us internal revenue service: i1120 a--1991

8/14/2019 US Internal Revenue Service: i1120 a--1991

1/18

Cat. No. 11455T

Voluntary Contributions ToReduce the Public DebtA corporation may make a contributionto reduce the public debt. If the

corporation wishes to do so, enclosewith the tax return a check madepayable to Bureau of the Public Debt.Voluntary contributions to reduce thepublic debt are deductible subject to therules and limitations for charitablecontributions.

ContentsFiling Requirements 1

Who Must File 1

When To File 2

Where To File 2

Who Must Sign 2

Accounting Information 3

Rounding Off to Whole Dollars 3

Depositary Method of Tax Payment 3

Backup Withholding 4

Estimated Tax Payments 4

Interest and Penalties 4

Other Required Forms, Returns,and Statements 4

Income 6

Deductions 7

Schedule A and Cost of Goods SoldWorksheet 11

Schedule C 11

Schedule J 13

Schedule K 15Schedule L 15

Schedule M-1 15

Codes for Principal BusinessActivity 17

Index 18

Avoid Common MistakesTo speed the processing of your return,be sure to do the following:

1. If the corporation does not use acalendar tax year, enter the beginningand ending dates of its fiscal year in thespace at the top of the form.

2. Unless the corporation changed itsname since it last filed, enter the namethe way it appeared on the last filedreturn.

3. Enter the correct employeridentification number (EIN) in item B ifyou are not using the label.

4. Enter total assets in item D.

5. If you are reporting gross receiptsor sales on line 1, complete lines 1a, 1b,and 1c.

6. If you are reporting salaries andwages on line 13, complete lines 13a,13b, and 13c.

7. Complete line 32d (line 28d, Form1120-A).

8. If the corporation is a qualifiedpersonal service corporation, check thebox on Schedule J, line 3 (Part I, line 1,Form 1120-A).

9. Enter your business activity codenumber on Schedule K, line 2a (Part II,line 1a, Form 1120-A).

10. To avoid interest and penalties, fileyour return on time and pay any taxwhen due. See pages 3 and 4.

Important ChangeEnhanced Oil Recovery Credit.Corporations may take a credit on Form8830, Enhanced Oil Recovery Credit, for15% of qualified enhanced oil recoverycosts paid or incurred in tax yearsbeginning after 1990. These costsgenerally include amounts paid orincurred in connection with a qualifiedenhanced oil recovery project for:

Certain tangible property for which thecorporation can claim a deduction fordepreciation or amortization,

Intangible drilling and developmentcosts eligible for the election undersection 263(c) or required to becapitalized under section 291(b)(1), and

Qualified tertiary injectant expensesfor which a deduction is allowed undersection 193.

If a corporation takes this credit,limitations apply to amounts otherwisedeductible (or required to be capitalizedand recovered through depreciation,depletion, or amortization), that wereused in figuring the credit. For moreinformation, see section 43 and Form8830.

General InstructionsNote: In addition to the publicationslisted throughout these instructions,taxpayers may wish to get:Pub. 534,Depreciation;Pub. 535, BusinessExpenses; andPub. 542, TaxInformation on Corporations.

Purpose of FormForm 1120, U.S. Corporation IncomeTax Return, and Form 1120-A, U.S.Corporation Short-Form Income TaxReturn, are used by corporations toreport income, gains, losses, deductions,credits, and to figure their income taxliability.

Filing Requirements

Who Must File

Unless exempt under section 501, alldomestic corporations (includingcorporations in bankruptcy) must file,

Instructions forForms 1120 and 1120-A(Section references are to the Internal Revenue Code unless otherwise noted.)

Paperwork Reduction Act NoticeWe ask for the information on this form to carry out the Internal Revenue laws of theUnited States. You are required to give us this information. We need it to ensure thatyou are complying with these laws and to allow us to figure and collect the rightamount of tax.

The time needed to complete and file the following forms will vary depending onindividual circumstances. The estimated average times are:

Copying,assembling,and sendingthe form to

the IRSPreparingthe form

Learning aboutthe law or the

formRecordkeepingForm

8 hr., 2 min.70 hr., 39 min.39 hr., 51 min.68 hr., 10 min.1120

4 hr., 50 min.42 hr., 44 min.24 hr., 13 min.43 hr., 3 min.1120-A48 min.6 hr., 45 min.3 hr., 41 min.6 hr., 28 min.Sch. D (1120)32 min.8 hr., 29 min.6 hr., 6 min.15 hr., 19 min.Sch. PH (1120)

If you have comments concerning the accuracy of these time estimates orsuggestions for making these forms more simple, we would be happy to hear fromyou. You can write to both the Internal Revenue Service, Washington, DC 20224,Attention: IRS Reports Clearance Officer, T:FP; and the Office of Management andBudget, Paperwork Reduction Project (1545-0123), Washington, DC 20503. DONOT send the tax form to either of these offices. Instead, see Where To File.

Department of the TreasuryInternal Revenue Service


2/18

Page 2

whether or not they have taxableincome. Domestic corporations must fileForm 1120, or, if they qualify, Form1120-A, unless they are required to file aspecial return (see Special Returns forCertain Organizations below).

Note: If an organization more nearlyresembles a corporation than apartnership or trust, it will be consideredan association taxed as a corporation.

Who May File Form 1120-A

Form 1120-A may be filed by acorporation if it meets all of thefollowing requirements:

Its gross receipts (line 1a, page 1)must be under $500,000.

Its total income (line 11, page 1) mustbe under $500,000.

Its total assets (line 12, column (b),Part III on page 2) must be under$500,000.

It does not have any ownership in aforeign corporation.

It does not have foreign shareholderswho own, directly or indirectly, 50% ormore of its stock.

It is not a member of a controlledgroup of corporations (sections 1561and 1563).

It is not a personal holding company(sections 541 through 547).

It is not a consolidated corporatereturn filer.

It is not a corporation undergoing adissolution or liquidation.

It is not filing its final tax return.

Its only dividend income (none ofwhich represents debt-financedsecurities) is from domesticcorporations, and those dividends

qualify for the 70% deduction. It has no nonrefundable tax creditsother than the general business creditand the credit for prior year minimumtax.

It is not subject to environmental taxunder section 59A.

It has no liability for interest undersection 453(l)(3) or 453A(c) (relating tocertain installment sales) or installmentpayments of tax under section 1363(d).

It has no liability for interest due underthe look-back method of section460(b)(2).

It is not required to file Form 8621,Return by a Shareholder of a PassiveForeign Investment Company orQualified Electing Fund.

It is not required to file one of thespecial tax returns listed below.

Special Returns for CertainOrganizations

Certain organizations, as shown below,have to file special returns.

If the organization is a: File Form

Foreign corporation (otherthan life and property andcasualty insurancecompany filing Form 1120Lor 1120-PC)

1120F

Foreign sales corporation(sec. 922)

1120-FSC

Life insurance company(sec. 801)

1120L

Property and casualty

insurance company(sec. 831)

1120-PC

Farmers cooperative(sec. 1381)

990-C

Exempt organization withunrelated trade or businessincome

990-T

S corporation (sec. 1361) 1120S

Interest charge domesticinternational salescorporation (sec. 992)

1120-IC-DISC

Political organization(sec. 527)

1120-POL

Condominium managementassociation or residential

real estate managementassociation that elects tobe treated as ahomeowners associationunder sec. 528

1120-H

Fund set up to pay fornuclear decommissioningcosts (sec. 468A)

1120-ND

Designated settlement fund(sec. 468B)

1120-DF

Real estate investment trust(sec. 856)

1120-REIT

Entity that elects to betreated as real estatemortgage investmentconduit (REMIC) under sec.

860D

1066

Regulated investmentcompany (sec. 851)

1120-RIC

When To FileIn general, a corporation must file itsincome tax return by the 15th day of the3rd month after the end of the tax year.A new corporation filing a short-periodreturn must generally file by the 15thday of the 3rd month after the shortperiod ends. A corporation that hasdissolved must generally file by the 15thday of the 3rd month after the date it

dissolved.Extension.File Form 7004, Applicationfor Automatic Extension of Time To FileCorporation Income Tax Return, torequest a 6-month extension of time tofile.

Where To FileUse the preaddressed envelope. If youdo not use the envelope, file your returnat the applicable IRS address listedbelow.

If the corporationsprincipal business, office,

or agency is located in

Use the followingInternal RevenueService Center

address

New Jersey, New York(New York City andcounties of Nassau,Rockland, Suffolk, andWestchester)

Holtsville, NY 00501

New York (all othercounties), Connecticut,Maine, Massachusetts, New

Hampshire, Rhode Island,Vermont

Andover, MA 05501

Florida, Georgia, SouthCarolina

Atlanta, GA 39901

Indiana, Kentucky,Michigan, Ohio, WestVirginia

Cincinnati, OH 45999

Kansas, New Mexico,Oklahoma, Texas

Austin, TX 73301

Alaska, Arizona, California(counties of Alpine, Amador,Butte, Calaveras, Colusa,Contra Costa, Del Norte, ElDorado, Glenn, Humboldt,Lake, Lassen, Marin,Mendocino, Modoc, Napa,

Nevada, Placer, Plumas,Sacramento, San Joaquin,Shasta, Sierra, Siskiyou,Solano, Sonoma, Sutter,Tehama, Trinity, Yolo, andYuba), Colorado, Idaho,Montana, Nebraska,Nevada, North Dakota,Oregon, South Dakota,Utah, Washington,Wyoming

Ogden, UT 84201

California (all othercounties), Hawaii

Fresno, CA 93888

Illinois, Iowa, Minnesota,Missouri, Wisconsin

Kansas City, MO 64999

Alabama, Arkansas,Louisiana, Mississippi,

North Carolina, Tennessee

Memphis, TN 37501

Delaware, District ofColumbia, Maryland,Pennsylvania, Virginia

Philadelphia, PA 19255

Corporations having their principalplace of business outside the UnitedStates or claiming a possessions taxcredit (section 936) must file with theInternal Revenue Service Center,Philadelphia, PA 19255.

If the principal office of the managingcorporation of a group of corporationslocated in several service center regionskeeps all the books and records, theincome tax returns of the corporations

may be filed with the service center forthe region in which this principal office islocated.

Who Must SignThe return must be signed and dated bythe president, vice president, treasurer,assistant treasurer, chief accountingofficer, or any other corporate officer(such as tax officer) authorized to sign. Areceiver, trustee, or assignee must signand date any return required to be filedon behalf of a corporation.


3/18

Page 3

If a corporate officer filled in thecorporate tax return, the Paid Preparersspace under Signature of officershould remain blank. If someoneprepares the tax return and does notcharge the corporation, that personshould not sign the return. Certainothers who prepare the tax return shouldnot sign. For example, a regular, full-timeemployee of the corporation, such as aclerk, secretary, etc., should not sign.

Generally, anyone who is paid to

prepare the tax return must sign it andfill in the other blanks in the PaidPreparers Use Only area of the return.

The preparer required to sign thereturn must complete the requiredpreparer information and:

Sign it, by hand, in the space providedfor the preparers signature. (Signaturestamps or labels are not acceptable.)

Give a copy of the tax return to thetaxpayer in addition to the copy filedwith the IRS.

Figuring and Paying the Tax

Accounting InformationAccounting methods.Taxable incomemust be computed using the method ofaccounting regularly used in keeping thecorporations books and records. In allcases, the method adopted must clearlyreflect taxable income. See section 446.

Generally, corporations engaged infarming operations must use the accrualmethod of accounting. See section 447for exceptions.

Generally, corporations (other thanqualified personal service corporations)are required to use the accrual methodof accounting if their average annual

gross receipts are more than $5 million.See section 448(c). A corporationchanging to the accrual method becauseof this provision must complete Form3115, Application for Change inAccounting Method, and attach it toForm 1120 for the year of change. Thecorporation must also show on astatement accompanying Form 3115 theperiod over which the section 481(a)adjustment will be taken into accountand the basis for that conclusion. Seesection 448 and Temporary Regulationssections 1.448-1T(g) and 1.448-1T(h) formore information. Include the amountreportable as income in 1991 under

section 481(a) on line 10, page 1.Unless the law specifically permits

otherwise, the corporation may changethe method of accounting used to reporttaxable income in earlier years (forincome as a whole or for any materialitem) only by first getting consent onForm 3115. Also see Pub. 538,Accounting Periods and Methods.

The percentage of completion method,including the look-back method undersection 460(b), is generally the onlypermissible method of accounting for

long-term contracts entered into afterJuly 10, 1989.

Certain contracts, including realproperty construction contracts, maycontinue to be accounted for under thepermissible methods of accounting forlong-term contracts under prior law.However, an election can be made notto recognize income under a long-termcontract and not to take into accountany costs allocable to the long-termcontract if less than 10% of the

estimated total contract costs have beenincurred as of the end of the tax year.See section 460(b)(5) for more details.An election to use the 10% method willapply to all long-term contracts enteredinto during the tax year the election ismade and to any later tax year.

See section 460; Notice 87-61, 1987-2C.B. 370; Notice 88-66, 1988-1 C.B.552; and Notice 89-15, 1989-1 C.B. 634for more information.

Change in accounting period.Generally, before changing anaccounting period, the Commissionersapproval must be obtained (Regulationssection 1.442-1) by filing Form 1128,Application To Adopt, Change, or Retaina Tax Year. Also see Pub. 538.

Personal service corporations asdefined in Temporary Regulationssection 1.441-4T (see the instructions forItem A on page 6) must adopt acalendar year unless:

The corporation can establish to thesatisfaction of the Commissioner thatthere is a business purpose for having adifferent tax year, or

The corporation elects under section444 to have a tax year other than acalendar year.

Personal service corporations thatwish to establish a business purpose forhaving a different tax year should seeRev. Rul. 87-57, 1987-2 C.B. 117, formore information. Also see Rev. Proc.87-32, 1987-2 C.B. 396, for proceduresto use in adopting, retaining, orchanging the corporations tax year.Personal service corporations that wishto adopt or retain a noncalendar tax yearmust file requests to do so on Form1128 in accordance with the proceduresoutlined in Rev. Proc. 87-32.

Personal service corporations thatwish to elect under section 444 to havea tax year other than a calendar year

must file Form 8716, Election To Have aTax Year Other Than a Required TaxYear. Generally, Form 8716 must be filedby the earlier of:

The 15th day of the 5th monthfollowing the month that includes the 1stday of the tax year for which theelection will be effective, or

The due date (not includingextensions) of the income tax returnresulting from the section 444 election.

Electing corporations are subject tominimum distribution requirements under

section 280H(c) for each year theelection is in effect. If the corporationfails to make the required minimumdistributions, the deduction allowable forcertain amounts paid toemployee-owners is limited to amaximum deductible amount undersection 280H(d). Amounts not allowedas a deduction for the tax year arecarried over to the following tax year.Complete Schedule H (Form 8716),Section 280H Limitations for a PersonalService Corporation (PSC), to figure therequired minimum distributions and themaximum deductible amount, ifapplicable.

Timing change in deducting accruedexpenses.Generally, an accrual basistaxpayer can deduct accrued expensesin the tax year that (1) all events haveoccurred that determine the liability and(2) the amount of the liability can befigured with reasonable accuracy.However, the events that establishliability for the amount are generallytreated as occurring only wheneconomic performance takes place.There are exceptions for recurring items.

See section 461(h).Rule of 78s.Taxpayers are remindedthat, generally, the Rule of 78s is not anacceptable method for computinginterest income and expense. Anyoneusing the Rule of 78s should see Rev.Procs. 84-27, 84-28, 84-29, and 84-30(1984-1 C.B.) to change their method.

Rounding Off to Whole-Dollars

The corporation may show the moneyitems on the return and accompanyingschedules as whole-dollar amounts. Todo so, drop any amount less than 50cents and increase any amount from 50

cents through 99 cents to the nexthigher dollar.

Depositary Method of TaxPayment

The corporation must pay the tax due infull when the return is filed but no laterthan the 15th day of the 3rd month afterthe end of the tax year.

Deposit corporation income taxpayments (and estimated tax payments)with a Federal Tax Deposit Coupon(Form 8109). Do not submit depositsdirectly to an IRS office. Mail or deliverthe completed Federal Tax DepositCoupon (Form 8109) and the payment toa qualified depositary for Federal taxesor to the Federal Reserve bank (FRB)servicing your geographic area. Makechecks or money orders payable to thatdepositary or FRB. To help ensureproper crediting to your account, writeyour employer identification number,Form 1120, and the tax period towhich the deposit applies on your checkor money order. Be sure to darken the1120 box on the coupon. Records ofdeposits will be sent to the IRS forcrediting to the corporations account.


4/18

Page 4

A penalty may be imposed for failureto deposit the required amount of tax.See section 6656. This penalty may alsoapply if you mail or deliver deposits toIRS offices rather than to authorizeddepositaries or FRBs.

For more information about deposits,see the instructions contained in thecoupon book (Form 8109) and Pub. 583,Taxpayers Starting a Business.

Backup Withholding

If the corporation has had income taxwithheld from any payments it receivedbecause, for example, it failed to givethe payer its correct employeridentification number, it may claim acredit on Form 1120 (or 1120-A) for thetotal amount withheld. This type ofwithholding is called backupwithholding. On Form 1120, show theamount withheld in the blank space inthe right hand column between lines 31and 32h, page 1, and label the amountas backup withholding. Also includethe amount in the total for line 32h. OnForm 1120-A, show the amount withheldon the dotted line to the left of line 28h,

page 1, and label the amount asbackup withholding. Also include theamount in the total for line 28h.

Estimated Tax Payments

Generally, a corporation must makeinstallment payments of estimated tax ifit expects its estimated tax (income taxminus credits) to be $500 or more. For acalendar or fiscal year corporation, theinstallments are due by the 15th day ofthe 4th, 6th, 9th, and 12th months of thetax year. If any date falls on a Saturday,Sunday, or legal holiday, substitute thenext regular workday. Use Form

1120-W, Corporation Estimated Tax, asa worksheet to compute estimated tax.Use the deposit coupons (Forms 8109)to make deposits of estimated tax.

If a corporation is the beneficiary of atrust, and the trust makes a section643(g) election to credit its estimated taxpayments to its beneficiaries, include thecorporations share of the estimated taxpayment in the total amount entered online 32b, Form 1120 (line 28b, Form1120-A). Write T and the amount ofthe payment on the dotted line next tothe entry space.

If the corporation overpaid estimatedtax, it may be able to get a quick

refund by filing Form 4466, CorporationApplication for Quick Refund ofOverpayment of Estimated Tax. Theoverpayment must be at least 10% ofthe expected income tax liability and atleast $500. To apply for a quick refund,file Form 4466 before the 16th day ofthe 3rd month after the end of the taxyear, but before the corporation files itsincome tax return. Do not file Form 4466before the end of the corporations taxyear.

Interest and PenaltiesInterest.Interest is charged on taxesnot paid by the due date even if anextension of the time to file is granted.Interest is also charged on penaltiesimposed for failure to file, negligence,fraud, gross valuation overstatements,and substantial understatements of taxfrom the due date (including extensions)to the date of payment. The interestcharge is figured at a rate determinedunder section 6621.

Late filing of return.A corporationthat fails to file its return when due(including extensions of time for filing)may be subject to a penalty of 5% ofthe unpaid tax for each month or part ofa month the return is late, up to amaximum of 25% of the unpaid tax. Theminimum penalty for a return that ismore than 60 days late is the smaller ofthe tax due or $100. The penalty will notbe imposed if the taxpayer can showthat failure to file a timely return is dueto reasonable cause. Those filing late(after the due date, includingextensions), must attach a statement to

the return explaining the reasonablecause.

Late payment of tax.The penalty forlate payment of taxes is usually 12 of 1%of the unpaid tax for each month or partof a month the tax is unpaid. Thepenalty cannot exceed 25% of theamount due. This penalty may alsoapply to any additional tax not paidwithin 10 days of the date of the noticeand demand for payment.

Estimated tax penalty.A corporationthat fails to make estimated taxpayments when due may be subject toan underpayment penalty for the periodof underpayment. In general, to avoidthe estimated tax penalty, thecorporation must make estimated taxpayments of at least the smaller of 90%of the tax shown on the return or 100%of its prior years tax. See section 6655for details and exceptions.

Form 2220, Underpayment ofEstimated Tax by Corporations, is usedto see if the corporation owes a penaltyand to figure the amount of the penalty.Generally, the corporation does not haveto file this form because the IRS canfigure the amount of any penalty and billthe corporation for it. However, you mustcomplete and attach Form 2220 even if

the corporation does not owe thepenalty if:

The annualized income or adjustedseasonal installment method is used, or

The corporation is a largecorporation computing its first requiredinstallment based on the prior years tax.(See the Instructions for Form 2220 forthe definition of a large corporation.)

If you attach Form 2220, be sure tocheck the box on line 33, Form 1120(line 29, Form 1120-A), and enter theamount of any penalty on this line.

Other penalties.Other penalties canbe imposed for negligence, substantialunderstatement of tax, and fraud. Seesections 6662 and 6663.

Other Forms, Returns, andStatements That May BeRequired

Forms

The corporation may have to file any of

the following:Forms W-2 and W-3, Wage and TaxStatement and Transmittal of Incomeand Tax Statements.

Form 720, Quarterly Federal Excise TaxReturn. Use Form 720 to report a 10%excise tax that applies to the first retailsale of the following items sold afterDecember 31, 1990, to the extent thesales price exceeds the amounts shown:(1) passenger vehicles, $30,000;(2) boats and yachts, $100,000;(3) aircraft, $250,000; and (4)jewelryand furs, $10,000. Form 720 is alsoused to report environmental excisetaxes, communications and air

transportation taxes, fuel taxes,manufacturers taxes, ship passengertax, and certain other excise taxes.

Form 966, Corporate Dissolution orLiquidation.

Forms 1042 and 1042S, AnnualWithholding Tax Return for U.S. SourceIncome of Foreign Persons, and ForeignPersons U.S. Source Income Subject toWithholding. Use these forms to reportand transmit withheld tax on paymentsor distributions made to nonresidentalien individuals, foreign partnerships, orforeign corporations, to the extent suchpayments or distributions constitute

gross income from sources within theUnited States (see sections 861 through865). For more information, see sections1441 and 1442, and Pub. 515,Withholding of Tax on Nonresident Aliensand Foreign Corporations.

Form 1096, Annual Summary andTransmittal of U.S. Information Returns.

Form 1098, Mortgage InterestStatement. This form is used to reportthe receipt from any individual of $600or more of mortgage interest and pointsin the course of the corporations tradeor business for any calendar year.

Forms 1099-A, B, DIV, INT, MISC, OID,

PATR, R, and S. Information returns forreporting abandonments, acquisitionsthrough foreclosure, proceeds frombroker and barter exchangetransactions, certain dividends anddistributions, interest payments,payments for certain fishing boat crewmembers, medical and dental healthcare payments, direct sales of consumergoods for resale, miscellaneous incomepayments, nonemployee compensation,original issue discount, patronagedividends, distributions from


5/18

Page 5

profit-sharing plans, retirement plans,individual retirement arrangements,insurance contracts, etc., and proceedsfrom real estate transactions. Also usethese returns to report amounts thatwere received as a nominee on behalf ofanother person.

For more information, see theinstructions for Form 1099 and Pub.937, Business Reporting.

Note: Every corporation must file Form1099-MISC if, in the course of its trade

or business, it makes payments of rents,commissions, or other fixed ordeterminable income (see section 6041)totaling $600 or more to any one personduring the calendar year.

Form 5452, Corporate Report ofNondividend Distributions.

Form 5498, Individual RetirementArrangement Information. Use this formto report contributions (including rollovercontributions) to an individual retirementarrangement (IRA) and the value of anIRA or simplified employee pensionaccount.

Form 5713, International Boycott

Report, for persons having operations inor related to boycotting countries. Inaddition, persons who participate in orcooperate with an international boycottmay have to complete Schedule A orSchedule B and Schedule C of Form5713 to compute their loss of thefollowing items: the foreign tax credit,the deferral of earnings of a controlledforeign corporation, IC-DISC benefits,and FSC benefits.

Form 8264, Application for Registrationof a Tax Shelter. It is used by tax shelterorganizers to register tax shelters withthe IRS, for the purpose of receiving atax shelter registration number.

Form 8271, Investor Reporting of TaxShelter Registration Number. Taxpayerswho have acquired an interest in a taxshelter which is required to be registereduse this form to report the tax sheltersregistration number. Form 8271 must beattached to any tax return (including anapplication for tentative refund (Form1139) and an amended return (Form1120X)) on which a deduction, credit,loss, or other tax benefit attributable to atax shelter is taken or any incomeattributable to a tax shelter is reported.

Form 8281, Information Return forPublicly Offered Original Issue Discount

Instruments. This form is generallyrequired to be filed by issuers of publicofferings of debt instruments within 30days of the issuance of the debtinstrument.

Form 8300, Report of Cash PaymentsOver $10,000 Received in a Trade orBusiness. Generally, this form is used toreport the receipt of more than $10,000in cash or foreign currency in onetransaction or in a series of relatedtransactions.

Form 8594, Asset AcquisitionStatement, is to be filed by both thepurchaser and seller of a group ofassets constituting a trade or business ifgoodwill or a going concern valueattaches, or could attach, to such assetsand if the purchasers basis in the assetsis determined only by the amount paidfor the assets.

Form 8621, Return by a Shareholder ofa Passive Foreign Investment Companyor Qualified Electing Fund. A corporation

that was a shareholder in a passiveforeign investment company (as definedin section 1296) at any time during thetax year must complete and attach thisform to its return.

Form 8697, Interest Computation Underthe Look-Back Method for CompletedLong-Term Contracts. Use this form tofigure the interest due or to be refundedunder the look-back method of section460(b)(2) on certain long-term contractsentered into after February 28, 1986,that are accounted for under either thepercentage of completion-capitalizedcost method or the percentage ofcompletion method.

The look-back method also applies tothe new 10% method for long-termcontracts entered into after July 10,1989, and accounted for under thepercentage of completion method.Attach Form 8697 to the tax return if thecorporation owes interest but not ifinterest is to be refunded. See theinstructions for Form 8697.

Form 8810, Corporate Passive ActivityLoss and Credit Limitations. Closely heldcorporations and personal servicecorporations, which are subject to thepassive activity limitations of section469, use this form to compute their

allowable passive activity loss andcredit.

Form 8817, Allocation of Patronage andNonpatronage Income and Deductions.Taxable cooperatives with gross receiptsof $10 million or more that have bothpatronage and nonpatronage sourceincome and deductions must completeand attach this form to the return.

Consolidated Return

The parent corporation of an affiliatedgroup of corporations must attach Form851, Affiliations Schedule, to theconsolidated return. For the first year a

consolidated return is filed, eachsubsidiary must attach Form 1122,Authorization and Consent of SubsidiaryCorporation to be Included in aConsolidated Income Tax Return.

File supporting statements for eachcorporation included in the consolidatedreturn. Use columns to show thefollowing, both before and afteradjustments:

Items of gross income anddeductions.

A computation of taxable income.

Balance sheets as of the beginningand end of the tax year.

A reconciliation of income per bookswith income per return.

A reconciliation of retained earnings.

Attach consolidated balance sheetsand a reconciliation of consolidatedretained earnings.

Amended Return

Use Form 1120X, Amended U.S.Corporation Income Tax Return, tocorrect any error in a previously filedForm 1120 or Form 1120-A.

Statements

Stock ownership in foreigncorporations.Attach the requiredstatement to Form 1120 if thecorporation owned 5% or more in valueof the outstanding stock of a foreignpersonal holding company and thecorporation was required to include in itsgross income any undistributed foreignpersonal holding company income froma foreign personal holding company. Seesection 551(c).

A corporation that controls a foreigncorporation, or that is a 10%-or-moreshareholder of a controlled foreigncorporation, or acquires, disposes of, orowns 5% or more ownership in theoutstanding stock of a foreigncorporation, may have to file Form5471, Information Return of U.S.Persons With Respect to Certain ForeignCorporations.

A domestic corporation controlled bya foreign person or a foreign corporationthat is engaged in a trade or business inthe United States may have to file Form5472, Information Return of aForeign-Owned U.S. Corporation or aForeign Corporation Engaged in a U.S.Trade or Business.

Transfers to a corporation controlledby the transferor.If a person receivesstock of a corporation in exchange forproperty, and no gain or loss isrecognized under section 351, theperson (transferor) and the transfereemust attach to their respective taxreturns the information required byRegulations section 1.351-3.

Attachments

Attach Form 4136, Credit for FederalTax on Fuels, after page 4, Form 1120,

or page 2, Form 1120-A. Attachschedules in alphabetical order andother forms in numerical order after theForm 4136.

Please complete every applicableentry space on Form 1120. Do notattach statements and write Seeattached instead of completing theentry spaces.

If more space is needed on the formsor schedules, attach separate sheetsshowing at the top of each attachmentthe form number or schedule letter of


6/18

Page 6

the form or schedule being continued.Also, show the information called for onthe form in the same order as on theprinted forms. Be sure to show totalson the printed forms. Please usesheets that are the same size as theforms and schedules. Attach theseseparate sheets after all the schedulesand forms. Also, put the corporationsname and employer identificationnumber (EIN) on each sheet.

Specific InstructionsPeriod covered.File the 1991 returnfor calendar year 1991 and fiscal yearsthat begin in 1991 and end in 1992. Fora fiscal year, fill in the tax year space atthe top of the form.

Note: The 1991 Form 1120 may also beused if:(1)the corporation has a tax yearof less than 12 months that begins andends in 1992; and(2)the 1992 Form1120 is not available by the time thecorporation is required to file its return.However, the corporation must show its1992 tax year on the 1991 Form 1120and incorporate any tax law changes

that are effective for tax years beginningafter December 31, 1991.

Address.Include the suite, room, orother unit number after the streetaddress. If a preaddressed label is used,please include this information on thelabel.

If the Post Office does not deliver mailto the street address and thecorporation has a P.O. box, show theP.O. box number instead of the streetaddress.

Note: If a change in address occurs afterthe return is filed, the corporation shoulduseForm 8822, Change of Address, to

notify the IRS of the new address.Item APersonal servicecorporation.The term personalservice corporation means acorporation whose principal activityduring the testing period for the tax yearis the performance of personal servicesthat are substantially performed byemployee-owners who own more than10% of the fair market value of thecorporations outstanding stock as of thelast day of the testing period for the taxyear.

The testing period for a tax year is thetax year preceding the tax year, except

for a new corporation (a corporation inits first tax year). The testing period for anew corporation is the period beginningon the first day of its first tax year andending on the earlier of the last day ofits first tax year or the last day of thecalendar year in which the first tax yearbegan.

Activities of the taxpayer that aretreated as the performance of personalservices are limited to activities of thetaxpayer that involve the performance ofservices in the fields of health, law,

engineering, architecture, accounting,actuarial science, performing arts, orconsulting (as such fields are defined inTemporary Regulations section1.448-1T(e)).

Personal services are substantiallyperformed by employee-owners if morethan 20% of the corporationscompensation cost for the testing periodattributable to the performance ofpersonal services is attributable topersonal services performed by

employee-owners.A person is considered to be an

employee-owner if the person is anemployee of the corporation on any dayof the testing period and the personowns any outstanding stock of thecorporation on any day of the testingperiod. Stock ownership is determinedunder the attribution rules of section 318(except that any is substituted for50% in sect ion 318(a)(2)(C)).

For details, see Temporary Regulationssection 1.441-4T.

Item BEmployer identificationnumber.If the employer identification

number (EIN) on the label is wrong or ifthe corporation did not receive a label,enter the correct number at the top ofthe return.

A corporation that does not have anEIN should apply for one on Form SS-4,Application for Employer IdentificationNumber. This form may be obtainedfrom most IRS and Social SecurityAdministration offices. Send Form SS-4to the same Internal Revenue ServiceCenter to which Form 1120 or Form1120-A is mailed. If the EIN has notbeen received by the filing time for thecorporation return, write Applied for inthe space for the EIN.

For more information concerning anEIN, see Pub. 583.

Item DTotal assets.Enter the totalassets of the corporation. If there are noassets at the end of the tax year, enterthe total assets as of the beginning ofthe tax year.

Item EInitial return, final return, orchange in address.If this is thecorporations first return, check the Initial return box. If the corporationceases to exist, file Form 1120 andcheck the Final return box. Do not fileForm 1120-A.

If the corporation has changed itsaddress since it last filed a return, checkthe box for Change in address.

IncomeNote: Generally, income from allsources, whether U.S. or foreign, mustbe included.

Line 1

Gross Receipts

Enter gross receipts or sales from allbusiness operations except those that

must be reported on lines 4 through 10.For reporting advance payments, seeRegulations section 1.451-5. To reportincome from long-term contracts, seesection 460.

Generally, the installment methodcannot be used for dealer dispositions ofproperty. See section 453(I) for detailsand exceptions. For dealer dispositionsof property before March 1, 1986,dispositions of property used orproduced in the trade or business of

farming, and certain dispositions oftimeshares and residential lots reportedunder the installment method, enter online 1 the gross profit on collections frominstallment sales and carry the sameamount to line 3. Attach a scheduleshowing the following for the currentyear and the 3 preceding years: (a)gross sales, (b) cost of goods sold, (c)gross profits, (d) percentage of grossprofits to gross sales, (e) amountcollected, and (f) gross profit on amountcollected. For sales of timeshares andresidential lots reported under theinstallment method, the corporationsincome tax is increased by the interest

payable under section 453(l)(3). To reportthis addition to the tax, see theinstructions for line 10, Schedule J,Form 1120.

Accrual basis taxpayers need notaccrue certain amounts to be receivedfrom the performance of services that,on the basis of their experience, will notbe collected (section 448(d)(5)). Thisprovision does not apply to any amountif interest is required to be paid on theamount or if there is any penalty forfailure to timely pay the amount.Corporations that fall under thisprovision should attach a scheduleshowing total gross receipts, the amountnot accrued as a result of theapplication of section 448(d)(5), and thenet amount accrued. Enter the netamount on line 1a. For more informationand guidelines on this non-accrualexperience method, see TemporaryRegulations section 1.448-2T.

Line 2

Cost of Goods Sold

Enter the cost of goods sold on line 2,page 1, of Form 1120 or Form 1120-A.Before making this entry, a Form 1120filer must first complete Schedule A onpage 2 of Form 1120. Form 1120-A filers

may use the worksheet on page 11 tofigure the amount to enter on line 2.Both Form 1120 and Form 1120-A filersshould see the instructions on page 11.

Line 4

Dividends

Form 1120 filers.Complete ScheduleC and enter the amount from ScheduleC, line 19.

Form 1120-A filers.Enter the totaldividends received (that are not from


7/18

Page 7

debt-financed stock) from domesticcorporations that qualify for the 70%dividends-received deduction.

Line 5

Interest

Enter taxable interest on U.S. obligationsand on loans, notes, mortgages, bonds,bank deposits, corporate bonds, taxrefunds, etc.

Do not offset interest expense againstinterest income.

Special rules apply to interest incomefrom certain below-market rate loans.See section 7872 for more information.

Line 6

Gross Rents

Enter the gross amount received for therent of property. Deduct expenses suchas repairs, interest, taxes, anddepreciation on the proper lines fordeductions. A rental activity held by aclosely held corporation or a personalservice corporation may be subject tothe passive activity loss rules. See Form8810 and the related instructions.

Line 8

Capital Gain Net Income

Every sale or exchange of a capitalasset must be reported in detail onSchedule D (Form 1120), Capital Gainsand Losses, even though no gain or lossis indicated.

Line 9

Net Gain or (Loss)

Enter the net gain or (loss) from line 18,Part ll, Form 4797, Sales of BusinessProperty.

Line 10Other Income

Enter any other taxable income notlisted above, and explain its nature onan attached schedule. Examples of otherincome are any adjustment undersection 481(a) required to be included inincome during the current tax year dueto a change in a method of accounting;recoveries of bad debts deducted inprior years under the specific charge-offmethod; the amount of credit for alcoholused as fuel (determined without regardto the limitation based on tax) that wasentered on Form 6478, Credit for

Alcohol Used as Fuel; and refunds oftaxes deducted in prior years to theextent they reduced income subject totax in the year deducted (see section111). Do not offset current years taxeswith tax refunds.

If other income consists of only oneitem, describe it in parentheses on line10.

Deductions

Limitations on Deductions

Section 263A uniform capitalizationrules.The uniform capitalization rulesof section 263A require corporations tocapitalize or include in inventory certaincosts incurred in connection with theproduction of real and personal tangibleproperty held in inventory or held forsale in the ordinary course of business.Tangible personal property produced by

a taxpayer includes a film, soundrecording, videotape, book, or similarproperty. The rules also apply topersonal property (tangible andintangible) acquired for resale. Taxpayerssubject to the rules are required tocapitalize not only direct costs but anallocable portion of most indirect costs(including taxes) that relate to the assetsproduced or acquired for resale. Interestexpense paid or incurred during theproduction period of certain propertymust be capitalized and is governed byspecial rules. For more information, seeNotice 88-99, 1988-2 C.B. 422. Theuniform capitalization rules also apply to

the production of property constructedor improved by a taxpayer for use in itstrade or business or in an activityengaged in for profit.

Section 263A does not apply topersonal property acquired for resale ifthe taxpayers annual average grossreceipts are $10 million or less. It doesnot apply to timber or to most propertyproduced under a long-term contract.Special rules apply for farmers. The rulesdo not apply to property that isproduced for use by the taxpayer ifsubstantial construction occurred beforeMarch 1, 1986.

In the case of inventory, some of theindirect costs that must be capitalizedare administration expenses; taxes;depreciation; insurance; compensationpaid to officers attributable to services;rework labor; and contributions topension, stock bonus, and certainprofit-sharing, annuity, or deferredcompensation plans.

The costs that must be capitalizedunder section 263A are not deductibleuntil the property to which the costsrelate is sold, used, or otherwisedisposed of by the corporation.

Current deductions may still be

claimed for reasonable research andexperimental costs under section 174,intangible drilling costs for oil and gasand geothermal property, and miningand exploration and development costs.Temporary Regulations section1.263A-1T specifies other indirect coststhat may be currently deducted andthose that must be capitalized withrespect to production or resale activities.For more information, see TemporaryRegulations section 1.263A-1T.

Transactions between relatedtaxpayers.Generally, an accrual basis

taxpayer may only deduct businessexpenses and interest owed to a relatedparty in the year the payment is includedin the income of the related party. Seesections 163(j) and 267 for limitation ondeductions for unpaid expenses andinterest.

Section 291 limitations.Corporationsmay be required to adjust deductions fordepletion of iron ore and coal, intangibledrilling and exploration and developmentcosts, certain deductions for financial

institutions, and the amortizable basis ofpollution control facilities. See section291 to determine the amount ofadjustment. Also see section 43.

Golden parachute payments.Aportion of the payments made by acorporation to key personnel thatexceeds their usual compensation maynot be deductible. This occurs when thecorporation has an agreement (goldenparachute) with these key employees topay them these excessive amounts ifcontrol of the corporation changes. Seesection 280G.

Business startup expenses.Businessstartup expenses are required to becapitalized unless an election is made toamortize them over a period of 60months. See section 195.

Passive activity limitations.Limitations on passive activity lossesand credits under section 469 apply toclosely held corporations (defined below)and personal service corporations asdefined in Temporary Regulationssection 1.441-4T (see Item APersonalservice corporation, on page 6.) Acorporation is a closely held corporationfor this purpose if at any time during thelast half of the tax year more than 50%in value of its outstanding stock is

owned, directly or indirectly, by or fornot more than five individuals, and thecorporation is not a personal servicecorporation. Certain organizations aretreated as individuals for purposes ofthis test. (See section 542(a)(2).) Forrules of determining stock ownership,see section 544 (as modified by section465(a)(3)).

There are two kinds of passiveactivities: trade or business activities inwhich the corporation did not materiallyparticipate for the tax year, and rentalactivities regardless of its participation.An activity is a trade or business activityif the activity involves the conduct of atrade or business (i.e., deductions fromthe activity would be allowable undersection 162 if other limitations, such asthe passive loss rules, did not apply), orthe activity involves research orexperimental expenditures that aredeductible under section 174 (or wouldbe deductible if the corporation chose todeduct rather than capitalize them), andthe activity is not a rental activity.Temporary Regulations section1.469-1T(g)(3) defines materialparticipation of corporations.


8/18

Page 8

Corporations subject to the passiveactivity limitations must complete Form8810, Corporate Passive Activity Lossand Credit Limitations, to compute theirallowable passive activity loss andcredit. Before completing Form 8810,see Temporary Regulations section1.163-8T, which provides rules forallocating interest expense amongactivities. If a passive activity is alsosubject to the at-risk rules of section465, the at-risk rules apply before thepassive loss rules. For more information,see section 469, the temporaryregulations thereunder, and Pub. 925,Passive Activity and At-Risk Rules.

Line 12

Compensation of Officers

Besides entering officers compensationon line 12, filers of Form 1120 mustcomplete Schedule E on page 2 if theirtotal receipts (line 1a, plus lines 4through 10, of page 1, Form 1120) are$500,000 or more. Do not includecompensation deductible elsewhere onthe return, such as amounts included incost of goods sold, elective

contributions to a section 401(k) cash ordeferred arrangement, or amountscontributed under a salary reductionSEP agreement.

Complete Schedule E, line 1, columns(a) through (f), for all officers. Thecorporation determines who is an officerunder the laws of the state whereincorporated.

If a consolidated return is filed, eachmember of an affiliated group mustfurnish this information.

Line 13

Salaries and Wages

Enter the amount of total salaries andwages paid or incurred for the tax year.Do not include salaries and wagesdeductible elsewhere on the return, suchas amounts included in cost of goodssold, elective contributions to a section401(k) cash or deferred arrangement, oramounts contributed under a salaryreduction SEP agreement.

Caution: If the corporation providedtaxable fringe benefits to its employees,such as personal use of a car, do notdeduct as wages the amount allocatedfor depreciation and other expenses thatyou claimed on lines 20 and 26, Form

1120, or lines 20 and 22, Form 1120-A.Enter on line 13b the amount of jobs

credit from Form 5884, Jobs Credit.

Line 14Repairs

Enter the cost of incidental repairs notclaimed elsewhere on the return, suchas labor and supplies, that do not add tothe value of the property or appreciablyprolong its life.

Line 15

Bad Debts

Enter the total debts that becameworthless in whole or in part during thetax year. A small bank or thrift institutionusing the reserve method should attacha schedule showing how it arrived at thecurrent years provision.

Caution: A cash basis taxpayer may notclaim a bad debt deduction unless theamount was previously included inincome.

Line 16

Rents

If the corporation rented or leased avehicle, enter the total annual rent orlease expense paid or incurred duringthe year. Also complete Part V of Form4562, Depreciation and Amortization. Ifthe corporation leased a vehicle for aterm of 30 days or more, the deductionfor vehicle lease expense may have tobe reduced by an amount called theinclusion amount. You may have aninclusion amount if:

The lease term began:

And the vehicles

fair market valueon the first day of

the lease exceeded:

After 12/31/90 $13,400

After 12/31/86 but before 1/ 1/91 $12,800

After 4/2/85 but before 1/1/87 $28,000

After 6/18/84 but before 4/3/85 $40,500

See Pub. 917, Business Use of a Car,for instructions on how to figure theinclusion amount.

Line 17

Taxes

Enter taxes paid or accrued during the

tax year, but do not include thefollowing:

1. Federal income taxes (except theenvironmental tax under section 59A);

2. Foreign or U.S. possession incometaxes if a tax credit is claimed;

3. Taxes not imposed on thecorporation; or

4. Taxes, including state or local salestaxes, that are paid or incurred inconnection with an acquisition ordisposition of property (these taxes mustbe treated as a part of the cost of theacquired property or, in the case of adisposition, as a reduction in the amount

realized on the disposition).See section 164(d) for apportionment

of taxes on real property between sellerand purchaser.

If the corporation is liable for theenvironmental tax under section 59A,see Form 4626, Alternative MinimumTaxCorporations, for computation ofthe environmental tax deduction.

Line 18

Interest

If the proceeds of a loan were used formore than one purpose (e.g., topurchase a portfolio investment and toacquire an interest in a passive activity),an interest allocation must be made. SeeTemporary Regulations section 1.163-8Tfor the interest allocation rules.

Do not include interest onindebtedness incurred or continued topurchase or carry obligations if theinterest is wholly exempt from incometax. For exceptions, see section 265(b).

Mutual savings banks, building andloan associations, and cooperativebanks can deduct the amounts paid orcredited to the accounts of depositorsas dividends, interest, or earnings. Seesection 591.

Generally, a cash basis taxpayercannot deduct prepaid interest allocableto years following the current tax year.For example, a cash basis calendar yeartaxpayer who in 1991 prepaid interestallocable to any period after 1991 candeduct only the amount allocable to

1991.Generally, the interest and carrying

charges on straddles cannot bededucted and must be capitalized. Seesection 263(g).

See section 163(e)(5), which providesspecial rules for the disqualified portionof original issue discount on a high yielddiscount obligation.

Certain interest paid or accrued by thecorporation (directly or indirectly) to arelated person may be limited if no tax isimposed on that interest. See section163(j) for more detailed information.

Do not deduct interest on debtallocable to the production of qualifiedproperty. Interest that is allocable toproperty produced by a corporation forits own use or for sale must becapitalized. A corporation must alsocapitalize any interest on debt allocableto an asset used to produce the aboveproperty. See section 263A and Notice88-99 for definitions and moreinformation.

See section 7872 for special rulesregarding the deductibility of foregoneinterest on certain below-market rateloans.

Line 19Contributions

Enter contributions or gifts actually paidwithin the tax year to or for the use ofcharitable and governmentalorganizations described in section 170(c)and any unused contributions carriedover from prior years.

The total amount claimed may not bemore than 10% of taxable income (line30, Form 1120, or line 26, Form 1120-A)computed without regard to thefollowing:


9/18

Page 9

Any deduction for contributions,

The special deductions on line 29b,Form 1120 (line 25b, Form 1120-A),

The deduction allowed under section249,

Any net operating loss (NOL)carryback to the tax year under section172, and

Any capital loss carryback to the taxyear under section 1212(a)(1).

Charitable contributions over the 10%

limitation may not be deducted for thetax year but may be carried over to thenext 5 tax years.

Taxable income is modified in order todetermine the amount of an NOL usedin an intervening year (i.e., a year towhich an NOL is carried but not fullyabsorbed). For this purpose, taxableincome is computed by determining theNOL deduction for the year withoutregard to the NOL for the loss year orany later year. See section 172(b)(2). Tothe extent charitable contributions areused to reduce taxable income for thispurpose and increase an NOL carryover,a contributions carryover is not allowed.

See section 170(d)(2)(B).Corporations on the accrual basis may

elect to deduct contributions paid by the15th day of the 3rd month after the endof the tax year if the contributions areauthorized by the board of directorsduring the tax year. Attach to the returna declaration, signed by an officer,stating that the resolution authorizing thecontributions was adopted by the boardof directors during the tax year. Alsoattach a copy of the resolution.

If a contribution is in property otherthan money and the total claimeddeduction of all such property

contributed exceeds $500, corporations(except closely held and personalservice corporations) must attach aschedule describing the kind of propertycontributed and the method used todetermine its fair market value. Closelyheld corporations and personal servicecorporations must complete Form 8283,Noncash Charitable Contributions, andattach it to their returns. All othercorporations generally must completeand attach Form 8283 to their returns forcontributions of property other thanmoney if the total claimed deduction forall property contributed was more than$5,000.

Also, a corporation must keep records,as required by the regulations for section170, for all of its charitable contributions.

If the corporation made a qualifiedconservation contribution under section170(h), also include the fair market valueof the underlying property before andafter the donation, as well as the type oflegal interest contributed, and describethe conservation purpose furthered bythe donation.

If a contribution carryover is included,show the amount and how it wasdetermined.

Special rule for contributions ofcertain property.For a charitablecontribution of property, the corporationmust reduce the contribution by the sumof:

The ordinary income, short-termcapital gain that would have resulted ifthe property were sold at its fair marketvalue, and

For certain contributions, all of thelong-term capital gain that would haveresulted if the property were sold at itsfair market value.

The reduction for the long-term capitalgain applies to:

Contributions of tangible personalproperty for use by an exemptorganization for a purpose or functionunrelated to the basis for its exemption,and

Contributions of any property (exceptstock for which market quotations arereadily availablesee section 170(e)(5))to or for the use of certain private

foundations. See section 170(e) andRegulations section 1.170A-4.

For special rules for contributions ofinventory and other property to certainorganizations, see section 170(e)(3) andRegulations section 1.170A-4A.

Charitable contributions of scientificproperty used for research.Acorporation (other than a personalholding company or a serviceorganization) can receive a largerdeduction for contributing scientificproperty used for research to aninstitution of higher education. Forfurther information, see section 170(e).

Line 20Depreciation

Besides depreciation, include on line 20the part of the cost (up to $10,000) thatthe corporation elected to expense forcertain tangible property placed inservice during tax year 1991 or carriedover from 1990. See the instructions forForm 4562, Depreciation andAmortization.

Line 22 (Form 1120 only)

Depletion

See sections 613 and 613A for

percentage depletion rates applicable tonatural deposits. Also, see section 291for the limitation on the depletiondeduction for iron ore and coal(including lignite).

Foreign intangible drilling costs andforeign exploration and developmentcosts must either be added to thecorporations basis for cost depletionpurposes or be deducted ratably over a10-year period. See sections 263(i), 616,and 617 for more information.

Attach Form T (Timber), ForestIndustries Schedules, if a deduction fordepletion of timber is taken.


Pension, Profit-Sharing, etc., Plans

Enter the deduction for contributions topension, profit-sharing, or other fundeddeferred compensation plans. Employerswho maintain such a plan generally arerequired to file one of the forms listedbelow, even if the plan is not a

qualified plan under the InternalRevenue Code. The filing requirementapplies even if no deduction is claimedfor the current tax year. There arepenalties for failure to file these forms ontime and for overstating the pensionplan deduction. See sections 6652(e)and 6662(f).

Form 5500.Complete this form foreach plan with 100 or more participants.

Form 5500-C/R.Complete this formfor each plan with fewer than 100participants.

Form 5500EZ.Complete this form fora one-participant plan.


Employee Benefit Programs

Enter the amount of contributions toemployee benefit programs not claimedelsewhere on the return (e.g., insurance,health and welfare programs) that arenot an incidental part of a pension,profit-sharing, etc., plan included on line24.

Line 26, Form 1120(Line 22, Form 1120-A)

Other Deductions

Attach a separate sheet listing allallowable deductions that are notdeductible elsewhere on Form 1120 orForm 1120-A. Form 1120-A filers shouldinclude amounts described in theinstructions above for lines 22, 24, and25 of Form 1120. Enter the total on line26, Form 1120 (line 22, Form 1120-A).

Include on this line the deductiontaken for amortization of pollutioncontrol facilities, organization expenses,etc. See Form 4562.

A corporation may deduct d ividends itpays in cash on stock held by anemployee stock ownership plan.However, a deduction may only be taken

if, according to the plan, the dividendsare:

1. Paid in cash directly to the planparticipants or beneficiaries;

2. Paid to the plan, which distributesthem in cash to the plan participants ortheir beneficiaries no later than 90 daysafter the end of the plan year in whichthe dividends are paid; or

3. Used to make payments on a loandescribed in section 404(a)(9).


10/18

Page 10

See section 404(k) for moreinformation and the limitation on certaindividends.

Generally, a deduction may not betaken for the amount of any item or partthereof allocable to a class of exemptincome. See section 265(b) forexceptions.

Generally, the corporation can deductonly 80% of the amount otherwiseallowable for meals and entertainmentexpenses paid or incurred in its trade or

business. In addition, meals must not belavish or extravagant; a bona fidebusiness discussion must occur during,immediately before, or immediately afterthe meal; and an employee of thecorporation must be present at the meal.See section 274(k)(2) for exceptions. Ifthe corporation claims a deduction forunallowable meal expenses, it may haveto pay a penalty.

Additional limitations apply todeductions for gifts, skybox rentals,luxury water travel, conventionexpenses, and entertainment tickets.See section 274 and Pub. 463, Travel,Entertainment, and Gift Expenses, fordetails.

Generally, a corporation can deduct allother ordinary and necessary travel andentertainment expenses paid or incurredin its trade or business. However, itcannot deduct an expense paid orincurred for a facility (such as a yacht orhunting lodge) that is used for an activitythat is usually considered entertainment,amusement, or recreation.

Note: The corporation may be able todeduct the expense if the amount istreated as compensation and reportedon Form W-2 for an employee or onForm 1099-MISC for an independent

contractor.Note: Do not deduct penalties such asthose listed underInterest andPenaltieson page 4.


Taxable Income Before NOLDeduction and Special Deductions

At-risk rules.Special at-risk rulesunder section 465 generally apply toclosely held corporations (defined underPassive activity limitations on page 7)engaged in any activity as a trade orbusiness or for the production of

income. Such corporations may have toadjust the amount on line 28, Form1120, or line 24, Form 1120-A. (Seebelow.) But the at-risk rules do not applyto (1) holding real property placed inservice by the taxpayer before 1987;(2) equipment leasing under sections465(c)(4), (5), and (6); and (3) anyqualifying business of a qualifiedcorporation under section 465(c)(7).However, the at-risk rules do apply tothe holding of mineral property.

If the at-risk rules apply, adjust theamount on this line for any section465(d) losses. These losses are limitedto the amount for which the corporationis at risk for each separate activity at theclose of the tax year. If the corporationis involved in one or more activities, oneor more of which incurs a loss for theyear, report the losses for each activityseparately. Attach Form 6198, At-RiskLimitations, showing the amount at riskand gross income and deductions forthe activities with the losses.

If the corporation sells or otherwisedisposes of an asset or its interest(either total or partial) in an activity towhich the at-risk rules apply, determinethe net profit or loss from the activity bycombining the gain or loss on the sale ordisposition with the profit or loss fromthe activity. If the corporation has a netloss, it may be limited because of theat-risk rules.

Treat any loss from an activity notallowed for the tax year as a deductionallocable to the activity in the next taxyear.

Line 29a, Form 1120(Line 25a, Form 1120-A)

Net Operating Loss Deduction

The net operating loss deduction is theamount of the net operating loss (NOL)carryovers and carrybacks that can bededucted in the tax year. See section172(a). If this deduction is taken, explainits computation on an attachedschedule.

Generally, a corporation may carry anNOL back to each of the 3 yearspreceding the year of the loss and carryit over to each of the 15 years followingthe year of the loss. Personal servicecorporations are not permitted to carryback an NOL to or from any tax year towhich a section 444 election applies.

A corporation may carry back 10years the part of the NOL attributable toa product liability loss (section172(b)(1)(C)). See Regulations section1.172-13(c) for the required statementthat must be attached to Form 1120when claiming the 10-year carryback onproduct liability losses.

There is also an available election tocarry an NOL over to just each of the 15years following the year of the loss. Theelection may be made by attaching a

statement to a return that is filed ontime (including extensions). The electionis irrevocable. Section 172(b)(1)describes types of losses for which the15-year carryover period does not apply.Also see section 172(b)(1)(E) for specialrules for a corporation with an excessinterest loss if the corporation had anequity reduction interest loss for anyloss limitation year ending after August2, 1989.

After applying the NOL to the first taxyear to which it may be carried, the

portion of the loss the corporation maycarry to each of the remaining tax yearsis the excess, if any, of the loss over thesum of the modified taxable income foreach of the prior tax years to which thecorporation may carry the loss. Seesection 172(b).

If there is a carryback of an NOL, netcapital loss, or an unused credit, fileForm 1139, Corporation Application forTentative Refund, within 12 months afterthe close of the tax year for a quick

refund of taxes. See section 6411.Caution: Donotattach Form 1139 tothe corporations income tax return. Mailit in a separate envelope and file it withthe service center where the corporationfiles its income tax return.

For carryback claims filed later than12 months after the end of the tax year,file Form 1120X instead of Form 1139.

See section 172 for special rules,limitations, and definitions pertaining toNOL carrybacks and carryovers. Alsosee Pub. 536, Net Operating Losses.

See section 382 for the limitation onthe amount of taxable income of a loss

corporation for any tax year ending aftera post-1986 ownership change that maybe offset by pre-change NOL carryovers.Also see Temporary Regulations section1.382-2T(a)(2)(ii), which requires that aloss corporation file an informationstatement with its income tax return foreach tax year that it is a losscorporation.

See section 384 for the limitation onthe use of preacquisition losses of onecorporation to offset recognized built-ingains of another corporation.

Line 29b, Form 1120(Line 25b, Form 1120-A)

Special Deductions

Form 1120 filers.See the Instructionsfor Schedule C on page 11.

Form 1120-A filers.Generally, enter70% of line 4, page 1, on line 25b.However, this deduction may not bemore than 70% of line 24, page 1. Forthis purpose, compute line 24 withoutregard to any adjustment under section1059 and without regard to any capitalloss carryback to the tax year undersection 1212(a)(1).

In a year in which an NOL occurs, this70% limitation does not apply, even if

the loss is created by thedividends-received deduction. Seesections 172(d) and 246(b).

Line 32g, Form 1120(Line 28g, Form 1120-A)

Include on line 32g (line 28g, Form1120-A) any credit the corporation isclaiming under section 4682(g)(3) forozone-depleting chemicals used in themanufacture of rigid foam insulation.Write ODC to the left of the entryspace.


11/18

Page 11

Line 32h, Form 1120(Line 28h, Form 1120-A)

If the corporation has backupwithholding, read Backup Withholdingon page 4 to see how to report thisamount. Include any backup withholdingin the total for line 32h, Form 1120 (line28h, Form 1120-A).

Schedule A, Form 1120

(Worksheet, Form 1120-A)Cost of Goods Sold

All filers should see Section 263Auniform capitalization rules on page 7before completing Schedule A or theworksheet on this page. The instructionsfor lines 4a through 6 below apply toboth Schedule A and the worksheet.

Inventory valuation methods.Inventories can be valued at (1) cost;(2) cost or market value (whichever islower); or (3) any other method that isapproved by the Commissioner, and thatconforms to the provisions of the

applicable regulations cited below.Taxpayers using erroneous valuation

methods must change to a methodpermitted for Federal income taxpurposes. Make the change by filingForm 3115. For more information aboutthe change, see Regulations section1.446-1(e)(3) and Rev. Proc. 84-74,1984-2 C.B. 736 as modified by Rev.Proc. 88-15, 1988-1 C.B. 683.

On line 8a of Schedule A (Form 1120only), check the method(s) used forvaluing inventories. Under lower of costor market, the term marketgenerallyapplies to normal market conditions

where there is a current bid priceprevailing at the date the inventory isvalued. When no regular open marketexists or when quotations are nominalbecause of inactive market conditions,use fair market prices from the mostreliable sales or purchase transactionsthat occurred near the date the inventoryis valued.

For more requirements, seeRegulations section 1.471-4.

Inventory may be valued below costwhen the merchandise is: (1) unusableat normal prices, or (2) unusable in thenormal way because the goods aresubnormal (i.e., because of damage,imperfections, shop wear, etc.) within themeaning of Regulations section1.471-2(c). The goods may be valued ata current bona fide selling price, minusdirect cost of disposition (but not lessthan scrap value) if such a price can beestablished. See Regulations section1.471-2(c) for more requirements.

If this is the first year the Last-inFirst-out (LIFO) inventory method waseither adopted or extended to inventorygoods not previously valued under theLIFO method provided in section 472,

attach Form 970, Application To UseLIFO Inventory Method, or a statementwith the information required by Form970. Also check the LIFO box on line 8bof Schedule A (Form 1120 only). Enterthe amount or percent of total closinginventories covered under section 472on line 8c. Estimates are acceptable.

If the corporation changed orextended its inventory method to LIFOand had to write up its openinginventory to cost in the year of election,

report the effect of this writeup asincome (line 10, page 1) proportionatelyover a 3-year period that begins with theyear of the LIFO election (section472(d)).

Note: If inventories are not anincome-determining factor, enter -0- onlines 1 and 6 of Schedule A or theworksheet below.

Cost of Goods Sold WorksheetForm 1120-A

(keep for your records)

1. Inventory at start of year. Enter hereand in Part III, line 3, column (a), Form1120-A

2. Purchases. Enter here and in Part II,line 5(a)(1), Form 1120-A

3. Cost of labor. Enter here and includein total in Part II, line 5(a)(3), Form1120-A

4a. Additional section 263A costs. Enterhere and in Part II, line 5(a)(2), Form1120-A (see instructions)

b. Other costs. Enter here and include inPart II, line 5(a)(3), Form 1120-A

5. SubtotalAdd lines 1 through 4b

6. Inventory at end of year. Enter hereand in Part III, line 3, column (b), Form1120-A

7. Total cost of goods sold. Subtract line6 from line 5. Enter the result here andon page 1, line 2, Form 1120-A

Line 4a.An entry is required on thisline only for corporations that haveelected a simplified method ofaccounting. In the case of taxpayers thathave elected the simplified productionmethod, additional section 263A costsare generally those costs, other thaninterest, that were not capitalized orincluded in the inventory costs under thetaxpayers method of accountingimmediately prior to the effective date inTemporary Regulations section1.263A-1T, but that are now required tobe capitalized under section 263A. In thecase of taxpayers that have elected a

simplified resale method, additionalsection 263A costs are generally thosecosts incurred with respect to thefollowing categories: off-site storage orwarehousing; purchasing; handling,processing, assembly, and repackaging;and general and administrative costs(mixed service costs). Enter on line 4athe balance of section 263A costs paidor incurred during the tax year notincluded on lines 2 and 3. SeeTemporary Regulations section1.263A-1T for more information.

Line 4b.Enter on line 4b any costspaid or incurred during the tax year notentered on lines 2 through 4a.

Line 6.See Temporary Regulationssection 1.263A-1T for more informationon computing the amount of additionalsection 263A costs to be capitalized andadded to ending inventory.

Schedule C (Form 1120Only)

Dividends and Special Deductions

For purposes of the 20% ownership teston lines 1 through 7, the percentage ofstock owned by the corporation is basedon voting power and value of the stock.Preferred stock described in section1504(a)(4) is not taken into account.Corporations filing a consolidated returnshould see Regulations sections1.1502-14, 1.1502-26, and 1.1502-27before completing Schedule C.

Line 1, Column (a)

Enter dividends (except those receivedon debt- financed stock acquired afterJuly 18, 1984see section 246A) thatare received from less-than-20%-owneddomestic corporations subject to incometax and that are subject to the 70%deduct ion under sect ion 243(a)(1).Include on this line taxable distributionsfrom an IC-DISC or former DISC that aredesignated as being eligible for the 70%deduction and certain dividends ofFederal Home Loan Banks. See section246(a)(2).

For dividends received from aregulated investment company, seesection 854 for the amount subject to

the 70% deduction.So-called dividends or earnings

received from mutual savings banks,etc., are really interest. Do not treatthem as dividends.

Line 2, Column (a)

Enter dividends (except those receivedon debt- financed stock acquired afterJuly 18, 1984) that are received from20%-or-more-owned domesticcorporations subject to income tax andthat are subject to the 80% deductionunder section 243(c). Include on this linetaxable distributions from an IC-DISC or

former DISC that are designated asbeing eligible for the 80% deduction.

Line 3, Column (a)

Enter dividends on debt-financed stockacquired after July 18, 1984, that arereceived from domestic and foreigncorporations subject to income tax andthat would otherwise be subject to thedividends-received deduction undersection 243(a)(1), 243(c), or 245(a).Generally, debt-financed stock is stockthat the corporation acquired by


12/18

Page 12

incurring a debt (e.g., it borrowed moneyto buy the stock).

Line 3, Columns (b) and (c)

Dividends received on debt-financedstock acquired after July 18, 1984, arenot entitled to the full 70% or 80%dividends-received deduction. The 70%or 80% deduction is reduced by apercentage that is related to the amountof debt incurred to acquire the stock.See section 246A. Also see section

245(a) before making this computationfor an additional limitation that applies todividends received from foreigncorporations. Attach a schedule to Form1120 showing how the amount on line 3,column (c), was figured.

Line 4, Column (a)

Enter dividends received on thepreferred stock of a less-than-20%-owned public utility that is subjectto income tax and is allowed thededuction provided in section 247 fordividends paid.

Line 5, Column (a)

Enter dividends received on preferredstock of a 20%-or-more-owned publicutility that is subject to income tax andis allowed the deduction provided insection 247 for dividends paid.

Line 6, Column (a)

Enter the U.S.-source portion ofdividends that are received fromless-than-20%-owned foreigncorporations and that qualify for the70% deduction under section 245(a). Toqualify for the 70% deduction, thecorporation must own at least 10% ofthe stock of the foreign corporation by

vote and value. Also include dividendsreceived from a less-than-20%-ownedFSC that are attributable to incometreated as effectively connected with theconduct of a trade or business withinthe United States (excluding foreigntrade income) and that qualify for the70% deduction provided in section245(c)(1)(B).

Line 7, Column (a)

Enter the U.S.-source portion ofdividends that are received from20%-or-more-owned foreigncorporations and that qualify for the80% deduction under section 245(a).

Also include dividends received from a20%-or-more-owned FSC that areattributable to income treated aseffectively connected with the conductof a trade or business within the UnitedStates (excluding foreign trade income)and that qualify for the 80% deductionprovided in section 245(c)(1)(B).

Line 8, Column (a)

Enter dividends received from whollyowned foreign subsidiaries that are

eligible for the 100% deduction providedin section 245(b).

In general, the deduction undersection 245(b) applies to dividends paidout of the earnings and profits of aforeign corporation for a tax year duringwhich:

1. All of its outstanding stock isowned (directly or indirectly) by thedomestic corporation receiving thedividends, and

2. All of its gross income from all

sources is effectively connected with theconduct of a trade or business withinthe United States.

Line 9, Column (c)

Limitation on Dividends-ReceivedDeduction

Generally, line 9 of column (c) may notexceed the amount from the worksheetbelow. However, in a year in which anNOL occurs, this limitation does notapply even if the loss is created by thedividends-received deduction. Seesections 172(d) and 246(b). Certainfinancial institutions to which section

593(a) applies should see section 596for the special limitation on thedividends-received deduction.

Worksheet for Schedule C, line 9(keep for your records)

1. Refigure line 28, page 1, Form 1120,without regard to any adjustmentunder section 1059 and without regardto any capital loss carryback to the taxyear under section 1212(a)(1)

2. Complete lines 10, 11, and 12 ofcolumn (c) and enter the sum of thoselines

3. Subtract line 2 from line 1

4. Multiply the amount on line 3 by 80%

5. Enter the sum of the amounts on lines2, 5, 7, and 8 of column (c) and theportion of the deduction on line 3 ofcolumn (c) that is attributable todividends received from 20%-or-more-owned corporations

6. Enter the smaller of line 4 or line 5. (Donot complete the rest of this worksheetif line 5 is greater than line 4. Instead,enter the amount from line 6 on line 9of column (c).)

7. Enter the total amount of dividendsreceived from 20%-or-more-ownedcorporations and included on lines 2,3, 5, 7, and 8 of column (a)


9. Multiply line 8 by 70%

10. Subtract line 5 above from line 9 of

column (c)11. Enter the smaller of line 9 or line 10

12. Dividends-received deduction afterlimitation (sec. 246(b)). Add lines 6 and11 and enter the result on line 9,column (c)

Line 10, Columns (a) and (c)

Small business investment companiesoperating under the Small BusinessInvestment Act of 1958 (15 U.S.C. 661and following) must enter dividends thatare received from domestic corporationssubject to income tax even though a

deduction is allowed for the entireamount of those dividends. To claim the100% deduction on line 10, column (c),the company must file with its return astatement that it was a Federal licenseeunder the Small Business InvestmentAct of 1958 at the time it received thedividends.

Line 11, Column (a)

Enter dividends from FSCs that areattributable to foreign trade income and

that are eligible for the 100% deductionprovided in section 245(c)(1)(A).

Line 12, Columns (a) and (c)

Enter only those dividends that qualifyunder section 243(b) for the 100%dividends-received deduction describedin section 243(a)(3). Corporations takingthis deduction are subject to theprovisions of section 1561.

Line 13, Column (a)

Enter foreign dividends not reportable onlines 3, 6, 7, 8, or 11 of column (a).Exclude distributions of amountsconstructively taxed in the current year

or in prior years under subpart F(sections 951 through 964).

Line 14, Column (a)

Include income constructively receivedfrom controlled foreign corporationsunder subpart F. This amount shouldequal the total of amounts reported onSchedule I of Form 5471.

Line 15, Column (a)

Include gross-up for taxes deemed paidunder sections 902 and 960.

Line 16, Column (a)

Enter taxable distributions from anIC-DISC or former DISC that aredesignated as not being eligible for adividends-received deduction.

No deduction is allowed under section243 for a dividend from an IC-DISC orformer DISC (as defined in section992(a)) to the extent the dividend:

1. Is paid out of the corporationsaccumulated IC-DISC income orpreviously taxed income, or

2. Is a deemed distribution undersection 995(b)(1).

Line 17, Column (a)

Include the following:1. Dividends (other than capital gain

dividends and exempt-interest dividends)received from regulated investmentcompanies and that are not subject tothe 70% deduction.

2. Dividends from tax-exemptorganizations.

3. Dividends (other than capital gaindividends) received from a real estateinvestment trust that, for the tax year ofthe trust in which the dividends are paid,


13/18

Page 13

qualifies under sections 856 through860.

4. Dividends not eligible for adividends-received deduction becauseof the holding period of the stock or anobligation to make correspondingpayments with respect to similar stock.

Two situations in which thedividends-received deduction will not beallowed on any share of stock are:

(a) if the corporation held it 45 days orless (see section 246(c)(1)(A)), or

(b) to the extent the corporation isunder an obligation to make relatedpayments for substantially similar orrelated property.

5. Any other taxable dividend incomenot properly reported above (includingdistribut ions under section 936(h)(4)).

If patronage dividends or per-unitretain allocations are included on line 17,identify the total of these amounts in aschedule attached to Form 1120.

Line 18, Column (c)

Section 247 allows public utilities adeduction of 41.176% of the lesser of:

1. Dividends paid on their preferredstock during the tax year, or

2. Taxable income computed withoutregard to this deduction.

In a year in which an NOL occurs,compute the deduction without regard tosection 247(a)(1)(B). See section 172(d).

Schedule J, Form 1120(Part I, Form 1120-A)

Tax Computation


Members of a controlled group shoulduse the Worksheet for Members of aControlled Group on this page to figuretheir tax. Qualified personal servicecorporations should see the instructionsbelow the Tax Rate Schedule to figuretheir tax.

All other corporations should figurethe tax to enter on line 3 (line 1, Form1120-A) using the tax rate schedulebelow.

Tax Rate ScheduleIf taxable income (line 30,Form 1120, or line 26, Form1120-A) on page 1 is:

Of theBut not amount

Over over Tax is: over

$0 $50,000 15% $050,000 75,000 $7,500 + 25% 50,00075,000 100,000 13,750 + 34% 75,000

100,000 335,000 22,250 + 39% 100,000335,000 - - - - - 34% 0

Qualified personal servicecorporations.A qualified personalservice corporation is taxed at a flat rateof 34% on taxable income. For thispurpose, a qualified personal servicecorporation is any corporation(a) substantially all of the activities ofwhich involve the performance ofservices in the fields of health, law,engineering, architecture, accounting,actuarial science, performing arts, orconsulting, and (b) at least 95% of thestock of which is owned by employeesperforming the services, retiredemployees who had performed theservices listed above, any estate of anemployee or retiree described above, orany person who acquired the stock ofthe corporation as a result of the deathof an employee or retiree describedabove, if the acquisition occurred within2 years of death. See TemporaryRegulations section 1.448-1T(e) fordetails.

Note: If the corporation is a qualifiedpersonal service corporation, be sure tocheck the box on line 3, Schedule J,Form 1120 (line 1, Part I, Form 1120-A).

Members of a controlled group (Form1120 only).A member of a controlledgroup, as defined in section 1563, mustcheck the box on line 1 and completelines 2a and 2b of Schedule J, Form1120.

Members of a controlled group areentitled to one $50,000 and one $25,000taxable income bracket amount (in thatorder) on line 2a.

When a controlled group adopts orlater amends an apportionment plan,each member must attach to its taxreturn a copy of its consent to this plan.The copy (or an attached statement)

must show the part of the amount ineach taxable income bracketapportioned to that member. There areother requirements as well. SeeRegulations section 1.1561-3(b) for therequirements and for the time andmanner of making the consent.

Equal apportionment plan. If noapportionment plan is adopted, themembers of the controlled group mustdivide the amount in each taxableincome bracket equally amongthemselves. For example, ControlledGroup AB consists of Corporation A andCorporation B. They do not elect anapportionment plan. Therefore, bothCorporation A and Corporation B areentitled to $25,000 (one-half of $50,000)in the $50,000 taxable income bracketon line 2a(i) and to $12,500 (one-half of$25,000) in the $25,000 taxable incomebracket on line 2a(ii).

Unequal apportionment plan. Membersof a controlled group may elect anunequal apportionment plan and dividethe taxable income brackets as theywish. There is no need for consistencybetween taxable income brackets. Anymember of the controlled group may be

entitled to all, some, or none of thetaxable income bracket. However, thetotal amount for all members of thecontrolled group cannot be more thanthe total amount in each taxable incomebracket.

Worksheet for Members of aControlled Group

(keep for your records)

Note: Each member of a controlledgroup (except a qualified personalservice corporation) must compute thetax using the worksheet below.1. Enter taxable income (line 30, page 1,

Form 1120)

2. Enter line 1 or the corporations shareof the $50,000 taxable income bracket,whichever is less


4. Enter line 3 or the corporations shareof the $25,000 taxable income bracket,whichever is less

5. Subtract line 4 f

us internal revenue service: i1120 a--1991

Documents