us internal revenue service: i1120 a--2000

8/14/2019 US Internal Revenue Service: i1120 a--2000

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2000Department of the TreasuryInternal Revenue Service

Instructions forForms 1120 and 1120-ASection references are to the Internal Revenue Code unless otherwise noted.

Paperwork Reduction Act Notice. We ask for the information on these forms to carryout the Internal Revenue laws of the United States. You are required to give us theinformation. We need it to ensure that you are complying with these laws and to allowus to figure and collect the right amount of tax.

You are not required to provide the information requested on a form that is subjectto the Paperwork Reduction Act unless the form displays a valid OMB control number.Books or records relating to a form or its instructions must be retained as long as theircontents may become material in the administration of any Internal Revenue law.Generally, tax returns and return information are confidential, as required by section6103.

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

If you have comments concerning the accuracy of these time estimates orsuggestions for making this form and related schedules simpler, we would be happyto hear from you. You can write to the Tax Forms Committee, Western Area DistributionCenter, Rancho Cordova, CA 95743-0001. Do not send the tax form to this address.Instead, see Where To File on page 3.

Changes To Noteq The FSC Repeal and ExtraterritorialIncome Exclusion Act of 2000 allows anew extraterritorial income exclusion fortransactions after September 30, 2000.The exclusion is based on a corporation'squalifying foreign trade income. For moredetails and to figure the amount of theexclusion, see new Form 8873,Extraterritorial Income Exclusion.q The corporation may need to mail itsreturn to a different service center thisyear because the IRS has changed thefiling location for several areas. If anenvelope was received with the taxpackage, please use it. Otherwise, seeWhere To File on page 3.q A corporation is required to attach astatement to its income tax return todisclose participation in certaintransactions that have tax sheltercharacteristics or are structured to avoidtax. See Corporate tax shelters on page5.q Generally, if a corporation's averageannual gross receipts for the 3 prior taxyears are $1 million or less, it may beeligible to adopt or change to the cashmethod of accounting. If the corporationmakes this change, it will not be requiredto account for inventories. Instead, thecorporation may treat inventory in thesame manner as costs of materials andsupplies that are not incidental. Fordetails, see the instructions for Cost ofGoods Sold on page 14.q Corporations that file Form 1120 and,at any time during the tax year, hadassets in or operated a business in aforeign country may have to attach newSchedule N (Form 1120), ForeignOperations of U.S. Corporations, to theirtax returns. See Schedule N for details.

Photographs ofMissing ChildrenThe Internal Revenue Service is a proudpartner with the National Center forMissing and Exploited Children.Photographs of missing children selectedby the Center may appear in instructionson pages that would otherwise be blank.You can help bring these children homeby looking at the photographs and calling1-800-THE-LOST (1-800-843-5678) if yourecognize a child.

Unresolved Tax IssuesIf the corporation has attempted to dealwith an IRS problem unsuccessfully, itshould contact the Taxpayer Advocate.The Taxpayer Advocate independently

Form Recordkeeping

Learning aboutthe law or the

form

Preparing the

form

Copying,assembling, andsending the form

to the IRS1120 71 hr., 30 min. 42 hr., 2 min. 72 hr., 58 min. 8 hr., 2 min.1120-A 44 hr., 14 min. 23 hr., 33 min. 41 hr., 7 min. 4 hr., 34 min.Sch. D (1120) 7 hr., 10 min. 4 hr., 6 min. 6 hr., 16 min. 32 min.Sch. H (1120) 5 hr., 58 min. 35 min. 43 min. - - - - -Sch. N (1120) 3 hr., 21 min. 1 hr., 7 min. 3 hr., 6 min. 32 min.Sch. PH (1120) 15 hr., 18 min. 6 hr., 12 min. 8 hr., 35 min. 32 min.

Contents PageContents PageSpecific Instructions . . . . . . . 7Changes To Note . . . . . . . . . . 1Period Covered . . . . . . . . . . . 7

Photographs of Missing Children . . 1 Name . . . . . . . . . . . . . . . 7Unresolved Tax Issues . . . . . . . 1Address . . . . . . . . . . . . . . . 7How To Make a Contribution To Reduce

the Public Debt . . . . . . . . . . 2 Employer Identification Number (EIN) 7How To Get Forms and Publications 2 Personal Service Corporation . . . . 7General Instructions . . . . . . . . 2 Total Assets . . . . . . . . . . . . . 8Purpose of Form . . . . . . . . . . 2 Initial Return, Final Return, or Change

of Address . . . . . . . . . . . . 8Who Must File . . . . . . . . . . . 2Income . . . . . . . . . . . . . . . 8When To File . . . . . . . . . . . . 3Deductions . . . . . . . . . . . . 9-14Who Must Sign . . . . . . . . . . . 3Schedule A and Cost of Goods

Sold Worksheet . . . . . . . . 14-15Where To File . . . . . . . . . . . . 3

Other Forms, Returns, andStatements That May Be Required 3-5 Schedule C and Worksheet for

Schedule C . . . . . . . . . . 15-17Consolidated Return . . . . . . . . 5

Schedule J and Worksheet forMembers of a Controlled Group 17-19Farm Return . . . . . . . . . . . . 5

Amended Return . . . . . . . . . . 5 Schedule K . . . . . . . . . . . 19-20Statements . . . . . . . . . . . . . 5 Schedule L . . . . . . . . . . . . . 20Assembling the Return . . . . . . . 5 Schedule M-1 . . . . . . . . . . . . 20Accounting Methods . . . . . . . . 5 Codes for Principal Business

Activity . . . . . . . . . . . . 21-23Accounting Periods . . . . . . . . . 6

Rounding Off to Whole Dollars . . . 6 Index . . . . . . . . . . . . . . . . 24Recordkeeping . . . . . . . . . . . 6

Depository Method of Tax Payment 6

Estimated Tax Payments . . . . . . 6

Interest and Penalties . . . . . . . . 7

Cat. No. 11455T



represents the corporation's interests andconcerns within the IRS by protecting itsrights and resolving problems that havenot been fixed through normal channels.

While Taxpayer Advocates cannotchange the tax law or make a technicaltax decision, they can clear up problemsthat resulted from previous contacts andensure that the corporation's case is givena complete and impartial review.

The corporation's assigned personaladvocate will listen to its point of view andwill work with the corporation to address

its concerns. The corporation can expectthe advocate to provide:q A "fresh look" at a new or on-goingproblem.q Timely acknowledgment.q The name and phone number of theindividual assigned to its case.q Updates on progress.q Timeframes for action.q Speedy resolution.q Courteous service.

When contacting the TaxpayerAdvocate, the corporation should providethe following information:q The corporation's name, address, andemployer identification number.q The name and telephone number of anauthorized contact person and the hourshe or she can be reached.q The type of tax return and year(s)involved.q A detailed description of the problem.q Previous attempts to solve the problemand the office that had been contacted.q A description of the hardship thecorporation is facing (if applicable).

The corporation may contact aTaxpayer Advocate by calling a toll-freenumber, 1-877-777-4778. Persons whohave access to TTY/TDD equipment maycall 1-800-829-4059 and ask for TaxpayerAdvocate assistance. If the corporation

prefers, it may call, write, or fax theTaxpayer Advocate office in its area. SeePub. 1546, The Taxpayer AdvocateService of the IRS, for a list of addressesand fax numbers.

How To Make a ContributionTo Reduce the Public DebtTo help reduce the public debt, send acheck made payable to the: “Bureau ofthe Public Debt” to Bureau of the PublicDebt, Department G, P.O. Box 2188,Parkersburg, WV 26106-2188. Or,enclose a check with the income taxreturn. Contributions to reduce the publicdebt are deductible subject to the rulesand limitations for charitable contributions.

How To Get Formsand PublicationsPersonal computer. You can access theIRS Web Site 24 hours a day, 7 days aweek at www.irs.gov to:q Download forms, instructions, andpublications.q See answers to frequently asked taxquestions.q Search publications on-line by topic orkeyword.

q Send us comments or request help bye-mail.q Sign up to receive local and national taxnews by e-mail.

You can also reach us using filetransfer protocol at ftp.irs.gov.CD-ROM. Order Pub. 1796, Federal TaxProducts on CD-ROM, and get:q Current year forms, instructions, andpublications.q Prior year forms, instructions, andpublications.

q Popular tax forms that may be filled inelectronically, printed out for submission,and saved for recordkeeping.q The Internal Revenue Bulletin.

Buy the CD-ROM on the Internet atwww.irs.gov/cdorders from the NationalTechnical Information Service (NTIS) for$21 (no handling fee), or call1-877-CDFORMS (1-877-233-6767)toll-free to buy the CD-ROM for $21 (plusa $5 handling fee).By phone and in person. You can orderforms and publications 24 hours a day, 7days a week, by calling1-800-TAX-FORM (1-800-829-3676). Youcan also get most forms and publicationsat your local IRS office.

General Instructions

Purpose of FormUse Form 1120, U.S. Corporation IncomeTax Return, and Form 1120-A, U.S.Corporation Short-Form Income TaxReturn, to report the income, gains,losses, deductions, credits, and to figurethe income tax liability of a corporation.Also see Pub. 542, Corporations, formore information.

Who Must FileUnless exempt under section 501, all

domestic corporations (includingcorporations in bankruptcy) must filewhether or not they have taxable income.Domestic corporations must file Form1120, or, if they qualify, Form 1120-A,unless they are required to file a specialreturn (see Special Returns for CertainOrganizations below).Limited liability companies. If an entitywas formed as a limited liability companyunder state law and is treated as apartnership for Federal income taxpurposes, it should not file Form 1120 or1120-A. Instead, it should file Form 1065,U.S. Partnership Return of Income. Forthe definition of a limited liability company,see the Instructions for Form 1065.

Who May File Form 1120-AForm 1120-A may be filed by acorporation if it met all of the followingrequirements during the tax year:q Its gross receipts (line 1a on page 1)are under $500,000.q It total income (line 11 on page 1) isunder $500,000.q Its total assets (Form 1120, ScheduleL, line 15) are under $500,000.q Its only dividend income is fromdomestic corporations and thosedividends (a) qualify for the 70%

dividends-received deduction and (b) arenot from debt-financed securities.q It does not have any of the “write-in”additions to tax listed on pages 18 and19 in the Instructions for Form 1120,Schedule J, line 3 or line 11.q It has no nonrefundable tax credits(other than the general business credit orthe credit for prior year minimum tax).q It is not: (a) a member of a controlledgroup, (b) a personal holding company,(c) filing a consolidated return, (d) filing itsfinal return, (e) dissolving or liquidating,(f) electing to forego the carryback periodof an NOL, or (g) required to file one ofthe returns listed under Special Returnsfor Certain Organizations below.q It does not have: (a) any ownership ina foreign corporation or foreignpartnership, (b) foreign shareholders thatdirectly or indirectly own 25% or more ofits stock, or (c) any ownership in, ortransactions with, a foreign trust.

Special Returns forCertain OrganizationsInstead of filing Form 1120 or Form1120-A, certain organizations, as shownbelow, have to file special returns.

Ownership Interest in a FASITIf a corporation holds an ownershipinterest in a financial assetsecuritization investment trust (FASIT),it must report all items of income, gain,

If the organization is a File Form

Farmers' cooperative (sec. 1381) 990-C

Exempt organization with unrelatedtrade or business income 990-T

Religious or apostolic organizationexempt under section 501(d) 1065

Entity formed as a limited liabilitycompany under state law and treatedas a partnership for Federal incometax purposes

1065

Entity that elects to be treated as areal estate mortgage investmentconduit (REMIC) under sec. 860D

1066

Interest charge domestic international

sales corporation (sec. 992)1120-IC-DISC

Foreign corporation (other than lifeand property and casualty insurancecompany filing Form 1120-L or Form1120-PC)

1120-F

Foreign sales corporation (sec. 922) 1120-FSC

Condominium managementassociation or residential real estatemanagement association that electsto be treated as a homeownersassociation under sec. 528

1120-H

Life insurance company (sec. 801) 1120-L

Fund set up to pay for nucleardecommissioning costs (sec. 468A) 1120-ND

Property and casualty insurancecompany (sec. 831) 1120-PC

Political organization (sec. 527) 1120-POL

Real estate investment trust (sec.856) 1120-REIT

Regulated investment company (sec.851) 1120-RIC

S corporation (sec. 1361) 1120S

Settlement fund (sec. 468B) 1120-SF

Instructions for Forms 1120 and 1120-A



deductions, losses, and credits on thecorporation's income tax return (exceptas provided in section 860H). Show abreakdown of the items on an attachedschedule. For more information, seesections 860H and 860L.

When To FileGenerally, 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-period

return must generally file by the 15th dayof the 3rd month after the short periodends. A corporation that has dissolvedmust generally file by the 15th day of the3rd month after the date it dissolved.

If the due date falls on a Saturday,Sunday, or legal holiday, the corporationmay file on the next business day.Private delivery services. You can usecertain private delivery servicesdesignated by the IRS to meet the “timelymailing as timely filing/paying” rule for taxreturns and payments. The most recentlist of designated private delivery serviceswas published by the IRS in August 1999.

The list includes only the following:q Airborne Express (Airborne): Overnight

Air Express Service, Next AfternoonService, Second Day Service.q DHL Worldwide Express (DHL): DHL“Same Day” Service, DHL USAOvernight.q Federal Express (FedEx): FedExPriority Overnight, FedEx StandardOvernight, FedEx 2 Day.q United Parcel Service (UPS): UPS NextDay Air, UPS Next Day Air Saver, UPS2nd Day Air, UPS 2nd Day Air A.M.

The private delivery service can tell youhow to get written proof of the mailingdate.

Extension. File Form 7004, Applicationfor Automatic Extension of Time To File

Corporation Income Tax Return, torequest a 6-month extension of time tofile.

Who Must SignThe return must be signed and dated by:q The president, vice president,treasurer, assistant treasurer, chiefaccounting officer orq Any other corporate officer (such as taxofficer) 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 Paid Preparer's

space should remain blank. Anyone whoprepares Form 1120 or Form 1120-A butdoes not charge the corporation shouldnot sign the return. Generally, anyonewho is paid to prepare the return mustsign it and fill in the Paid Preparer's UseOnly area.

The paid preparer must complete therequired preparer information and—q Sign the return, by hand, in the spaceprovided for the preparer's signature(signature stamps and labels are notacceptable).q Give a copy of the return to thetaxpayer.

Where To FileFile your return at the applicable IRSaddress listed below.

Corporations with their principal placeof business outside the United States orclaiming a possessions tax credit(sections 936 and 30A) must file with theInternal Revenue Service Center,Philadelphia, PA 19255-0012.

A group of corporations located inseveral service center regions will oftenkeep all the books and records at theprincipal office of the managingcorporation. In this case, the income tax

returns of the corporations may be filedwith the service center for the region inwhich the principal office is located.

Other Forms, Returns,and Statements ThatMay Be Required

FormsThe corporation may have to file some ofthe following forms. See the form formore information.

Employment Tax Returns

Form 940 or Form 940-EZ, Employer'sAnnual Federal Unemployment (FUTA)Tax Return. The corporation may be liablefor FUTA tax and may have to file Form940 or 940-EZ if either of the followingapplies.

1. It paid wages of $1,500 or more inany calendar quarter in 1999 or 2000 or

2. It had at least one employee whoworked for the corporation for some partof a day in any 20 or more different weeks

in 1999 or 20 or more different weeks in2000.Form 941, Employer's Quarterly FederalTax Return, or Form 943, Employer'sAnnual Tax Return for AgriculturalEmployees. Employers must file theseforms to report income tax withheld, andemployer and employee social securityand Medicare taxes. Also, see Trustfund recovery penalty on page 7.Form 945, Annual Return of WithheldFederal Income Tax. File Form 945 toreport income tax withholding fromnonpayroll distributions or payments, suchas the following income:q Pensions, annuities, IRAs, militaryretirement, gambling winnings and

q Indian gaming profits and backupwithholding.

See Trust fund recovery penalty onpage 7.

Information Returns

Form W-2, Wage and Tax Statement, andForm W-3, Transmittal of Wage and TaxStatements. Use these forms to reportwithheld income, wages, tips, othercompensation, social security, andMedicare taxes for an employee.Form W-2G, Certain Gambling Winnings.Use this form to report gambling winningsfrom horse racing, dog racing, jai alai,lotteries, keno, bingo, slot machines,sweepstakes, wagering pools, etc.Form 1096, Annual Summary andTransmittal of U.S. Information Returns.Form 1098, Mortgage Interest Statement.Use this form to report the receipt fromany individual of $600 or more ofmortgage interest (including points) in thecourse of the corporation's trade orbusiness and reimbursements of overpaidinterest.Form 1098-E, Student Loan InterestStatement. Use this form to report thereceipt of $600 or more of student loaninterest in the course of the corporation'strade or business.Forms 1099. Use these informationreturns to report the following:

q Form 1099-A. Acquisitions andabandonments of secured property.q Form 1099-B. Proceeds from brokerand barter exchange transactions.q Form 1099-C. Cancellation of a debt.q Form 1099-DIV. Certain dividends anddistributions.q Form 1099-INT. Interest income.q Form 1099-LTC. Certain paymentsmade under a long-term care insurancecontract and certain accelerated deathbenefits.

If the corporation'sprincipal business,office, or agency is

located in

Use the followingInternal Revenue

Service Center address

Florida, GeorgiaAtlanta, GA39901-0012

Kansas, New Mexico,

Oklahoma

Austin, TX

73301-0012Delaware, District ofColumbia, Indiana, Kentucky,Maryland, Michigan, NewJersey, North Carolina, Ohio,Pennsylvania, SouthCarolina, West Virginia,Wisconsin

Cincinnati, OH45999-0012

New York (New York City and counties of Nassau,Rockland, Suffolk, and Westchester)

Holtsville, NY00501-0012

New York (all other counties), Connecticut,Maine, Massachusetts, NewHampshire, Rhode Island,Vermont

Andover, MA05501-0012

IllinoisKansas City, MO

64999-0012

Alabama, TennesseeMemphis, TN

37501-0012

Alaska, Arizona, Arkansas,California (counties of Alpine,Amador, Butte, Calaveras,Colusa, Contra Costa, Del Norte, El Dorado, Glenn,Humboldt, Lake, Lassen,Marin, Mendocino, Modoc,Napa, Nevada, Placer,Plumas, Sacramento, San Joaquin, Shasta, Sierra,Siskiyou, Solano, Sonoma,Sutter, Tehama, Trinity, Yolo,and Yuba), Colorado, Hawaii,Idaho, Iowa, Louisiana,Minnesota, Mississippi,Missouri, Montana,Nebraska, Nevada, NorthDakota, Oregon, SouthDakota, Texas, Utah,

Washington, Wyoming

Ogden, UT84201-0012

California (all other counties)Fresno, CA93888-0012

VirginiaPhiladelphia, PA

19255-0012




q Form 1099-MISC. Miscellaneousincome (e.g., payments to certain fishingboat crew members; payments toproviders of health and medical services;rent or royalty payments; nonemployeecompensation, etc.).Note: Every corporation must file Form 1099-MISC if it makes payments or rents,commissions, or other fixed or determinable income (see section 6041)totaling $600 or more to any one person in the course of its trade or business during the calendar year.q Form 1099-MSA. Distributions from amedical savings account (MSA) orMedicare+Choice MSA.q Form 1099-OID. Original issuediscount.q Form 1099-PATR. Distributions fromcooperatives to their patrons.q Form 1099-R. Distributions frompensions, annuities, retirement orprofit-sharing plans, individual retirementarrangements (IRAs) (including SEPs,SIMPLEs, Roth IRAs, Ed IRAs, Rothconversions, and IRArecharacterizations), or insurancecontracts.q Form 1099-S. Gross proceeds from the

sale or exchange of real estatetransactions.Also use these returns to report

amounts received as a nominee foranother person.Form 5498, IRA Contribution Information.Use this form to report contributions(including rollover contributions) to anyIRA, including a SEP, SIMPLE, Roth IRAand Ed IRA, Roth conversions, IRArecharacterization, and the fair marketvalue of the account.Form 5498-MSA, MSA orMedicare+Choice MSA Information. Usethis form to report contributions to amedical savings account (MSA) and thefair market value of an MSA or

Medicare+Choice MSA.For more information, see the generaland specific Instructions for Forms 1099,1098, 5498, and W-2G.Form 8027, Employer's AnnualInformation Return of Tip Income andAllocated Tips. Use this form to reportreceipts from large food or beverageoperations, tips reported by employees,and allocated tips.Form 8281, Information Return forPublicly Offered Original Issue DiscountInstruments. Use this form to report theissuance of public offerings of debtinstruments (obligations).Form 8300, Report of Cash PaymentsOver $10,000 Received in a Trade or

Business. Use this form to report thereceipt of more than $10,000 in cash orforeign currency in one transaction or aseries of related transactions.

International Forms

Form 926, Return by a U.S. Transferorof Property to a Foreign Corporation. Thisform is filed to report certain transfers toforeign corporations under section 6038B.Form 1042, Annual Withholding TaxReturn for U.S. Source Income of ForeignPersons, and

Form 1042-S, Foreign Person's U.S.Source Income Subject to Withholding.Use these forms to report and sendwithheld tax on payments or distributionsmade to nonresident alien individuals,foreign partnerships, or foreigncorporations.

Also see Pub. 515, Withholding of Taxon Nonresident Aliens and ForeignCorporations, and sections 1441 and1442.Form 3520, Annual Return to ReportTransactions With Foreign Trusts andReceipt of Certain Foreign Gifts. Use thisform to report a distribution received froma foreign trust; or, if the corporation wasthe grantor of, transferor of, or transferorto, a foreign trust that existed during thetax year. (See Question 5 of Schedule N(Form 1120)).Form 5471, Information Return of U.S.Persons With Respect to Certain ForeignCorporations. This form is required if thecorporation controls a foreign corporation;acquires, disposes of, or owns 10% ormore in value or vote of the outstandingstock of a foreign corporation; or hadcontrol of a foreign corporation for anuninterrupted period of at least 30 daysduring the annual accounting period of theforeign corporation. (See Question 4 ofSchedule N (Form 1120)).Form 5472, Information Return of a 25%Foreign-Owned U.S. Corporation or aForeign Corporation Engaged in a U.S.Trade or Business. This form is filed if thecorporation is 25% or moreforeign-owned. See Question 7 on page20.Form 5713, International Boycott Report.Corporations that had operations in, orrelated to, certain “boycotting” countriesfile Form 5713.Form 8621, Return by a Shareholder ofa Passive Foreign Investment Companyor Qualified Electing Fund. Use this form

to make certain elections by shareholdersin a passive foreign investment companyand to figure certain deferred taxes.Form 8865, Return of U.S. Persons WithRespect to Certain Foreign Partnerships.A domestic corporation may have to fileForm 8865 if it:

1. Controlled a foreign partnership(i.e., owned more than a 50% direct orindirect interest in the partnership).

2. Owned at least a 10% direct orindirect interest in a foreign partnershipwhile U.S. persons controlled thatpartnership.

3. Had an acquisition, disposition, orchange in proportional interest in a foreignpartnership that:q Increased its direct interest to at least10% or reduced its direct interest of atleast 10% to less than 10%.q Changed its direct interest by at leasta 10% interest.

4. Contributed property to a foreignpartnership in exchange for a partnershipinterest if:q Immediately after the contribution, thecorporation owned, directly or indirectly,at least a 10% interest in the foreignpartnership; orq The fair market value of the propertythe corporation contributed to the foreign

partnership in exchange for a partnershipinterest, when added to othercontributions of property made to theforeign partnership during the preceding12-month period, exceeds $100,000.

Also, the domestic corporation mayhave to file Form 8865 to report certaindispositions by a foreign partnership ofproperty it previously contributed to thatpartnership if it was a partner at the timeof the disposition. For more details,including penalties for failing to file Form8865, see Form 8865 and its separate

instructions.

Other Forms

Form 720, Quarterly Federal Excise TaxReturn. Use this form to report and paythe luxury tax on passenger vehicles,environmental taxes, communications andair transportation taxes, fuel taxes,manufacturers taxes, ship passengertaxes, or certain other excise taxes.Form 952, Consent To Extend Period ofLimitation on Assessment of IncomeTaxes. This form is filed to extend theperiod of assessment of all income taxesof the receiving corporation on thecomplete liquidation of a subsidiary undersection 332.Form 966, Corporate Dissolution orLiquidation. Use this form to report theadoption of a resolution or plan to dissolvethe corporation or liquidate any of itsstock.Form 5452, Corporate Report ofNondividend Distributions. Use this formto report nondividend distributions.Form 8264, Application for Registrationof a Tax Shelter. Tax shelter organizersuse this form to receive a tax shelterregistration number from the IRS.Form 8271, Investor Reporting of TaxShelter Registration Number. Taxpayers,who have acquired an interest in a taxshelter that is required to be registered,

use this form to report the tax shelter'sregistration number. Form 8271 must beattached to any tax return (including anapplication for tentative refund (Form1139) and an amended return) on whicha deduction, credit, loss, or other taxbenefit attributable to a tax shelter istaken or any income attributable to a taxshelter is reported.Form 8275, Disclosure Statement, andForm 8275-R, Regulation DisclosureStatement. Disclose items or positionstaken on a tax return that are nototherwise adequately disclosed on a taxreturn or that are contrary to Treasuryregulations (to avoid parts of theaccuracy-related penalty or certain

preparer penalties).Form 8594, Asset Acquisition Statement.Corporations file this form to report thepurchase or sale of a group of assets thatconstitute a trade or business if goodwillor going concern value attach to theassets.Form 8697, Interest Computation Underthe Look-Back Method for CompletedLong-Term Contracts. This form is usedto figure the interest due or to be refundedunder the look-back method of section460(b)(2). The look-back method appliesto certain long-term contracts accountedfor under the percentage of completion




method or percentage ofcompletion-capitalized cost method.Form 8810, Corporate Passive ActivityLoss and Credit Limitations. Closely heldcorporations (and corporations that arepersonal service corporations) must usethis form to compute the passive activityloss and credit allowed under section 469.Form 8817, Allocation of Patronage andNonpatronage Income and Deductions.Use this form to figure and reportpatronage and nonpatronage income anddeductions (used by taxablecooperatives).Form 8842, Election To Use DifferentAnnualization Periods for CorporateEstimated Tax. Corporations use Form8842 for each year they want to elect oneof the annualization periods in section6655(e)(2) for figuring estimated taxpayments under the annualized incomeinstallment method.Form 8849, Claim for Refund of ExciseTaxes. Corporations use this form to claima refund of certain excise taxes.Form 8866, Interest Computation Underthe Look-Back Method for PropertyDepreciated Under the Income ForecastMethod. Figure the interest due or to be

refunded under the look-back method ofsection 167(g)(2) for property placed inservice after September 13, 1995, that isdepreciated under the income forecastmethod.

Consolidated ReturnThe parent corporation of an affiliatedgroup of corporations must attach Form851, Affiliations Schedule, to theconsolidated 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 each

corporation included in the consolidatedreturn. Do not use Form 1120 as asupporting statement. On the supportingstatement, use columns to show thefollowing, both before and afteradjustments:q Items of gross income and deductions.q A computation of taxable income.q Balance sheets as of the beginning andend of the tax year.q A reconciliation of income per bookswith income per return.q A reconciliation of retained earnings.

Enter the totals for the consolidatedgroup on Form 1120. Attach consolidatedbalance sheets and a reconciliation ofconsolidated retained earnings. For moreinformation on consolidated returns, seethe regulations under section 1502.

Farm ReturnDo not file Schedule F (Form 1040),Profit or Loss From Farming. Instead,enter income on lines 1a through 10, andsee the related instructions. Forms 1120and 1120-A have entry lines for many ofthe expenses deducted by farmingcorporations. Expenses not listed on theform should be entered on the line for"Other deductions." Attach a schedule,

listing by type and amount, all deductionsshown on this line. Also, see theinstructions for lines 12 through 26 andline 29a, Form 1120 (lines 12 through 22and line 25a, Form 1120-A).

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

Statements

Corporate tax shelters. A corporation isrequired to disclose its participation incertain tax shelters:q By attaching a disclosure statementto its income tax return for a reportabletransaction for each tax year its incometax liability is affected by its participationin the transaction andq For the first tax year a disclosurestatement is attached to its tax return, bysending a copy of the disclosurestatement to the Internal RevenueService, LM:PFTG:OTSA, 1111Constitution Ave., NW, Washington, DC20224.

Disclosure is required for reportable

transactions that are: (a) listedtransactions that the IRS has identified astax avoidance transactions and (b) otherreportable transactions that have taxshelter characteristics. A listed transactionmust be reported if it is expected toreduce the taxpayer's income tax liabilityby more than $1 million in a single taxyear or by a total of more than $2 millionfor any combination of years. For otherreportable transactions, the thresholdincreases to $5 million for a single taxyear or to $10 million for any combinationof years. Generally, reporting is notrequired for customary businesstransactions or transactions with taxbenefits that the IRS has no reasonablebasis to challenge.

See Temporary Regulations section1.6011-4T for details, including:q The definition of a reportabletransaction and a listed transaction,q The relevant tax shelter characteristicsfor other reportable transactions,q The form and content of the disclosurestatement, andq The filing requirements of the disclosurestatement.

Also see Notice 2000-15, 2000-12I.R.B. 826 and Notice 2000-44, 2000-36I.R.B. 255, for certain listed transactionsdetermined to have a tax avoidancepurpose and the intended tax benefits thatare subject to disallowance. The listed

transactions in these notices may beupdated from time to time when other taxavoidance transactions are identified.Stock ownership in foreigncorporations. Attach the statementrequired by section 551(c) if:q The corporation owned 5% or more invalue of the outstanding stock of a foreignpersonal holding company andq The corporation was required toinclude in its gross income anyundistributed foreign personal holdingcompany income from a foreign personalholding company.

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, the person(transferor) and the transferee must eachattach to their tax returns the informationrequired by Regulations section 1.351-3.Dual consolidated losses. If a domesticcorporation incurs a dual consolidatedloss (as defined in Regulations section1.1503-2(c)(5)), the corporation (orconsolidated group) may need to attach

an elective relief agreement and/or anannual certification as provided inRegulations section 1.1503-2(g)(2).

Assembling the ReturnAfter page 4, Form 1120, or page 2, Form1120-A, assemble any schedules andother forms in the following order.

1. Schedule N (Form 1120).2. Form 4136, Form 4626, and Form

851.3. Additional schedules in alphabetical

order.4. Additional forms in numerical order.

Complete every applicable entry spaceon Form 1120 or Form 1120-A. Do not

write “See attached” instead of completingthe entry spaces. If more space isneeded on the forms or schedules, attachseparate sheets using the same size andformat as the printed forms. If there aresupporting statements and attachments,arrange them in the same order as theschedules or forms they support andattach them last. Show the totals on theprinted forms. Also, be sure to enter thecorporation's name and EIN on eachsupporting statement or attachment.

Accounting MethodsAn accounting method is a set of rulesused to determine when and how incomeand expenses are reported.

Figure taxable income using themethod of accounting regularly used inkeeping the corporation's books andrecords. Generally, permissible methodsinclude:q Cash,q Accrual, orq Any other method authorized by theInternal Revenue Code.

In all cases, the method used mustclearly show taxable income. Ifinventories are required, the accrualmethod must be used for sales andpurchases of merchandise. See Cost ofGoods Sold on page 14.

Generally, a corporation (other than a

qualified 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 section 447.

Under the accrual method, an amountis includible in income when:q All the events have occurred that fixthe right to receive the income, which isthe earliest of the date: (a) the requiredperformance takes place, (b) payment isdue, or (c) payment is received and




q The amount can be determined withreasonable accuracy.

See Regulations section 1.451-1(a) fordetails.

Generally, an accrual basis taxpayercan deduct accrued expenses in the taxyear when:q All events that determine the liabilityhave occurred,q The amount of the liability can befigured with reasonable accuracy, andq Economic performance takes place with

respect to the expense.There are exceptions to the economicperformance rule for certain items,including recurring expenses. See section461(h) and the related regulations for therules for determining when economicperformance takes place.

Long-term contracts (except for certainreal property construction contracts) mustgenerally be accounted for using thepercentage of completion methoddescribed in section 460. See section 460for general rules on long-term contracts.Mark-to-market accounting method.Generally, dealers in securities must usethe mark-to-market accounting methoddescribed in section 475. Under this

method, any security that is inventory tothe dealer must be included in inventoryat its fair market value (FMV). Anysecurity held by a dealer that is notinventory and that is held at the close ofthe tax year is treated as sold at its FMVon the last business day of the tax year.Any gain or loss must be taken intoaccount in determining gross income. Thegain or loss taken into account isgenerally treated as ordinary gain or loss.For details, including exceptions, seesection 475, the related regulations, andRev. Rul. 94-7, 1994-1 C.B. 151.

Dealers in commodities and traders in securities and commodities mayelect to use the mark-to-market

accounting method. To make the election,the corporation must file a statementdescribing the election, the first tax yearthe election is to be effective, and, in thecase of an election for traders in securitiesor commodities, the trade or business forwhich the election is made. Except fornew taxpayers, the statement must befiled by the due date (not includingextensions) of the income tax return forthe tax year immediately preceding theelection year and attached to that return,or if applicable, to a request for anextension of time to file that return. Formore details, see Rev. Proc. 99-17,1999-1 C.B. 503, and sections 475(e) and(f).

Change in accounting method.Generally, the corporation must get IRSconsent to change the method ofaccounting used to report taxable income(for income as a whole or for any materialitem). To do so, it must file Form 3115,Application for Change in AccountingMethod. For more information, see Pub.538, Accounting Periods and Methods.

Accounting PeriodsA corporation must figure its taxableincome on the basis of a tax year. The tax

year is the annual accounting period thecorporation uses to keep its records andreport its income and expenses.Generally, corporations can use acalendar year or a fiscal year. Personalservice corporations, however, must usea calendar year unless they meet one ofthe exceptions discussed in Accountingperiod under Item A on page 7.

For more information about accountingperiods, see Temporary Regulationssections 1.441-1T, 1.441-2T, and Pub.538.

Calendar year. If the calendar year isadopted as the annual accounting period,the corporation must maintain its booksand records and report its income andexpenses for the period from January 1through December 31 of each year.Fiscal year. A fiscal year is 12consecutive months ending on the lastday of any month except December. A52–53-week year is a fiscal year thatvaries from 52 to 53 weeks.Adoption of tax year. A corporationadopts a tax year when it files its firstincome tax return. It must adopt a tax yearby the due date (not including extensions)of its first income tax return.

Change of tax year. Generally, acorporation must get the consent of theIRS before changing its tax year by filingForm 1128, Application To Adopt,Change, or Retain a Tax Year. However,under certain conditions, a corporation(other than a personal servicecorporation) may change its tax yearwithout getting the consent. SeeRegulations section 1.442-1 and Pub.538.

Rounding Off toWhole DollarsThe corporation may show amounts onthe return and accompanying schedules

as whole dollars. To do so, drop amountsless than 50 cents and increase amountsfrom 50 cents through 99 cents to the nexthigher dollar.

RecordkeepingKeep the corporation's records for as longas they may be needed for theadministration of any provision of theInternal Revenue Code. Usually, recordsthat support an item of income, deduction,or credit on the return must be kept for 3years from the date the return is due orfiled, whichever is later. Keep records thatverify the corporation's basis in propertyfor as long as they are needed to figurethe basis of the original or replacement

property.The corporation should keep copies of

all filed returns. They help in preparingfuture returns and amended returns.

Depository Methodof Tax PaymentThe corporation must pay the tax due infull no later than the 15th day of the 3rdmonth after the end of the tax year. Thetwo methods of depositing corporateincome taxes are discussed below.

Electronic Deposit RequirementThe corporation must make electronicdeposits of all depository taxes (such asemployment tax, excise tax, andcorporate income tax) using the ElectronicFederal Tax Payment System (EFTPS) in2001 if:q The total deposits of such taxes in 1999were more than $200,000 orq The corporation was required to useEFTPS in 2000.

If the corporation is required to use

EFTPS and fails to do so, it may besubject to a 10% penalty. If thecorporation is not required to use EFTPS,it may participate voluntarily. To enroll inor get more information about EFTPS, call1-800-555-4477 or 1-800-945-8400.Depositing on time. For deposits madeby EFTPS to be on time, the corporationmust initiate the transaction at least 1business day before the date the depositis due.

Deposits With Form 8109If the corporation does not use EFTPS,deposit corporation income tax payments(and estimated tax payments) with Form8109, Federal Tax Deposit Coupon. If you

do not have a preprinted Form 8109, useForm 8109-B to make deposits. You canget this form only by calling1-800-829-1040. Be sure to have youremployer identification number (EIN)ready when you call.

Do not send deposits directly to an IRSoffice; otherwise, the corporation mayhave to pay a penalty. Mail or deliver thecompleted Form 8109 with the paymentto an authorized depositary, i.e., acommercial bank or other financialinstitution authorized to accept Federaltax deposits.

Make checks or money orders payableto the depositary. To help ensure propercrediting, write the corporation's EIN, the

tax period to which the deposit applies,and "Form 1120" on the check or moneyorder. Be sure to darken the "1120" boxon the coupon. Records of these depositswill be sent to the IRS.

For more information on deposits, seethe instructions in the coupon booklet(Form 8109) and Pub. 583, Starting aBusiness and Keeping Records.

CAUTION

!If the corporation owes tax when it files Form 1120 or Form 1120-A,do not include the payment with the tax return. Instead, mail or deliver

the payment with Form 8109 to an authorized depositary, or use EFTPS, if applicable.

Estimated Tax PaymentsGenerally, the following rules apply to thecorporation's payments of estimated tax.q The corporation must make installmentpayments of estimated tax if it expects itsestimated tax (income tax minus credits)to be $500 or more.q The installments are due by the 15thday of the 4th, 6th, 9th, and 12th monthsof the tax year. If any date falls on aSaturday, Sunday, or legal holiday, theinstallment is due on the next regularbusiness day.




q Use Form 1120-W, Estimated Tax forCorporations, as a worksheet to computeestimated tax.q If the corporation does not use EFTPS,use the deposit coupons (Forms 8109) tomake deposits of estimated tax.

For more information on estimated taxpayments, including penalties that applyif the corporation fails to make requiredpayments, see the instructions for line 33on page 14.Overpaid estimated tax. If thecorporation overpaid estimated tax, it maybe able to get a quick refund by filingForm 4466, Corporation Application forQuick Refund of Overpayment ofEstimated Tax. The overpayment must beat least 10% of the corporation's expectedincome tax liability and at least $500. FileForm 4466 before the 16th day of the 3rdmonth after the end of the tax year, butbefore the corporation files its income taxreturn. Do not file Form 4466 before theend of the corporation's tax year.

Interest and PenaltiesInterest. Interest is charged on taxespaid late even if an extension of time tofile is granted. Interest is also charged on

penalties imposed for failure to file,negligence, fraud, gross valuationoverstatements, and substantialunderstatements of tax from the due date(including extensions) to the date ofpayment. The interest charge is figuredat a rate determined under section 6621.Penalty for late filing of return. Acorporation that does not file its tax returnby the due date, including extensions,may be penalized 5% of the unpaid tax foreach month or part of a month the returnis late, up to a maximum of 25% of theunpaid tax. The minimum penalty for areturn that is over 60 days late is thesmaller of the tax due or $100. Thepenalty will not be imposed if the

corporation can show that the failure tofile on time was due to reasonable cause.Corporations that file late must attach astatement explaining the reasonablecause.Penalty for late payment of tax. Acorporation that does not pay the taxwhen due generally may be penalized 1 / 2of 1% of the unpaid tax for each monthor part of a month the tax is not paid, upto a maximum of 25% of the unpaid tax.The penalty will not be imposed if thecorporation can show that the failure topay on time was due to reasonable cause.Trust fund recovery penalty. Thispenalty may apply if certain excise,income, social security, and Medicare

taxes that must be collected or withheldare not collected or withheld, or thesetaxes are not paid. These taxes aregenerally reported on Forms 720, 941,943, or 945 (see Other Forms, Returns,and Statements That May Be Requiredon page 3). The trust fund recoverypenalty may be imposed on all personswho are determined by the IRS to havebeen responsible for collecting,accounting for, and paying over thesetaxes, and who acted willfully in not doing

so. The penalty is equal to the unpaidtrust fund tax. See the instructions forForm 720, Pub. 15 (Circular E),Employer's Tax Guide, or Pub. 51(Circular A), Agricultural Employer's TaxGuide, for details, including the definitionof responsible persons.Other penalties. Other penalties can beimposed for negligence, substantialunderstatement of tax, and fraud. Seesections 6662 and 6663.

Specific Instructions

Period CoveredFile the 2000 return for calendar year2000 and fiscal years that begin in 2000and end in 2001. For a fiscal year, fill inthe tax year space at the top of the form.Note: The 2000 Form 1120 may also be used if: q The corporation has a tax year of less than 12 months that begins and ends in 2001 and q The 2001 Form 1120 is not available at the time the corporation is required to file its return.

The corporation must show its 2001 tax year on the 2000 Form 1120 and take into account any tax law changes that are effective for tax years beginning after December 31, 2000.

NameUse the label on the tax packageinformation form (Form 8160-A) or theForm 1120 package that was mailed tothe corporation. Cross out any errors andprint the correct information on the label.If the corporation doesn't have a label,print or type the corporation's true name(as set forth in the charter or other legaldocument creating it), address, and EINon the appropriate lines.

AddressInclude the suite, room, or other unitnumber after the street address. If apreaddressed label is used, include thisinformation on the label.

If the Post Office does not deliver mailto the street address and the corporationhas a P.O. box, show the box numberinstead.Note: If a change in address occurs after the return is filed, use Form 8822,Change of Address, to notify the IRS of the new address.

Employer IdentificationNumber (EIN)Show the correct EIN in item B on page1 of Form 1120 or Form 1120-A. If thecorporation does not have an EIN, itshould apply for one on Form SS-4,Application for Employer IdentificationNumber. If the corporation has notreceived its EIN by the time the return isdue, write “Applied for” in the space forthe EIN. See Pub. 583 for details.

Item A—PersonalService CorporationA personal service corporation is acorporation whose principal activity(defined below) for the testing period forthe tax year is the performance ofpersonal services. The services must besubstantially performed byemployee-owners. Employee-ownersmust own more than 10% of the fairmarket value of the corporation'soutstanding stock on the last day of the

testing period.Testing period. Generally, the testingperiod for a tax year is the prior tax year.The testing period for a new corporationstarts with the first day of its first tax yearand ends on the earlier of:q The last day of its first tax year orq The last day of the calendar year inwhich the first tax year began.Principal activity. The principal activityof a corporation is considered to be theperformance of personal services if,during the testing period, the corporation'scompensation costs for the performanceof personal services (defined below) aremore than 50% of its total compensation

costs.Performance of personal services.Personal services are those performed inthe health, law, engineering, architecture,accounting, actuarial science, performingarts, or consulting fields (as defined inTemporary Regulations section1.448-1T(e)). The term “performance ofpersonal services” includes any activityinvolving the performance of personalservices in these fields.Substantial performance byemployee-owners. Personal servicesare substantially performed byemployee-owners if, for the testing period,more than 20% of the corporation'scompensation costs for the performance

of personal services are for servicesperformed by employee-owners.Employee-owner. A person isconsidered to be an employee-owner ifthe person:q Is an employee of the corporation onany day of the testing period andq Owns any outstanding stock of thecorporation on any day of the testingperiod.Stock ownership is determined under theattribution rules of section 318, exceptthat “any” is substituted for “50%” insection 318(a)(2)(C).Accounting period. A personal servicecorporation must use a calendar tax yearunless:q It can establish a business purpose fora different tax year (see Rev. Proc. 87-32,1987-2 C.B. 396, and Rev. Rul. 87-57,1987-2 C.B. 117) orq It elects under section 444 to have a taxyear other than a calendar year. To makethe election, see Form 8716, Election ToHave a Tax Year Other Than a RequiredTax Year.

Personal service corporations that wantto change their tax year must also fileForm 1128.




If a corporation makes the section 444election, its deduction for certain amountspaid to employee-owners may be limited.See Schedule H (Form 1120), Section280H Limitations for a Personal ServiceCorporation (PSC), to figure the maximumdeduction.

If a section 444 election is terminatedand the termination results in a short taxyear, type or print at the top of the firstpage of Form 1120 or 1120-A for the shorttax year “SECTION 444 ELECTIONTERMINATED.” See Temporary

Regulations section 1.444-1T(a)(5) formore information.

For more information about personalservice corporations, see TemporaryRegulations section 1.441-4T.Other rules. For other rules that apply topersonal service corporations, seePassive activity limitations on page 9and Contributions of property otherthan cash on page 11.

Item D—Total AssetsEnter the corporation's total assets (asdetermined by the accounting methodregularly used in keeping thecorporation's books and records) at the

end of the tax year. If there are no assetsat the end of the tax year, enter the totalassets as of the beginning of the tax year.

Item E—Initial Return,Final Return, orChange of Addressq If this is the corporation's first return,check the “Initial return” box.q If the corporation ceases to exist, fileForm 1120 and check the “Final return”box. Do not file Form 1120-A.q If the corporation has changed itsaddress since it last filed a return, checkthe box for “Change of address.”

IncomeNote: Generally, income from all sources, whether U.S. or foreign, must be included.

Line 1

Gross Receipts

Enter gross receipts or sales from allbusiness operations except those thatmust be reported on lines 4 through 10.In general, advance payments arereported in the year of receipt. To reportincome from long-term contracts, seesection 460. For special rules for reportingcertain advance payments for goods and

long-term contracts, see Regulationssection 1.451-5. For permissible methodsfor reporting advance payments forservices by an accrual methodcorporation, see Rev. Proc. 71-21, 1971-2C.B. 549.Installment sales. Generally, theinstallment method cannot be used for:q Sales of property after December 16,1999, that would otherwise be reportedusing the accrual method of accounting.q Dealer dispositions of property. A“dealer disposition” is: (a) any disposition

of personal property by a person whoregularly sells or otherwise disposes ofpersonal property of the same type on theinstallment plan or (b) any disposition ofreal property held for sale to customers inthe ordinary course of the taxpayer's tradeor business.

Exception. These restrictions on usingthe installment method do not apply todispositions of property used or producedin a farming business or sales oftimeshares and residential lots for whichthe corporation elects to pay interest

under section 453(l)(3).Enter on line 1 (and carry to line 3), the

gross profit on collections from installmentsales for any of the following:q Dealer dispositions of property beforeMarch 1, 1986.q Dispositions of property used orproduced in the trade or business offarming.q 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 gross sales,(e) amount collected, and (f) gross profiton the amount collected.

For sales of timeshares and residentiallots reported under the installmentmethod, the corporation's income tax isincreased by the interest payable undersection 453(l)(3). To report this additionto the tax, see the instructions for line 11,Schedule J, Form 1120.Nonaccrual experience method.Accrual method taxpayers need notaccrue certain amounts to be receivedfrom the performance of services that, onthe basis of their experience, will not becollected (section 448(d)(5)). Thisprovision does not apply to any amount if

interest is required to be paid on theamount or if there is any penalty for failureto timely pay the amount. Corporationsthat fall under this provision should attacha schedule showing total gross receipts,the amount not accrued as a result of theapplication of section 448(d)(5), and thenet amount accrued. Enter the net amounton line 1a. For more information andguidelines on this “nonaccrual experiencemethod,” see Temporary Regulationssection 1.448-2T.

Line 2

Cost of Goods Sold

Enter the cost of goods sold on line 2,

page 1. Before making this entry, a Form1120 filer must complete Schedule A onpage 2 of Form 1120. See the ScheduleA instructions on page 14. Form 1120-Afilers may use the worksheet on page 14to figure the amount to enter on line 2.

Line 4

Dividends

Form 1120 filers. See the instructions forSchedule C on page 15. Then, completeSchedule C and enter on line 4 theamount 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. Seesection 7872 for more information.

Line 6

Gross Rents

Enter the gross amount received for therental 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 to thepassive activity loss rules. See Form 8810

and its instructions.

Line 8

Capital Gain Net Income

Every sale or exchange of a capital assetmust be reported in detail on ScheduleD (Form 1120), Capital Gains andLosses, even though no gain or loss isindicated.

Line 9

Net Gain or (Loss)

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

Line 10

Other Income

Enter any other taxable income notreported on lines 1 through 9. List the typeand amount of income on an attachedschedule. If the corporation has only oneitem of other income, describe it inparentheses on line 10. Examples of otherincome to report on line 10 are:q Any adjustment under section 481(a)required to be included in income duringthe current tax year due to a change in amethod of accounting.q Recoveries of bad debts deducted inprior years under the specific charge-off

method.q The amount of credit for alcohol usedas fuel (determined without regard to thelimitation based on tax) entered on Form6478, Credit for Alcohol Used as Fuel.q Refunds of taxes deducted in prioryears to the extent they reduced incomesubject to tax in the year deducted (seesection 111). Do not offset current yeartaxes against tax refunds.q The amount of any deduction previouslytaken under section 179A that is subjectto recapture. The corporation mustrecapture the benefit of any allowable




deduction for clean-fuel vehicle property(or clean-fuel vehicle refueling property),if the property later ceases to qualify. SeeRegulations section 1.179A-1 for details.q Ordinary income from trade or businessactivities of a partnership (from ScheduleK-1 (Form 1065 or 1065-B)). Do not offsetordinary losses against ordinary income.Instead, include the losses on line 26,Form 1120, or line 22, Form 1120-A.Show the partnership's name, address,and EIN on a separate statementattached to this return. If the amount

entered is from more than onepartnership, identify the amount fromeach partnership.q Any LIFO recapture amount undersection 1363(d). The corporation mayhave to include a LIFO recapture amountin income if it:

1. Used the LIFO inventory method forits last tax year before the first tax year forwhich it elected to become an Scorporation or

2. Transferred LIFO inventory assets toan S corporation in a nonrecognitiontransaction in which those assets weretransferred basis property.

The LIFO recapture amount is theamount by which the C corporation'sinventory under the FIFO methodexceeds the inventory amount under theLIFO method at the close of thecorporation's last tax year as a Ccorporation (or for the year of the transfer,if 2 above applies). For more information,see Regulations section 1.1363-2 andRev. Proc. 94-61, 1994-2 C.B. 775. Alsosee the instructions for Schedule J, line11.

Deductions

Limitations on DeductionsSection 263A uniform capitalizationrules. The uniform capitalization rules of

section 263A require corporations tocapitalize, or include in inventory costs,certain costs incurred in connection with:q The production of real property andtangible personal property held ininventory or held for sale in the ordinarycourse of business.q Real property or personal property(tangible and intangible) acquired forresale.q The production of real property andtangible personal property by acorporation for use in its trade or businessor in an activity engaged in for profit.

Tangible personal property producedby a corporation includes a film, soundrecording, videotape, book, or similarproperty.

Corporations subject to the section263A uniform capitalization rules arerequired to capitalize:

1. Direct costs and2. An allocable part of most indirect

costs (including taxes) that (a) benefit theassets produced or acquired for resale or(b) are incurred by reason of theperformance of production or resaleactivities.

For inventory, some of the indirectexpenses that must be capitalized are:q Administration expenses.

q Taxes.q Depreciation.q Insurance.q Compensation paid to officersattributable to services.q Rework labor.q Contributions to pension, stock bonus,and certain profit-sharing, annuity, ordeferred compensation plans.

Regulations section 1.263A-1(e)(3)specifies other indirect costs that relate toproduction or resale activities that must

be capitalized and those that may becurrently deductible.Interest expense paid or incurred

during the production period ofdesignated property must be capitalizedand is governed by special rules. Formore details, see Regulations sections1.263A-8 through 1.263A-15.

The costs required to be capitalizedunder section 263A are not deductibleuntil the property (to which the costsrelate) is sold, used, or otherwisedisposed of by the corporation.Exceptions. Section 263A does notapply to:q Personal property acquired for resale ifthe corporation's average annual gross

receipts for the 3 prior tax years were $10million or less.q Timber.q Most property produced under along-term contract.q Certain property produced in a farmingbusiness.q Research and experimental costs undersection 174.q Intangible drilling costs for oil, gas, andgeothermal property.q Mining exploration and developmentcosts.q Inventory of a cash method corporationthat does not account for inventories. SeePub. 553, Highlights of 2000 Tax

Changes, for details.For more details on the uniformcapitalization rules, see Regulationssections 1.263A-1 through 1.263A-3 andsection 1.263A-4 for rules for propertyproduced in a farming business.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 for

depletion of iron ore and coal, intangibledrilling and exploration and developmentcosts, certain deductions for financialinstitutions, and the amortizable basis ofpollution control facilities. See section 291to determine the amount of adjustment.Also see section 43.Golden parachute payments. A portionof the payments made by a corporation tokey personnel that exceeds their usualcompensation may not be deductible.This occurs when the corporation has anagreement (golden parachute) with thesekey employees to pay them these

excessive amounts if control of thecorporation changes. See section 280G.Business startup expenses. Businessstartup expenses must be capitalizedunless an election is made to amortizethem over a period of 60 months. Seesection 195 and Regulations section1.195-1.Passive activity limitations. Limitationson passive activity losses and creditsunder section 469 apply to personalservice corporations as defined inTemporary Regulations section 1.441-4T(see Item A–Personal ServiceCorporation on page 7 and Closely heldcorporations below).

Generally, the two kinds of passiveactivities are:q Trade or business activities in whichthe corporation did not materiallyparticipate for the tax year (seeTemporary Regulations section1.469-1T(g)(3)) andq Rental activities regardless of itsparticipation.

For exceptions, see Form 8810.An activity is a trade or business activityif it is not a rental activity, andq The activity involves the conduct of a

trade or business (i.e., deductions fromthe activity would be allowable undersection 162 if other limitations, such asthe passive loss rules, did not apply) orq The activity involves research andexperimental costs that are deductibleunder section 174 (or would be deductibleif the corporation chose to deduct ratherthan capitalize them).

Corporations subject to the passiveactivity limitations must complete Form8810 to compute their allowable passiveactivity loss and credit. Before completingForm 8810, see Temporary Regulationssection 1.163-8T, which provides rules forallocating interest expense amongactivities. If a passive activity is also

subject to the earnings stripping rules ofsection 163(j) or the at-risk rules ofsection 465, those rules apply before thepassive loss rules. For more information,see section 469, the related regulations,and Pub. 925, Passive Activity andAt-Risk Rules.

Closely held corporations. For thispurpose, a corporation is a closely heldcorporation if:q At any time during the last half of thetax year more than 50% in value of itsoutstanding stock is owned, directly orindirectly, by or for not more than fiveindividuals andq The corporation is not a personalservice corporation.

Certain organizations are treated asindividuals for purposes of this test. (Seesection 542(a)(2).) For rules ofdetermining stock ownership, see section544 (as modified by section 465(a)(3)).Reducing certain expenses for whichcredits are allowable. For each creditlisted below, the corporation must reducethe otherwise allowable deductions forexpenses used to figure the credit by theamount of the current year credit:q Work opportunity credit.q Research credit.q Enhanced oil recovery credit.




q Disabled access credit.q Empowerment zone employment credit.q Indian employment credit.q Employer credit for social security andMedicare taxes paid on certain employeetips.q Orphan drug credit.q Welfare-to-work credit.

If the corporation has any of thesecredits, figure each current year creditbefore figuring the deduction for expenseson which the credit is based.

Line 12

Compensation of Officers

Enter deductible officers' compensationon line 12. Form 1120 filers mustcomplete Schedule E if their total receipts(line 1a, plus lines 4 through 10) are$500,000 or more. Do not includecompensation deductible elsewhere onthe return, such as amounts included incost of goods sold, elective contributionsto a section 401(k) cash or deferredarrangement, or amounts contributedunder a salary reduction SEP agreementor a SIMPLE IRA plan.

Include only the deductible part of

officers' compensation on Schedule E.(See Disallowance of deduction foremployee compensation in excess of$1 million below.) Complete Schedule E,line 1, columns (a) through (f), for allofficers. The corporation determines whois an officer under the laws of the statewhere incorporated.

If a consolidated return is filed, eachmember of an affiliated group must furnishthis information.Disallowance of deduction foremployee compensation in excess of$1 million. Publicly held corporationsmay not deduct compensation to a“covered employee” to the extent that thecompensation exceeds $1 million.

Generally, a covered employee is:q The chief executive officer of thecorporation (or an individual acting in thatcapacity) as of the end of the tax year orq An employee whose total compensationmust be reported to shareholders underthe Securities Exchange Act of 1934because the employee is among the fourhighest compensated officers for that taxyear (other than the chief executiveofficer).

For this purpose, compensation doesnot include the following:q Income from certain employee trusts,annuity plans, or pensions andq Any benefit paid to an employee that isexcluded from the employee's income.

The deduction limit does not apply to:q Commissions based on individualperformance,q Qualified performance-basedcompensation, andq Income payable under a written, bindingcontract in effect on February 17, 1993.

The $1-million limit is reduced byamounts disallowed as excess parachutepayments under section 280G.

For details, see section 162(m) andRegulations section 1.162-27.

Line 13

Salaries and Wages

Enter the amount of salaries and wagespaid for the tax year, reduced by:q Any work opportunity credit from Form5884,q Any empowerment zone employmentcredit from Form 8844,q Any Indian employment credit fromForm 8845, andq Any welfare-to-work credit from Form8861.See the instructions for these forms formore information. Do not include salariesand wages deductible elsewhere on thereturn, such as amounts included in costof goods sold, elective contributions to asection 401(k) cash or deferredarrangement, or amounts contributedunder a salary reduction SEP agreementor a SIMPLE IRA plan.

CAUTION

!If the corporation provided taxable fringe benefits to its employees,such as personal use of a car, do not deduct as wages the amount

allocated for depreciation and other expenses claimed on lines 20 and 26,Form 1120, or lines 20 and 22, Form 1120-A.

Line 14

Repairs and Maintenance

Enter the cost of incidental repairs andmaintenance not claimed elsewhere onthe return, such as labor and supplies,that do not add to the value of theproperty or appreciably prolong its life.New buildings, 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 the taxyear. A small bank or thrift institutionusing the reserve method of section 585should attach a schedule showing how itarrived at the current year's provision.

CAUTION

!A cash basis taxpayer may not claim a bad debt deduction unless the amount was previously included in income.

Line 16

RentsIf the corporation rented or leased avehicle, enter the total annual rent orlease expense paid or incurred during theyear. Also complete Part V of Form 4562,Depreciation and Amortization. If thecorporation leased a vehicle for a term of30 days or more, the deduction for vehiclelease expense may have to be reducedby an amount called the inclusionamount. The corporation may have aninclusion amount if:

See Pub. 463 for instructions onfiguring the inclusion amount.

Line 17

Taxes and Licenses

Enter taxes paid or accrued during the taxyear, but do not include the following:q Federal income taxes.q Foreign or U.S. possession incometaxes if a tax credit is claimed (however,see the Instructions for Form 5735 forspecial rules for possession incometaxes).q Taxes not imposed on the corporation.q 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).q Taxes assessed against local benefitsthat increase the value of the propertyassessed (such as for paving, etc.).q 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.

Line 18

Interest

Note: The deduction for interest is limited when the corporation is a policyholder or beneficiary with respect to a life insurance, endowment, or annuity contract issued after June 8, 1997. For details, see section 264(f). Attach a statement showing the computation of the deduction.

The corporation must make an interestallocation if the proceeds of a loan wereused for more than one purpose (e.g., topurchase a portfolio investment and toacquire an interest in a passive activity).See Temporary Regulations section1.163-8T for the interest allocation rules.

Mutual savings banks, building and

loan associations, and cooperative bankscan deduct the amounts paid or creditedto the accounts of depositors asdividends, interest, or earnings. Seesection 591.

Do not deduct the following interest:q Interest on indebtedness incurred orcontinued to purchase or carry obligationsif the interest is wholly exempt fromincome tax. For exceptions, see section265(b).q For cash basis taxpayers, prepaidinterest allocable to years following thecurrent tax year (e.g., a cash basiscalendar year taxpayer who in 2000

The lease term began:

And the vehicle's FMVon the first day of the

lease exceeded:

After 12/31/98 ............................................... $15,500

After 12/31/96 but before 1/1/99................... $15,800

After 12/31/94 but before 1/1/97................... $15,500

After 12/31/93 but before 1/1/95................... $14,600

If the lease term began before January 1, 1994, or,the leased vehicle was an electric vehicle, see Pub.463, Travel, Entertainment, Gift, and Car Expenses,to find out if the corporation has an inclusion amount.




prepaid interest allocable to any periodafter 2000 can deduct only the amountallocable to 2000).q Interest and carrying charges onstraddles. Generally, these amounts mustbe capitalized. See section 263(g).q Interest on debt allocable to theproduction of designated property by acorporation for its own use or for sale. Thecorporation must capitalize this interest.Also capitalize any interest on debtallocable to an asset used to produce theproperty. See section 263A(f) and

Regulations section 1.263A-8 through1.263A-15 for definitions and moreinformation.

Special rules apply to:q Interest on which no tax is imposed(see section 163(j)).q Foregone interest on certainbelow-market-rate loans (see section7872).q Original issue discount on certainhigh-yield discount obligations. (Seesection 163(e) to figure the disqualifiedportion.)

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 carried overfrom prior years.

Corporations reporting taxable incomeon the accrual method may elect to treatas paid during the tax year anycontributions paid by the 15th day of the3rd month after the end of the tax year ifthe contributions were authorized by theboard of directors during the tax year.Attach a declaration to the return, signedby an officer, stating that the resolutionauthorizing the contributions was adoptedby the board of directors during the taxyear. Also attach a copy of the resolution.Limitation on deduction. The totalamount claimed may not be more than10% of taxable income (line 30, Form1120, or line 26, Form 1120-A) computedwithout regard to the following:q Any deduction for contributions,q The special deductions on line 29b,Form 1120 (line 25b, Form 1120-A),q The deduction allowed under section249,q Any net operating loss (NOL) carrybackto the tax year under section 172, andq Any capital loss carryback to the taxyear under section 1212(a)(1).

Carryover. Charitable contributions

over the 10% limitation may not bededucted for the tax year but may becarried over to the next 5 tax years.

Special rules apply if the corporationhas an NOL carryover to the tax year. Infiguring the charitable contributionsdeduction for the tax year, the 10% limitis applied using the taxable income aftertaking into account any deduction for theNOL.

To figure the amount of any remainingNOL carryover to later years, taxableincome must be modified (see section172(b)). To the extent that contributions

are used to reduce taxable income for thispurpose and increase an NOL carryover,a contributions carryover is not allowed.See section 170(d)(2)(B).Substantiation requirements.Generally, no deduction is allowed for anycontribution of $250 or more unless thecorporation gets a writtenacknowledgment from the doneeorganization that shows the amount ofcash contributed, describes any propertycontributed, and, either gives adescription and a good faith estimate of

the value of any goods or servicesprovided in return for the contribution, orstates that no goods or services wereprovided in return for the contribution. Theacknowledgment must be obtained by thedue date (including extensions) of thecorporation's return, or, if earlier, the datethe return is filed. Do not attach theacknowledgment to the tax return, butkeep it with the corporation's records.These rules apply in addition to the filingrequirements for Form 8283 describedbelow.

For more information on substantiationand recordkeeping requirements, see theregulations under section 170 and Pub.526, Charitable Contributions.

Contributions to organizationsconducting lobbying activities.Contributions made to an organizationthat conducts lobbying activities are notdeductible if:q The lobbying activities relate to mattersof direct financial interest to the donor'strade or business andq The principal purpose of thecontribution was to avoid Federal incometax by obtaining a deduction for activitiesthat would have been nondeductibleunder the lobbying expense rules ifconducted directly by the donor.Contributions of property other thancash. If a corporation (other than a

closely held or personal servicecorporation) contributes property otherthan cash and claims over a $500deduction for the property, it must attacha schedule to the return describing thekind of property contributed and themethod used to determine its fair marketvalue (FMV). Closely held corporationsand personal service corporations mustcomplete Form 8283, Noncash CharitableContributions, and attach it to theirreturns. All other corporations generallymust complete and attach Form 8283 totheir returns for contributions of property(other than money) if the total claimeddeduction for all property contributed wasmore than $5,000.

If the corporation made a “qualifiedconservation contribution” under section170(h), also include the FMV of theunderlying property before and after thedonation, as well as the type of legalinterest contributed, and describe theconservation purpose benefited by thedonation. If a contribution carryover isincluded, show the amount and how itwas determined.

Reduced deduction for contributions of certain property. For a charitablecontribution of property, the corporationmust reduce the contribution by the sumof:

q The ordinary income and short-termcapital gain that would have resulted if theproperty were sold at its FMV andq For certain contributions, the long-termcapital gain that would have resulted if theproperty were sold at its FMV.

The reduction for the long-term capitalgain applies to:q Contributions of tangible personalproperty for use by an exemptorganization for a purpose or functionunrelated to the basis for its exemptionandq Contributions of any property to or forthe use of certain private foundationsexcept for stock for which marketquotations are readily available (section170(e)(5)).

Larger deduction. A larger deductionis allowed for certain contributions of:q Inventory and other property to certainorganizations for use in the care of the ill,needy, or infants (see section 170(e)(3)and Regulations section 1.170A-4A);q Scientific equipment used for researchto institutions of higher learning or tocertain scientific research organizations(other than by personal holdingcompanies and service organizations)

(see section 170(e)(4)); andq Computer technology and equipment toschools.

Contributions of computer technology and equipment to schools.A corporation may take an increaseddeduction under section 170(e)(6) forqualified contributions of computertechnology or equipment for elementaryor secondary school purposes. Acontribution is a qualified contribution if:q It is made to an eligible donee (seebelow);q Substantially all of the donee property'suse is:

1. Related to the purpose or functionof the donee;

2. For use within the United States;and

3. For educational purposes in anygrade K–12.q The contribution is made not later than2 years after the date the taxpayeracquired or substantially completed theconstruction of the property;q The original use of the property is bythe donor or the donee;q The property is not transferred by thedonee for money, services, or otherproperty, except for shipping, transfer,and installation costs; andq The property fits productively into thedonee's education plan.

Eligible donee. The term “eligibledonee” means:q An educational organization thatnormally maintains a regular faculty andcurriculum and has a regularly enrolledbody of pupils in attendance at the placewhere its educational activities areregularly conducted orq A section 501(c)(3) entity organizedprimarily for purposes of supportingelementary and secondary education.Note: Contributions of computer technology or equipment to private foundations may be treated as qualified elementary or secondary educational




contributions if certain requirements are met. See section 170(e)(6)(C).

Line 20

Depreciation

Besides depreciation, include on line 20the part of the cost that the corporationelected to expense under section 179 forcertain tangible property placed in serviceduring tax year 2000 or carried over from1999. See Form 4562 and its instructions.

Line 22 (Form 1120 Only)Depletion

See sections 613 and 613A forpercentage depletion rates applicable tonatural deposits. Also, see section 291 forthe limitation on the depletion deductionfor iron ore and coal (including lignite).

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

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

and 617 for details.

Line 24 (Form 1120 Only)

Pension, Profit-Sharing, etc., Plans

Enter the deduction for contributions toqualified pension, profit-sharing, or otherfunded deferred compensation plans.Employers who maintain such a plangenerally must file one of the forms listedbelow, even if the plan is not a qualifiedplan under the Internal Revenue Code.The filing requirement applies even if thecorporation does not claim a deduction forthe current tax year. There are penaltiesfor failure to file these forms on time andfor overstating the pension plan

deduction. See sections 6652(e) and6662(f).Form 5500, Annual Return/Report ofEmployee Benefit Plan. File this form fora plan that is not a one-participant plan(see below).Form 5500-EZ, Annual Return ofOne-Participant (Owners and TheirSpouses) Retirement Plan. File this formfor a plan that only covers the owner (orthe owner and his or her spouse) but onlyif the owner (or the owner and his or herspouse) owns the entire business.

Line 25 (Form 1120 Only)

Employee Benefit Programs

Enter contributions to employee benefitprograms not claimed elsewhere on thereturn (e.g., insurance, health and welfareprograms, etc.) that are not an incidentalpart of a pension, profit-sharing, etc., planincluded on line 24.

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

Other Deductions

Attach a schedule, listing by type andamount, all allowable deductions that arenot deductible elsewhere on Form 1120

or Form 1120-A. Form 1120-A filersshould include amounts described in theinstructions above for lines 22, 24, and25 of Form 1120. Enter the total of otherdeductions on line 26, Form 1120 (line 22,Form 1120-A).

Examples of other deductions include:q Amortization of pollution controlfacilities, organization expenses, etc. (seeForm 4562).q Insurance premiums.q Legal and professional fees.q

Supplies used and consumed in thebusiness.q Utilities.q Ordinary losses from trade or businessactivities of a partnership (from ScheduleK-1 (Form 1065 or 1065-B)). Do not offsetordinary income against ordinary losses.Instead, include the income on line 10.Show the partnership's name, address,and EIN on a separate statementattached to this return. If the amount isfrom more than one partnership, identifythe amount from each partnership.q Dividends paid in cash on stock heldby an employee stock ownership plan.However, a deduction may only be takenif, according to the plan, the dividends

are: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 which thedividends are paid; or

3. Used to make payments on a loandescribed in section 404(a)(9).See section 404(k) for more details andthe limitation on certain dividends.

Also see Special rules below for limitson certain other deductions.

Do not deduct:q Fines or penalties paid to a governmentfor violating any law.q Any amount that is allocable to a classof exempt income. See section 265(b) forexceptions.

Special rules apply to the followingexpenses:Travel, meals, and entertainment.Subject to limitations and restrictionsdiscussed below, a corporation candeduct ordinary and necessary travel,meals, and entertainment expenses paidor incurred in its trade or business. Also,special rules apply to deductions for gifts,skybox rentals, luxury water travel,convention expenses, and entertainmenttickets. See section 274 and Pub. 463 formore details.

Travel. The corporation cannot deducttravel expenses of any individualaccompanying a corporate officer oremployee, including a spouse ordependent of the officer or employee,unless:q That individual is an employee of thecorporation andq His or her travel is for a bona fidebusiness purpose and would otherwisebe deductible by that individual.

Meals and entertainment. Generally,the corporation can deduct only 50% ofthe amount otherwise allowable for mealsand entertainment expenses paid or

incurred in its trade or business. Inaddition (subject to exceptions undersection 274(k)(2)):q Meals must not be lavish orextravagant;q A bona fide business discussion mustoccur during, immediately before, orimmediately after the meal; andq An employee of the corporation mustbe present at the meal.

See section 274(n)(3) for a special rulethat applies to expenses for mealsconsumed by individuals subject to thehours of service limits of the Departmentof Transportation.

Membership dues. The corporationmay deduct amounts paid or incurred formembership dues in civic or public serviceorganizations, professional organizations(such as bar and medical associations),business leagues, trade associations,chambers of commerce, boards of trade,and real estate boards. However, nodeduction is allowed if a principal purposeof the organization is to entertain, orprovide entertainment facilities for,members or their guests. In addition,corporations may not deduct membershipdues in any club organized for business,pleasure, recreation, or other socialpurpose. This includes country clubs, golfand athletic clubs, airline and hotel clubs,and clubs operated to provide mealsunder conditions favorable to businessdiscussion.

Entertainment facilities. Thecorporation cannot deduct an expensepaid or incurred for a facility (such as ayacht or hunting lodge) used for anactivity usually considered entertainment,amusement, or recreation.Note: The corporation may be able to deduct otherwise nondeductible meals,travel, and entertainment expenses if the amounts are treated as compensation and reported on Form W-2 for an

employee or on Form 1099-MISC for an independent contractor.Deduction for clean-fuel vehicles andcertain refueling property. Section179A allows a deduction for part of thecost of qualified clean-fuel vehicleproperty and qualified clean-fuel vehiclerefueling property placed in service duringthe tax year. For more information, seePub. 535.Lobbying expenses. Generally,lobbying expenses are not deductible.These expenses include:q Amounts paid or incurred in connectionwith influencing Federal or statelegislation (but not local legislation) orq Amounts paid or incurred in connection

with any communication with certainFederal executive branch officials in anattempt to influence the official actions orpositions of the officials. See Regulationssection 1.162-29 for the definition of“influencing legislation.”

Dues and other similar amounts paidto certain tax-exempt organizations maynot be deductible. See section 162(e)(3).If certain in-house lobbying expendituresdo not exceed $2,000, they aredeductible. For information oncontributions to charitable organizationsthat conduct lobbying activities, see theinstructions for line 19. For more




information on lobbying expenses, seesection 162(e).


Taxable Income Before NOLDeduction and Special Deductions

At-risk rules. Generally, special at-riskrules under section 465 apply to closelyheld corporations (see Passive activitylimitations on page 9) engaged in anyactivity as a trade or business or for theproduction of income. These corporationsmay have to adjust the amount on line 28,Form 1120, or line 24, Form 1120-A. (Seebelow.)

The at-risk rules do not apply to:q Holding real property placed in serviceby the taxpayer before 1987;q Equipment leasing under sections465(c)(4), (5), and (6); orq 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 section 465(d)losses. These losses are limited to the

amount for which the corporation is at riskfor each separate activity at the close ofthe tax year. If the corporation is involvedin one or more activities, any of whichincurs a loss for the year, report thelosses for each activity separately. AttachForm 6198, At-Risk Limitations, showingthe amount at risk and gross income anddeductions for the activities with thelosses.

If the corporation sells or otherwisedisposes of an asset or its interest (eithertotal or partial) in an activity to which theat-risk rules apply, determine the net profitor loss from the activity by combining thegain or loss on the sale or disposition withthe profit or loss from the activity. If the

corporation has a net loss, it may belimited because of the at-risk rules.Treat any loss from an activity not

allowed 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

A corporation may use the net operatingloss (NOL) incurred in one tax year toreduce its taxable income in another taxyear. Generally, a corporation may carryan NOL back to each of the 2 yearspreceding the year of the loss and then

carry any remaining amount over to eachof the 20 years (15 years for NOLsincurred in tax years beginning beforeAugust 6, 1997), following the year of theloss (but Form 1120 filers see Waivingthe carryback period below). Forexceptions to the general rule, seeSpecial carryback periods for certain losses below.

Enter on line 29a (line 25a, Form1120-A), the total NOL carryovers fromprior tax years, but do not enter more thanthe corporation's taxable income (afterspecial deductions). An NOL deductioncannot be taken in a year in which the

corporation has a negative taxableincome. Attach a schedule showing thecomputation of the NOL deduction. Form1120 filers must also complete question12 on Schedule K.

For details on the NOL deduction, seePub. 536, Net Operating Losses.Carryback and carryover rules. Tocarry back the loss and obtain a quickrefund of taxes, use Form 1139,Corporation Application for TentativeRefund. Form 1139 must be filed within12 months after the close of the tax yearof the loss. See section 6411 for details.

For carryback claims filed later than 12months after the close of the tax year ofthe loss, file Form 1120X, Amended U.S.Corporation Income Tax Return, insteadof Form 1139.

After the corporation applies the NOLto the first tax year to which it may becarried, the taxable income of that year ismodified (as described in section 172(b))to determine how much of the remainingloss may be carried to other years. Seesection 172(b) and the related regulationsfor details.

Special NOL rules apply when:q An ownership change occurs (i.e., the

amount of the taxable income of a losscorporation that can be offset bypre-change NOL carryovers is limited).See section 382 and the relatedregulations. Also see TemporaryRegulations section 1.382-2T(a)(2)(ii),which requires that a loss corporation filean information statement with its incometax return for each tax year that it is a losscorporation and certain shifts inownership occurred. See Regulationssection 1.382-6(b) for details on how tomake the closing-of-the-books election.q A corporation acquires control ofanother corporation (or acquires its assetsin a reorganization) and the amount ofpre-acquisition losses that may offset

recognized built-in gains is limited. Seesection 384.Waiving the carryback period (Form1120 filers only). A corporation maymake an irrevocable election to waive thecarryback period and instead carry theNOL forward to years following the yearof the loss. To make this election, checkthe box in question 11 on Schedule K.Form 1120 must be timely filed (includingextensions).

Special carryback periods for certain losses. The regular 2-year carrybackperiod generally does not apply to thefollowing losses.q Specified liability losses, including aproduct liability loss. The part of an NOL

that is attributable to a specified liabilityloss may be carried back 10 years. Thecorporation may, however, elect to treatsuch a loss as if it were not a specifiedliability loss. If the corporation makes thiselection, the loss carryback period will be2, 3, or 5 years, whichever applies. Makethe election by attaching a statement to atimely filed return (including extensions,however, see Exception below). Also seesection 172(b)(1)(C).q Farming losses. An NOL attributableto any farming business may be carriedback 5 years. However, the corporationmay elect to treat the loss as if it were not

a farming loss. If the corporation makesthis election, the loss carryback period willbe 2 years or 3 years, whichever applies.Make the election by attaching astatement to a timely filed return(including extensions, however, seeException). Also see sections172(b)(1)(G) and 172(i).

Exception. If the corporation timelyfiled its return for the loss year withoutmaking the election for Specified liabilitylosses or Farming losses above, thecorporation may still make the election by

filing an amended return within 6 monthsof the due date of the loss year return(excluding extensions). Attach theelection to the amended return and write“Filed pursuant to section 301.9100-2” onthe election statement. File the amendedreturn at the same address the originalreturn was filed. Once made, the electionis irrevocable.q Eligible losses.The part of an NOL thatis attributable to an eligible loss may becarried back 3 years. An “eligible loss” isan NOL attributable to a Presidentiallydeclared disaster if, for the tax year inwhich the NOL arose, the corporation was(a) engaged in a farming business or (b)a small business that met the gross

receipts test of section 448(c). An eligibleloss does not include any farming loss orspecified liability loss described above.q Corporate equity reduction interestlosses. See section 172(b)(1)(E) forspecial rules that apply if the corporationhas an NOL attributable to interestdeducted in connection with corporateequity reduction transactions.q Losses incurred by a personalservice corporation (PSC). A PSC maynot carry back an NOL to or from any taxyear to which a section 444 electionapplies.

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

Special Deductions

Form 1120 filers. See the instructionson page 15 for Schedule C.Form 1120-A filers. Generally, enter70% of line 4, page 1, on line 25b.However, this deduction may not be morethan 70% of line 24, page 1. Compute line24 without regard to any adjustment undersection 1059 and without regard to anycapital loss carryback to the tax yearunder section 1212(a)(1).

In a year in which an NOL occurs, this70% limitation does not apply even if theloss is created by the dividends-receiveddeduction. See sections 172(d) and246(b).


Taxable Income

Capital construction fund. To take adeduction for amounts contributed to acapital construction fund (CCF), reducethe amount that would otherwise beentered on line 30 (line 26, Form 1120-A)by the amount of the deduction. On thedotted line next to the entry space, write“CCF” and the amount of the deduction.




For more information, see Pub. 595, TaxHighlights 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 thecorporation's share of the payment in thetotal for line 32b, Form 1120 (line 28b,Form 1120-A). Write “T” and the amounton the dotted line next to the entry space.Special estimated tax payments forcertain life insurance companies. If thecorporation is required to make or applyspecial estimated tax payments (SETP)under section 847 in addition to its regularestimated tax payments, enter on line 32b(line 28b, Form 1120-A), the corporation'stotal estimated tax payments. In themargin near line 32b, write “Form 8816”and the amount. Attach a scheduleshowing your computation of estimatedtax payments. See sections 847(2) and847(8) and Form 8816, Special LossDiscount Account and Special EstimatedTax Payments for Insurance Companies,for more information.

Line 32f, Form 1120(Line 28f, Form 1120-A)Enter the credit (from Form 2439, Noticeto Shareholder of UndistributedLong-Term Capital Gains) for thecorporation's share of the tax paid by aregulated investment company (RIC) or areal estate investment trust (REIT) onundistributed long-term capital gainsincluded in the corporation's income.Attach Form 2439 to Form 1120 or1120-A.

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

Credit for Federal Tax on Fuels

Complete and attach Form 4136, Creditfor Federal Tax Paid on Fuels, if thecorporation qualifies to take this credit.Credit for tax on ozone-depletingchemicals. Include on line 32g (line 28g,Form 1120-A) any credit the corporationis claiming under section 4682(g)(2) fortax on ozone-depleting chemicals. Write“ODC” to the left of the entry space.

Line 32h, Form 1120

(Line 28h, Form 1120-A)Total Payments

On Form 1120, add the amounts on lines32d through 32g and enter the total online 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 EIN, include the amount withheldin the total for line 32h, Form 1120 (line28h, Form 1120-A). This type of

withholding is called backup withholding.On Form 1120, show the amount withheldin the blank space in the right-handcolumn between lines 31 and 32h, andwrite “backup withholding.” On Form1120-A, show the amount withheld on thedotted line to the left of line 28h, and write“backup withholding.”


Estimated Tax Penalty

A corporation that does not makeestimated tax payments when due maybe subject to an underpayment penalty forthe period of underpayment. Generally, acorporation is subject to the penalty if itstax liability is $500 or more and it did nottimely pay the smaller of:q Its tax liability for 2000 orq Its prior year's tax.See section 6655 for details andexceptions, including special rules forlarge corporations.

Use Form 2220, Underpayment ofEstimated Tax by Corporations, to see ifthe corporation owes a penalty and tofigure 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, even if thecorporation does not owe the penalty, youmust complete and attach Form 2220 if:q The annualized income or adjustedseasonal installment method is used orq The corporation is a large corporationcomputing its first required installmentbased on the prior year's tax. (See theForm 2220 instructions for the definitionof a large corporation.)

If you attach Form 2220, check the boxon line 33, Form 1120 (line 29, Form1120-A), and enter the amount of anypenalty on this line.

Schedule A, Form 1120(Worksheet, Form 1120-A)

Cost of Goods SoldGenerally, inventories are required at thebeginning and end of each tax year if theproduction, purchase, or sale of

merchandise is an income-producingfactor. See Regulations section 1.471-1.

However, if a corporation's averageannual gross receipts for the 3 prior taxyears are $1 million or less and thecorporation is an eligible taxpayer thatadopts or changes to the cash method ofaccounting, it will be not required toaccount for inventories. If the corporationis not required to account for inventoriesand does not want to do so, it must treatinventory in the same manner as costs ofmaterials and supplies that are not

incidental. Under this rule, inventory costsfor raw materials purchased for use inproducing finished goods andmerchandise purchased for resale aredeductible in the year the finished goodsor merchandise are sold (or, if later, theyear the corporation paid for the rawmaterials or merchandise). Enter amountspaid for all raw materials andmerchandise during the tax year on line2. The amount the corporation can deductfor the tax year is figured on line 8.

If the corporation wants to change tothe cash method of accounting, it must fileForm 3115. It may also have to make anadjustment to prevent amounts of incomeor expense from being duplicated or

omitted. This is called a section 481(a)adjustment, which is taken into accountover a period not to exceed 4 years. Forexample, if the corporation accrued salesin 1999 for which it received payment in2000, it must report those sales in bothyears as a result of changing itsaccounting method and will make asection 481(a) adjustment to preventduplication of income. See Rev. Proc.99-49, 1999-52 I.R.B. 725, to figure theamount of this adjustment for the tax year.Include any positive section 481(a)adjustment on page 1, line 10. If thesection 481(a) adjustment is negative,report it on Form 1120, line 26 (Form1120-A, line 22).

For eligibility requirements and furtherdetails on changing to the cash methodof accounting, see Pub. 553.

All filers not using the cash method ofaccounting should see Section 263Auniform capitalization rules on page 9before completing Schedule A or theworksheet. The instructions for lines 4through 7 on page 15 apply to ScheduleA and the worksheet below.

Cost of Goods Sold Worksheet

Form 1120-A(keep for your records)

Inventory at start of year. Enter here and in Part III, line 3, column

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

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

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

Other costs. Enter here and include in Part II, line 5a(3), Form1120-A 5.

Total. Add lines 1 through 5 6.

Inventory at end of year. Enter here and in Part III, line 3, column(b), Form 1120-A 7.

Cost of goods sold. Subtract line 7 from line 6. Enter the resulthere and on page 1, line 2, Form 1120-A 8.

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Line 1

Inventory at Beginning of Year

If the corporation is changing its methodof accounting from accrual to cash for thecurrent tax year and it does not want toaccount for inventories, it must refigurelast year's closing inventory using thecash method and enter the result on line1. If there is a difference between theclosing inventory and the refiguredamount, attach an explanation and take itinto account when figuring thecorporation's section 481(a) adjustment(explained on page 14).

Line 4

Additional Section 263A Costs

An entry is required on this line only forcorporations that have elected a simplifiedmethod of accounting.

For corporations that have elected thesimplified production method,additional section 263A costs aregenerally those costs, other than interest,that were not capitalized under thecorporation's method of accountingimmediately prior to the effective date ofsection 263A but are now required to becapitalized under section 263A. Fordetails, see Regulations section1.263A-2(b).

For corporations that have elected thesimplified resale method, additionalsection 263A costs are generally thosecosts incurred with respect to thefollowing categories.q Off-site storage or warehousing.q Purchasing; handling, such asprocessing, assembling, repackaging, andtransporting.q General and administrative costs(mixed service costs).

For details, see Regulations section1.263A-3(d).

Enter on line 4 the balance of section263A costs paid or incurred during the taxyear not includable on lines 2, 3, and 5.

Line 5

Other Costs

Enter on line 5 any costs paid or incurredduring the tax year not entered on lines 2through 4.

Line 7

Inventory at End of Year

See Regulations section 1.263A-1through 1.263A-3 for details on figuringthe amount of additional section 263A

costs to be included in ending inventory.If the corporation is using the cashmethod of accounting and it does notwant to account for inventories, enter online 7 the portion of its raw materials andmerchandise purchased for resale thatare included on line 6 and were not soldduring the year.

Lines 9a Through 9f (Schedule A)

Inventory Valuation Methods

Inventories can be valued at:q Cost;

q Cost or market value (whichever islower); orq Any other method approved by the IRSthat conforms to the requirements of theapplicable regulations cited below.

However, the corporation is required touse cost if it is using the cash method ofaccounting.

Producers whose average annual grossreceipts are $1 million or less that use thecash method of accounting and choosenot to account for inventories maycurrently deduct expenditures for directlabor and all indirect costs that wouldotherwise be included in inventory costs.

The average cost (rolling average)method of valuing inventories generallydoes not conform to the requirements ofthe regulations. See Rev. Rul. 71-234,1971-1 C.B. 148.

Corporations that use erroneousvaluation methods must change to amethod permitted for Federal income taxpurposes. To make this change, use Form3115.

On line 9a, check the method(s) usedfor valuing inventories. Under lower ofcost or market, the term “market” (fornormal goods) means the current bid

price prevailing on the inventory valuationdate for the particular merchandise in thevolume usually purchased by thetaxpayer. For a manufacturer, marketapplies to the basic elements of cost—rawmaterials, labor, and burden. If section263A applies to the taxpayer, the basicelements of cost must reflect the currentbid price of all direct costs and all indirectcosts properly allocable to goods on handat the inventory date.

Inventory may be valued below costwhen the merchandise is unsalable atnormal prices or unusable in the normalway because the goods are subnormaldue to damage, imperfections, shopwear,etc., within the meaning of Regulationssection 1.471-2(c). The goods may bevalued at the current bona fide sellingprice, minus direct cost of disposition (butnot less than scrap value) if such a pricecan 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 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 9c.On line 9d, enter the amount or thepercent of total closing inventoriescovered under section 472. Estimates areacceptable.

If the corporation changed or extendedits inventory method to LIFO and had towrite up the opening inventory to cost inthe year of election, report the effect ofthe write-up as other income (line 10,page 1), proportionately over a 3-yearperiod that begins with the year of theLIFO election (section 472(d)).Note: Corporations using the LIFO method that make an S corporation election or transfer LIFO inventory to an S corporation in a nonrecognition transaction may be subject to an additional tax attributable to the LIFO

recapture amount. See the instructions for line 11, Schedule J, on page 19, and for line 10, Other Income , on page 8.

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

Schedule C(Form 1120 Only)

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 sections1.1502-13, 1.1502-26, and 1.1502-27before completing Schedule C.

Line 1, Column (a)Enter dividends (except those receivedon debt-financed stock acquired after July18, 1984–see section 246A) that:q Are received fromless-than-20%-owned domesticcorporations subject to income tax andq Qualify for the 70% deduction undersection 243(a)(1).

Also include on line 1:q Taxable distributions from an IC-DISCor former DISC that are designated aseligible for the 70% deduction and certaindividends of Federal Home Loan Banks.See section 246(a)(2).q Dividends (except those received ondebt-financed stock acquired after July18, 1984) from a regulated investmentcompany (RIC). The amount of dividendseligible for the dividends-receiveddeduction under section 243 is limited bysection 854(b). The corporation should

receive a notice from the RIC specifyingthe amount of dividends that qualify forthe deduction.

Report so-called dividends or earningsreceived from mutual savings banks, etc.,as interest. Do not treat them asdividends.

Line 2, Column (a)Enter on line 2:q Dividends (except those received ondebt-financed stock acquired after July18, 1984) that are received from20%-or-more-owned domesticcorporations subject to income tax andthat are subject to the 80% deductionunder section 243(c) andq

Taxable distributions from an IC-DISCor former DISC that are consideredeligible for the 80% deduction.

Line 3, Column (a)Enter dividends that are:q Received on debt-financed stockacquired after July 18, 1984, fromdomestic and foreign corporations subjectto income tax that would otherwise besubject to the dividends-receiveddeduction under section 243(a)(1), 243(c),or 245(a). Generally, debt-financed stockis stock that the corporation acquired by




incurring a debt (e.g., it borrowed moneyto buy the stock).q Received from a RIC on debt-financedstock. The amount of dividends eligible forthe dividends-received deduction islimited by section 854(b). The corporationshould receive a notice from the RICspecifying the amount of dividends thatqualify for the deduction.

Line 3, Columns (b) and (c)Dividends received on debt-financedstock acquired after July 18, 1984, are notentitled 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. Seesection 246A. Also, see section 245(a)before making this computation for anadditional 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 the preferredstock of a less-than-20%-owned publicutility that is subject to income tax and is

allowed the deduction provided in section247 for dividends paid.

Line 5, Column (a)Enter dividends received on preferredstock of a 20%-or-more-owned publicutility that is subject to income tax and isallowed the deduction provided in section247 for dividends paid.

Line 6, Column (a)Enter the U.S.-source portion of dividendsthat:q Are received fromless-than-20%-owned foreigncorporations andq

Qualify for the 70% deduction undersection 245(a). To qualify for the 70%deduction, the corporation must own atleast 10% of the stock of the foreigncorporation by vote and value.

Also include dividends received froma less-than-20%-owned FSC that:q Are attributable to income treated aseffectively connected with the conduct ofa trade or business within the UnitedStates (excluding foreign trade income)andq Qualify for the 70% deduction providedin section 245(c)(1)(B).

Line 7, Column (a)Enter the U.S.-source portion of dividends

that are received from20%-or-more-owned foreign corporationsthat qualify for the 80% deduction undersection 245(a). Also include dividendsreceived from a 20%-or-more-owned FSCthat:q Are attributable to income treated aseffectively connected with the conduct ofa trade or business within the UnitedStates (excluding foreign trade income)andq Qualify for the 80% deduction providedin 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 section245(b) applies to dividends paid out of theearnings and profits of a foreigncorporation for a tax year during which:q All of its outstanding stock is owned(directly or indirectly) by the domesticcorporation receiving the dividends andq

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-ReceivedDeduction

Generally, line 9, column (c) may notexceed the amount from the worksheetbelow. However, in a year in which anNOL occurs, this limitation does not applyeven if the loss is created by thedividends-received deduction. Seesections 172(d) and 246(b).

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 adeduction is allowed for the entire amountof those dividends. To claim the 100%deduction on line 10, column (c), thecompany must file with its return astatement that it was a Federal licenseeunder the Small Business Investment Actof 1958 at the time it received thedividends.

Line 11, Column (a)

Enter dividends from FSCs that areattributable to foreign trade income andthat 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 described insection 243(a)(3). Corporations taking thisdeduction are subject to the provisions ofsection 1561.Note: The 100% deduction does not apply to affiliated group members that are joining in the filing of a consolidated return.

Line 13, Column (a)Enter foreign dividends not reportable onlines 3, 6, 7, 8, or 11 of column (a).Include on line 13 the corporation's shareof the ordinary earnings of a qualifiedelecting fund from Form 8621, line 1c.Exclude distributions of amountsconstructively taxed in the current year orin prior years under subpart F (sections951 through 964).

Line 14, Column (a)Include income constructively receivedfrom controlled foreign corporations undersubpart F. This amount should equal thetotal subpart F income reported onSchedule I, 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 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:q Is paid out of the corporation'saccumulated IC-DISC income orpreviously taxed income orq Is a deemed distribution under section995(b)(1).

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

Refigure line 28, page 1, Form 1120, without any adjustment undersection 1059 and without any capital loss carryback to the tax yearunder section 1212(a)(1) 1.

Complete lines 10, 11, and 12, column (c), and enter the total here 2.

Subtract line 2 from line 1 3.

Multiply line 3 by 80% 4.

Add lines 2, 5, 7, and 8, column (c), and the part of the deduction

on line 3, column (c), that is attributable to dividends from20%-or-more-owned corporations 5.

Enter the smaller of line 4 or 5. If line 5 is greater than line 4, stophere; enter the amount from line 6 on line 9, column (c), and do notcomplete the rest of this worksheet 6.

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



Subtract line 5 above from line 9, column (c) 10.

Enter the smaller of line 9 or line 10 11.

Dividends-received deduction after limitation (sec. 246(b)). Addlines 6 and 11. Enter the result here and on line 9, column (c) 12.

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Line 17, Column (a)Include the following:

1. Dividends (other than capital gaindividends and exempt-interest dividends)that are received from RICs and that arenot subject to the 70% deduction.

2. Dividends from tax-exemptorganizations.

3. Dividends (other than capital gaindividends) received from a REIT that, forthe tax year of the trust in which thedividends are paid, qualifies under

sections 856 through 860.4. Dividends not eligible for adividends-received deduction because ofthe 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:q If the corporation held it less than 46days during the 90-day period beginning45 days before the stock becameex-dividend with respect to the dividend(see section 246(c)(1)(A)) orq To the extent the corporation is underan obligation to make related paymentsfor substantially similar or related

property.5. Any other taxable dividend income

not properly reported above (includingdistributions under section 936(h)(4)).

If patronage dividends or per-unit retainallocations 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 40% of the smaller of:q Dividends paid on their preferred stockduring the tax year or

q 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 ComputationNote: Members of a controlled group must attach a statement showing the

computation of the tax entered on line 3.

Lines 1 and 2, Form 1120Members 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.Line 2a. Members of a controlled groupare entitled to one $50,000, one $25,000,and one $9,925,000 taxable incomebracket amount (in that order) on line 2a.

When a controlled group adopts or lateramends an apportionment plan, eachmember must attach to its tax return a

copy of its consent to this plan. The copy(or an attached statement) must show thepart of the amount in each taxable incomebracket apportioned to that member. SeeRegulations section 1.1561-3(b) for otherrequirements and for the time and mannerof making the consent.

Unequal apportionment plan.Members of a controlled group may electan unequal apportionment plan and dividethe taxable income brackets as they want.There is no need for consistency amongtaxable income brackets. Any membermay be entitled to all, some, or none ofthe taxable income bracket. However, thetotal amount for all members cannot be

more than the total amount in eachtaxable income bracket.

Equal apportionment plan. If noapportionment plan is adopted, membersof a controlled group must divide theamount in each taxable income bracketequally among themselves. For example,Controlled Group AB consists ofCorporation A and Corporation B. Theydo not elect an apportionment plan.Therefore, each corporation is entitled to:q $25,000 (one-half of $50,000) on line2a(1),q $12,500 (one-half of $25,000) on line2a(2), andq $4,962,500 (one-half of $9,925,000) online 2a(3).Line 2b. Members of a controlled groupare treated as one group to figure theapplicability of the additional 5% tax andthe additional 3% tax. If an additional taxapplies, each member will pay that taxbased on the part of the amount used ineach taxable income bracket to reducethat member's tax. See section 1561(a).If an additional tax applies, attach aschedule showing the taxable income ofthe entire group and how the corporationfigured its share of the additional tax.

Line 2b(1). Enter the corporation'sshare of the additional 5% tax on line2b(1).

Line 2b(2). Enter the corporation'sshare of the additional 3% tax on line2b(2).

Line 3, Form 1120(Line 1, Form 1120-A)Most corporations figure their tax by usingthe Tax Rate Schedule below. Exceptionsapply to members of a controlled group(see worksheet below) and qualifiedpersonal service corporations (seebelow).

Qualified personal service corporation.A qualified personal service corporation istaxed at a flat rate of 35% on taxableincome. A corporation is a qualified

personal service corporation if it meetsboth of the following tests:q Substantially all of the corporation'sactivities involve the performance ofservices in the fields of health, law,engineering, architecture, accounting,actuarial science, performing arts, orconsulting andq At least 95% of the corporation's stock,by value, is owned, directly or indirectly,by (1) employees performing the services,(2) retired employees who had performedthe services listed above, (3) any estateof the employee or retiree described

Tax Rate Schedule

Tax Computation Worksheet for Members of a Controlled Group(keep for your records)

Note: Each member of a controlled group (except a qualified personal service corporation)must compute the tax using this worksheet.

Enter taxable income (line 30, page 1, Form 1120) 1.

Enter line 1 or the corporation’s share of the $50,000 taxable incomebracket, whichever is less 2.


Enter line 3 or the corporation’s share of the $25,000 taxable incomebracket, whichever is less 4.


Enter line 5 or the corporation’s share of the $9,925,000 taxableincome bracket, whichever is less 6.



Multiply line 4 by 25% 9.Multiply line 6 by 34% 10.


If the taxable income of the controlled group exceeds $100,000,enter this member’s share of the smaller of: 5% of the taxableincome in excess of $100,000, or $11,750 (See the instructions forSchedule J, line 2b.) 12.

If the taxable income of the controlled group exceeds $15 million,enter this member’s share of the smaller of: 3% of the taxableincome in excess of $15 million, or $100,000 (See the instructionsfor Schedule J, line 2b.) 13.

Total. Add lines 8 through 13. Enter here and on line 3, ScheduleJ, Form 1120 14.

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9.10.

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14.

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

Over— But not over— Tax is:

Of the amount 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 10,000,000 113,900 + 34% 335,000

10,000,000 15,000,000 3,400,000 + 35% 10,000,00015,000,000 18,333,333 5,150,000 + 38% 15,000,00018,333,333 - - - - - 35% 0




above, or (4) any person who acquiredthe stock of the corporation as a result ofthe death of an employee or retiree (butonly for the 2-year period beginning onthe date of the employee or retiree'sdeath). See Temporary Regulationssection 1.448-1T(e) for details.Note: If the corporation meets these tests, check the box on line 3, Schedule J, Form 1120 (line 1, Part I, Form 1120-A).Mutual savings bank conducting lifeinsurance business. The tax undersection 594 consists of the sum of (a) apartial tax computed on Form 1120 on thetaxable income of the bank determinedwithout regard to income or deductionsallocable to the life insurance departmentand (b) a partial tax on the taxable incomecomputed on Form 1120-L of the lifeinsurance department. Enter thecombined tax on line 3 of Schedule J,Form 1120. Attach Form 1120-L as aschedule and identify it as such.Deferred tax under section 1291. If thecorporation was a shareholder in apassive foreign investment company(PFIC) and received an excessdistribution or disposed of its investmentin the PFIC during the year, it mustinclude the increase in taxes due undersection 1291(c)(2) in the total for line 3,Schedule J, Form 1120. On the dottedline next to line 3, write “Section 1291”and the amount.

Do not include on line 3 any interestdue under section 1291(c)(3). Instead,show the amount of interest owed in thebottom margin of page 1, Form 1120, andwrite “Section 1291 interest.” For details,see Form 8621, Return by a Shareholderof a Passive Foreign InvestmentCompany or Qualified Electing Fund.Additional tax under section 197(f). Acorporation that elects to pay tax on thegain from the sale of an intangible underthe related person exception to theanti-churning rules should include anyadditional tax due under section197(f)(9)(B) in the total for line 3. On thedotted line next to line 3, write “Section197” and the amount. For moreinformation, see Pub. 535, BusinessExpenses.


Alternative Minimum Tax

Unless the corporation is treated as asmall corporation exempt from thealternative minimum tax (AMT), it mayowe the AMT if it has any of theadjustments and tax preference itemslisted on Form 4626, Alternative MinimumTax–Corporations. The corporation mustfile Form 4626 if its taxable income (loss)combined with these adjustments and taxpreference items is more than the smallerof $40,000 or the corporation's allowableexemption amount (from Form 4626).

For this purpose, taxable income doesnot include the NOL deduction. Get Form4626 for details.Exemption for small corporations. Acorporation is treated as a smallcorporation exempt from the AMT for its

tax year beginning in 2000 if that year isthe corporation's first tax year in existence(regardless of its gross receipts) or:

1. It was treated as a smallcorporation exempt from the AMT for allprior tax years beginning after 1997 and

2. Its average annual gross receiptsfor the 3-tax-year period (or portionthereof during which the corporation wasin existence) ending before its tax yearbeginning in 2000 did not exceed $7.5million ($5 million if the corporation hadonly 1 prior tax year).

Line 6a(Form 1120 Only)

Foreign Tax Credit

To find out when a corporation can takethe credit for payment of income tax to aforeign country or U.S. possession, seeForm 1118, Foreign TaxCredit–Corporations.

Line 6b(Form 1120 Only)

Possessions Tax Credit

The Small Business Job Protection Actof 1996 repealed the possessions credit.However, existing credit claimants mayqualify for a credit under the transitionalrules. See Form 5735, PossessionsCorporation Tax Credit (Under Sections936 and 30A).

Line 6c(Form 1120 Only)Complete line 6c if the corporation cantake either of the following credits. Besure to check the appropriate box.Nonconventional source fuel credit. Acredit is allowed for the sale of qualifiedfuels produced from a nonconventionalsource. Section 29 contains a definitionof qualified fuels, provisions for figuring

the credit, and other special rules. Attacha separate schedule to the return showingthe computation of the credit.Qualified electric vehicle (QEV) credit.Include on line 6c any credit from Form8834, Qualified Electric Vehicle Credit.Vehicles that qualify for this credit are noteligible for the deduction for clean-fuelvehicles under section 179A.

Line 6d, Form 1120(Line 4a, Form 1120-A)

General Business Credit

Complete this line if the corporation cantake any of the following credits.Complete Form 3800, General Business

Credit, if the corporation has two or moreof these credits (other than theempowerment zone employment credit),general credits from an electing largepartnership, a general business creditcarryforward or carryback (other than theempowerment zone employment credit),a trans-Alaska pipeline liability fund credit,or a passive activity credit (other than thelow-income housing credit or theempowerment zone employment credit).Enter the amount of the general business

credit on line 6d (line 4a, Form 1120-A),and check the box for Form 3800.

If the corporation has only one credit,enter on line 6d (line 4a, Form 1120-A),the amount of the credit from the form.Also be sure to check the appropriate boxfor that form.Form 3468, Investment Credit.Form 5884, Work Opportunity Credit.Form 6478, Credit for Alcohol Used asFuel.Form 6765, Credit for Increasing

Research Activities.Form 8586, Low-Income Housing Credit.Form 8820, Orphan Drug Credit.Form 8826, Disabled Access Credit.Form 8830, Enhanced Oil RecoveryCredit.Form 8835, Renewable ElectricityProduction Credit.Form 8844, Empowerment ZoneEmployment Credit.Note: While the empowerment zone employment credit is a component of the general business credit, it is figured separately and is not carried to Form 3800.Form 8845, Indian Employment Credit.

Form 8846, Credit for Employer SocialSecurity and Medicare Taxes Paid onCertain Employee Tips.Form 8847, Credit for Contributions toSelected Community DevelopmentCorporations.Form 8861, Welfare-to-Work Credit.

Line 6e, Form 1120(Line 4b, Form 1120-A)

Credit for Prior Year Minimum Tax

To figure the minimum tax credit and anycarryforward of that credit, use Form8827, Credit for Prior Year Minimum Tax– Corporations. Also see Form 8827 if anyof the corporation's 1999 nonconventionalsource fuel credit or qualified electricvehicle credit was disallowed solelybecause of the tentative minimum taxlimitation. See section 53(d).

Line 6f (Form 1120 Only)Enter the amount of any credit from Form8860, Qualified Zone Academy BondCredit.

Line 9(Form 1120 Only)

Personal Holding Company Tax

A corporation is taxed as a personalholding company under section 542 if:q

At least 60% of its adjusted ordinarygross income for the tax year is personalholding company income andq At any time during the last half of thetax year more than 50% in value of itsoutstanding stock is owned, directly orindirectly, by five or fewer individuals.

See Schedule PH (Form 1120), U.S.Personal Holding Company (PHC) Tax,for definitions and details on how to figurethe tax.





Recapture Taxes

Recapture of investment credit. If thecorporation disposed of investment creditproperty or changed its use before theend of its useful life or recovery period, itmay owe a tax. See Form 4255,Recapture of Investment Credit, fordetails.Recapture of low-income housing

credit. If the corporation disposed ofproperty (or there was a reduction in thequalified basis of the property) for whichit took the low-income housing credit, itmay owe a tax. See Form 8611,Recapture of Low-Income Housing Credit.Recapture of qualified electric vehicle(QEV) credit. The corporation mustrecapture part of the QEV credit it claimedin a prior year, if, within 3 years of thedate the vehicle was placed in service, itceases to qualify for the credit. SeeRegulations section 1.30-1 for details onhow to figure the recapture. Include theamount of the recapture in the total forline 10, Schedule J, Form 1120 (line 7,Part I, Form 1120-A). On the dotted line

next to the entry space, write “QEVrecapture” and the amount.Recapture of Indian employmentcredit. Generally, if an employerterminates the employment of a qualifiedemployee less than 1 year after the dateof initial employment, any Indianemployment credit allowed for a prior taxyear because of wages paid or incurredto that employee must be recaptured. Fordetails, see Form 8845 and section 45A.Include the amount of the recapture in thetotal for line 10, Schedule J, Form 1120(line 7, Part I, Form 1120-A). On thedotted line next to the entry space, write“45” and the amount.

Line 11 (Form 1120 Only)Other Tax and Interest Amounts

Other tax and interest amounts may beincluded in or subtracted from the total taxreported on line 11.

Amounts to include in the total for line11 are:q Tax and interest on a nonqualifiedwithdrawal from a capital constructionfund (section 7518).q Interest on deferred tax attributable to:

1. Installment sales of certaintimeshares and residential lots (section453(l)(3)) and

2. Certain nondealer installmentobligations (section 453A(c)).q Interest due under the look-backmethod (see Form 8697 or Form 8866).q Interest due on deferred gain (section1260(b)).q For shareholders in qualified electingfunds, deferred tax due upon thetermination of a section 1294 election(see Form 8621, Part V).

Amounts to subtract from the total forline 11 are:q Deferred tax on the corporation's shareof the undistributed earnings of a qualifiedelecting fund (see Form 8621, Part II).

q Deferred LIFO recapture tax (section1363(d)). See Deferred LIFO recapturetax below and the instructions regardingLIFO recapture amount under Line 10,Other Income, on page 8.

How to report. Attach a scheduleshowing your computation of each itemincluded in, or subtracted from, the totalfor line 11. On the dotted line next to line11, enter the amount of tax or interestand:q Identify it as tax or interest andq

Specify the Code section that applies.Example. To show $50 of interest dueon deferred tax from the installment saleof a timeshare, write “Sec. 453(l)(3)interest – $50.”

If you figured the tax or interest usinganother form (e.g., Form 8621 or Form8697), see the instructions for that formto find out how to report the amount.Deferred LIFO recapture tax. Thedeferred LIFO recapture tax is the part ofthe LIFO recapture tax that will bedeferred and paid with Form 1120S in thefuture. To figure the deferred tax you mustfirst figure the total LIFO recapture tax.Follow the steps below to figure the totalLIFO recapture tax and the deferred

amount.Step 1. Figure the tax on thecorporation's income including the LIFOrecapture amount. (Complete Schedule Jthrough line 10 but do not enter a total online 11 yet.)

Step 2. On a separate worksheet usingthe Schedule J format, figure the taxagain, but this time do not include theLIFO recapture amount in taxable income.

Step 3. Compare the tax in Step 2 tothe tax in Step 1. The difference betweenthe two is the LIFO recapture tax.

Step 4. Multiply the amount from Step 3 above by 75%. The result is thedeferred LIFO recapture tax. Subtractthis amount from the total for line 11,

Schedule J, and enter the amount on thedotted line next to line 11. Label it “Sec.1363 deferred tax.”

Schedule K, Form 1120(Part II, Form 1120-A)

Other InformationThe following instructions apply toquestions 1 through 12 on Form 1120,page 3, Schedule K, or questions 1through 6 on Form 1120-A, page 2, PartII. Be sure to answer all the questions thatapply to the corporation.

Question 4(Form 1120 Only)Check the “Yes” box for question 4 if:q The corporation is a subsidiary in anaffiliated group (defined below), but is notfiling a consolidated return for the tax yearwith that group orq The corporation is a subsidiary in aparent-subsidiary controlled group(defined below).

Any corporation that meets either of therequirements above should check the“Yes” box. This applies even if the

corporation is a subsidiary member of onegroup and the parent corporation ofanother.Note: If the corporation is an “ excluded member ” of a controlled group (see section 1563(b)(2)), it is still considered a member of a controlled group for this purpose.Affiliated group. The term “affiliatedgroup” means one or more chains ofincludible corporations (section 1504(a))connected through stock ownership witha common parent corporation. Thecommon parent must be an includiblecorporation and the followingrequirements must be met.

1. The common parent must owndirectly stock that represents at least 80%of the total voting power and at least 80%of the total value of the stock of at leastone of the other includible corporations.

2. Stock that represents at least 80%of the total voting power and at least 80%of the total value of the stock of each ofthe other corporations (except for thecommon parent) must be owned directlyby at least one of the other includiblecorporations.

For this purpose, the term “stock”generally does not include any stock that(a) is nonvoting, (b) is nonconvertible, (c)is limited and preferred as to dividendsand does not participate significantly incorporate growth, and (d) has redemptionand liquidation rights that do not exceedthe issue price of the stock (except for areasonable redemption or liquidationpremium). See section 1504(a)(4).Parent-subsidiary controlled group.The term “parent-subsidiary controlledgroup” means one or more chains ofcorporations connected through stockownership (section 1563(a)(1)). Both ofthe following requirements must be met.

1. 80% of the total combined votingpower of all classes of stock entitled to

vote or at least 80% of the total value ofall classes of stock of each corporation inthe group (except the parent) must beowned by one or more of the othercorporations in the group.

2. The common parent must own atleast 80% of the total combined votingpower of all classes of stock entitled tovote or at least 80% of the total value ofall classes of stock of at least one of theother corporations in the group. Stockowned directly by other members of thegroup is not counted when computing thevoting power or value.

See section 1563(d)(1) for the definitionof “stock” for purposes of determiningstock ownership above.

Question 6(Form 1120-A Only)Foreign financial accounts. Check the“Yes” box for question 6 if either 1 or 2below applies to the corporation.Otherwise, check the “No” box:

1. At any time during the 2000calendar year, the corporation had aninterest in or signature or other authorityover a bank, securities, or other financialaccount in a foreign country (see FormTD F 90-22.1, Report of Foreign Bank andFinancial Accounts); and




q The combined value of the accountswas more than $10,000 at any time duringthe calendar year andq The account was not with a U.S.military banking facility operated by a U.S.financial institution.

2. The corporation owns more than50% of the stock in any corporation thatwould answer “Yes” to item 1 above.

If “Yes” is checked for the question:q Enter the name of the foreign countryor countries. Attach a separate sheet ifmore space is needed.q File Form TD F 90-22.1 by June 30,2001, with the Department of the Treasuryat the address shown on the form.Because Form TD F 90-22.1 is not a taxform, do not file it with Form 1120-A. Youcan order Form TD F 90-22.1 by calling1-800-TAX-FORM (1-800-829-3676) oryou can download it from the IRS WebSite at www.irs.gov.

Question 7(Form 1120 Only)Check the “Yes” box if one foreign personowned at least 25% of (a) the total votingpower of all classes of stock of thecorporation entitled to vote or (b) the total

value of all classes of stock of thecorporation.The constructive ownership rules of

section 318 apply in determining if acorporation is foreign owned. See section6038A(c)(5) and the related regulations.

Enter on line 7a the percentage ownedby the foreign person specified in question7. On line 7b, write the name of theowner's country.Note: If there is more than one 25%-or-more foreign owner, complete lines 7a and 7b for the foreign person with the highest percentage of ownership.Foreign person. The term “foreignperson” means:q A foreign citizen or nonresident alien.q An individual who is a citizen of a U.S.possession (but who is not a U.S. citizenor resident).q A foreign partnership.q A foreign corporation.q Any foreign estate or trust within themeaning of section 7701(a)(31).q A foreign government (or one of itsagencies or instrumentalities) to theextent that it is engaged in the conductof a commercial activity as described insection 892.Owner's country. For individuals, theterm “owner's country” means the countryof residence. For all others, it is thecountry where incorporated, organized,

created, or administered.

Requirement to file Form 5472. If thecorporation checked “Yes” to question 7,it may have to file Form 5472. Generally,a 25% foreign-owned corporation that hada reportable transaction with a foreign ordomestic related party during the tax yearmust file Form 5472.

See Form 5472 for filing instructionsand penalties for failure to file.

Question 9, Form 1120(Question 3, Form 1120-A)Show any tax-exempt interest receivedor accrued. Include any exempt-interestdividends received as a shareholder in amutual fund or other RIC.

Question 11(Form 1120 Only)Check the box on line 11 if the corporationelects under section 172(b)(3) to foregothe carryback period for a net operatingloss (NOL). If you check this box, do notattach the statement described inTemporary Regulations section301.9100-12T(d).

Question 12(Form 1120 Only)

Enter the amount of the net operatingloss (NOL) carryover to the tax year fromprior years, even if some of the loss isused to offset income on this return. Theamount to enter is the total of all NOLsgenerated in prior years but not used tooffset income (either as a carryback orcarryover) to a tax year prior to 2000. Donot reduce the amount by any NOLdeduction reported on line 29a.

Pub. 536 has a worksheet for figuringa corporation's NOL carryover.

Schedule L, Form 1120(Part III, Form 1120-A)

Balance Sheets per BooksThe balance sheet should agree with thecorporation's books and records. Includecertificates of deposit as cash on line 1,Schedule L.

Line 5

Tax-Exempt Securities

Include on this line:1. State and local government

obligations, the interest on which isexcludable from gross income undersection 103(a) and

2. Stock in a mutual fund or other RICthat distributed exempt-interest dividends

during the tax year of the corporation.


Adjustments to Shareholders' Equity

Some examples of adjustments to reporton this line include:q Unrealized gains and losses onsecurities held “available for sale.”q Foreign currency translationadjustments.q The excess of additional pensionliability over unrecognized prior service

cost.q Guarantees of employee stock (ESOP)debt.q Compensation related to employeestock award plans.

If the total adjustment to be entered online 26 (line 21, Form 1120-A) is anegative amount, enter the amount inparentheses.

Schedule M-1, Form 1120(Part IV, Form 1120-A)

Reconciliation of Income (Loss)per Books With Income per Return

Line 5c, Form 1120(Line 5, Form 1120-A)

Travel and Entertainment

Include on line 5c (line 5, Form 1120-A)any of the following:q 50% of the meals and entertainment notallowed under section 274(n).q Expenses for the use of anentertainment facility.q The part of business gifts over $25.q Expenses of an individual over $2,000,which are allocable to conventions oncruise ships.q Employee achievement awards over

$400.q The cost of entertainment tickets overface value (also subject to 50%disallowance under section 274(n)).q The cost of skyboxes over the facevalue of nonluxury box seat tickets.q The part of luxury water travel notallowed under section 274(m).q Expenses for travel as a form ofeducation.q Other travel and entertainmentexpenses not allowed as a deduction.

For more information, see Pub. 542.


Tax-Exempt InterestInclude as interest on line 7 (line 6, Form1120-A), any exempt-interest dividendsreceived as a shareholder in a mutualfund or other RIC.




Code Code

Codes for Principal Business ActivityThis list of principal business activities and their associated codes isdesigned to classify an enterprise by the type of activity in which it isengaged to facilitate the administration of the Internal Revenue Code. Theseprincipal business activity codes are based on the North American IndustryClassification System.

Using the list of activities and codes below, determine from which activitythe company derives the largest percentage of its “total receipts.” Totalreceipts is defined as the sum of gross receipts or sales (page 1, line 1a)plus all other income (page 1, lines 4 through 10). If the company purchasesraw materials and supplies them to a subcontractor to produce the finished

product, but retains title to the product, the company is considered amanufacturer and must use one of the manufacturing codes(311110-339900).

Once the principal business activity is determined, entries must be madeon Form 1120, Schedule K, lines 2a, 2b, and 2c, or on Form 1120-A, Part II,lines 1a, 1b, and 1c. For the business activity code number, enter the sixdigit code selected from the list below. On the next line (Form 1120, line 2b,or Form 1120-A, line 1b), enter a brief description of the company ’sbusiness activity. Finally, enter a description of the principal product orservice of the company on Form 1120, line 2c, or Form 1120-A, line 1c.

Computer and Electronic ProductManufacturing

Agriculture, Forestry, Fishingand Hunting

111100 Oilseed & Grain Farming111210 Vegetable & Melon Farming

(including potatoes & yams)111300 Fruit & Tree Nut Farming111400 Greenhouse, Nursery, &

Floriculture Production111900 Other Crop Farming (including

tobacco, cotton, sugarcane,hay, peanut, sugar beet & allother crop farming)

Animal Production112111 Beef Cattle Ranching &

Farming112112 Cattle Feedlots112120 Dairy Cattle & Milk Production112210 Hog & Pig Farming112300 Poultry & Egg Production112400 Sheep & Goat Farming112510 Animal Aquaculture (including

shellfish & finfish farms &hatcheries)

112900 Other Animal Production

Forestry and Logging113110 Timber Tract Operations113210 Forest Nurseries & Gathering

of Forest Products113310 Logging

Fishing, Hunting and Trapping114110 Fishing114210 Hunting & Trapping

Support Activities for Agriculture andForestry115110 Support Activities for Crop

Production (including cottonginning, soil preparation,planting, & cultivating)

115210 Support Activities for AnimalProduction

115310 Support Activities ForForestry

Mining211110 Oil & Gas Extraction212110 Coal Mining212200 Metal Ore Mining

212320 Sand, Gravel, Clay, & Ceramic& Refractory Minerals Mining& Quarrying

212390 Other Nonmetallic MineralMining & Quarrying

213110 Support Activities for Mining

221100 Electric Power Generation,Transmission & Distribution

221210 Natural Gas Distribution221300 Water, Sewage & Other

Systems

Construction

233110 Land Subdivision & LandDevelopment

233200 Residential BuildingConstruction

233300 Nonresidential BuildingConstruction

Heavy Construction234100 Highway, Street, Bridge, &

Tunnel Construction234900 Other Heavy Construction

Special Trade Contractors235110 Plumbing, Heating, &

Air-Conditioning Contractors235210 Painting & Wall Covering

Contractors235310 Electrical Contractors235400 Masonry, Drywall, Insulation,

& Tile Contractors235500 Carpentry & Floor Contractors235610 Roofing, Siding, & Sheet

Metal Contractors235710 Concrete Contractors235810 Water Well Drilling

Contractors

235900 Other Special TradeContractors

ManufacturingFood Manufacturing311110 Animal Food Mfg311200 Grain & Oilseed Milling311300 Sugar & Confectionery

Product Mfg311400 Fruit & Vegetable Preserving

& Specialty Food Mfg

311610 Animal Slaughtering andProcessing

311710 Seafood Product Preparation& Packaging

212310 Stone Mining & Quarrying

Building, Developing, and GeneralContracting

311800 Bakeries & Tortilla Mfg311900 Other Food Mfg (including

coffee, tea, flavorings &seasonings)

Beverage and Tobacco ProductManufacturing312110 Soft Drink & Ice Mfg312120 Breweries312130 Wineries312140 Distilleries312200 Tobacco Manufacturing

Textile Mills and Textile ProductMills313000 Textile Mills314000 Textile Product Mills

Apparel Manufacturing315100 Apparel Knitting Mills315210 Cut & Sew Apparel

Contractors315220 Men’s & Boys’ Cut & Sew

Apparel Mfg

315230 Women’s & Girls’ Cut & SewApparel Mfg

315290 Other Cut & Sew Apparel Mfg315990 Apparel Accessories & Other

Apparel Mfg

Leather and Allied ProductManufacturing316110 Leather & Hide Tanning &

Finishing316210 Footwear Mfg (including

rubber & plastics)316990 Other Leather & Allied

Product Mfg

Wood Product Manufacturing321110 Sawmills & WoodPreservation

321210 Veneer, Plywood, &Engineered Wood ProductMfg

321900 Other Wood Product Mfg

Paper Manufacturing322100 Pulp, Paper, & Paperboard

Mills322200 Converted Paper Product Mfg

Printing and Related SupportActivities323100 Printing & Related Support

Activities

Petroleum and Coal ProductsManufacturing324110 Petroleum Refineries

(including integrated)324120 Asphalt Paving, Roofing, &

Saturated Materials Mfg324190 Other Petroleum & Coal

Products Mfg

Chemical Manufacturing325100 Basic Chemical Mfg325200 Resin, Synthetic Rubber, &

Artificial & Synthetic Fibers &Filaments Mfg

325300 Pesticide, Fertilizer, & OtherAgricultural Chemical Mfg

325410 Pharmaceutical & MedicineMfg

325500 Paint, Coating, & AdhesiveMfg

325600 Soap, Cleaning Compound, &Toilet Preparation Mfg

325900 Other Chemical Product &Preparation Mfg

Plastics and Rubber ProductsManufacturing326100 Plastics Product Mfg

326200 Rubber Product MfgNonmetallic Mineral ProductManufacturing327100 Clay Product & Refractory

Mfg327210 Glass & Glass Product Mfg327300 Cement & Concrete Product

Mfg327400 Lime & Gypsum Product Mfg327900 Other Nonmetallic Mineral

Product Mfg

Primary Metal Manufacturing331110 Iron & Steel Mills & Ferroalloy

Mfg331200 Steel Product Mfg from

Purchased Steel331310 Alumina & Aluminum

Production & Processing331400 Nonferrous Metal (except

Aluminum) Production &

Processing331500 Foundries

Fabricated Metal ProductManufacturing332110 Forging & Stamping332210 Cutlery & Handtool Mfg332300 Architectural & Structural

Metals Mfg332400 Boiler, Tank, & Shipping

Container Mfg332510 Hardware Mfg332610 Spring & Wire Product Mfg332700 Machine Shops; Turned

Product; & Screw, Nut, & BoltMfg

332810 Coating, Engraving, HeatTreating, & Allied Activities

332900 Other Fabricated MetalProduct Mfg

Machinery Manufacturing333100 Agriculture, Construction, &

Mining Machinery Mfg333200 Industrial Machinery Mfg333310 Commercial & Service

Industry Machinery Mfg333410 Ventilation, Heating,

Air-Conditioning, &Commercial RefrigerationEquipment Mfg

333510 Metalworking Machinery Mfg

333610 Engine, Turbine & PowerTransmission Equipment Mfg333900 Other General Purpose

Machinery Mfg

334110 Computer & PeripheralEquipment Mfg

334200 Communications EquipmentMfg

334310 Audio & Video Equipment Mfg334410 Semiconductor & Other

Electronic Component Mfg334500 Navigational, Measuring,

Electromedical, & ControlInstruments Mfg

334610 Manufacturing & ReproducingMagnetic & Optical Media

Electrical Equipment, Appliance, andComponent Manufacturing335100 Electric Lighting Equipment

Mfg335200 Household Appliance Mfg335310 Electrical Equipment Mfg335900 Other Electrical Equipment &

Component Mfg

Transportation EquipmentManufacturing336100 Motor Vehicle Mfg336210 Motor Vehicle Body & Trailer

Mfg336300 Motor Vehicle Parts Mfg336410 Aerospace Product & Parts

Mfg336510 Railroad Rolling Stock Mfg336610 Ship & Boat Building336990 Other Transportation

Equipment Mfg

Furniture and Related ProductManufacturing337000 Furniture & Related Product

ManufacturingMiscellaneous Manufacturing339110 Medical Equipment &

Supplies Mfg339900 Other Miscellaneous

Manufacturing

Wholesale TradeWholesale Trade, Durable Goods421100 Motor Vehicle & Motor Vehicle

Parts & Supplies Wholesalers421200 Furniture & Home Furnishing

Wholesalers421300 Lumber & Other Construction

Materials Wholesalers421400 Professional & Commercial

Equipment & SuppliesWholesalers

421500 Metal & Mineral (exceptPetroleum) Wholesalers

421600 Electrical Goods Wholesalers421700 Hardware, & Plumbing &Heating Equipment &Supplies Wholesalers

421800 Machinery, Equipment, &Supplies Wholesalers

421910 Sporting & RecreationalGoods & SuppliesWholesalers

421920 Toy & Hobby Goods &Supplies Wholesalers

421930 Recyclable MaterialWholesalers

421940 Jewelry, Watch, PreciousStone, & Precious MetalWholesalers

421990 Other Miscellaneous DurableGoods Wholesalers

Crop Production

Utilities

Forms 1120 and 1120-A

Code

Code

311500 Dairy Product Mfg




Code Code Code Code

441110 New Car Dealers

441120 Used Car Dealers441210 Recreational Vehicle Dealers441221 Motorcycle Dealers441222 Boat Dealers441229 All Other Motor Vehicle

Dealers441300 Automotive Parts,

Accessories, & Tire Stores

442110 Furniture Stores442210 Floor Covering Stores442291 Window Treatment Stores442299 All Other Home Furnishings

Stores

Retail TradeMotor Vehicle and Parts Dealers

Furniture and Home FurnishingsStores

Electronics and Appliance Stores443111 Household Appliance Stores443112 Radio, Television, & Other

Electronics Stores443120 Computer & Software Stores

443130 Camera & PhotographicSupplies Stores

Building Material and GardenEquipment and Supplies Dealers444110 Home Centers444120 Paint & Wallpaper Stores444130 Hardware Stores444190 Other Building Material

Dealers444200 Lawn & Garden Equipment &

Supplies Stores

Food and Beverage Stores445110 Supermarkets and Other

Grocery (except Convenience)Stores

445120 Convenience Stores445210 Meat Markets445220 Fish & Seafood Markets445230 Fruit & Vegetable Markets445291 Baked Goods Stores

445292 Confectionery & Nut Stores445299 All Other Specialty Food

Stores445310 Beer, Wine, & Liquor Stores

Health and Personal Care Stores446110 Pharmacies & Drug Stores446120 Cosmetics, Beauty Supplies,

& Perfume Stores446130 Optical Goods Stores446190 Other Health & Personal Care

Stores

Gasoline Stations447100 Gasoline Stations (including

convenience stores with gas)

Clothing and Clothing AccessoriesStores448110 Men’s Clothing Stores448120 Women’s Clothing Stores448130 Children’s & Infants’ Clothing

Stores448140 Family Clothing Stores448150 Clothing Accessories Stores448190 Other Clothing Stores448210 Shoe Stores448310 Jewelry Stores448320 Luggage & Leather Goods

Stores

Sporting Goods, Hobby, Book, andMusic Stores451110 Sporting Goods Stores451120 Hobby, Toy, & Game Stores451130 Sewing, Needlework, & Piece

Goods Stores451140 Musical Instrument & Supplies

Stores451211 Book Stores451212 News Dealers & Newsstands451220 Prerecorded Tape, Compact

Disc, & Record Stores

General Merchandise Stores452110 Department stores452900 Other General Merchandise

Stores

Miscellaneous Store Retailers453110 Florists453210 Office Supplies & Stationery

Stores

453220 Gift, Novelty, & SouvenirStores

453310 Used Merchandise Stores453910 Pet & Pet Supplies Stores453920 Art Dealers453930 Manufactured (Mobile) Home

Dealers453990 All Other Miscellaneous Store

Retailers (including tobacco,candle, & trophy shops)

Nonstore Retailers454110 Electronic Shopping &

Mail-Order Houses454210 Vending Machine Operators454311 Heating Oil Dealers454312 Liquefied Petroleum Gas

(Bottled Gas) Dealers454319 Other Fuel Dealers454390 Other Direct Selling

Establishments (including

door-to-door retailing, frozenfood plan providers, partyplan merchandisers, &coffee-break serviceproviders)

Transportation andWarehousingAir, Rail, and Water Transportation481000 Air Transportation482110 Rail Transportation483000 Water Transportation

Truck Transportation484110 General Freight Trucking,

Local484120 General Freight Trucking,

Long-distance484200 Specialized Freight Trucking

Transit and Ground PassengerTransportation

485110 Urban Transit Systems485210 Interurban & Rural Bus

Transportation485310 Taxi Service485320 Limousine Service485410 School & Employee Bus

Transportation485510 Charter Bus Industry485990 Other Transit & Ground

Passenger Transportation

Pipeline Transportation486000 Pipeline Transportation

487000 Scenic & SightseeingTransportation

Support Activities for Transportation488100 Support Activities for Air

Transportation488210 Support Activities for Rail

Transportation488300 Support Activities for Water

Transportation488410 Motor Vehicle Towing488490 Other Support Activities for

Road Transportation488510 Freight Transportation

Arrangement488990 Other Support Activities for

Transportation

Couriers and Messengers492110 Couriers492210 Local Messengers & Local

Delivery

Warehousing and Storage493100 Warehousing & Storage

(except lessors ofminiwarehouses & self-storage units)

InformationPublishing Industries511110 Newspaper Publishers511120 Periodical Publishers511130 Book Publishers511140 Database & Directory

Publishers511190 Other Publishers511210 Software Publishers

Motion Picture and Sound RecordingIndustries512100 Motion Picture & Video

Industries (except videorental)

512200 Sound Recording Industries

513100 Radio & TelevisionBroadcasting

513200 Cable Networks & ProgramDistribution

513300 Telecommunications(including paging, cellular,satellite, & othertelecommunications)

Information Services and DataProcessing Services514100 Information Services

(including news syndicates,libraries, & on-line information

services)514210 Data Processing Services

Finance and InsuranceDepository Credit Intermediation522110 Commercial Banking522120 Savings Institutions522130 Credit Unions522190 Other Depository Credit

Intermediation

Nondepository Credit Intermediation522210 Credit Card Issuing522220 Sales Financing522291 Consumer Lending522292 Real Estate Credit (including

mortgage bankers &originators)

522293 International Trade Financing522294 Secondary Market Financing522298 All Other Nondepository

Credit IntermediationActivities Related to CreditIntermediation522300 Activities Related to Credit

Intermediation (including loanbrokers)

Securities, Commodity Contracts,and Other Financial Investments andRelated Activities523110 Investment Banking &

Securities Dealing523120 Securities Brokerage523130 Commodity Contracts Dealing523140 Commodity Contracts

Brokerage

523210 Securities & CommodityExchanges

523900 Other Financial InvestmentActivities (including portfoliomanagement & investmentadvice)

Insurance Carriers and RelatedActivities524140 Direct Life, Health, & Medical

Insurance & ReinsuranceCarriers

524150 Direct Insurance &Reinsurance (except Life,Health & Medical) Carriers

524210 Insurance Agencies &Brokerages

524290 Other Insurance RelatedActivities

Funds, Trusts, and Other FinancialVehicles525100 Insurance & Employee Benefit

Funds525910 Open-End Investment Funds

(Form 1120-RIC)525920 Trusts, Estates, & Agency

Accounts525930 Real Estate Investment Trusts

(Form 1120-REIT)525990 Other Financial Vehicles

Real Estate and Rental andLeasingReal Estate531110 Lessors of Residential

Buildings & Dwellings

531120 Lessors of NonresidentialBuildings (exceptMiniwarehouses)

531130 Lessors of Miniwarehouses &Self-Storage Units

531190 Lessors of Other Real EstateProperty

531210 Offices of Real Estate Agents& Brokers

531310 Real Estate PropertyManagers

531320 Offices of Real EstateAppraisers

531390 Other Activities Related toReal Estate

Rental and Leasing Services532100 Automotive Equipment Rental

& Leasing532210 Consumer Electronics &

Appliances Rental532220 Formal Wear & Costume

Rental532230 Video Tape & Disc Rental532290 Other Consumer Goods

Rental532310 General Rental Centers532400 Commercial & Industrial

Machinery & EquipmentRental & Leasing

Lessors of Nonfinancial IntangibleAssets (except copyrighted works)533110 Lessors of Nonfinancial

Intangible Assets (exceptcopyrighted works)

Professional, Scientific, andTechnical Services

541110 Offices of Lawyers541190 Other Legal Services

Accounting, Tax Preparation,Bookkeeping, and Payroll Services541211 Offices of Certified Public

Accountants541213 Tax Preparation Services541214 Payroll Services541219 Other Accounting Services

Architectural, Engineering, andRelated Services541310 Architectural Services

Broadcasting andTelecommunications

Legal Services

422400 Grocery & Related ProductWholesalers

422500 Farm Product Raw MaterialWholesalers

422600 Chemical & Allied ProductsWholesalers

422700 Petroleum & Petroleum

Products Wholesalers422800 Beer, Wine, & Distilled

Alcoholic BeverageWholesalers

422910 Farm Supplies Wholesalers422920 Book, Periodical, &

Newspaper Wholesalers422930 Flower, Nursery Stock, &

Florists’ Supplies Wholesalers422940 Tobacco & Tobacco Product

Wholesalers422950 Paint, Varnish, & Supplies

Wholesalers422990 Other Miscellaneous

Nondurable GoodsWholesalers

Wholesale Trade, Nondurable Goods422100 Paper & Paper Product

Wholesalers422210 Drugs & Druggists’ Sundries

Wholesalers422300 Apparel, Piece Goods, &

Notions Wholesalers

Scenic & Sightseeing Transportation

531114 Cooperative Housing

“Offices of Bank Holding Companies”

and “Offices of Other HoldingCompanies,” are located underManagement of Companies (HoldingCompanies) on page 23.




Code Code Code Code

Management of Companies(Holding Companies)551111 Offices of Bank Holding

Companies551112 Offices of Other Holding

Companies

Administrative and Supportand Waste Management andRemediation ServicesAdministrative and Support Services561110 Office Administrative Services561210 Facilities Support Services561300 Employment Services561410 Document Preparation

Services561420 Telephone Call Centers561430 Business Service Centers

(including private mail centers& copy shops)

561440 Collection Agencies561450 Credit Bureaus561490 Other Business Support

Services (includingrepossession services, courtreporting, & stenotypeservices)

561500 Travel Arrangement &Reservation Services

561600 Investigation & SecurityServices

561710 Exterminating & Pest ControlServices

561720 Janitorial Services561730 Landscaping Services561740 Carpet & Upholstery Cleaning

Services561790 Other Services to Buildings &

Dwellings561900 Other Support Services

(including packaging &

labeling services, &convention & trade showorganizers)

Waste Management andRemediation Services562000 Waste Management &

Remediation Services

Educational Services611000 Educational Services

(including schools, colleges, &universities)

Offices of Physicians and Dentists621111 Offices of Physicians (except

mental health specialists)621112 Offices of Physicians, Mental

Health Specialists

621210 Offices of Dentists

621310 Offices of Chiropractors621320 Offices of Optometrists621330 Offices of Mental Health

Practitioners (exceptPhysicians)

621340 Offices of Physical,Occupational & SpeechTherapists, & Audiologists

Offices of Other Health Practitioners

621391 Offices of Podiatrists621399 Offices of All Other

Miscellaneous HealthPractitioners

Outpatient Care Centers621410 Family Planning Centers621420 Outpatient Mental Health &

Substance Abuse Centers621491 HMO Medical Centers621492 Kidney Dialysis Centers

621493 Freestanding AmbulatorySurgical & EmergencyCenters

621498 All Other Outpatient CareCenters

Medical and Diagnostic Laboratories621510 Medical & Diagnostic

Laboratories

Home Health Care Services621610 Home Health Care Services

Other Ambulatory Health CareServices621900 Other Ambulatory Health Care

Services (includingambulance services & blood& organ banks)

Hospitals622000 Hospitals

Nursing and Residential CareFacilities623000 Nursing & Residential Care

Facilities

Social Assistance

624100 Individual & Family Services624200 Community Food & Housing,& Emergency & Other ReliefServices

624310 Vocational RehabilitationServices

624410 Child Day Care Services

Arts, Entertainment, andRecreationPerforming Arts, Spectator Sports,and Related Industries711100 Performing Arts Companies711210 Spectator Sports (including

sports clubs & racetracks)711300 Promoters of Performing Arts,

Sports, & Similar Events711410 Agents & Managers for

Artists, Athletes, Entertainers,& Other Public Figures

711510 Independent Artists, Writers,& Performers

Museums, Historical Sites, andSimilar Institutions712100 Museums, Historical Sites, &

Similar Institutions

Amusement, Gambling, andRecreation Industries713100 Amusement Parks & Arcades713200 Gambling Industries713900 Other Amusement &

Recreation Industries(including golf courses, skiingfacilities, marinas, fitnesscenters, & bowling centers)

Accommodation and FoodServicesAccommodation721110 Hotels (except casino hotels)

& Motels

721120 Casino Hotels721191 Bed & Breakfast Inns721199 All Other Traveler

Accommodation721210 RV (Recreational Vehicle)

Parks & Recreational Camps721310 Rooming & Boarding Houses

Food Services and Drinking Places722110 Full-Service Restaurants722210 Limited-Service Eating Places722300 Special Food Services

(including food servicecontractors & caterers)

722410 Drinking Places (AlcoholicBeverages)

Other ServicesRepair and Maintenance811110 Automotive Mechanical &

Electrical Repair &Maintenance

811120 Automotive Body, Paint,Interior, & Glass Repair

811190 Other Automotive Repair &Maintenance (including oilchange & lubrication shops &car washes)

811210 Electronic & PrecisionEquipment Repair &Maintenance

811310 Commercial & IndustrialMachinery & Equipment(except Automotive &Electronic) Repair &Maintenance

811410 Home & Garden Equipment &Appliance Repair &Maintenance

811420 Reupholstery & FurnitureRepair

811430 Footwear & Leather GoodsRepair

811490 Other Personal & HouseholdGoods Repair & Maintenance

Personal and Laundry Services812111 Barber Shops812112 Beauty Salons812113 Nail Salons812190 Other Personal Care Services

(including diet & weightreducing centers)

812210 Funeral Homes & FuneralServices

812220 Cemeteries & Crematories812310 Coin-Operated Laundries &

Drycleaners812320 Drycleaning & Laundry

Services (exceptCoin-Operated)

812330 Linen & Uniform Supply812910 Pet Care (except Veterinary)

Services

812920 Photofinishing812930 Parking Lots & Garages812990 All Other Personal Services

Religious, Grantmaking, Civic,Professional, and SimilarOrganizations813000 Religious, Grantmaking, Civic,

Professional, & SimiliarOrganizations (includingcondominium andhomeowners associations)

Other Professional, Scientific, andTechnical Services541600 Management, Scientific, &

Technical Consulting Services541700 Scientific Research &

Development Services541800 Advertising & Related

Services541910 Marketing Research & Public

Opinion Polling

541920 Photographic Services541930 Translation & Interpretation

Services541940 Veterinary Services541990 All Other Professional,

Scientific, & TechnicalServices

541360 Geophysical Surveying &Mapping Services

541370 Surveying & Mapping (exceptGeophysical) Services

541380 Testing Laboratories

541400 Specialized Design Services(including interior, industrial,graphic, & fashion design)

Computer Systems Design andRelated Services541511 Custom Computer

Programming Services541512 Computer Systems Design

Services541513 Computer Facilities

Management Services541519 Other Computer Related

Services

Specialized Design Services

Health Care and SocialAssistance

541320 Landscape ArchitectureServices

541330 Engineering Services541340 Drafting Services541350 Building Inspection Services




Index

A Accounting methods ........................... 5 Accounting periods ............................. 6 Address change ................................. 8 Affiliated group ............................. 5, 19 Amended return .................................. 5 Apportionment plan .......................... 17

Assembling the return ........................ 5 At-risk rules ...................................... 13

B Backup withholding .......................... 14 Bad debts ......................................... 10 Balance sheets ................................. 20

Business startup expenses ................ 9

CCapital construction fund:

Deduction for contributions .......... 13Tax on a nonqualified withdrawal 19

Capital gain net income ..................... 8Closely held corporations ................... 9Compensation of officers ................. 10

Consolidated return ............................ 5Contributions to reduce the public

debt ................................................. 2 Contributions, charitable ................... 11 Controlled group:

Member of .................................... 17 Parent-subsidiary .......................... 19

Corporate tax shelters ........................ 5Cost of goods sold ....................... 8, 14Credits against tax ........................... 18

D Deductions .......................................... 9 Depletion .......................................... 12

Depository method of tax payment .... 6 Depreciation ..................................... 12

Disclosure statement (tax shelter) ..... 5 Dividend income ................................. 8 Dividends-received deduction ..... 15-17

Dues, membership and other ........... 12

EElectronic Federal Tax Payment

System (EFTPS) ............................ 6Employee benefit programs ............. 12Employer identification number .......... 7

Estimated tax: Overpaid ......................................... 7 Payments .................................. 6, 14 Penalty .......................................... 14

Extension of time to file ...................... 3

F Farm return ......................................... 5 Final return ......................................... 8

Financial asset securitizationinvestment trust (FASIT) ................ 2

Foreign corporation, stock ownershipin ..................................................... 5

Foreign financial accounts ............... 19Foreign person (defined) .................. 20Foreign tax credit ............................. 18Form 1120-A requirements ................ 2Forms and publications, how to get ... 2

Fuels, credit for tax on ..................... 14

GGeneral business credit ................... 18Golden parachute payments .............. 9

Gross receipts .................................... 8

I Income ................................................ 8 Installment sales ................................. 8 Interest due:Late payment of tax ....................... 7

Look-back method ........................ 19 Interest expense ............................... 10

Interest expense (relating to section263A) .............................................. 9 Interest income:

Tax-exempt ................................... 20 Taxable ........................................... 8

Inventory:Section 263A uniform

capitalization rules ................ 9, 15 Valuation methods ........................ 15

LLIFO recapture amount:

Tax on .......................................... 19 LIFO recapture:

Amount ........................................... 9Limitations on deductions ................... 9

Lobbying activities ............................ 11 Lobbying expenses .......................... 12

MMark-to-market accounting method ... 6 Minimum tax:

Alternative ..................................... 18Prior year, credit for ..................... 18

Mutual banks conducting life insurancebusiness ....................................... 18

NNet operating loss ...................... 13, 20Nonaccrual experience method ......... 8

O Other deductions .............................. 12 Other income ...................................... 8

Ozone-depleting chemicals, credit fortax on ............................................ 14

PPartnership income (loss) ............ 9, 12Passive activity limitations .................. 9

Penalties ....................................... 7, 14Pension, profit-sharing, etc. plans .... 12Personal holding company tax ......... 18Personal service corporation .............. 7Possessions tax credit ..................... 18Preparer, tax return ............................ 3

QQualified personal service

corporation .................................... 17

R Recapture taxes ............................... 19

Reconciliation of income .................. 20 Recordkeeping ................................... 6

Related party transactions ................. 9 Rents (expense) ............................... 10 Rents (income) ................................... 8

Repairs and maintenance ................ 10

SSalaries and wages .......................... 10

Schedule: A ................................................... 14 C ................................................... 15 J .................................................... 17 K ................................................... 19 L .................................................... 20 M-1 ............................................... 20

Section 263A costs ...................... 9, 15Shareholders' equity adjustments .... 20

Signature ............................................ 3Special returns for certain

organizations .................................. 2

T Tax computation ............................... 17

Tax issues, unresolved ...................... 1Tax rate schedule ............................. 17

Tax shelters ........................................ 5 Tax-exempt securities ...................... 20Taxes and licenses, deduction for ... 10Travel, meals, and entertainment .... 12

WWhen to file ........................................ 3Where to file ....................................... 3Who must file ..................................... 2Who must sign ................................... 3

Worksheets:Controlled group members, tax

computation .............................. 17Cost of goods sold ....................... 14

Schedule C ................................... 16

us internal revenue service: i1120 a--2000

Documents