 million or            or accrued, including any exempt-interest
• Stock in a mutual fund or other RIC that        more on the last day of the tax year must         dividends received as a shareholder in a
distributed exempt-interest dividends             complete Schedule M-3 (Form 1120)                 mutual fund or other RIC. Also report this
during the tax year of the corporation.           instead of Schedule M-1. A corporation            same amount on Schedule K, item 9.


Paperwork Reduction Act Notice. We ask for the information on these forms to carry out the Internal Revenue laws of the United
States. You are required to give us the information. We need it to ensure that you are complying with these laws and to allow us to
figure and collect the right amount of tax.
   You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the
form displays a valid OMB control number. Books or records relating to a form or its instructions must be retained as long as their
contents may become material in the administration of any Internal Revenue law. Generally, tax returns and return information are
confidential, as required by section 6103.
   The time needed to complete and file the following forms will vary depending on individual circumstances. The estimated average
times are:
                                                                                                                              Copying,
                                                                                                                            assembling,
                                                                Learning about                                            and sending the
Form                               Recordkeeping              the law or the form         Preparing the form               form to the IRS
1120                                65 hr., 31 min.              41 hr., 16 min.                 71 hr., 8 min.              7 hr., 46 min.
Sch B (1120)                         3 hr., 06 min.                    1 hr.                     1 hr., 5 min.                  -----
Sch. D (1120)                        9 hr., 05 min.               3 hr., 55 min.                 6 hr., 5 min.                  32 min.
Sch G (1120)                         2 hr., 37 min.                  30 min.                        34 min.                     -----
Sch. H (1120)                        5 hr., 58 min.                  35 min.                        43 min.                     -----
Sch. M-3 (1120)                     79 hr., 52 min.               3 hr., 40 min.                 5 hr., 8 min.                  -----
Sch. N (1120)                        3 hr., 21 min.               1 hr., 30 min.                 4 hr., 24 min.                 48 min.
Sch. O (1120)                       13 hr., 23 min.               2 hr., 5 min.                  2 hr., 23 min.                  -----
Sch. PH (1120)                      12 hr., 54 min.               4 hr., 18 min.                 6 hr., 34 min.                 32 min.
Sch UTP (1120)                       2 hr., 48 min.                  36 min.                        34 min.                     -----

   If you have comments concerning the accuracy of these time estimates or suggestions for making these forms simpler, we would
be happy to hear from you. You can write to Internal Revenue Service, Tax Products Coordinating Committee,
SE:W:CAR:MP:T:T:SP, 1111 Constitution Ave. NW, IR-6526, Washington, DC 20224. Do not send the tax form to this address.
Instead, see Where To File on page 3.


Instructions for Form 1120                                            -21-
Principal Business Activity                                    Using the list of activities and codes below,
                                                            determine from which activity the company derives
                                                                                                                             Once the principal business activity is determined,
                                                                                                                          entries must be made on Form 1120, Schedule K,
Codes                                                       the largest percentage of its “total receipts.” Total         lines 2a, 2b, and 2c. For the business activity code
                                                            receipts is defined as the sum of gross receipts or           number, enter on line 2a the six digit code selected
This list of principal business activities and their        sales (page 1, line 1a) plus all other income (page 1,        from the list below. On the next line (Form 1120,
associated codes is designed to classify an                 lines 4 through 10). If the company purchases raw             Schedule K, line 2b), enter the company’s business
enterprise by the type of activity in which it is           materials and supplies them to a subcontractor to             activity. Finally, enter a brief description of the
engaged to facilitate the administration of the             produce the finished product, but retains title to the        principal product or service of the company on Form
Internal Revenue Code. These principal business             product, the company is considered a manufacturer             1120, Schedule K, line 2c.
activity codes are based on the North American              and must use one of the manufacturing codes
Industry Classification System.                             (311110-339900).

Code                                         Code                                          Code                                        Code
Agriculture, Forestry, Fishing                Heavy and Civil Engineering                  Wood Product Manufacturing                  332810 Coating, Engraving, Heat
and Hunting                                  Construction                                  321110 Sawmills & Wood                                Treating, & Allied Activities
                                             237100 Utility System Construction                      Preservation                      332900 Other Fabricated Metal
Crop Production                                                                                                                                  Product Mfg
                                             237210 Land Subdivision                       321210 Veneer, Plywood, &
111100 Oilseed & Grain Farming                                                                       Engineered Wood Product
                                             237310 Highway, Street, & Bridge                                                          Machinery Manufacturing
111210 Vegetable & Melon Farming                      Construction                                   Mfg
         (including potatoes & yams)                                                                                                   333100 Agriculture, Construction, &
                                             237990 Other Heavy & Civil                    321900 Other Wood Product Mfg                         Mining Machinery Mfg
111300 Fruit & Tree Nut Farming                       Engineering Construction             Paper Manufacturing                         333200 Industrial Machinery Mfg
111400 Greenhouse, Nursery, &
         Floriculture Production             Specialty Trade Contractors                   322100 Pulp, Paper, & Paperboard            333310 Commercial & Service
                                             238100 Foundation, Structure, &                         Mills                                       Industry Machinery Mfg
111900 Other Crop Farming
         (including tobacco, cotton,                  Building Exterior Contractors        322200 Converted Paper Product Mfg          333410 Ventilation, Heating,
         sugarcane, hay, peanut,                      (including framing carpentry,        Printing and Related Support                          Air-Conditioning, &
         sugar beet & all other crop                  masonry, glass, roofing, &           Activities                                            Commercial Refrigeration
         farming)                                     siding)                              323100 Printing & Related Support                     Equipment Mfg
                                             238210 Electrical Contractors                           Activities                        333510 Metalworking Machinery Mfg
Animal Production
                                             238220 Plumbing, Heating, &                   Petroleum and Coal Products                 333610 Engine, Turbine & Power
112111 Beef Cattle Ranching &                         Air-Conditioning Contractors                                                               Transmission Equipment Mfg
         Farming                                                                           Manufacturing
                                             238290 Other Building Equipment               324110 Petroleum Refineries                 333900 Other General Purpose
112112 Cattle Feedlots                                Contractors                                                                                Machinery Mfg
112120 Dairy Cattle & Milk                                                                           (including integrated)
                                             238300 Building Finishing                     324120 Asphalt Paving, Roofing, &           Computer and Electronic Product
         Production                                   Contractors (including                         Saturated Materials Mfg           Manufacturing
112210 Hog & Pig Farming                              drywall, insulation, painting,
                                                                                           324190 Other Petroleum & Coal               334110 Computer & Peripheral
112300 Poultry & Egg Production                       wallcovering, flooring, tile, &                                                            Equipment Mfg
                                                                                                     Products Mfg
112400 Sheep & Goat Farming                           finish carpentry)                                                                334200 Communications Equipment
                                             238900 Other Specialty Trade                  Chemical Manufacturing
112510 Aquaculture (including                                                                                                                    Mfg
         shellfish & finfish farms &                  Contractors (including site          325100 Basic Chemical Mfg
                                                                                                                                       334310 Audio & Video Equipment
         hatcheries)                                  preparation)                         325200 Resin, Synthetic Rubber, &
                                                                                                                                                 Mfg
112900 Other Animal Production                                                                       Artificial & Synthetic Fibers &
                                                                                                     Filaments Mfg                     334410 Semiconductor & Other
Forestry and Logging                         Manufacturing                                                                                       Electronic Component Mfg
                                             Food Manufacturing                            325300 Pesticide, Fertilizer, & Other
113110 Timber Tract Operations                                                                       Agricultural Chemical Mfg         334500 Navigational, Measuring,
113210 Forest Nurseries & Gathering          311110 Animal Food Mfg                                                                              Electromedical, & Control
                                                                                           325410 Pharmaceutical & Medicine
         of Forest Products                  311200 Grain & Oilseed Milling                                                                      Instruments Mfg
                                                                                                     Mfg
113310 Logging                               311300 Sugar & Confectionery                                                              334610 Manufacturing &
                                                                                           325500 Paint, Coating, & Adhesive
Fishing, Hunting and Trapping                         Product Mfg                                                                                Reproducing Magnetic &
                                                                                                     Mfg
                                             311400 Fruit & Vegetable Preserving                                                                 Optical Media
114110 Fishing                                                                             325600 Soap, Cleaning Compound, &
                                                      & Specialty Food Mfg                           Toilet Preparation Mfg            Electrical Equipment, Appliance, and
114210 Hunting & Trapping
                                             311500 Dairy Product Mfg                                                                  Component Manufacturing
Support Activities for Agriculture                                                         325900 Other Chemical Product &
                                             311610 Animal Slaughtering and                          Preparation Mfg                   335100 Electric Lighting Equipment
and Forestry                                                                                                                                     Mfg
                                                      Processing                           Plastics and Rubber Products
115110 Support Activities for Crop                                                                                                     335200 Household Appliance Mfg
         Production (including cotton        311710 Seafood Product Preparation            Manufacturing
         ginning, soil preparation,                   & Packaging                                                                      335310 Electrical Equipment Mfg
                                                                                           326100 Plastics Product Mfg
         planting, & cultivating)            311800 Bakeries & Tortilla Mfg                                                            335900 Other Electrical Equipment &
                                                                                           326200 Rubber Product Mfg
115210 Support Activities for Animal         311900 Other Food Mfg (including                                                                    Component Mfg
                                                                                           Nonmetallic Mineral Product
         Production                                   coffee, tea, flavorings &                                                        Transportation Equipment
                                                                                           Manufacturing
115310 Support Activities For                         seasonings)                                                                      Manufacturing
                                                                                           327100 Clay Product & Refractory
         Forestry                            Beverage and Tobacco Product                                                              336100 Motor Vehicle Mfg
                                                                                                     Mfg
                                             Manufacturing                                                                             336210 Motor Vehicle Body & Trailer
                                                                                           327210 Glass & Glass Product Mfg
Mining                                       312110 Soft Drink & Ice Mfg
                                                                                           327300 Cement & Concrete Product
                                                                                                                                                 Mfg
211110 Oil & Gas Extraction                  312120 Breweries                                                                          336300 Motor Vehicle Parts Mfg
                                                                                                     Mfg
212110 Coal Mining                           312130 Wineries                                                                           336410 Aerospace Product & Parts
                                                                                           327400 Lime & Gypsum Product Mfg
212200 Metal Ore Mining                      312140 Distilleries                                                                                 Mfg
                                                                                           327900 Other Nonmetallic Mineral
212310 Stone Mining & Quarrying              312200 Tobacco Manufacturing                                                              336510 Railroad Rolling Stock Mfg
                                                                                                     Product Mfg
212320 Sand, Gravel, Clay, &                 Textile Mills and Textile Product                                                         336610 Ship & Boat Building
                                                                                           Primary Metal Manufacturing
       Ceramic & Refractory                  Mills                                                                                     336990 Other Transportation
                                                                                           331110 Iron & Steel Mills & Ferroalloy                Equipment Mfg
       Minerals Mining & Quarrying           313000 Textile Mills                                    Mfg
212390 Other Nonmetallic Mineral             314000 Textile Product Mills                                                              Furniture and Related Product
                                                                                           331200 Steel Product Mfg from
       Mining & Quarrying                                                                                                              Manufacturing
                                             Apparel Manufacturing                                   Purchased Steel
213110 Support Activities for Mining                                                                                                   337000 Furniture & Related Product
                                             315100 Apparel Knitting Mills                 331310 Alumina & Aluminum
                                                                                                                                                 Manufacturing
                                             315210 Cut & Sew Apparel                                Production & Processing
Utilities                                             Contractors                          331400 Nonferrous Metal (except             Miscellaneous Manufacturing
221100 Electric Power Generation,            315220 Men’s & Boys’ Cut & Sew                          Aluminum) Production &            339110 Medical Equipment &
       Transmission & Distribution                    Apparel Mfg                                    Processing                                  Supplies Mfg
221210 Natural Gas Distribution              315230 Women’s & Girls’ Cut & Sew             331500 Foundries                            339900 Other Miscellaneous
221300 Water, Sewage & Other                          Apparel Mfg                                                                                Manufacturing
                                                                                           Fabricated Metal Product
       Systems                               315290 Other Cut & Sew Apparel Mfg            Manufacturing
221500 Combination Gas & Electric            315990 Apparel Accessories & Other            332110 Forging & Stamping                   Wholesale Trade
                                                      Apparel Mfg                          332210 Cutlery & Handtool Mfg               Merchant Wholesalers, Durable
Construction                                                                                                                           Goods
                                             Leather and Allied Product                    332300 Architectural & Structural
Construction of Buildings                    Manufacturing                                           Metals Mfg                        423100 Motor Vehicle & Motor
                                                                                                                                               Vehicle Parts & Supplies
236110 Residential Building                  316110 Leather & Hide Tanning &               332400 Boiler, Tank, & Shipping
        Construction                                  Finishing                                      Container Mfg                     423200 Furniture & Home
                                                                                                                                               Furnishings
236200 Nonresidential Building               316210 Footwear Mfg (including                332510 Hardware Mfg
        Construction                                  rubber & plastics)                                                               423300 Lumber & Other Construction
                                                                                           332610 Spring & Wire Product Mfg                    Materials
                                             316990 Other Leather & Allied                 332700 Machine Shops; Turned
                                                      Product Mfg                                                                      423400 Professional & Commercial
                                                                                                     Product; & Screw, Nut, & Bolt             Equipment & Supplies
                                                                                                     Mfg

                                                                                        -22-
Principal Business Activity Codes (continued)
Code                                   Code                                      Code                                         Code
423500 Metal & Mineral (except         445120   Convenience Stores               Truck Transportation                         Finance and Insurance
        Petroleum)                     445210   Meat Markets                     484110 General Freight Trucking,             Depository Credit Intermediation
423600 Electrical & Electronic Goods   445220   Fish & Seafood Markets                    Local                               522110 Commercial Banking
423700 Hardware, & Plumbing &          445230   Fruit & Vegetable Markets        484120 General Freight Trucking,             522120 Savings Institutions
        Heating Equipment &            445291   Baked Goods Stores                        Long-distance
        Supplies                                                                                                              522130 Credit Unions
                                       445292   Confectionery & Nut Stores       484200 Specialized Freight Trucking
423800 Machinery, Equipment, &                                                                                                522190 Other Depository Credit
                                       445299   All Other Specialty Food         Transit and Ground Passenger                           Intermediation
        Supplies                                                                 Transportation
                                                Stores                                                                        Nondepository Credit Intermediation
423910 Sporting & Recreational                                                   485110 Urban Transit Systems
        Goods & Supplies               445310 Beer, Wine, & Liquor Stores                                                     522210 Credit Card Issuing
                                       Health and Personal Care Stores           485210 Interurban & Rural Bus
423920 Toy & Hobby Goods &                                                                Transportation                      522220 Sales Financing
        Supplies                       446110 Pharmacies & Drug Stores                                                        522291 Consumer Lending
                                                                                 485310 Taxi Service
423930 Recyclable Materials            446120 Cosmetics, Beauty Supplies,                                                     522292 Real Estate Credit (including
                                                & Perfume Stores                 485320 Limousine Service
423940 Jewelry, Watch, Precious                                                                                                         mortgage bankers &
                                       446130 Optical Goods Stores               485410 School & Employee Bus                           originators)
        Stone, & Precious Metals                                                          Transportation
423990 Other Miscellaneous Durable     446190 Other Health & Personal                                                         522293 International Trade Financing
                                                Care Stores                      485510 Charter Bus Industry
        Goods                                                                                                                 522294 Secondary Market Financing
                                       Gasoline Stations                         485990 Other Transit & Ground
Merchant Wholesalers, Nondurable                                                          Passenger Transportation            522298 All Other Nondepository
Goods                                  447100 Gasoline Stations (including                                                              Credit Intermediation
                                                convenience stores with gas)     Pipeline Transportation
424100 Paper & Paper Products                                                                                                 Activities Related to Credit
                                       Clothing and Clothing Accessories         486000 Pipeline Transportation               Intermediation
424210 Drugs & Druggists’ Sundries
                                       Stores                                    Scenic & Sightseeing Transportation          522300 Activities Related to Credit
424300 Apparel, Piece Goods, &
        Notions                        448110 Men’s Clothing Stores              487000 Scenic & Sightseeing                            Intermediation (including loan
                                       448120 Women’s Clothing Stores                     Transportation                                brokers, check clearing, &
424400 Grocery & Related Products
424500 Farm Product Raw Materials      448130 Children’s & Infants’ Clothing     Support Activities for Transportation                  money transmitting)
424600 Chemical & Allied Products               Stores                           488100 Support Activities for Air            Securities, Commodity Contracts,
                                       448140 Family Clothing Stores                      Transportation                      and Other Financial Investments and
424700 Petroleum & Petroleum                                                                                                  Related Activities
        Products                       448150 Clothing Accessories Stores        488210 Support Activities for Rail
                                                                                          Transportation                      523110 Investment Banking &
424800 Beer, Wine, & Distilled         448190 Other Clothing Stores
                                                                                 488300 Support Activities for Water                    Securities Dealing
        Alcoholic Beverages            448210 Shoe Stores                                 Transportation                      523120 Securities Brokerage
424910 Farm Supplies                   448310 Jewelry Stores                     488410 Motor Vehicle Towing                  523130 Commodity Contracts
424920 Book, Periodical, &             448320 Luggage & Leather Goods                                                                   Dealing
        Newspapers                                                               488490 Other Support Activities for
                                                Stores                                    Road Transportation                 523140 Commodity Contracts
424930 Flower, Nursery Stock, &        Sporting Goods, Hobby, Book, and                                                                 Brokerage
        Florists’ Supplies                                                       488510 Freight Transportation
                                       Music Stores                                       Arrangement                         523210 Securities & Commodity
424940 Tobacco & Tobacco Products      451110 Sporting Goods Stores                                                                     Exchanges
                                                                                 488990 Other Support Activities for
424950 Paint, Varnish, & Supplies      451120 Hobby, Toy, & Game Stores                   Transportation                      523900 Other Financial Investment
424990 Other Miscellaneous             451130 Sewing, Needlework, & Piece        Couriers and Messengers                                Activities (including portfolio
        Nondurable Goods                        Goods Stores                                                                            management & investment
                                                                                 492110 Couriers
Wholesale Electronic Markets and       451140 Musical Instrument &                                                                      advice)
Agents and Brokers                                                               492210 Local Messengers & Local
                                                Supplies Stores                           Delivery                            Insurance Carriers and Related
425110 Business to Business            451211 Book Stores                                                                     Activities
        Electronic Markets                                                       Warehousing and Storage
                                       451212 News Dealers & Newsstands                                                       524140 Direct Life, Health, & Medical
425120 Wholesale Trade Agents &                                                  493100 Warehousing & Storage                           Insurance & Reinsurance
                                       451220 Prerecorded Tape, Compact                   (except lessors of
        Brokers                                 Disc, & Record Stores                                                                   Carriers
                                                                                          miniwarehouses &
                                       General Merchandise Stores                         self-storage units)                 524150 Direct Insurance &
Retail Trade                           452110 Department Stores
                                                                                                                                        Reinsurance (except Life,
 Motor Vehicle and Parts Dealers                                                                                                        Health & Medical) Carriers
                                       452900 Other General Merchandise          Information                                  524210 Insurance Agencies &
441110 New Car Dealers                          Stores                           Publishing Industries (except                          Brokerages
441120 Used Car Dealers                Miscellaneous Store Retailers             Internet)                                    524290 Other Insurance Related
441210 Recreational Vehicle Dealers    453110 Florists                           511110 Newspaper Publishers                            Activities (including
441221 Motorcycle Dealers              453210 Office Supplies & Stationery       511120 Periodical Publishers                           third-party administration of
441222 Boat Dealers                             Stores                           511130 Book Publishers                                 insurance and pension funds)
441229 All Other Motor Vehicle         453220 Gift, Novelty, & Souvenir          511140 Directory & Mailing List              Funds, Trusts, and Other Financial
         Dealers                                Stores                                     Publishers                         Vehicles
441300 Automotive Parts,               453310 Used Merchandise Stores            511190 Other Publishers                      525100 Insurance & Employee
         Accessories, & Tire Stores    453910 Pet & Pet Supplies Stores          511210 Software Publishers                             Benefit Funds
Furniture and Home Furnishings         453920 Art Dealers                        Motion Picture and Sound                     525910 Open-End Investment Funds
Stores                                 453930 Manufactured (Mobile) Home         Recording Industries                                   (Form 1120-RIC)
442110 Furniture Stores                         Dealers                          512100 Motion Picture & Video                525920 Trusts, Estates, & Agency
442210 Floor Covering Stores           453990 All Other Miscellaneous Store                Industries (except video                     Accounts
442291 Window Treatment Stores                  Retailers (including tobacco,              rental)                            525990 Other Financial Vehicles
442299 All Other Home Furnishings               candle, & trophy shops)          512200 Sound Recording Industries                      (including mortgage REITs &
         Stores                        Nonstore Retailers                                                                               closed-end investment funds)
                                                                                 Broadcasting (except Internet)
Electronics and Appliance Stores       454110 Electronic Shopping &                                                           “Offices of Bank Holding Companies”
                                                                                 515100 Radio & Television                    and “Offices of Other Holding
443111 Household Appliance Stores               Mail-Order Houses                          Broadcasting
                                       454210 Vending Machine Operators                                                       Companies” are located under
443112 Radio, Television, & Other                                                515210 Cable & Other Subscription            Management of Companies (Holding
         Electronics Stores            454311 Heating Oil Dealers                          Programming                        Companies) on page 25.
443120 Computer & Software Stores      454312 Liquefied Petroleum Gas            Telecommunications
443130 Camera & Photographic                    (Bottled Gas) Dealers            517000 Telecommunications
         Supplies Stores               454319 Other Fuel Dealers
                                                                                                                              Real Estate and Rental and
                                                                                           (including paging, cellular,
                                       454390 Other Direct Selling                         satellite, cable & other           Leasing
Building Material and Garden
Equipment and Supplies Dealers                  Establishments (including                  program distribution,              Real Estate
444110 Home Centers                             door-to-door retailing, frozen             resellers, other                   531110 Lessors of Residential
                                                food plan providers, party                 telecommunications, &                       Buildings & Dwellings
444120 Paint & Wallpaper Stores                                                            Internet service providers)                 (including equity REITs)
                                                plan merchandisers, &
444130 Hardware Stores                          coffee-break service                                                          531114 Cooperative Housing
                                                                                 Data Processing Services
444190 Other Building Material                  providers)                                                                             (including equity REITs)
                                                                                 518210 Data Processing, Hosting, &
         Dealers                                                                                                              531120 Lessors of Nonresidential
                                                                                           Related Services
444200 Lawn & Garden Equipment &       Transportation and                        Other Information Services                            Buildings (except
         Supplies Stores               Warehousing                                                                                     Miniwarehouses) (including
                                                                                 519100 Other Information Services
Food and Beverage Stores               Air, Rail, and Water Transportation                                                             equity REITs)
                                                                                           (including news syndicates,
445110 Supermarkets and Other          481000 Air Transportation                           libraries, Internet publishing &   531130 Lessors of Miniwarehouses &
         Grocery (except                                                                   broadcasting)                               Self-Storage Units (including
         Convenience) Stores           482110 Rail Transportation                                                                      equity REITs)
                                       483000 Water Transportation

                                                                             -23-
Principal Business Activity Codes (continued)
Code                                        Code                                      Code                                         Code
531190 Lessors of Other Real Estate         541920 Photographic Services              621391 Offices of Podiatrists                721120 Casino Hotels
         Property (including equity         541930 Translation & Interpretation       621399 Offices of All Other                  721191 Bed & Breakfast Inns
         REITs)                                    Services                                      Miscellaneous Health              721199 All Other Traveler
531210 Offices of Real Estate Agents        541940 Veterinary Services                           Practitioners                             Accommodation
         & Brokers                          541990 All Other Professional,            Outpatient Care Centers                      721210 RV (Recreational Vehicle)
531310 Real Estate Property                        Scientific, & Technical            621410 Family Planning Centers                       Parks & Recreational Camps
         Managers                                  Services                           621420 Outpatient Mental Health &            721310 Rooming & Boarding Houses
531320 Offices of Real Estate                                                                    Substance Abuse Centers           Food Services and Drinking Places
         Appraisers                         Management of Companies                   621491 HMO Medical Centers                   722110 Full-Service Restaurants
531390 Other Activities Related to          (Holding Companies)                       621492 Kidney Dialysis Centers
         Real Estate                                                                                                               722210 Limited-Service Eating
                                            551111 Offices of Bank Holding            621493 Freestanding Ambulatory                       Places
Rental and Leasing Services                        Companies                                     Surgical & Emergency              722300 Special Food Services
532100 Automotive Equipment Rental          551112 Offices of Other Holding                      Centers                                   (including food service
         & Leasing                                 Companies                          621498 All Other Outpatient Care                     contractors & caterers)
532210 Consumer Electronics &                                                                    Centers                           722410 Drinking Places (Alcoholic
         Appliances Rental                  Administrative and Support                Medical and Diagnostic Laboratories                  Beverages)
532220 Formal Wear & Costume                and Waste Management and                  621510 Medical & Diagnostic
         Rental
                                            Remediation Services                                 Laboratories                      Other Services
532230 Video Tape & Disc Rental
                                            Administrative and Support Services       Home Health Care Services                    Repair and Maintenance
532290 Other Consumer Goods
                                            561110 Office Administrative              621610 Home Health Care Services             811110 Automotive Mechanical &
         Rental
                                                    Services                          Other Ambulatory Health Care                          Electrical Repair &
532310 General Rental Centers                                                                                                               Maintenance
                                            561210 Facilities Support Services        Services
532400 Commercial & Industrial                                                                                                     811120 Automotive Body, Paint,
         Machinery & Equipment              561300 Employment Services                621900 Other Ambulatory Health
                                                                                                 Care Services (including                   Interior, & Glass Repair
         Rental & Leasing                   561410 Document Preparation
                                                    Services                                     ambulance services & blood        811190 Other Automotive Repair &
Lessors of Nonfinancial Intangible                                                               & organ banks)                             Maintenance (including oil
Assets (except copyrighted works)           561420 Telephone Call Centers                                                                   change & lubrication shops &
                                                                                      Hospitals
533110 Lessors of Nonfinancial              561430 Business Service Centers                                                                 car washes)
         Intangible Assets (except                  (including private mail centers   622000 Hospitals
                                                                                                                                   811210 Electronic & Precision
         copyrighted works)                         & copy shops)                     Nursing and Residential Care
                                                                                                                                            Equipment Repair &
                                            561440 Collection Agencies                Facilities
                                                                                                                                            Maintenance
Professional, Scientific, and               561450 Credit Bureaus                     623000 Nursing & Residential Care
                                                                                                                                   811310 Commercial & Industrial
                                                                                                 Facilities
Technical Services                          561490 Other Business Support                                                                   Machinery & Equipment
                                                    Services (including               Social Assistance                                     (except Automotive &
Legal Services
                                                    repossession services, court      624100 Individual & Family Services                   Electronic) Repair &
541110 Offices of Lawyers                           reporting, & stenotype            624200 Community Food & Housing,                      Maintenance
541190 Other Legal Services                         services)                                    & Emergency & Other Relief        811410 Home & Garden Equipment &
Accounting, Tax Preparation,                561500 Travel Arrangement &                          Services                                   Appliance Repair &
Bookkeeping, and Payroll Services                   Reservation Services              624310 Vocational Rehabilitation                      Maintenance
541211 Offices of Certified Public          561600 Investigation & Security                      Services                          811420 Reupholstery & Furniture
         Accountants                                Services                          624410 Child Day Care Services                        Repair
541213 Tax Preparation Services             561710 Exterminating & Pest Control                                                    811430 Footwear & Leather Goods
541214 Payroll Services                             Services                          Arts, Entertainment, and                              Repair
541219 Other Accounting Services            561720 Janitorial Services                Recreation                                   811490 Other Personal & Household
Architectural, Engineering, and             561730 Landscaping Services                                                                     Goods Repair & Maintenance
                                                                                      Performing Arts, Spectator Sports,
Related Services                            561740 Carpet & Upholstery Cleaning       and Related Industries                       Personal and Laundry Services
541310 Architectural Services                       Services                          711100 Performing Arts Companies             812111 Barber Shops
541320 Landscape Architecture               561790 Other Services to Buildings &      711210 Spectator Sports (including           812112 Beauty Salons
         Services                                   Dwellings                                   sports clubs & racetracks)         812113 Nail Salons
541330 Engineering Services                 561900 Other Support Services             711300 Promoters of Performing Arts,         812190 Other Personal Care
541340 Drafting Services                            (including packaging &                      Sports, & Similar Events                    Services (including diet &
541350 Building Inspection Services                 labeling services, &                                                                    weight reducing centers)
                                                    convention & trade show           711410 Agents & Managers for
541360 Geophysical Surveying &                                                                  Artists, Athletes, Entertainers,   812210 Funeral Homes & Funeral
                                                    organizers)                                                                             Services
         Mapping Services                                                                       & Other Public Figures
                                            Waste Management and                                                                   812220 Cemeteries & Crematories
541370 Surveying & Mapping (except          Remediation Services                      711510 Independent Artists, Writers,
         Geophysical) Services                                                                  & Performers                       812310 Coin-Operated Laundries &
                                            562000 Waste Management &                                                                       Drycleaners
541380 Testing Laboratories                         Remediation Services              Museums, Historical Sites, and
Specialized Design Services                                                           Similar Institutions                         812320 Drycleaning & Laundry
541400 Specialized Design Services                                                    712100 Museums, Historical Sites, &                   Services (except
                                            Educational Services                                Similar Institutions                        Coin-Operated)
         (including interior, industrial,
                                            611000 Educational Services                                                            812330 Linen & Uniform Supply
         graphic, & fashion design)
                                                   (including schools, colleges,      Amusement, Gambling, and
Computer Systems Design and                        & universities)                    Recreation Industries                        812910 Pet Care (except Veterinary)
Related Services                                                                      713100 Amusement Parks & Arcades                      Services
541511 Custom Computer                                                                713200 Gambling Industries                   812920 Photofinishing
                                            Health Care and Social                                                                 812930 Parking Lots & Garages
         Programming Services                                                         713900 Other Amusement &
541512 Computer Systems Design
                                            Assistance                                          Recreation Industries              812990 All Other Personal Services
         Services                           Offices of Physicians and Dentists                  (including golf courses, skiing    Religious, Grantmaking, Civic,
541513 Computer Facilities                  621111 Offices of Physicians (except                facilities, marinas, fitness       Professional, and Similar
         Management Services                         mental health specialists)                 centers, & bowling centers)        Organizations
541519 Other Computer Related               621112 Offices of Physicians, Mental                                                   813000 Religious, Grantmaking,
         Services                                    Health Specialists               Accommodation and Food                                Civic, Professional, & Similar
Other Professional, Scientific, and         621210 Offices of Dentists                Services                                              Organizations (including
Technical Services                          Offices of Other Health Practitioners     Accommodation                                         condominium and
541600 Management, Scientific, &            621310 Offices of Chiropractors                                                                 homeowners associations)
                                                                                      721110 Hotels (except Casino Hotels)
         Technical Consulting               621320 Offices of Optometrists                   & Motels
         Services                           621330 Offices of Mental Health
541700 Scientific Research &                         Practitioners (except
         Development Services                        Physicians)
541800 Advertising & Related                621340 Offices of Physical,
         Services                                    Occupational & Speech
541910 Marketing Research & Public                   Therapists, & Audiologists
         Opinion Polling




                                                                                   -24-
Index


A                                                         E                                                              Limited liability companies . . . . . 2                    R
Accounting methods . . . . . . . . . . . 5                Electronic filing . . . . . . . . . . . . . . . . 2            Lobbying expenses,                                         Recapture taxes . . . . . . . . . . . . . . 18
Accounting period (Tax                                    Employee benefit                                                 nondeductibility . . . . . . . . . . . . 13              Reconciliation of income . . . . . . 21
  Year) . . . . . . . . . . . . . . . . . . . . . . . 5     programs . . . . . . . . . . . . . . . . . . 12                                                                         Recordkeeping . . . . . . . . . . . . . . . . 5
Address change . . . . . . . . . . . . . . . 7            Employer identification number                                 M                                                          Refundable credits . . . . . . . . . . . 14
Affiliated group . . . . . . . . . . . . . . . 19           (EIN) . . . . . . . . . . . . . . . . . . . . . . . 7        Merchant Marine capital                                    Related party transactions . . . . . 9
Amended return . . . . . . . . . . . . . . . 5            Estimated tax:                                                   construction fund:                                       Rents (expense) . . . . . . . . . . . . . . 11
Amortization . . . . . . . . . . . . . . . . . . 9          Penalty . . . . . . . . . . . . . . . . . . . . 15             Deduction for                                            Rents (income) . . . . . . . . . . . . . . . . 8
Assembling the return . . . . . . . . . 4                 Extension of time to file . . . . . . . . 3                          contributions . . . . . . . . . . . . . 14           Repairs and maintenance . . . . . 10
At-risk rules . . . . . . . . . . . . . . . . . . 13                                                                       Tax on nonqualified
                                                          F                                                                    withdrawal . . . . . . . . . . . . . . . 19
                                                                                                                         Minimum tax:                                               S
B                                                         Farming, corporations engaged                                                                                             Salaries and wages . . . . . . . . . . . 10
                                                            in . . . . . . . . . . . . . . . . . . . . . . . . . . . 2     Alternative . . . . . . . . . . . . . . . . . 18
Backup withholding . . . . . . . . . . . 15                                                                                Prior year, credit for . . . . . . . . 18                Schedule:
Bad debts . . . . . . . . . . . . . . . . . . . . 11      Final return . . . . . . . . . . . . . . . . . . . . 7                                                                      A . . . . . . . . . . . . . . . . . . . . . . . . . . 15
                                                          Financial asset securitization                                 Mutual savings banks conducting
Balance sheets . . . . . . . . . . . . . . . 20                                                                            life insurance business . . . . . 18                       C . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Business startup expenses . . . . . 9                       investment trust (FASIT) . . . . . 2                                                                                      J . . . . . . . . . . . . . . . . . . . . . . . . . . 17
                                                          Foreign person (defined) . . . . . . 20                                                                                     K . . . . . . . . . . . . . . . . . . . . . . . . . . 19
                                                          Foreign tax credit . . . . . . . . . . . . . 18                N                                                            L . . . . . . . . . . . . . . . . . . . . . . . . . . 20
C                                                         Forms and publications, how to                                 Name change . . . . . . . . . . . . . . . . . 7              M-1 . . . . . . . . . . . . . . . . . . . . . . . . 21
Capital construction fund (See                              get . . . . . . . . . . . . . . . . . . . . . . . . . 1      Net operating loss . . . . . . . . 14, 20                    M-3 . . . . . . . . . . . . . . . . . . . . . . 7, 21
  Merchant Marine capital                                                                                                Nonaccrual experience                                        O . . . . . . . . . . . . . . . . . . . . . . . . . . 17
  construction fund)                                                                                                       method . . . . . . . . . . . . . . . . . . . . . 8       Section 263A costs . . . . . . . . . 9, 15
Closely held corporations . . . . . 10                    G
                                                                                                                                                                                    Shareholders’ equity
Compensation of officers . . . . . . 10                   General business credit . . . . . . . 18                                                                                    adjustments . . . . . . . . . . . . . . . . 21
                                                          Golden parachute                                               O
Consolidated return . . . . . . . . . 6, 20                                                                                                                                         Signature . . . . . . . . . . . . . . . . . . . . . 3
                                                            payments . . . . . . . . . . . . . . . . . . . 9             Other deductions . . . . . . . . . . . . . 12
Contributions to reduce debt held                                                                                                                                                   Special returns for certain
  by the public . . . . . . . . . . . . . . . . 1         Gross receipts . . . . . . . . . . . . . . . . . 7             Other income . . . . . . . . . . . . . . . . . 8
                                                                                                                                                                                      organizations . . . . . . . . . . . . . . . 2
Contributions, charitable . . . . . . 11                                                                                 Other taxes . . . . . . . . . . . . . . . . . . 18
Controlled group . . . . . . . . . . . . . 17             I                                                              Overpaid estimated tax . . . . . . . 14
                                                                                                                                                                                    T
Cost of goods sold . . . . . . . . . . 8, 15              Installment sales . . . . . . . . . . . . . . 7                                                                           Tax issues, unresolved . . . . . . . . 1
Credits against tax . . . . . . . . . . . . 18            Interest due:                                                  P
                                                                                                                                                                                    Tax rate schedule . . . . . . . . . . . . 18
                                                             Late payment of tax . . . . . . . . . 4                     Partnership income (loss) . . . . . 13
                                                             Look-back method . . . . . . . . . . 18                                                                                Taxes and licenses . . . . . . . . . . . 11
D                                                                                                                        Passive activity limitations . . . . . . 9
                                                          Interest expense . . . . . . . . . . . . . 11                                                                             Tax-exempt securities . . . . . . . . 21
Deductions . . . . . . . . . . . . . . . . . . . . 9                                                                     Penalties . . . . . . . . . . . . . . . . . . . 4, 15
                                                          Interest expense (relating to                                                                                             Travel, meals, and
Depletion . . . . . . . . . . . . . . . . . . . . 12                                                                     Pension, profit-sharing, etc.                                entertainment . . . . . . . . . . . . . . 13
                                                             section 263A) . . . . . . . . . . . . . . . 9                 plans . . . . . . . . . . . . . . . . . . . . . . 12
Depository methods of tax                                 Interest income:
  payment . . . . . . . . . . . . . . . . . . . . 4                                                                      Personal holding company . . . . . 6
                                                             Taxable . . . . . . . . . . . . . . . . . . . . . 8         Personal holding company                                   W
Depreciation . . . . . . . . . . . . . . . . . 12            Tax-exempt . . . . . . . . . . . . 20, 21                                                                              When to file . . . . . . . . . . . . . . . . . . . 3
                                                                                                                           tax . . . . . . . . . . . . . . . . . . . . . . . . 18
Direct deposit of refund . . . . . 1, 15                  Inventory:                                                                                                                Where to file . . . . . . . . . . . . . . . . . . 3
                                                                                                                         Personal service
Disclosure statement . . . . . . . . . . 5                   Section 263A uniform                                          corporation . . . . . . . . . . . . . . . . . 7          Who must file . . . . . . . . . . . . . . . . . 2
Dividend income . . . . . . . . . . . . . . 8                  capitalization rules . . . . . 9, 15                      Preparer, tax return . . . . . . . . . . . . 3             Who must sign . . . . . . . . . . . . . . . . 3
Dividends-received                                           Valuation methods . . . . . . . . . 15                                                                                 Worksheets . . . . . . . . . . . . . . . . . . 17
                                                                                                                         Private delivery services . . . . . . . 3
  deduction . . . . . . . . . . . . . . . 16-17                                                                                                                                       Schedule C . . . . . . . . . . . . . . . . 17
Dues, membership and                                      L
  other . . . . . . . . . . . . . . . . . . . . . . 13                                                                   Q                                                                                                                s
                                                          LIFO recapture:
                                                            Tax on . . . . . . . . . . . . . . . . . . . . . 19          Qualified personal service
                                                                                                                           corporation . . . . . . . . . . . . . . . . 18
                                                          Limitations on deductions . . . . . . 9,
                                                                                                             12




                                                                                                                    -25-

				
DOCUMENT INFO
Description: IRS Instructions for Form 1120 - U.S. Corporation Income Tax Return - 2010