us internal revenue service: i1120 a--1992

8/14/2019 US Internal Revenue Service: i1120 a--1992

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Cat. No. 11455T

ContentsChanges to Note 1Voluntary Contributions To Reduce

the Public Debt 2Avoid Common Mistakes 2General Instructions 2Purpose of Form 2Who Must File 2When To File 2Where To File 3Who Must Sign 3Accounting Methods 3Change in Accounting Period 3Rounding Off to Whole Dollars 4Recordkeeping 4Depositary Method of Tax Payment 4Estimated Tax Payments 4

Interest and Penalties 4Unresolved Tax Problems 4Other Required Forms, Returns,

and Statements 4Specific Instructions 6Income 7Deductions 8Schedule A and Cost of Goods Sold

Worksheet 12Schedule C 13Schedule J 14Schedule K 17

Schedule L 18Schedule M-1 18Codes for Principal Business

Activity 19Index 20

Changes To NoteThe Energy Policy Act of 1992 madeseveral changes that affect corporations.Some of the changes are highlightedbelow. These changes affect fiscal year1992-93 filers. Calendar year filers arenot impacted until 1993.

Deduction for clean-fuel vehiclesand certain refueling property.Newsection 179A allows a deduction for partof the cost of qualified clean-fuel vehicle

property and qualified clean-fuel vehiclerefueling property placed in service afterJune 30, 1993.

Qualified clean-fuel vehicle propertyincludes:

1. The part of the basis of a newvehicle designed to use a clean-burningfuel that is attributable to an engine thatuses that fuel (and its related fuelstorage, delivery, and exhaust systems),and

2. New retrofit parts and componentsused to convert a motor vehicle tooperate on a clean-burning fuel.

Clean-burning fuels are natural gas,liquefied natural gas, liquefied petroleum(LP) gas, hydrogen, electricity, and fuelscontaining at least 85% alcohol(including methanol or ethanol) or ether.

The deduction for most motor vehiclesis limited to $2,000 per vehicle. A motorvehicle is any vehicle with at least 4wheels that is made for use on publicroads. The limit is $5,000 per vehicle fortrucks and vans with a gross vehicleweight (gvw) over 10,000 pounds but

not over 26,000 pounds. For trucks andvans with a gvw over 26,000 poundsand buses that seat at least 20 adultpassengers, the limit is $50,000 pervehicle.

Qualified clean-fuel vehicle refuelingproperty is new depreciable propertyused to store or dispense clean-burningfuels (or to recharge an electric vehicle)that is located at the point where thefuel is delivered into the tank of aclean-fuel vehicle (or where the vehicleis recharged). The deduction for thisproperty is limited to $100,000 perlocation.

For more details, see section 179A. Qualified electric vehicle credit.New section 30 provides a credit equalto 10% of the cost of a qualified newelectric vehicle, or $4,000, whichever isless, for each vehicle placed in serviceafter June 30, 1993. Vehicles qualifyingfor this credit are not eligible for thededuction for clean-fuel vehicles undersection 179A. Get Form 8834, QualifiedElectric Vehicle Credit, for more details.

Renewable electricity productioncredit.New section 45 provides acredit equal to 1.5 cents per kilowatthour for electricity produced by the

corporation using closed-loop biomassand sold to an unrelated person. Thefacility from which the electricity isproduced must have been orginallyplaced in service after 1992. Get Form8835, Renewable Electricity ProductionCredit, for more details.

Other Changes

Schedule H (Form 1120).Schedule H(Form 8716) has been retitled ScheduleH (Form 1120). Schedule H is used bycertain personal service corporations todetermine if they have met the minimum

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 the 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., 38 min.39 hr., 51 min.68 hr., 24 min.1120

4 hr., 34 min.40 hr., 41 min.23 hr., 8 min.43 hr., 3 min.1120-A48 min.6 hr., 46 min.3 hr., 41 min.6 hr., 56 min.Sch. D (1120)

Sch. H (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

32 min.8 hr., 29 min.6 hr., 6 min.15 hr., 19 min.Sch. PH (1120)

0 min.43 min.35 min.5 hr., 59 min.


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distribution requirements of section280H for the tax year and to determinelimits on deductions.

Voluntary Contributions ToReduce the Public DebtA corporation may make a contributionto reduce the public debt. To do so,enclose with the tax return a checkmade payable to Bureau of the PublicDebt. Voluntary contributions to reducethe public debt are deductible subject tothe rules and limitations for charitablecontributions.

Avoid Common MistakesTo speed the processing of the 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 the

box on Schedule J, line 3 (Part I, line 1,Form 1120-A).

9. Enter the corporations businessactivity code number on Schedule K,line 2a (Part II, line 1a, Form 1120-A).

10. To avoid interest and penalties, filethe return on time and pay any tax whendue. See page 4.

General InstructionsNote: In addition to the publicationslisted in these instructions, taxpayersmay wish to get:Pub. 534, Depreciation;Pub. 535, Business Expenses;Pub. 542,Tax Information on Corporations; andPub. 946, How to Begin DepreciatingYour Property.

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.

Who Must FileUnless exempt under section 501, alldomestic corporations (includingcorporations in bankruptcy) must file,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 resembles acorporation more than it resembles apartnership or trust, it will be consideredan association taxed as a corporation.

Who May File Form 1120-A

A corporation may file Form 1120-A if itmeets all of the following requirements:

Its gross receipts (line 1a, page 1) areunder $500,000.

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

Its total assets (line 12, column (b),Part III on page 2) are 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 of

which represents debt-financedsecurities) is from domesticcorporations, and those dividendsqualify 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 under

the 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 has no liability for tax under section7518 on a nonqualified withdrawal froma capital construction fund.

It is not making an election undersection 172(b)(3) to forego the carrybackperiod of an NOL.

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

Farmers cooperative(sec. 1381)

990-C

Exempt organization withunrelated trade or businessincome

990-T

Entity that elects to betreated as real estatemortgage investmentconduit (REMIC) under sec.860D

1066

Designated settlement fund(sec. 468B)

1120-DF

Interest charge domesticinternational salescorporation (sec. 992)

1120-IC-DISC

Foreign corporation (otherthan life and property andcasualty insurancecompany filing Form 1120L

or 1120-PC)

1120F

Foreign sales corporation(sec. 922)

1120-FSC

Condominium managementassociation or residentialreal estate managementassociation that elects tobe treated as ahomeowners associationunder sec. 528

1120-H

Life insurance company(sec. 801)

1120L

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

1120-ND

Property and casualtyinsurance company(sec. 831)

1120-PC

Political organization(sec. 527)

1120-POL

Real estate investment trust(sec. 856)

1120-REIT

Regulated investmentcompany (sec. 851)

1120-RIC

S corporation (sec. 1361) 1120S

When To FileIn general, a corporation must file itsincome tax return by the 15th day of the

3rd 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 itdissolved.

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


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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, NewHampshire, 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 other

counties), 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.

A group of corporations located inseveral service center regions will oftenkeep all the books and records at theprincipal office of the managingcorporation. If this is the case, theincome tax returns of the corporationsmay be filed with the service centerregion 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.Receivers, trustees, or assignees mustalso sign and date any return filed onbehalf of a corporation.

If a corporate officer completes Form1120 or Form 1120-A, the PaidPreparers space should remain blank.Anyone who prepares Form 1120 orForm 1120-A but does not charge thecorporation should not sign the return.Generally, anyone who is paid to preparethe return must sign it and fill in the PaidPreparers Use Only area.

The paid preparer must complete therequired preparer information and:

Sign the return, by hand, in the spaceprovided for the preparers signature(signature stamps and labels are notacceptable).

Give a copy of the return to thetaxpayer.

Accounting MethodsTaxable income must be computedusing the method of accounting regularlyused in keeping the corporations booksand records. Generally, permissiblemethods include the cash, accrual, orany other method authorized by theInternal Revenue Code. In all cases, themethod used must clearly show taxableincome.

Generally, a corporation (other than aqualified personal service corporation)must use the accrual method ofaccounting if its average annual grossreceipts exceed $5 million. See section448(c). A corporation engaged in farmingoperations must also use the accrualmethod. For exceptions, see section447.

Under the accrual method, an amountis includible in income when all theevents have occurred that fix the right toreceive the income and the amount canbe determined with reasonableaccuracy. See Regulations section1.451-1(a) for details.

Generally, an accrual basis taxpayercan deduct accrued expenses in the taxyear in which all events that determinethe liability have occurred, the amount of

the liability can be figured withreasonable accuracy, and economicperformance takes place with respect tothe expense. There are exceptions forrecurring items. See section 461(h) andthe related regulations for moreinformation.

Long-term contracts (except forcertain real property constructioncontracts) must generally be accountedfor using the percentage of completionmethod described in section 460. See

section 460 for general rules onlong-term contracts.

Generally, the corporation may changethe method of accounting used to reporttaxable income (for income as a wholeor for any material item) only by gettingconsent on Form 3115, Application forChange in Accounting Method. For moreinformation, get Pub. 538, AccountingPeriods and Methods.

Change in Accounting

PeriodGenerally, 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 use a calendaryear 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 Form

1128 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 yearmust 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 return

resulting from the section 444 election.Electing corporations are subject to

minimum distribution requirements undersection 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.


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Complete Schedule H (Form 1120),Section 280H Limitations for a PersonalService Corporation (PSC), to figure therequired minimum distributions and themaximum deductible amount, ifapplicable.

Rounding Off to WholeDollarsThe corporation may show amounts onthe return and accompanying schedulesas whole dollars. To do so, drop anyamount less than 50 cents and increaseany amount from 50 cents through 99cents to the next higher dollar.

RecordkeepingThe corporations records should bekept for as long as they may be neededfor the administration of any provision ofthe Internal Revenue Code. Usually,records that support an item of income,deduction, or credit on the return mustbe kept for 3 years from the date thereturn is due or filed, whichever is later.Keep records that verify thecorporations basis in property for aslong as they are needed to figure thebasis of the original or replacementproperty.

The corporation should also keepcopies of any returns it has filed. Theyhelp in preparing future returns and inmaking computations when filing anamended return.

Depositary Method of TaxPaymentThe corporation must pay the tax due infull no later than the 15th day of the 3rdmonth after the end of the tax year.

Deposit corporation income taxpayments (and estimated tax payments)with Form 8109, Federal Tax DepositCoupon. Do not send deposits directlyto an IRS office. Mail or deliver thecompleted Form 8109 with the paymentto a qualified depositary for Federaltaxes or to the Federal Reserve bank(FRB) servicing the corporationsgeographic area. Make checks or moneyorders payable to that depositary orFRB.

To help ensure proper crediting, writethe corporations employer identificationnumber, the tax period to which thedeposit applies, and Form 1120 on thecheck or money order. Be sure to darkenthe 1120 box on the coupon. Theserecords of deposits will be sent to theIRS.

A penalty may be imposed if thedeposits are mailed or delivered to anIRS office rather than to an authorizeddepositary or FRB.

For more information on deposits, seethe instructions in the coupon booklet(Form 8109) and Pub. 583, TaxpayersStarting a Business.

Caution: If the corporation owes taxwhen it files Form 1120 or Form 1120-A,do not include the payment with the taxreturn. Instead, mail or deliver thepayment with Form 8109 to a qualifieddepositary or FRB.

Estimated Tax PaymentsGenerally, a corporation must makeinstallment payments of estimated tax ifit expects its estimated tax (income taxminus credits) to be $500 or more. For a

calendar 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, the installmentis due on the next regular workday. UseForm 1120-W, Corporation EstimatedTax, as a worksheet to computeestimated tax. Use the deposit coupons(Forms 8109) to make deposits ofestimated tax. For more information onestimated tax payments, includingpenalties that apply if the corporationfails to make required payments, see theinstructions for line 33 on page 12.

If the corporation overpaid estimatedtax, it may be able to get a quickrefund 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 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 does not file its tax return by thedue date, including extensions, mayhave to pay a penalty of 5% of the

unpaid tax for each month or part of amonth 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 corporation can showthat the failure to file on time was due toreasonable cause. Corporations that filelate must attach a statement explainingthe reasonable cause.

Late payment of tax.A corporationthat does not pay the tax when due may

have to pay a penalty of 12 of 1% of theunpaid tax for each month or part of amonth the tax is not paid, up to amaximum of 25% of the unpaid tax. Thispenalty may also apply to any additionaltax not paid within 10 days of the dateof the notice and demand for payment.The penalty will not be imposed if thecorporation can show that the failure topay on time was due to reasonablecause.

Other penalties.Other penalties can

be imposed for negligence, substantialunderstatement of tax, and fraud. Seesections 6662 and 6663.

Unresolved Tax ProblemsThe IRS has a Problem ResolutionProgram for taxpayers who have beenunable to resolve their problems with theIRS. If the corporation has a tax problemit has been unable to resolve throughnormal channels, write to thecorporations local IRS district director orcall the corporations local IRS office andask for Problem Resolution Assistance.Hearing-impaired persons who have

access to TDD equipment may call1-800-829-4059 to ask for help. TheProblem Resolution office will ensurethat your problem receives properattention. Although the office cannotchange the tax law or make technicaldecisions, it can help clear up problemsthat resulted from previous contacts.

Other Forms, Returns, andStatements That May BeRequired

Forms

The corporation may have to file any of

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

Form 720, Quarterly Federal Excise TaxReturn. Use Form 720 to report the 10%excise tax that applies to the followingitems, to the extent the sales priceexceeds the amounts shown:

Passenger vehicles, $30,000;

Boats and yachts, $100,000;

Aircraft, $250,000; and

Jewelry and furs, $10,000.

Form 720 is also used to report

environmental excise taxes,communications and air transportationtaxes, fuel taxes, manufacturers taxes,ship passenger tax, and certain otherexcise taxes.

Caution: A 100% penalty may apply ifcertain excise taxes that must becollected are not collected or are notpaid to the IRS. The penalty is 100% ofthe unpaid taxes. The 100% penalty maybe imposed on all persons who aredetermined by the IRS to beresponsiblefor collecting, accounting


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for, and paying over these taxes, andwho acted willfully in not doing so. Seethe Instructions for Form 720 for moredetails, including the definition ofresponsible person.

Form 926, Return by a U.S. Transferorof Property to a Foreign Corporation,Foreign Estate or Trust, or ForeignPartnership. Use this form to reporttransfers of property to a foreigncorporation, foreign estate or trust,foreign partnership, and to pay any

excise tax due under section 1491. Onthe day of the transfer, file Form 926with the Service Center where thecorporation is required to file its incometax return.

Also use Form 926 to reportinformation required under section6038B. A corporation that transfersproperty to a foreign corporation in anexchange described in section 367(a) or(d), or that makes an election to applyprinciples similar to the principles ofsection 367 to any transfer covered bythe excise tax, must file Form 926 andattach the information required byRegulations section 1.6038B-1T. If

section 6038B applies, file Form 926and the required information with thecorporations income tax return for thetax year that includes the transfer date.

Form 940 or Form 940-EZ, EmployersAnnual Federal Unemployment (FUTA)Tax Return. The corporation may beliable for FUTA tax and may have to fileForm 940 or 940-EZ if it paid wages of$1,500 or more in any calendar quarteror one or more employees worked forthe corporation for some part of a day inany 20 different weeks during thecalendar year.

Form 941, Employers Quarterly Federal

Tax Return. Employers must file thisform quarterly to report income taxwithheld and employer and employeesocial security and Medicare taxes.Agricultural employers must file Form943, Employers Annual Tax Return forAgricultural Employees, instead of Form941, to report income tax withheld andemployer and employee social securityand Medicare taxes for farmworkers.

Caution: A 100% penalty may apply ifincome, social security, and Medicaretaxes that must be withheld are notwithheld or are not paid to the IRS. Thepenalty is 100% of the unpaid taxes. The100% penalty may be imposed on allpersons who are determined by the IRSto beresponsiblefor collecting,accounting for, and paying over thesetaxes, and who acted willfully in notdoing so. SeeCircular E, EmployersTax Guide (orCircular A, AgriculturalEmployers Tax Guide), for details,including the definition of responsibleperson.

Form 966, Corporate Dissolution orLiquidation.

Form 1042, Annual Withholding TaxReturn for U.S. Source Income ofForeign Persons, and Form 1042S,Foreign Persons U.S. Source IncomeSubject to Withholding. Use these formsto report and transmit withheld tax onpayments or distributions made tononresident alien individuals, foreignpartnerships, or foreign corporations, tothe extent such payments ordistributions constitute gross incomefrom sources within the United States(see sections 861 through 865). Formore information, see sections 1441 and1442, and Pub. 515, Withholding of Taxon Nonresident Aliens and ForeignCorporations.

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. These informationreturns are for reporting abandonments,acquisitions through foreclosure,proceeds from broker and barterexchange transactions, certain dividendsand distributions, 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 fromprofit-sharing plans, retirement plans,individual retirement arrangements,insurance contracts, etc., and proceedsfrom real estate transactions. Also use

these returns to report amounts thatwere received as a nominee on behalf ofanother person.

For more information, see theInstructions for Forms 1099, 1098, 5498,and W-2G and Pub. 937, EmploymentTaxes and Information Returns.

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

Nondividend 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 pension(SEP) account.

Form 5713, International BoycottReport, for persons having operations inor related to boycotting countries.Also, persons who participate in orcooperate with an international boycott

may 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 8275, Disclosure Statement. Form8275 is used by taxpayers and incometax return preparers to disclose items orpositions, except those contrary to aregulation (see Form 8275-R, below)that are not otherwise adequatelydisclosed on a tax return. The disclosureis made to avoid parts of theaccuracy-related penalty imposed fornegligence, disregard of rules, orsubstantial understatement of tax. Form8275 is also used for disclosures relatingto preparer penalties forunderstatements due to unrealisticpositions or for willful or recklessconduct.

Form 8275-R, Regulation DisclosureStatement, is used to disclose any item

on a tax return for which a position hasbeen taken that is contrary to Treasuryregulations.

Form 8281, Information Return forPublicly Offered Original Issue DiscountInstruments. 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 one

transaction or in a series of relatedtransactions.

After February 2, 1992, cashierschecks, bank drafts, and money orderswith face amounts of $10,000 or less areconsidered cash under certaincircumstances. For more information,see Form 8300 and Regulations section1.6050I-1(c).

Form 8594, Asset AcquisitionStatement, must be filed by both thepurchaser and seller of a group ofassets constituting a trade or business if


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goodwill 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 corporationthat was a shareholder in a passiveforeign investment company (as definedin section 1296) at any time during thetax year must complete and attach this

form 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 contractsthat are accounted for under either thepercentage of completion-capitalizedcost method or the percentage ofcompletion method.

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 theirallowable 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 the

consolidated return. For the first year aconsolidated 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 beginning

and 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, to

correct any error in a previously filedForm 1120 or Form 1120-A.

Statements

Stock ownership in foreigncorporations.Attach the statementrequired by section 551(c) if (a) thecorporation owned 5% or more in valueof the outstanding stock of a foreignpersonal holding company and (b) thecorporation was required to include in itsgross income any undistributed foreign

personal holding company income froma foreign personal holding company.

A corporation may have to file Form5471, Information Return of U.S.Persons With Respect to Certain ForeignCorporations, if any of the followingapplies:

1. It controls a foreign corporation.

2. It acquires, disposes of, or owns5% or more in value of the outstandingstock of a foreign corporation.

3. It is a 10%-or-more shareholder ofa foreign personal holding company.

4. It owns stock in a foreigncorporation that is a controlled foreign

corporation for an uninterrupted periodof 30 days or more during the tax yearof the foreign corporation that ends withor within its tax year, and it owned thatstock on the last day of the foreigncorporations tax year.

Foreign ownership in a domesticcorporation.A domestic corporationthat is 25% or more foreign-owned mayhave to file Form 5472, InformationReturn of a 25% Foreign-Owned U.S.Corporation or a Foreign CorporationEngaged in a U.S. Trade or Business.See the instructions on page 18 formore information.

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 each attach to their tax returns theinformation required by Regulationssection 1.351-3.

Attachments

Attach Form 4136, Credit for FederalTax Paid on Fuels, after page 4, Form1120, or page 2, Form 1120-A. Attachschedules in alphabetical order andother forms in numerical order after

Form 4136.To assist us in processing the return,

please complete every applicable entryspace on Form 1120 or Form 1120-A.Do not write See attached instead ofcompleting the entry spaces. If you needmore space on the forms or schedules,attach separate sheets and show thesame information in the same order ason the printed forms. But show yourtotals on the printed forms. Please usesheets that are the same size as theforms and schedules. Attach these

separate sheets after all the schedulesand forms. Be sure to put thecorporations name and EIN on eachsheet.

Specific InstructionsPeriod Covered

File the 1992 return for calendar year1992 and fiscal years that begin in 1992and end in 1993. For a fiscal year, fill inthe tax year space at the top of the

form.Note: The 1992 Form 1120 may also beused if(1)the corporation has a tax yearof less than 12 months that begins andends in 1993 and(2)the 1993 Form1120 is not available by the time thecorporation is required to file its return.However, the corporation must show its1993 tax year on the 1992 Form 1120and incorporate any tax law changesthat are effective for tax years beginningafter December 31, 1992.

Name, Address, and EmployerIdentification Number (EIN)

Use the label on the package that wasmailed to the corporation. Cross out anyerrors and print the correct informationon the label. If the corporation doesnthave a label, print or type thecorporations true name (as set forth inthe charter or other legal documentcreating it), address, and EIN on theappropriate lines.

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 mail

to the street address and thecorporation has a P.O. box, show thebox number instead of the streetaddress.

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

Employer identification number(EIN).Show the correct EIN in item Bon page 1 of Form 1120 or Form1120-A. If the corporation does not havean EIN, it should apply for one on FormSS-4, Application for EmployerIdentification Number. Form SS-4 can beobtained at most IRS or Social SecurityAdministration (SSA) offices. If thecorporation has not received its EIN bythe time the return is due, write Appliedfor in the space for the EIN. See Pub.583 for more information.

Item APersonal ServiceCorporation

The term personal service corporationmeans a corporation whose principalactivity during the testing period for thetax year is the performance of personalservices that are substantially performed


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by employee-owners who own morethan 10% 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. Thetesting period for a new corporation inits first tax year 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 the

calendar year in which the first tax yearbegan.

Activities that are treated as theperformance of personal services arethose 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 byemployee-owners.

A person is considered to be anemployee-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 section 318(a)(2)(C)).

For details, see Temporary Regulationssection 1.441-4T.

Item DTotal Assets

Enter the corporations total assets (asdetermined by the accounting methodregularly used in keeping thecorporations books and records) at theend of the tax year. If there are noassets at the end of the tax year, enterthe total assets as of the beginning ofthe tax year.

Item EInitial Return, FinalReturn, or Change in Address

If this is the corporations first return,check the Initial return box. If the

corporation ceases to exist, file Form1120 and check the Final return box.Do not file Form 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 thatmust 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 of

property. A dealer dispositon meansany disposition of personal property by aperson who regularly sells or otherwisedisposes of property of the same typeon the installment plan. The dispositionof property used or produced in thefarming business is not included as adealer disposition. See section 453(l) fordetails and exceptions.

Enter on line 1 and carry the sameamount to line 3, the gross profit oncollections from installment sales for anyof the following:

Dealer dispositions of property beforeMarch 1, 1986.

Dispositions of property used orproduced in the trade or business of

farming.

Certain dispositions of timeshares andresidential lots reported under theinstallment method.

Attach a schedule showing thefollowing information for the current andthe 3 preceding years: (a) gross sales,(b) cost of goods sold, (c) gross profits,(d) percentage of gross profits to grosssales, (e) amount collected, and (f) grossprofit on the amount collected.

For sales of timeshares and residentiallots reported under the installment

method, the corporations income tax isincreased by the interest payable undersection 453(l)(3). To report this additionto the tax, see the instructions for line10, Schedule J, Form 1120 on page 16.

Accrual method 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 schedule

showing 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 complete Schedule A on page2 of Form 1120. Form 1120-A filers mayuse the worksheet on page 12 to figurethe amount to enter on line 2. BothForm 1120 and Form 1120-A filersshould see the instructions for Schedule

A and the worksheet on page 12.Line 4

Dividends

Form 1120 filers.See the instructionsfor Schedule C on page 13. Then,complete Schedule C and enter on line4 the amount from Schedule C, line 19.

Form 1120-A filers.Enter the totaldividends received (that are not fromdebt-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 20,Part ll, Form 4797, Sales of BusinessProperty.


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Line 10

Other Income

Enter any other taxable income notreported on lines 1 through 9. List thetype and amount of income on anattached schedule. If the corporationhas only one item of other income,describe it in parentheses on line 10.Examples of other income to report online 10 are:

Any adjustment under section 481(a)

required to be included in income duringthe current tax year due to a change ina method of accounting;

Recoveries of bad debts deducted inprior years under the specific charge-offmethod;

The amount of credit for alcohol usedas fuel (determined without regard to thelimitation based on tax) that was enteredon Form 6478, Credit for Alcohol Usedas Fuel; and

Refunds of taxes deducted in prioryears to the extent they reduced incomesubject to tax in the year deducted (seesection 111). Do not offset current year

taxes against tax refunds.

Deductions

Limitations on Deductions

Section 263A uniform capitalizationrules.These rules require corporationsto capitalize or include in inventorycertain costs incurred in connection withthe production of real and personaltangible property held in inventory orheld for sale in the ordinary course ofbusiness. Tangible personal propertyproduced by a corporation includes afilm, sound recording, videotape, book,or similar property. The rules also applyto personal property (tangible andintangible) acquired for resale.Corporations subject to the rules arerequired to capitalize not only directcosts but an allocable portion of mostindirect costs (including taxes) that relateto the assets produced or acquired forresale. Interest expense paid or incurredduring the production period of certainproperty must be capitalized and isgoverned by special rules. For moreinformation, see Notice 88-99, 1988-2C.B. 422. The uniform capitalizationrules also apply to the production ofproperty constructed or improved by a

taxpayer for use in its trade or businessor in an activity engaged 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. Therules do not apply to property that isproduced for use by the corporation 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 costs

relate is sold, used, or otherwisedisposed of by the corporation.

Current deductions may still beclaimed 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 basistaxpayer 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(e)(3), 163(j), and 267 forlimitations on deductions for unpaidinterest and expenses.

Section 291 limitations.Corporationsmay be required to adjust deductions fordepletion of iron ore and coal, intangibledrilling and exploration and developmentcosts, certain deductions for financialinstitutions, and the amortizable basis ofpollution control facilities. See section

291 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 to

amortize them over a period of 60months. See section 195.

Passive activity limitations.Limitations on passive activity lossesand credits under section 469 apply topersonal service corporations as definedin Temporary Regulations section1.441-4T (see Item APersonalService Corporation on page 6) andclosely held corporations.

For this purpose, a corporation is aclosely held corporation if at any timeduring the last half of the tax year more

than 50% in value of its outstandingstock is owned, directly or indirectly, byor for not more than five individuals, andthe corporation 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 in

which the corporation did not materiallyparticipate (see Temporary Regulationssection 1.469-1T(g)(3)) for the tax year,and rental activities regardless of itsparticipation. An activity is a trade orbusiness activity if the activity involvesthe conduct of a trade or business (i.e.,deductions from the activity would beallowable under section 162 if otherlimitations, such as the passive lossrules, did not apply), or the activityinvolves research or experimentalexpenditures that are deductible undersection 174 (or would be deductible ifthe corporation chose to deduct ratherthan capitalize them), and the activity is

not a rental activity.Corporations subject to the passive

activity limitations must complete Form8810 to compute their allowable passiveactivity loss and credit. Beforecompleting Form 8810, see TemporaryRegulations section 1.163-8T, whichprovides rules for allocating interestexpense among activities. If a passiveactivity is also subject to the at-risk rulesof section 465, the at-risk rules applybefore the passive loss rules. For moreinformation, see section 469, the relatedregulations, and Pub. 925, PassiveActivity and At-Risk Rules.

Line 12

Compensation of Officers

Enter any officers compensation on line12. Before entering an amount on line12, Form 1120 filers must completeSchedule E on page 2 if their totalreceipts (line 1a, plus lines 4 through 10,of page 1, Form 1120) are $500,000 ormore. Do not include compensationdeductible 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.

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.


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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 expensesclaimed on lines 20 and 26, Form 1120,or lines 20 and 22, Form 1120-A.

Enter on line 13b the amount of jobscredit from Form 5884, Jobs Credit.

Line 14

Repairs

Enter the cost of incidental repairs notclaimed elsewhere on the return, suchas labor and supplies, that do not add

to the value of the property orappreciably prolong its life. Newbuildings, machinery, or permanentimprovements that increase the value ofthe property are not deductible. Theymust be depreciated or amortized.

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 deduction

for vehicle lease expense may have tobe reduced by an amount called theinclusion amount. The corporation mayhave an inclusion amount if:

The lease term began:

And the vehiclesfair market value

on the first day ofthe lease exceeded:

After 12/31/91 $14,000

After 12/31/ 90 but before 1/1/92 $13,400

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

If the lease term began after June 18,1984, but before January 1, 1987, see

Pub. 917, Business Use of a Car, to findout if the corporation has an inclusionamount. Also see Pub. 917 forinstructions on figuring the inclusionamount.

Line 17

Taxes

Enter taxes paid or accrued during thetax year, but do not include thefollowing:

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

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

Taxes not imposed on the corporation;

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 amountrealized on the disposition);

Taxes assessed against local benefitsthat increase the value of the property

assessed (such as for paving, etc.); or Taxes deducted elsewhere on thereturn, such as those reflected in cost ofgoods sold.

See section 164(d) for apportionmentof 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 or

credited 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 1992 prepaid interestallocable to any period after 1992 candeduct only the amount allocable to1992.

Generally, the interest and carryingcharges on straddles cannot be

deducted and must be capitalized. Seesection 263(g).

See section 163(e)(5) for special rulesfor the disqualified portion of originalissue discount on a high yield discountobligation.

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 debt

allocable 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 19

Charitable Contributions

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:

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 NOL used in an

intervening year (i.e., a year to which anNOL is carried but not fully absorbed).For this purpose, taxable income iscomputed by determining the NOLdeduction for the year without regard tothe NOL for the loss year or any lateryear. See section 172(b)(2). To the extentcharitable contributions are used toreduce taxable income for this purposeand increase an NOL carryover, acontributions carryover is not allowed.See section 170(d)(2)(B).


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Corporations on the accrual basis mayelect 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 a declarationto the return, 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 corporation (other than a closely

held or personal service corporation)contributes property other than cash andthe deduction claimed for the propertyexceeds $500, the corporation mustattach a schedule to the returndescribing 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 returnsfor contributions of property other thanmoney if the total claimed deduction for

all property contributed was more than$5,000.

A corporation must also 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 benefited bythe donation.

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

determined.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 capital

gain 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 privatefoundations. 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. For more

details, see section 170(e).Line 20

Depreciation

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 1992 or carriedover from 1991. See Form 4562,Depreciation and Amortization, and itsinstructions.

Line 22 (Form 1120 only)

Depletion

See sections 613 and 613A forpercentage 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 details.

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 mustfile one of the forms listed below, even ifthe plan is not a qualified plan underthe Internal Revenue Code. The filingrequirement applies even if thecorporation does not claim a deductionfor the current tax year. There arepenalties for failure to file these formson time 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. The termone-participant plan also means a planthat covers the owner and his or her

spouse, or a plan that covers partners ina business partnership (or the partnersand their spouses).


Employee Benefit Programs

Enter contributions to employee benefitprograms not claimed elsewhere on thereturn (e.g., insurance, health andwelfare programs) that are not anincidental part of a pension,profit-sharing, etc., plan included on line

24.

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 deduction for

amortization of pollution control facilities,organization expenses, etc. See Form4562.

A corporation may deduct dividends itpays in cash on stock held by anemployee stock ownership plan.However, a deduction may only be takenif, according to the plan, the dividendsare:

Paid in cash directly to the planparticipants or beneficiaries;

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 which

the dividends are paid; or Used to make payments on a loandescribed in section 404(a)(9).

See section 404(k) for more detailsand the limitation on certain dividends.

Generally, a deduction may not betaken for any amount that is allocable toa class of exempt income. See section265(b) for exceptions.

Generally, the corporation can deductonly 80% of the amount otherwiseallowable for meals and entertainmentexpenses paid or incurred in its trade orbusiness. Also, meals must not be lavishor extravagant; a bona fide business

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. Fordetails, see section 274 and Pub. 463,


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Travel, Entertainment, and GiftExpenses.

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 to

deduct the expense if the amount istreated as compensation and reportedon Form W-2 for an employee or onForm 1099-MISC for an independentcontractor.

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 (see Passiveactivity limitations on page 8) engagedin any activity as a trade or business orfor the production of income. Thesecorporations may have to adjust theamount on line 28, Form 1120, or line24, Form 1120-A. (See below.) But theat-risk rules do not apply to thefollowing:

Holding real property placed in serviceby the taxpayer before 1987;

Equipment leasing under sections465(c)(4), (5), and (6); and

Any qualifying 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, anyof which incurs a loss for the year, reportthe losses for each activity separately.Attach Form 6198, At-Risk Limitations,showing the amount at risk and grossincome and deductions for the activitieswith 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 deduction

allocable to the activity in the next taxyear.

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

Net Operating Loss Deduction

The net operating loss (NOL) deductionis the total of the NOL carryovers andcarrybacks that can be deducted in thetax year. See section 172(a). If thisdeduction is taken, show itscomputation on an attached schedule.

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 on

product liability losses.There is also an election to carry an

NOL over to each of the 15 yearsfollowing the year of the loss. To makethis election, check the box in Question13 on Schedule K. The return must betimely filed (including extensions). Theelection is 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 August

2, 1989.After applying the NOL to the first taxyear to which it may be carried, theportion 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 quickrefund of taxes. See section 6411.

Caution: Do notattach Form 1139 tothe corporations income tax return. Mailit in a separate envelope to the servicecenter where the corporation files itsincome 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 losscorporation 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 and certain shifts inownership occurred.

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 13.

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.Compute line 24 without regard to any

adjustment under section 1059 andwithout regard to any capital losscarryback to the tax year under section1212(a)(1).

In a year in which an NOL occurs, this70% limitation does not apply, even ifthe loss is created by thedividends-received deduction. Seesections 172(d) and 246(b).


Taxable Income

Capital construction fund.To take a

deduction for amounts contributed to acapital construction fund, reduce theamount that would otherwise be enteredon line 30 (line 26, Form 1120-A) by theamount of the deduction. On the dottedline next to the entry space, write CCFand the amount of the deduction. Formore information, get Pub. 595, TaxGuide for Commercial Fishermen.

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

Estimated Tax Payments

Enter any estimated tax payments thecorporation made for the tax year.

Beneficiaries of trusts.If thecorporation is the beneficiary of a trust,and the trust makes a section 643(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.

Special estimated tax payments forcertain life insurance companies.If


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the corporation is required to make orapply special estimated tax payments(SETP) under section 847 in addition toits regular estimated tax payments, enteron line 32b (line 28b, Form 1120-A), thecorporations total estimated taxpayments. On the dotted line next to theentry space, write SETP and theamount. Attach a schedule showing yourcomputation of estimated tax payments.See section 847(2) and Form 8816,Special Loss Discount Account andSpecial Estimated Tax Payments forInsurance Companies, for moreinformation.

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

Credit for Federal Tax on Fuels

Complete and attach Form 4136 if thecorporation qualifies to take this credit.

Credit for ozone-depletingchemicals.Also include on line 32g(line 28g, Form 1120-A) any credit thecorporation is claiming under section4682(g)(3) for ozone-depleting chemicalsused in the manufacture of rigid foam

insulation. Write ODC to the left of theentry space.

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

Total Payments

On Form 1120, add the amounts onlines 32d through 32g and enter the totalon line 32h. On Form 1120-A, add theamounts on lines 28d through 28g andenter the total on line 28h.

Backup withholding.If the corporationhad income tax withheld from anypayments it received, because, forexample, it failed to give the payer itscorrect employer identification number,include the amount withheld in the totalfor line 32h, Form 1120 (line 28h, Form1120-A). This type of withholding iscalled backup withholding. On Form1120, show the amount withheld in theblank space in the right hand columnbetween lines 31 and 32h, and label theamount backup withholding. On Form1120-A, show the amount withheld onthe dotted line to the left of line 28h,and label the amount backupwithholding.


Estimated Tax Penalty

A corporation that does not makeestimated tax payments when due maybe subject to an underpayment penaltyfor the period of underpayment.Generally, a corporation is subject to thepenalty if its tax liability is $500 or more,and it did not timely pay the smaller of(a) 93% of its tax liability for 1992 (97%of its tax liability for a tax year beginningafter June 30, 1992), or (b) 100% of itsprior years tax. See section 6655 for

details and exceptions, including specialrules for large corporations.

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 ifthe corporation does not owe the

penalty 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.

Schedule A, Form 1120

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

All filers should see Section 263Auniform capitalization rules on page 8before completing Schedule A or theworksheet on this page. The instructionsfor lines 4 through 7 below apply to bothSchedule A and the worksheet.

Note: If inventories are not anincome-determining factor, enter zero onlines 1 and 7 of Schedule A, Form 1120,or the worksheet.

Line 4

Additional Section 263A Costs

An entry is required on this line only forcorporations that have elected asimplified method of accounting. Fortaxpayers that have elected thesimplified production method, additionalsection 263A costs are generally thosecosts, other than interest, that were not

capitalized or included in the inventorycosts under the taxpayers method ofaccounting immediately prior to theeffective date in Temporary Regulationssection 1.263A-1T, but that are nowrequired to be capitalized under section263A.

For taxpayers that have elected asimplified resale method, additionalsection 263A costs are generally thosecosts incurred with respect to thefollowing categories: off-site storage or

warehousing; purchasing; handling,processing, assembly, and repackaging;and general and administrative costs(mixed service costs). Enter on line 4 thebalance of section 263A costs paid orincurred during the tax year not includedon lines 2, 3, and 5. See TemporaryRegulations section 1.263A-1T for moreinformation.

Line 5

Other Costs

Enter on line 5 any costs paid orincurred during the tax year not enteredon lines 2 through 4.

Line 7

Inventory at End of Year

See Temporary Regulations section1.263A-1T for more details oncomputing the amount of additionalsection 263A costs to be capitalized andadded to ending inventory.

Lines 9a through 9e (Schedule A)

Inventory Valuation Methods

Inventories can be valued at:

1. Cost;

2. Cost or market value (whichever is

lower); or3. Any other method approved by the

IRS that conforms with the provisions ofthe applicable regulations cited below.

Corporations that use erroneousvaluation methods must change to amethod permitted for Federal incometax purposes. To make this change, useForm 3115.

Cost of Goods Sold Worksheet

Form 1120-A(keep for your records)

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

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

3. Cost of labor. Enter here and include in total in Part II, line 5a(3), Form 1120-A 3.

4. Additional section 263A costs. Enter here and in Part II, line 5a(2), Form 1120-A(see instructions) 4.

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

6. Total. Add lines 1 through 5 6.

7. Inventory at end of year. Enter here and in Part III, line 3, column (b), Form1120-A 7.

8. Cost of goods sold. Subtract line 7 from line 6. Enter the result here and onpage 1, line 2, Form 1120-A 8.


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On line 9a, check the method(s) usedfor valuing inventories. Under lower ofcost or market, the term marketgenerally refers to normal marketconditions where there is a current bidprice prevailing at the date the inventoryis valued. 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 theinventory is valued.

Inventory may be valued below costwhen the merchandise is unsaleable atnormal prices or unusable in the normalway because the goods are subnormaldue to damage, imperfections,shopwear, etc., within the meaning ofRegulations section 1.471-2(c). Thegoods may be valued at the currentbona fide selling price, minus direct costof disposition (but not less than scrapvalue) if such a price can be established.

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

LIFO 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 line9b. On line 9c, enter the amount or thepercent of total closing inventoriescovered under section 472. Estimatesare acceptable.

If the corporation changed orextended its inventory method to LIFOand had to write up the openinginventory to cost in the year of election,report the effect of the writeup asincome (line 10, page 1), proportionately

over a 3-year period that begins with theyear of the LIFO election (section472(d)).

For more information on inventoryvaluation methods, get Pub. 538,Accounting Periods and Methods.

Schedule C (Form 1120Only)

Dividends and Special Deductions

For purposes of the 20% ownership teston lines 1 through 7, the percentage of

stock 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%-owned

domestic corporations subject to incometax and that are subject to the 70%deduction under section 243(a)(1).Include on this line taxable distributionsfrom an IC-DISC or former DISC that aredesignated as 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.Report so-called dividends or earnings

received from mutual savings banks,etc., as interest. Do not treat them asdividends.

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 orformer DISC that are considered eligiblefor 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 byincurring 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 section245(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 and

is 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 qualify for the 80% deductionprovided in section 245(c)(1)(B).

Line 8, Column (a)

Enter dividends received from whollyowned foreign subsidiaries that areeligible for the 100% deduction providedin section 245(b).

In general, the deduction under

section 245(b) applies to dividends paidout of the earnings and profits of aforeign corporation for a tax year duringwhich:

All of its outstanding stock is owned(directly or indirectly) by the domesticcorporation receiving the dividends, and

All of its gross income from all sourcesis effectively connected with the conductof a trade or business within the UnitedStates.

Line 9, Column (c)

Limitation on Dividends-Received Deduc

Generally, line 9, column (c) may not

exceed the amount from the worksheeton page 14. However, in a year in whichan NOL 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 section593(a) applies should see section 596for the special limitation on thedividends-received deduction.


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Line 10, Columns (a) and (c)

Small business investment companiesoperating under the Small Business

Investment Act of 1958 (15 U.S.C. 661and following) must enter dividends thatare received from domestic corporationssubject to income tax even though adeduction 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 tim

us internal revenue service: i1120 a--1992

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