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
• 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
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)
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
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
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)
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
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:
(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
• 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,
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,
Oklahoma, Oregon, South
Extension of Time To File Dakota, Texas, Utah,
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
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.
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”
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.
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.
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).
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
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
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
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
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
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
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
238220 Plumbing, Heating, & Petroleum and Coal Products 333610 Engine, Turbine & Power
112111 Beef Cattle Ranching & Air-Conditioning Contractors Transmission Equipment Mfg
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
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, &
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
113310 Logging 311300 Sugar & Confectionery 334610 Manufacturing &
325500 Paint, Coating, & Adhesive
Fishing, Hunting and Trapping Product Mfg Reproducing Magnetic &
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
115310 Support Activities For seasonings) Manufacturing
327100 Clay Product & Refractory
Forestry Beverage and Tobacco Product 336100 Motor Vehicle Mfg
Manufacturing 336210 Motor Vehicle Body & Trailer
327210 Glass & Glass Product Mfg
Mining 312110 Soft Drink & Ice Mfg
327300 Cement & Concrete Product
211110 Oil & Gas Extraction 312120 Breweries 336300 Motor Vehicle Parts 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
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
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
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
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
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
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
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
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
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
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
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 &
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 &
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
Professional, Scientific, and 561450 Credit Bureaus 623000 Nursing & Residential Care
811310 Commercial & Industrial
Technical Services 561490 Other Business Support Machinery & Equipment
Services (including Social Assistance (except Automotive &
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
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
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
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
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
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
Tax on . . . . . . . . . . . . . . . . . . . . . 19 Qualified personal service
corporation . . . . . . . . . . . . . . . . 18
Limitations on deductions . . . . . . 9,