U.S. Life Insurance Company Income Tax Return

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Instructions for Form 1120-L

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2005

Department of the Treasury
Internal Revenue Service

Instructions for Form 1120-L
U.S. Life Insurance Company Income Tax Return
Section references are to the Internal Revenue Code unless otherwise noted.

Contents
Page
Photographs of Missing
Children . . . . . . . . . . . . . . . . . . . 1
Unresolved Tax Issues . . . . . . . . . . 1
How To Get Forms and
Publications . . . . . . . . . . . . . . . . 2
IRS E-Services . . . . . . . . . . . . . . . . 2
General Instructions . . . . . . . . . . . 2
Purpose of Form . . . . . . . . . . . . . . . 2
Who Must File . . . . . . . . . . . . . . . . 2
Definitions . . . . . . . . . . . . . . . . . . . 2
When To File . . . . . . . . . . . . . . . . . 3
Where To File . . . . . . . . . . . . . . . . . 3
Who Must Sign . . . . . . . . . . . . . . . . 3
Paid Preparer Authorization . . . . . 4
Consolidated Return . . . . . . . . . . . . 4
Statements . . . . . . . . . . . . . . . . . . . 4
Assembling the Return . . . . . . . . . . 4
Depository Methods of Tax
Payment . . . . . . . . . . . . . . . . . . . 4
Estimated Tax Payments . . . . . . . . 5
Interest and Penalties . . . . . . . . . . . 5
Accounting Methods . . . . . . . . . . . . 6
Accounting Period . . . . . . . . . . . . . 6
Rounding Off to Whole
Dollars . . . . . . . . . . . . . . . . . . . . 6
Recordkeeping . . . . . . . . . . . . . . . . 6
Other Forms and Statements
That May Be Required . . . . . . . . 6
Specific Instructions . . . . . . . . . . 7
Period Covered . . . . . . . . . . . . . . . 7
Name and Address . . . . . . . . . . . . . 7
Item A . . . . . . . . . . . . . . . . . . . . . . 7
Item B . . . . . . . . . . . . . . . . . . . . . . 7
Item D . . . . . . . . . . . . . . . . . . . . . . 7
Item E . . . . . . . . . . . . . . . . . . . . . . 7
Life Insurance Company
Taxable Income . . . . . . . . . . . . . 7
Schedule A . . . . . . . . . . . . . . . . . . 13
Schedule B . . . . . . . . . . . . . . . . . . 15
Schedule F . . . . . . . . . . . . . . . . . . 16
Schedule G . . . . . . . . . . . . . . . . . 17
Schedule H . . . . . . . . . . . . . . . . . . 18
Schedule I . . . . . . . . . . . . . . . . . . 18
Schedule J . . . . . . . . . . . . . . . . . . 18
Schedule K . . . . . . . . . . . . . . . . . . 19
Schedule L . . . . . . . . . . . . . . . . . . 22
Schedule M . . . . . . . . . . . . . . . . . 22
Index . . . . . . . . . . . . . . . . . . . . . . 24

What’s New
• Section 809 is repealed for tax

years beginning after 2004. As a
result, Schedules C and E have been
removed from the 2005 Form 1120-L
and Schedule F has been modified.
For mutual life insurance companies,
if the recomputed differential earnings
amount for the 2004 tax year exceeds
the differential earnings amount for
2004, include the excess in other
income on line 7.
• Section 705 of the American Jobs
Creation Act of 2004 added section
815(g), which provides special rules
for distributions from the
policyholders surplus account (PSA)
to shareholders of stock life insurance
companies during 2005 and 2006.
For details, see the instructions for
Schedule J.
• The corporation may be able to
deduct a portion of the income from
certain qualified domestic production
activities. See section 199 and Form
8903, Domestic Production Activities
Deduction. Report the deduction on
line 18, page 1, Form 1120-L.
• The Gulf Opportunity Zone Act of
2005 provides certain tax relief
benefits for corporations. For details,
see Pub. 4492, Information for
Taxpayers Affected by Hurricanes
Katrina, Rita, and Wilma.
• A corporation can elect to deduct
qualified cash contributions made
after August 27, 2005, and before
January 1, 2006, for relief efforts
related to Hurricane Katrina, Rita, or
Wilma, without regard to the 10%
taxable income limit. See page 11.
• A corporation with a food inventory
from a trade or business may deduct
charitable contributions of “apparently
wholesome food” that were made
after August 27, 2005, and before
January 1, 2006. See section
170(e)(3)(C).
• A corporation is allowed a
deduction for qualified book
contributions made after August 27,
2005, and before January 1, 2006, to
certain public schools. See section
170(e)(3)(D).
Cat. No. 11485H

Photographs of Missing
Children
The Internal Revenue Service is a
proud partner with the National
Center for Missing and Exploited
Children. Photographs of missing
children selected by the Center may
appear in instructions on pages that
would otherwise be blank. You can
help bring these children home by
looking at the photographs and
calling 1-800-THE-LOST
(1-800-843-5678) if you recognize a
child.

Unresolved Tax Issues
If the corporation has attempted to
deal with an IRS problem
unsuccessfully, it should contact the
Taxpayer Advocate. The Taxpayer
Advocate independently represents
the corporation’s interests and
concerns within the IRS by protecting
its rights and resolving problems that
have not been fixed through normal
channels.
While Taxpayer Advocates cannot
change the tax law or make a
technical tax decision, they can clear
up problems that resulted from
previous contacts and ensure that the
corporation’s case is given a
complete and impartial review.
The corporation’s assigned
personal advocate will listen to its
point of view and will work with the
corporation to address its concerns.
The corporation can expect the
advocate to provide:
• A “fresh look” at a new or ongoing
problem,
• Timely acknowledgment,
• The name and phone number of
the individual assigned to its case,
• Updates on progress,
• Timeframes for action,
• Speedy resolution, and
• Courteous service.
When contacting the Taxpayer
Advocate, the corporation should be
prepared to provide the following
information.

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• The corporation’s name, address,

and employer identification number.
• The name and telephone number
of an authorized contact person and
the hours he or she can be reached.
• The type of tax return and year(s)
involved.
• A detailed description of the
problem.
• Previous attempts to solve the
problem and the office that was
contacted.
• A description of the hardship the
corporation is facing and supporting
documentation (if applicable).
The corporation can contact a
Taxpayer Advocate as follows.
• Call the Taxpayer Advocate’s
toll-free number: 1-877-777-4778.
• Call, write, or fax the Taxpayer
Advocate office in its area (see Pub.
1546 for addresses and phone
numbers).
• TTY/TDD help is available by
calling 1-800-829-4059.
• Visit the website at www.irs.gov/
advocate.

How To Get Forms and
Publications
Internet. You can access the IRS
website 24 hours a day, 7 days a
week, at www.irs.gov to:
• Download forms, instructions, and
publications;
• Order IRS products online;
• Research your tax questions
online;
• Search publications online by topic
or keyword; and
• Sign up to receive local and
national tax news by email.
CD-ROM. You can order Pub. 1796,
IRS Tax Products CD-ROM, and
obtain:

• A CD that is released twice so you

have the latest products. The first
release ships in late December and
the final release ships in late
February;
• Current year forms, instructions,
and publications;
• Prior year forms, instructions, and
publications;
• Tax Map: an electronic research
tool and finding aid;
• Tax law frequently asked questions
(FAQs);
• Tax Topics from the IRS telephone
response system;
• Fill-in, print, and save features for
most tax forms;
• Internal Revenue Bulletins; and
• Toll-free and email technical
support.

Buy the CD-ROM from the
National Technical Information
Service (NTIS) at www.irs.gov/
cdorders for $25 (no handling fee) or
call 1-877-CDFORMS (1-877-2336767) toll free to buy the CD-ROM for
$25 (plus a $5 handling fee).
By phone and in person. You can
order forms and publications by
calling 1-800-TAX-FORM
(1-800-829-3676). You can also get
most forms and publications at your
local IRS office.

IRS E-Services Make
Taxes Easier
Now more than ever before,
businesses can enjoy the benefits of
filing and paying their federal taxes
electronically. Whether you rely on a
tax professional or handle your own
taxes, the IRS offers you convenient
programs to make taxes easier.
• You can e-file your Form 7004;
Form 940 and 941 employment tax
returns; Form 1099 and other
information returns. Visit www.irs.gov/
efile for details.
• You can pay taxes online or by
phone using the free Electronic
Federal Tax Payment System
(EFTPS). Visit www.eftps.gov or call
1-800-555-4477 for details.
Use these electronic options to
make filing and paying taxes easier.

• A partial tax computed on Form

1120, U.S. Corporation Income Tax
Return, on the taxable income of the
bank excluding the life insurance
department, and
• A partial tax on the taxable income
computed on Form 1120-L of the life
insurance department.
Enter the combined tax on line 3 of
Schedule J, Form 1120. File Form
1120 and attach Form 1120-L as a
schedule (and identify it as such) or
attach a statement showing the
computation of the taxable income of
the life insurance department
(including all relevant information that
would be reported on Form 1120-L).

Foreign Life Insurance
Companies
A foreign life insurance company that
sells a U.S. real property interest
must file Form 1120-L and Schedule
D (Form 1120) to report the sale.
Gain or loss from the sale of a U.S.
real property interest is considered
effectively connected with the
conduct of a U.S. business, even
though the foreign life insurance
company does not carry on any
insurance business in the United
States and is not otherwise required
to file a U.S. income tax return. See
sections 842 and 897, and the
Schedule K, line 9, instructions on
page 21 for additional information.

Other Insurance Companies

General Instructions
Use Form 1120-L, U.S. Life
Insurance Company Income Tax
Return, to report the income, gains,
losses, deductions, credits, and to
figure the income tax liability of life
insurance companies.

Insurance companies, other than life
insurance companies, should file
Form 1120-PC, U.S. Property and
Casualty Insurance Company Income
Tax Return. A burial or funeral benefit
insurance company that directly
manufactures funeral supplies or
performs funeral services is taxable
under section 831 and should file
Form 1120-PC.

Who Must File

Definitions

Every domestic life insurance
company and every foreign
corporation that would qualify as a life
insurance company if it were a U.S.
corporation must file Form 1120-L.
This includes organizations described
in section 501(m)(1) that provide
commercial-type life insurance.

An “insurance company” means any
corporation if more than half of its
business during the tax year is from
the issuance of insurance or annuity
contracts or the reinsuring of risks
underwritten by insurance
companies.
A “life insurance company” is an
insurance company in the business of
issuing life insurance and annuity
contracts either separately or
combined with health and accident
insurance, or noncancelable
contracts of health and accident
insurance that meet the reserves test
in section 816(a). Guaranteed
renewable life, health, and accident

Purpose of Form

Mutual Savings Banks
Conducting Life Insurance
Business
Mutual savings banks conducting life
insurance business and meeting the
requirements of section 594 are
subject to an alternative tax
consisting of:
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Instructions for Form 1120-L

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Instructions for Form 1120-L

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insurance that the corporation cannot
cancel but reserves the right to adjust
premium rates by classes, according
to experience under the kind of policy
involved, are treated as
noncancelable.
The “reserves test” requires that
life insurance reserves, as defined in
section 816(b), plus unearned
premiums and unpaid losses
(whether or not ascertained) on
noncancelable life, health, or accident
policies not included in life insurance
reserves must make up more than
50% of total reserves as defined in
section 816(c). When determining
whether the reserves test has been
met:
1. Life insurance reserves and
total reserves must each be reduced
by an amount equal to the mean of
the aggregates, at the beginning and
end of the tax year, of the policy
loans outstanding with respect to
contracts for which life insurance
reserves are maintained;
2. Amounts set aside and held at
interest to satisfy obligations under
contracts that do not contain
permanent guarantees with respect to
life, accident, or health contingencies
must not be included in either life
insurance reserves (section
816(c)(1)) or other reserves required
by law (section 816(c)(3)); and
3. Deficiency reserves must not
be included in either life insurance
reserves or total reserves.

When To File
Generally, a corporation must file its
income tax return by the 15th day of
the 3rd month after the end of its tax
year. A new corporation filing a
short-period return must generally file
by the 15th day of the 3rd month after
the short period ends. A corporation
that has dissolved must generally file
by the 15th day of the 3rd month after
the date it dissolved.
If the due date falls on a Saturday,
Sunday, or legal holiday, the
corporation can file on the next
business day.

Private Delivery Services
Corporations can use certain private
delivery services designated by the
IRS to meet the “timely mailing as
timely filing/paying” rule for tax
returns and payments. These private
delivery services include only the
following.
• DHL Express (DHL): DHL Same
Day Service, DHL Next Day 10:30
am, DHL Next Day 12:00 pm, DHL
Instructions for Form 1120-L

Next Day 3:00 pm, and DHL 2nd Day
Service.
• Federal Express (FedEx): FedEx
Priority Overnight, FedEx Standard
Overnight, FedEx 2Day, FedEx
International Priority, and FedEx
International First.
• United Parcel Service (UPS): UPS
Next Day Air, UPS Next Day Air
Saver, UPS 2nd Day Air, UPS 2nd
Day Air A.M., UPS Worldwide
Express Plus, and UPS Worldwide
Express.
The private delivery service can
tell you how to get written proof of the
mailing date.
Private delivery services
cannot deliver items to P.O.
CAUTION boxes. You must use the U.S.
Postal Service to mail any item to an
IRS P.O. box address.

!

Extension of Time To File
File Form 7004, Application for
Automatic 6-Month Extension of Time
To File Certain Business Income Tax,

Information, and Other Returns, to
request a 6-month extension of time
to file. Generally file Form 7004 by
the regular due date of the return.

Who Must Sign
The return must be signed and dated
by:
• The president, vice-president,
treasurer, assistant treasurer, chief
accounting officer; or
• Any other corporate officer (such
as tax officer) authorized to sign.
If a return is filed on behalf of a
corporation by a receiver, trustee, or
assignee, the fiduciary must sign the
return, instead of the corporate
officer. Returns and forms signed by
a receiver or trustee in bankruptcy on
behalf of a corporation must be
accompanied by a copy of the order
or instructions of the court authorizing
signing of the return or form.
If an employee of the corporation
completes Form 1120-L, the paid
preparer’s space should remain

Where To File
File the corporation’s return at the applicable IRS address listed below.
And the total assets at the
If the corporation’s principal end of the tax year (Form
business, office, or agency 1120-L, Schedule L, Part I,
is located in:
line 6, column (b)) are:
Connecticut, Delaware,
District of Columbia, Illinois,
Indiana, Kentucky, Maine,
Maryland, Massachusetts,
Michigan, New Hampshire,
New Jersey, New York, North
Carolina, Ohio, Pennsylvania,
Rhode Island, South Carolina,
Vermont, Virginia, West
Virginia, Wisconsin

Use the following Internal
Revenue Service Center
address:

Less than $10 million

Cincinnati, OH 45999-0012

$10 million or more

Ogden, UT 84201-0012

Alabama, Alaska, Arizona,
Arkansas, California,
Colorado, Florida, Georgia,
Hawaii, Idaho, Iowa, Kansas,
Louisiana, Minnesota,
Mississippi, Missouri,
Montana, Nebraska, Nevada,
New Mexico, North Dakota,
Oklahoma, Oregon, South
Dakota, Tennessee, Texas,
Utah, Washington, Wyoming

Any amount

Ogden, UT 84201-0012

A foreign country or U.S.
possession (or the corporation
is claiming the possessions
corporation tax credit under
sections 30A and 936)

Any amount

Philadelphia, PA 19255-0012

A group of corporations with members located in more than one service
center area will often keep all the books and records at the principal office of
the managing corporation. In this case, the tax returns of the corporations may
be filed with the service center for the area in which the principal office of the
managing corporation is located.
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Instructions for Form 1120-L

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blank. Anyone who prepares Form
1120-L but does not charge the
corporation should not complete that
section. Generally, anyone who is
paid to prepare the return must sign it
and fill in the “Paid Preparer’s Use
Only” area.
The paid preparer must complete
the required preparer information
and:
• Sign the return in the space
provided for the preparer’s signature.
• Give a copy of the return to the
taxpayer.
Note. A paid preparer may sign
original or amended returns by rubber
stamp, mechanical device, or
computer software program.

Paid Preparer
Authorization
If the corporation wants to allow the
IRS to discuss its 2005 tax return with
the paid preparer who signed it,
check the “Yes” box in the signature
area of the return. This authorization
applies only to the individual whose
signature appears in the “Paid
Preparer’s Use Only” section of the
corporation’s return. It does not apply
to the firm, if any, shown in that
section.
If the “Yes” box is checked, the
corporation is authorizing the IRS to
call the paid preparer to answer any
questions that may arise during the
processing of its return. The
corporation is also authorizing the
paid preparer to:
• Give the IRS any information that is
missing from the return,
• Call the IRS for information about
the processing of the return or the
status of any related refund or
payment(s), and
• Respond to certain IRS notices
about math errors, offsets, and return
preparation.
The corporation is not authorizing
the paid preparer to receive any
refund check, bind the corporation to
anything (including any additional tax
liability), or otherwise represent the
corporation before the IRS.
The authorization will automatically
end no later than the due date
(excluding extensions) for filing the
corporation’s 2006 tax return. If the
corporation wants to expand the paid
preparer’s authorization or revoke the
authorization before it ends, see Pub.
947, Practice Before the IRS and
Power of Attorney.

Consolidated Return
If an affiliated group of corporations
includes one or more domestic life
insurance companies taxed under
section 801, the common parent may
elect to treat those life insurance
companies as includible corporations.
The life insurance companies must
have been members of the group for
the 5 tax years immediately
preceding the tax year for which the
election is made. See section
1504(c)(2) and Regulations section
1.1502-47(d)(12).
Note. If an election under section
1504(c)(2) is in effect for an affiliated
group for the tax year, all items of
members of the group that are not life
insurance companies must not be
taken into account in figuring the
tentative life insurance company
taxable income (LICTI) of members
that are life insurance companies.
Corporations filing a consolidated
return must attach Form 851,
Affiliations Schedule, and other
supporting statements to the return.
Also, for the first year a subsidiary
corporation is being included in a
consolidated return, attach Form
1122, Authorization and Consent of
Subsidiary Corporation To Be
Included in a Consolidated Income
Tax Return, to the parent’s
consolidated return. Attach a
separate Form 1122 for each
subsidiary being included in the
consolidated return.
File supporting statements for
each corporation included in the
consolidated return. Do not use Form
1120-L as a supporting statement. On
the supporting statement, use
columns to show the following, both
before and after adjustments.
1. Items of gross income and
deductions.
2. A computation of taxable
income.
3. Balance sheets as of the
beginning and end of the tax year.
4. A reconciliation of income per
books with income per return.
5. A reconciliation of retained
earnings.

!

CAUTION

Adjustments must be made to
eliminate all intercompany
transactions and balances.

Enter the totals for the consolidated group on Form 1120-L. Attach
consolidated balance sheets and a
reconciliation of consolidated retained
earnings.
-4-

For more information on
consolidated returns, see the
regulations under section 1502.
Note. If a nonlife insurance company
is a member of an affiliated group, file
Form 1120-PC as an attachment to
the consolidated return in lieu of filing
supporting statements. Across the top
of page 1 of Form 1120-PC, write
“Supporting Statement to
Consolidated Returns.”

Statements
NAIC Annual Statement.
Regulations section 1.6012-2(c)
requires that the NAIC Annual
Statement be filed with Form 1120-L.
A penalty for the late filing of a return
may be imposed for not including the
annual statement when the return is
filed.
Reconciliation. A schedule must be
attached that reconciles the NAIC
Annual Statement to Form 1120-L.

Assembling the Return
To ensure that the corporation’s tax
return is correctly processed, attach
all schedules and other forms after
page 8, Form 1120-L, and in the
following order:
1. Schedule N (Form 1120).
2. Form 8302.
3. Form 4136.
4. Form 4626.
5. Form 851.
6. Additional schedules in
alphabetical order.
7. Additional forms in numerical
order.
Complete every applicable entry
space on Form 1120-L. Do not enter
“See Attached” instead of completing
the entry spaces. If more space is
needed on the forms or schedules,
attach separate sheets using the
same size and format as on the
printed forms. If there are supporting
statements and attachments, arrange
them in the same order as the
schedules or forms they support and
attach them last. Show the totals on
the printed forms. Enter the
corporation’s name and EIN on each
supporting statement or attachment.

Depository Methods of
Tax Payment
The corporation must pay any tax due
in full no later than the 15th day of the
3rd month after the end of the tax
year. The two methods of depositing
taxes are discussed below.
Instructions for Form 1120-L

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Electronic Deposit
Requirement
The corporation must make electronic
deposits of all depository taxes (such
as employment tax, excise tax, and
corporate income tax) using the
Electronic Federal Tax Payment
System (EFTPS) in 2006 if:
• The total deposits of such taxes in
2004 were more than $200,000 or
• The corporation was required to
use EFTPS in 2005.
If the corporation is required to use
EFTPS and fails to do so, it may be
subject to a 10% penalty. If the
corporation is not required to use
EFTPS, it can participate voluntarily.
To enroll in or get more information
about EFTPS, call 1-800-555-4477.
To enroll online, visit www.eftps.gov.
Depositing on time. For EFTPS
deposits to be made timely, the
corporation must initiate the
transaction at least 1 business day
before the date the deposit is due.

Deposits With Form 8109
If the corporation does not use
EFTPS, deposit corporation income
tax payments (and estimated tax
payments) with Form 8109, Federal
Tax Deposit Coupon. If you do not
have a preprinted Form 8109, use
Form 8109-B to make deposits. You
can get this form by calling
1-800-829-4933 or visiting an IRS
taxpayer assistance center. Have
your EIN ready when you call or visit.
Do not send deposits directly to an
IRS office; otherwise, the corporation
may have to pay a penalty. Mail or
deliver the completed Form 8109 with
the payment to an authorized
depositary (a commercial bank or
other financial institution authorized to
accept federal tax deposits). Make
checks or money orders payable to
that depositary.
If the corporation prefers, it can
mail the coupon and payment to:
Financial Agent, Federal Tax Deposit
Processing, P.O. Box 970030, St.
Louis, MO 63197. Make the check or
money order payable to “Financial
Agent.”
To help ensure proper crediting,
enter the corporation’s employer
identification number, the tax period
to which the deposit applies, and
“Form 1120-L” on the check or money
order. Darken the “1120” box under
“Type of Tax” and the appropriate
“Quarter” box under “Tax Period” on
the coupon. Records of these
deposits will be sent to the IRS. For
more information, see “Marking the
Instructions for Form 1120-L

Proper Tax Period” in the instructions
for Form 8109.
For more information on deposits,
see the instructions in the coupon
booklet (Form 8109) and Pub. 583,
Starting a Business and Keeping
Records.
If the corporation owes tax
when it files Form 1120-L, do
CAUTION 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 Payments
Generally, the following rules apply to
the corporation’s payments of
estimated tax.
• The corporation must make
installment payments of estimated tax
if it expects its total tax for the year
(less applicable credits) to be $500 or
more.
• The installments are due by the
15th day of the 4th, 6th, 9th, and 12th
months of the tax year. If any date
falls on a Saturday, Sunday, or legal
holiday, the installment is due on the
next regular business day.
• Use Form 1120-W, Estimated Tax
for Corporations, as a worksheet to
compute estimated tax.
• If the corporation does not use
EFTPS, use the deposit coupons
(Forms 8109) to make deposits of
estimated tax.
• If the corporation overpaid
estimated tax, it may be able to get a
quick refund by filing Form 4466,
Corporation Application for Quick
Refund of Overpayment of Estimated
Tax.
See the instructions for lines 29c
and 29e on page 13.
Estimated tax penalty. A
corporation that does not make
estimated tax payments when due
may be subject to an underpayment
penalty for the period of
underpayment. Generally, a
corporation is subject to the penalty if
its tax liability is $500 or more and it
did not timely pay the smaller of:
• Its tax liability for 2005 or
• Its prior year’s tax.
See section 6655 for details and
exceptions, including special rules for
large corporations.
Use Form 2220, Underpayment of
Estimated Tax by Corporations, to
see if the corporation owes a penalty
and to figure the amount of the
penalty. Generally, the corporation
does not have to file this form
because the IRS can figure the
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amount of any penalty and bill the
corporation for it. However, even if
the corporation does not owe the
penalty, complete and attach Form
2220 if:
• The annualized income or adjusted
seasonal installment method is used,
or
• The corporation is a large
corporation computing its first
required installment based on the
prior year’s tax. See the Instructions
for Form 2220 for the definition of a
large corporation.
Also, see the instructions for line
30 on page 13.

Interest and Penalties
Interest. Interest is charged on taxes
paid late even if an extension of time
to file is granted. Interest is also
charged on penalties imposed for
failure to file, negligence, fraud,
substantial valuation misstatements,
substantial understatements of tax,
and reportable transaction
understatements from the due date
(including extensions) to the date of
payment. The interest charge is
figured at a rate determined under
section 6621.
Late filing of return. A corporation
that does not file its tax return by the
due date, including extensions, may
be penalized 5% of the unpaid tax for
each month or part of a month the
return is late, up to a maximum of
25% of the unpaid tax. The minimum
penalty for a return that is over 60
days late is the smaller of the tax due
or $100. The penalty will not be
imposed if the corporation can show
that the failure to file on time was due
to reasonable cause. Corporations
that file late should attach a
statement explaining the reasonable
cause.
Late payment of tax. A corporation
that does not pay the tax when due
generally may be penalized 1/2 of 1%
of the unpaid tax for each month or
part of a month the tax is not paid, up
to a maximum of 25% of the unpaid
tax. The penalty will not be imposed if
the corporation can show that the
failure to pay on time was due to
reasonable cause.
Trust fund recovery penalty. This
penalty may apply if certain excise,
income, social security, and Medicare
taxes that must be collected or
withheld are not collected or withheld,
or these taxes are not paid. These
taxes are generally reported on:
• Form 720, Quarterly Federal
Excise Tax Return;

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• Form 941, Employer’s Quarterly
Federal Tax Return; or
• Form 945, Annual Return of
Withheld Federal Income Tax.
The trust fund recovery penalty
may be imposed on all persons who
are determined by the IRS to have
been responsible for collecting,
accounting for, and paying over these
taxes, and who acted willfully in not
doing so. The penalty is equal to the
unpaid trust fund tax. See the
Instructions for Form 720 or Pub. 15
(Circular E), Employer’s Tax Guide,
for details, including the definition of
responsible persons.
Other penalties. Other penalties can
be imposed for negligence,
substantial understatement of tax,
reportable transaction
understatements, and fraud. See
sections 6662, 6662A, and 6663.

Accounting Methods
The return of a life insurance
company must be filed using the
accrual method of accounting or, to
the extent permitted under
regulations, a combination of the
accrual method with any other
method, except the cash receipts and
disbursements method. In all cases,
the method used must clearly show
LICTI.
Change in accounting method. To
change its method of accounting
used to report taxable income (for
income as a whole or for the
treatment of any material item), the
corporation must file Form 3115,
Application for Change in Accounting
Method. See Form 3115 and Pub.
538, Accounting Periods and
Methods, for more information on
accounting methods.

Accounting Period
An insurance company must figure its
taxable income on the basis of a tax
year. A tax year is the annual
accounting period an insurance
company uses to keep its records
and report its income and expenses.
As a general rule under section
843, the tax year for every insurance
company is the calendar year.
However, if an insurance company
joins in the filing of a consolidated
return, it may adopt the tax year of
the common parent corporation even
if that year is not a calendar year.

Rounding Off to Whole
Dollars
The corporation can round off cents
to whole dollars on its return and
schedules. If the corporation does
round to whole dollars, it must round
all amounts. To round, drop amounts
under 50 cents and increase amounts
from 50 to 99 cents to the next dollar.
For example, $1.39 becomes $1 and
$2.50 becomes $3.
If two or more amounts must be
added to figure the amount to enter
on a line, include cents when adding
the amounts and round off only the
total.

Recordkeeping
Keep the corporation’s records for as
long as they may be needed for the
administration of any provision of the
Internal Revenue Code. Usually,
records that support an item of
income, deduction, or credit on the
return must be kept for 3 years from
the date the return is due or filed,
whichever is later. Keep records that
verify the corporation’s basis in
property for as long as they are
needed to figure the basis of the
original or replacement property.
The corporation should keep
copies of all filed returns. They help in
preparing future and amended
returns.

Other Forms and
Statements That May Be
Required
Reportable transaction disclosure
statement. Disclose information for
each reportable transaction in which
the corporation participated. Form
8886, Reportable Transaction
Disclosure Statement, must be filed
for each tax year that the federal
income tax liability of the corporation
is affected by its participation in the
transaction. The corporation may
have to pay a penalty if it is required
to file Form 8886 and does not do so.
The following are reportable
transactions.
1. Any listed transaction, which is
a transaction that is the same as or
substantially similar to tax avoidance
transactions identified by the IRS.
2. Any transaction offered under
conditions of confidentiality for which
the corporation paid an advisor a fee
of at least $250,000.
3. Certain transactions for which
the corporation has contractual
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protection against disallowance of the
tax benefits.
4. Certain transactions resulting in
a loss of at least $10 million in any
single year or $20 million in any
combination of years.
5. Certain transactions resulting in
a book-tax difference of more than
$10 million on a gross basis.
6. Certain transactions resulting in
a tax credit of more than $250,000, if
the corporation held the asset
generating the credit for 45 days or
less.
Penalties. The corporation may
have to pay a penalty if it is required
to disclose a reportable transaction
under section 6011 and fails to
properly complete and file Form
8886. The penalty is $50,000
($200,000 if the reportable
transaction is a listed transaction) for
each failure to file Form 8886 with its
corporate return or for failure to
provide a copy of Form 8886 to the
Office of Tax Shelter Analysis
(OTSA). Other penalties, such as an
accuracy-related penalty under
section 6662A, may also apply. See
the Instructions for Form 8886 for
details.
Reportable transactions by
material advisors. Until further
guidance is issued, material advisors
who provide material aid, assistance,
or advice with respect to any
reportable transaction, must use
Form 8264, Application for
Registration of a Tax Shelter, to
disclose reportable transactions in
accordance with interim guidance
provided in Notice 2004-80, 2004-50
I.R.B. 963; Notice 2005-17, 2005-8
I.R.B. 606; and Notice 2005-22,
2005-12 I.R.B. 756.
Transfers to a corporation
controlled by the transferor. If a
person receives stock of a
corporation in exchange for property,
and no gain or loss is recognized
under section 351, the person
(transferor) and the transferee must
each attach to their tax returns the
information required by Regulations
section 1.351-3.
Dual consolidated losses. If a
domestic corporation incurs a dual
consolidated loss (as defined in
Regulations section 1.1503-2(c)(5)),
the corporation (or consolidated
group) may need to attach an elective
relief agreement and/or an annual
certification as provided in Temporary
Regulations section 1.1503-2T(g)(2).
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Election to reduce basis under
section 362(e)(2)(C). The transferor
and transferee in certain section 351
transactions can make a joint election
under section 362(e)(2)(C) to limit the
transferor’s basis in the stock
received instead of the transferee’s
basis in the transferred property. The
transferor and transferee may make
the election by attaching the
statement as provided in Notice
2005-70, 2005-41 I.R.B. 694, to their
tax returns filed by the due date
(including extensions) for the tax year
in which the transaction occurred.
Once made, the election is
irrevocable. See section 362(e)(2)(C)
and Notice 2005-70.
Other forms and statements. See
Pub. 542 for a list of other forms and
statements a corporation may need to
file in addition to the forms and
statements discussed throughout
these instructions.

Specific Instructions
Period Covered
Section 843 requires all insurance
companies to file on a calendar year
basis, unless they join in the filing of
a consolidated return. If a
consolidated return is filed, indicate
the period covered on the parent
corporation’s return.

Name and Address
Print or type the corporation’s true
name (as set forth in the charter or
other legal document creating it),
address, and EIN on the appropriate
lines. Include the suite, room, or other
unit number after the street address.
If the post office does not deliver mail
to the street address and the
corporation has a P.O. box, show the
box number instead.
If the corporation receives its mail
in care of a third party (such as an
accountant or an attorney), enter on
the street address line “C/O” followed
by the third party’s name and street
address or P.O. box.

Item A
If box A1 is checked and nonlife
insurance companies are included in
the consolidated return, also check
box A2. See Regulations section
1.1502-47(s) for the filing
requirements of a life-nonlife
company consolidated return.
Instructions for Form 1120-L

Item B. Employer
Identification Number
(EIN)
Enter the corporation’s EIN. If the
corporation does not have an EIN, it
must apply for one. An EIN can be
applied for:
• Online –Click on the EIN link at
www.irs.gov/businesses/small. The
EIN is issued immediately once the
application information is validated.
• By telephone at 1-800-829-4933
from 7:00 a.m. to 10:00 p.m. in the
corporation’s local time zone.
• By mailing or faxing Form SS-4,
Application for Employer Identification
Number.
If the corporation has not received
its EIN by the time the return is due,
enter “Applied for” in the space for the
EIN. For more details, see Pub. 583.
Note. The online application process
is not yet available for corporations
with addresses in foreign countries or
Puerto Rico.

Item D. Section 953
Elections
Check the appropriate box if the
corporation is a foreign corporation
and elects under:
1. Section 953(c)(3)(C) to treat its
related person insurance income as
effectively connected with the
conduct of a trade or business in the
United States or
2. Section 953(d) to be treated as
a domestic corporation.
Generally, a foreign corporation
making either election must file its
return with the Internal Revenue
Service Center, Philadelphia, PA
19255. See Notice 87-50, 1987-2
C.B. 357, and Rev. Proc. 2003-47,
2003-28 I.R.B. 55, for the procedural
rules, election statement formats, and
filing addresses for making the
respective elections under section
953(c)(3)(C) or section 953(d).
Note. Once either election is made, it
will apply to the tax year for which
made and all subsequent tax years
unless revoked with the consent of
the IRS. Also, any loss of a foreign
corporation electing to be treated as a
domestic insurance company under
section 953(d) will be treated as a
dual-consolidated loss and may not
be used to reduce the taxable income
of any other member of the affiliated
group for the tax year or any other tax
year.
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Note. If a section 953(d) election is
made, include the additional tax
required to be paid on line 11,
Schedule K. On the dotted line to the
left of line 11, Schedule K, write
“Section 953(d)” and the amount.
Attach a schedule showing the
computation. See section 953(d) for
more details.

Item E. Final Return,
Name Change, Address
Change, or Amended
Return
Indicate a final return, name change,
address change, or amended return
by checking the appropriate box.
Note. If a change of address occurs
after the return is filed, use Form
8822, Change of Address, to notify
the IRS of the new address.

Life Insurance Company
Taxable Income
Income
Except as otherwise provided in the
Internal Revenue Code, gross income
includes all income from whatever
source derived.
Extraterritorial income. Gross
income generally does not include
extraterritorial income that is
qualifying foreign trade income. The
extraterritorial income exclusion is
reduced by 20% for transactions in
2005 (40% for transactions in 2006),
unless made under a binding contract
with an unrelated person in effect on
September 17, 2003, and at all times
thereafter. Use Form 8873,
Extraterritorial Income Exclusion, to
figure the exclusion. Include the
exclusion in the total for “Other
deductions” on line 18.
Income from qualifying shipping
activities. Gross income does not
include income from qualifying
shipping activities if the corporation
makes an election under section
1354 to be taxed on its notional
shipping income (as defined in
section 1353) at the highest corporate
tax rate (35%). If the election is
made, the corporation generally may
not claim any loss, deduction, or
credit with respect to qualifying
shipping activities. A corporation
making this election also may elect to
defer gain on the disposition of a
qualifying vessel.

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Use Form 8902, Alternative Tax on
Qualifying Shipping Activities, to
figure the tax. Include the alternative
tax on Schedule K, line 10.
Line 1. Enter gross premiums and
other consideration received on
insurance and annuity contracts less
return premiums and premiums and
other consideration paid for indemnity
reinsurance.
Gross premiums and other
consideration includes advance
premiums, deposits, fees,
assessments, consideration received
for assuming liabilities under
contracts not issued by the
corporation, and any amount treated
as premiums received under section
808(e) (see the instructions for
Schedule F, 18a, on page 17).
Return premiums include amounts
rebated or refunded due to policy
cancellations or incorrectly computed
premiums, but do not include
amounts returned to policyholders
when such amounts are not fixed in
the contract but instead depend on
the corporation’s experience or the
management’s discretion.
Line 2. Net decrease in reserves. If
there is a decrease in reserves,
complete line 2 by doing the
following:
1. Pencil in the amount from line
8, Schedule F, on line 2, to tentatively
compute life insurance company
gross income (LICGI).
2. Enter this tentative LICGI on
Schedule F, line 12, and complete the
remainder of Schedule F.
After completing steps 1 and 2
above, erase the numbers penciled in
for step 1 and then enter on line 2 the
net decrease in reserves shown on
line 35, Schedule F.
Line 3. 10% of certain decreases in
reserves under section
807(f)(1)(B)(ii). If the amount of any
item referred to in section 807(c)
decreases as a result of a change in
the basis used to determine that item,
10% of the decrease must be
included in LICGI for each of the 10
succeeding tax years. See section
807(f)(1).
Note. If a corporation no longer
qualifies as a life insurance company,
the balance of any adjustments under
section 807(f) must be taken into
account in the last tax year the
corporation is qualified to file Form
1120-L. See section 807(f)(2).
Line 4. Investment income. Enter
the amount from Schedule B, line 8,
less 50% of interest income of an

ESOP loan made prior to August 20,
1996. Also, see Act section 1602 of
the Small Business Job Protection
Act of 1996 for binding contracts and
refinancing rules.
Line 5. Net capital gain. Unless
specifically excluded by section 1221,
each asset held by a corporation
(whether or not connected with its
business) is a ‘‘capital asset.’’
Under section 1221, capital asset
does not include:
1. Assets that can be inventoried
or property held mainly for sale to
customers.
2. Depreciable or real property
used in the trade or business.
3. Certain copyrights; or, literary,
musical, or artistic compositions.
4. Accounts or notes receivable
acquired in the ordinary course of
trade or business for services
rendered or from the sale of property
described in 1 above.
5. Certain publications of the U.S.
Government.
Section 818(b) modifies the above
definition so only property used in
carrying on an insurance business
will be considered as “depreciable or
real property used in the corporation’s
trade or business.” For life insurance
companies, gains or losses from the
sale or exchange of depreciable
assets of any business other than an
insurance business will be treated as
gains or losses from the sale or
exchange of capital assets.
See section 818(c) and the related
regulations for how to limit the gain
from the sale or exchange of any
section 818(c) property.
Line 6. Income from a special loss
discount account. Enter the total
from Form 8816, Part II, line 6. See
section 847(5) and the Instructions for
Form 8816 for more information.
Line 7. Other income. Enter any
other taxable income, includible in
LICGI, not reported on lines 1 through
6. List the type and amount of income
on an attached schedule. If the life
insurance company has only one item
of other income, describe it in
parentheses on line 7. The following
are examples of other income to
report on line 7.
• All income from noninsurance
business (defined in section
806(b)(3)), but list it separately from
all other income.
• For mutual life insurance
companies, if the recomputed
differential earnings amount for the
2004 tax year exceeds the differential
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earnings amount for 2004, include the
excess on line 7.
• Gains and losses (including
ordinary gains and losses) from sales
or exchanges of assets used in a
trade or business and from
involuntary conversions reported on
Form 4797, Sales of Business
Property. Section 818(b)(1) provides
that, for section 1231(a), “property
used in a trade or business” includes
only:
1. Property used in carrying on an
insurance business that is either real
or depreciable property held for more
than 1 year.
2. Timber, coal, and domestic iron
ore to which section 631 applies.
For paragraph 1 above, property
used in a trade or business does not
include property includible in
inventory, property held primarily for
sale to customers, or certain
copyrights, literary, musical, or artistic
compositions, letters, memoranda,
and similar property.
• The amount included in income
from Form 6478, Credit for Alcohol
Used as Fuel.
• The amount included in income
from line 8 of Form 8864, Biodiesel
and Renewable Diesel Fuels Credit.
• Any recapture amount under
section 179A for certain clean-fuel
vehicle property (or clean-fuel vehicle
refueling property) that ceases to
qualify. See Regulations section
1.179A-1 for details.
• Ordinary income from trade or
business activities of a partnership
(from Schedule K-1 (Form 1065 or
1065-B)). Do not offset ordinary
losses against ordinary income.
Instead, include the losses on line 18.
Show the partnership’s name,
address, and EIN on a separate
statement attached to this return. If
the amount entered is from more than
one partnership, identify the amount
from each partnership.

Deductions
Limitations on Deductions
Section 263A uniform
capitalization rules. The uniform
capitalization rules of section 263A
require corporations to capitalize
certain costs.
For details on the uniform
capitalization rules, see Regulations
sections 1.263A-1 through 1.263A-3.
Transactions between related
taxpayers. Generally, an accrual
basis taxpayer can only deduct
business expenses and interest owed
to a related party in the year the
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payment is included in the income of
the related party. See sections
163(e)(3), 163(j), and 267 for
limitations on deductions for unpaid
interest and expenses.
Section 291 limitations.
Corporations may be required to
adjust certain deductions. See
section 291 to determine the amount
of the adjustment. Also, see section
43.
Golden parachute payments. A
portion of the payments made by a
corporation to key personnel that
exceeds their usual compensation
may not be deductible. This occurs
when the corporation has an
agreement (golden parachute) with
these key employees to pay them
these excess amounts if control of the
corporation changes. See section
280G and Regulations section
1.280G-1.
Business start-up and
organizational costs. Business
start-up and organizational costs
must be capitalized unless an
election is made to deduct or
amortize them. The corporation can
elect to amortize costs paid or
incurred before October 23, 2004,
over a period of 60 months or more.
For costs paid or incurred after
October 22, 2004, the following rules
apply separately to each category of
costs.
• The corporation can elect to deduct
up to $5,000 of such costs for the
year the corporation begins business
operations.
• The $5,000 deduction is reduced
(but not below zero) by the amount
the total costs exceed $50,000. If the
total costs are $55,000 or more, the
deduction is reduced to zero.
• If the election is made, any costs
that are not deducted must be
amortized ratably over a 180-month
period.
In all cases, the amortization
period begins the month the
corporation begins business
operations. For more details on the
election for business start-up and
organizational costs, see Pub. 535.
Attach any statement required by
Regulations sections 1.195-1(b) or
1.248-1(c). Report the deductible
amount of these costs and any
amortization on line 18. For
amortization that begins during the
2005 tax year, complete and attach
Form 4562.
Reducing certain expenses for
which credits are allowable. For
each credit listed below, the
Instructions for Form 1120-L

corporation must reduce the
otherwise allowable deductions for
expenses used to figure the credit.
• Employment credits. See Salaries
and wages under Line 18. Other
Deductions on page 10.
• Research credit.
• Orphan drug credit.
• Disabled access credit.
• Enhanced oil recovery credit.
• Employer credit for social security
and Medicare taxes paid on certain
employee tips.
• Credit for small employer pension
plan startup costs.
• Credit for employer-provided
childcare facilities and services.
• Low sulfur diesel fuel production
credit.
If the corporation has any of these
credits, figure each current year credit
before figuring the deduction for
expenses on which the credit is
based. See the instructions for the
applicable form used to figure the
credit.
Limitations on deductions related
to property leased to tax-exempt
entities. If a corporation leases
property to a governmental or other
tax-exempt entity, the corporation
cannot claim deductions related to
the property to the extent that they
exceed the corporation’s income from
the lease payments (tax-exempt use
loss). Amounts disallowed may be
carried over to the next tax year and
treated as a deduction with respect to
the property for that tax year. See
section 470 for more details and
exceptions.
Line 9. Death benefits, etc. Enter all
claims and benefits accrued and
losses incurred (whether or not
ascertained) during the year on
insurance and annuity contracts.
Losses incurred (whether or not
ascertained) includes a reasonable
estimate both of losses incurred but
not reported and of reported losses,
when the amount of the losses
cannot be determined by the end of
the tax year. Losses incurred must be
adjusted to take into account
recoveries (e.g., for reinsurance) for
those losses together with estimates
of those recoveries that may be
recovered on those losses in future
years.
Under section 807(c), the
TIP amount of unpaid losses
(other than losses on life
insurance contracts) must be the
amount of the discounted unpaid
losses under section 846. See the
instructions for Schedule F, line 2, for
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more information on the discounting
provisions.
Line 11. 10% of increase in
reserves under section
807(f)(1)(B)(i). If the amount of any
item referred to in section 807(c)
increases as a result of a change in
the basis used to determine that item,
10% of the increase will be allowed
as a deduction in computing LICTI for
each of the 10 succeeding tax years.
See section 807(f)(1).
Termination as life insurance
company. If a corporation ceases to
qualify as a life insurance company,
the balance of any adjustments under
section 807(f) must be taken into
account in the last year that the
corporation is qualified to file Form
1120-L. See section 807(f)(2).
Line 13. Assumption by another
person of liabilities under
insurance, etc., contracts. Enter
the total consideration paid by the
corporation to another person (other
than for indemnity reinsurance) for
the assumption by that person of
liabilities under insurance and annuity
contracts (including supplementary
contracts).
Line 14. Dividends reimbursable by
taxpayer. Enter the amount of
policyholder dividends:
1. Paid or accrued by another
insurance company for policies this
corporation has reinsured and
2. That are reimbursable by the
corporation under the terms of the
reinsurance contract.
Line 15a. Interest. Enter all interest
paid or accrued during the tax year.
No deduction is allowed under
section 163 for interest on the items
described in section 807(c). Also, do
not include interest included on
Schedule G, line 9 (general
deductions).
Limitations. 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.
Line 15b. Less tax-exempt interest
expense. Enter interest paid or
accrued on indebtedness incurred or
continued to purchase or carry
obligations, the interest on which is
wholly tax-exempt.
Line 17. Additional deduction.
Enter the total from Form 8816, Part
II, line 5.

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Any insurance company taking the
additional deduction must:
• Make special estimated tax
payments equal to the tax benefit
from the deduction and
• Establish and maintain a Special
Loss Discount Account. See section
847 and Form 8816 for more
information.
Line 18. Other deductions. Attach a
schedule, listing by type and amount,
all allowable deductions in computing
LICTI (including the amortization of
premiums under section 811(b)) not
included on lines 9 through 17.
See Special rules on page 11 for
limits on certain other deductions.
Also, see Pub. 535 for details on
other deductions that may apply to
corporations.
Examples of other deductions
include the following:
• The domestic production activities
deduction. See Form 8903.
• Certain business start-up and
organizational costs that the
corporation elects to deduct. See
page 9.
• Legal and professional fees.
• Supplies used and consumed in
the business.
• Utilities.
• Ordinary losses from trade or
business activities of a partnership
(from Schedule K-1 (Form 1065 or
1065-B)). Do not offset ordinary
income against ordinary losses.
Instead, include the income on line 7.
Show the partnership’s name,
address, and EIN on a separate
statement attached to this return. If
the amount is from more than one
partnership, identify the amount from
each partnership.
• Any extraterritorial income
exclusion (from Form 8873, line 54).
• Deduction for clean-fuel vehicle
and certain refueling property placed
in service before January 1, 2006.
See Pub. 535.
• Deduction for certain energy
efficient commercial building property
placed in service after December 31,
2005. See section 179D.
• Dividends paid in cash on stock
held by an employee stock ownership
plan. However, a deduction may only
be taken if, according to the plan, the
dividends are:
1. Paid in cash directly to the plan
participants or beneficiaries;
2. Paid to the plan, which
distributes them in cash to the plan
participants or their beneficiaries no
later than 90 days after the end of the
plan year in which the dividends are
paid;

3. At the election of such
participants or their beneficiaries (a)
payable as provided under 1 or 2
above or (b) paid to the plan and
reinvested in qualifying employer
securities; or
4. Used to make payments on a
loan described in section 404(a)(9).
See section 404(k) for more details
and the limitation on certain
dividends.
• Deductions from any noninsurance
business (defined in section
806(b)(3)). Deductions from any
noninsurance business should be
listed separately from all other
deductions.
• Depreciation or amortization
(attach Form 4562, Depreciation and
Amortization, if required). Attach
Form T (Timber), Forest Activities
Schedule, if a deduction for depletion
of timber is taken. Foreign intangible
drilling costs and foreign exploration
and development costs must either
be added to the corporation’s basis
for cost depletion purposes or be
deducted ratably over a 10-year
period. See sections 263(i), 616, and
617 for details.

!

CAUTION

Do not deduct fines or
penalties paid to a
government for violating any

compensation to a “covered
employee” to the extent that the
compensation exceeds $1 million.
Generally, a covered employee is:
• The chief executive officer of the
corporation (or an individual acting in
that capacity) as of the end of the tax
year or
• An employee whose total
compensation must be reported to
shareholders under the Securities
Exchange Act of 1934 because the
employee is among the four highest
compensated officers for that tax year
(other than the chief executive
officer).
For this purpose, compensation
does not include the following.
• Income from certain employee
trusts, annuity plans, or pensions.
• Any benefit paid to an employee
that is excluded from the employee’s
income.
The deduction limit does not apply
to:
• Commissions based on individual
performance,
• Qualified performance-based
compensation, and
• Income payable under a written
binding contract in effect on February
17, 1993.
The $1 million limit is reduced by
amounts disallowed as excess
parachute payments under section
280G.

law.
Also include on line 18 the
following.
Compensation of officers.
Include deductible officers’
compensation. Do not include
compensation deductible elsewhere
on the return, such as elective
contributions to a section 401(k) cash
or deferred arrangement or amounts
contributed under a salary reduction
SEP agreement or a SIMPLE IRA
plan.
Include only the deductible part of
each officer’s compensation on line
18. (See Disallowance of deduction
for employee compensation in excess
of $1 million below.) Attach a
schedule for compensation of all
officers using the following columns.
1. Name of officer.
2. Social security number.
3. Percentage of time devoted to
business.
4. Amount of compensation.

For details, see section 162(m)
and Regulations section 1.162-27.
Salaries and wages. Include the
total salaries and wages paid for the
tax year, reduced by any current year
work opportunity credit from Form
5884, credits for employers affected
by Hurricane Katrina, Rita, or Wilma
from Form 5884-A, empowerment
zone and renewal community
employment credit from Form 8844,
Indian employment credit from Form
8845, or welfare-to-work credit from
Form 8861. See the instructions for
these forms for more information. Do
not include salaries and wages
deductible elsewhere on the return,
such as elective contributions to a
section 401(k) cash or deferred
arrangement or amounts contributed
under a salary reduction SEP
agreement or a SIMPLE IRA plan.

If a consolidated return is filed,
each member of an affiliated group
must furnish this information.
Disallowance of deduction for
employee compensation in excess
of $1 million. Publicly held
corporations cannot deduct

If the corporation provided
taxable fringe benefits to its
CAUTION employees, such as personal
use of a car, do not deduct as wages
the amount allocated for depreciation
and other expenses claimed under
Other Deductions on line 18.

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!

Instructions for Form 1120-L

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Instructions for Form 1120-L

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Pension, profit-sharing, etc.
plans. Include the deduction for
contributions to qualified pension,
profit-sharing, or other funded
deferred compensation plans.
Employers who maintain such a plan
generally must file one of the forms
listed below, even if the plan is not a
qualified plan under the Internal
Revenue Code. The filing
requirement applies even if the
corporation does not claim a
deduction for the current tax year.
There are penalties for failure to file
these forms on time and for
overstating the pension plan
deduction. See sections 6652(e) and
6662(f).
Form 5500, Annual Return/Report
of Employee Benefit Plan. File this
form for a plan that is not a
one-participant plan (see below).
Form 5500-EZ, Annual Return of
One-Participant (Owners and Their
Spouses) Retirement Plan. File this
form for a plan that only covers the
owner (or the owner and his or her
spouse) but only if the owner (or the
owner and his or her spouse) owns
the entire business.
Charitable contributions. Include
contributions or gifts actually paid
within the tax year to or for the use of
charitable and governmental
organizations described in section
170(c) and any unused contributions
carried over from prior years. Special
rules and limits apply to contributions
to organizations conducting lobbying
activities. See section 170(f)(9).
Life insurance companies reporting
LICTI on the accrual method can
elect to treat as paid during the tax
year any contributions paid by the
15th day of the 3rd month after the
end of the tax year if the contributions
were authorized by the board of
directors during the tax year. Attach a
declaration to the return stating that
the resolution authorizing the
contributions was adopted by the
board of directors during the tax year.
The declaration must include the date
the resolution was adopted.
Limitation on deduction. The
total amount claimed cannot be more
than 10% of LICTI computed without
regard to the following.
• Any deduction for contributions.
• The deduction for policyholder
dividends.
• The deduction for dividends
received.
• The small life insurance company
deduction.
Instructions for Form 1120-L

• The domestic production activities

deduction.
• Any operations loss carryback to
the tax year under section 810.
• Any capital loss carryback to the
tax year under section 1212(a)(1).
Temporary suspension of 10%
limitation. A corporation may elect
to deduct qualified cash contributions
without regard to the general 10%
limit if the contributions were made
after August 27, 2005, and before
January 1, 2006, to a qualified
charitable organization (other than
certain private foundations described
in section 509(a)(3)), for Hurricane
Katrina, Rita, or Wilma relief efforts.
The total amount claimed cannot be
more than LICTI as computed above
substituting “100%” for “10%.” Excess
qualified contributions are carried
over to the next 5 years. Attach a
statement substantiating that the
contributions are for Hurricane
Katrina, Rita, or Wilma relief efforts
and indicating the amount of qualified
contributions for which the election is
made. See Pub. 4492, Information for
Taxpayers Affected by Hurricanes
Katrina, Rita, and Wilma.
Carryover. Charitable
contributions over the 10% limitation
cannot be deducted for the tax year
but may be carried over to the next 5
tax years.
A contributions carryover is not
allowed, however, to the extent that it
increases an operations loss.
Substantiation requirements.
Generally, no deduction is allowed for
any contribution of $250 or more
unless the corporation gets a written
acknowledgment from the donee
organization that shows the amount
of cash contributed, describes any
property contributed, and, either gives
a description and a good faith
estimate of the value of any goods or
services provided in return for the
contribution or states that no goods or
services were provided in return for
the contribution. The acknowledgment must be obtained by the due
date (including extensions) of the
corporation’s return, or, if earlier, the
date the return is filed. Do not attach
the acknowledgment to the tax return,
but keep it with the corporation’s
records. These rules apply in addition
to the filing requirements for Form
8283, Noncash Charitable
Contributions.
Contributions of property other
than cash. If a corporation (other
than a closely held or personal
service corporation) contributes
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property other than cash and claims
over a $500 deduction for the
property, it must attach a schedule to
the return describing the kind of
property contributed and the method
used to determine its fair market
value (FMV). Closely held
corporations and personal service
corporations must complete Form
8283 and attach it to their returns. All
other corporations generally must
complete and attach Form 8283 to
their returns for contributions of
property (other than money) if the
total claimed deduction for all
property contributed was more than
$5,000. Special rules apply to the
contribution of certain property. See
the Instructions for Form 8283.
Larger deduction. A larger
deduction is allowed for certain
contributions of:
• Inventory and other property to
certain organizations for use in the
care of the ill, needy, or infants
(section 170(e)(3)), including
contributions after August 27, 2005,
and before January 1, 2006, of
“apparently wholesome food” (section
170(e)(3)(C)) and qualified book
contributions (section 170(e)(3)(D)).
• Scientific equipment used for
research to institutions of higher
learning or to certain scientific
research organizations (other than by
personal holding companies and
service organizations (section
170(e)(4)); and
• Computer technology and
equipment for educational purposes
(section 170(e)(6)).
For more information on charitable
contributions, including substantiation
and recordkeeping requirements, see
section 170 and the related
regulations and Pub. 526, Charitable
Contributions. For special rules that
apply to corporations, see Pub. 542.
Special rules apply to the
following expenses.
Travel, meals, and entertainment. Subject to limitations and
restrictions discussed below, a
corporation can deduct ordinary and
necessary travel, meals, and
entertainment expenses paid or
incurred in its trade or business. Also,
special rules apply to deductions for
gifts, skybox rentals, luxury water
travel, convention expenses, and
entertainment tickets. See section
274 and Pub. 463, Travel,
Entertainment, Gift, and Car
Expenses for details.
Travel. The corporation cannot
deduct travel expenses of any

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individual accompanying a corporate
officer or employee, including a
spouse or dependent of the officer or
employee, unless:
• That individual is an employee of
the corporation, and
• His or her travel is for a bona fide
business purpose and would
otherwise be deductible by that
individual.
Meals and entertainment.
Generally, the corporation can deduct
only 50% of the amount otherwise
allowable for meals and
entertainment expenses paid or
incurred in its trade or business. In
addition (subject to exceptions under
section 274(k)(2)):
• Meals must not be lavish or
extravagant;
• A bona fide business discussion
must occur during, immediately
before, or immediately after the meal;
and
• An employee of the corporation
must be present at the meal.
See section 274(n)(3) for a special
rule that applies to expenses for
meals consumed by individuals
subject to the hours of service limits
of the Department of Transportation.
Membership dues. The
corporation can deduct amounts paid
or incurred for membership dues in
civic or public service organizations,
professional organizations (such as
bar and medical associations),
business leagues, trade associations,
chambers of commerce, boards of
trade, and real estate boards.
However, no deduction is allowed if a
principal purpose of the organization
is to entertain, or provide
entertainment facilities for, members
or their guests. In addition,
corporations cannot deduct
membership dues in any club
organized for business, pleasure,
recreation, or other social purpose.
This includes country clubs, golf and
athletic clubs, airline and hotel clubs,
and clubs operated to provide meals
under conditions favorable to
business discussion.
Entertainment facilities. The
corporation cannot deduct an
expense paid or incurred for a facility
(such as a yacht or hunting lodge)
used for an activity usually
considered entertainment,
amusement, or recreation.
Amounts treated as
compensation. Generally, the
corporation may be able to deduct
otherwise nondeductible
entertainment, amusement, or

recreation expenses if the amounts
are treated as compensation to the
recipient and reported on Form W-2
for an employee or on Form
1099-MISC for an independent
contractor.
However, if the recipient is an
officer, director, or beneficial owner
(directly or indirectly) of more than
10% of any class of stock, the
deductible expense is limited. See
section 274(e)(2) and Notice
2005-45, 2005-24 I.R.B. 1228.
Lobbying expenses. Generally,
lobbying expenses are not deductible.
These expenses include:
• Amounts paid or incurred in
connection with influencing federal or
state legislation (but not local
legislation) or
• Amounts paid or incurred in
connection with any communication
with certain federal executive branch
officials in an attempt to influence the
official actions or positions of the
officials. See Regulations section
1.162-29 for the definition of
“influencing legislation.”
Dues and other similar amounts
paid to certain tax-exempt
organizations may not be deductible.
See section 162(e)(3). If certain
in-house lobbying expenditures do
not exceed $2,000, they are
deductible.
Line 20. Operations loss
deduction. The operations loss
deduction (OLD) is the total of the
operations loss carryovers from prior
tax years. However, the OLD cannot
exceed the corporation’s LICTI (after
the dividends-received deduction).
See section 810(c). If this deduction
is taken, show its computation on an
attached schedule.
Generally, a life insurance
company can carry an operating loss
back to each of the 3 years preceding
the year of the loss and carry it over
to each of the 15 years following the
year of the loss.
There is also an irrevocable
election to waive the carryback period
and instead carry an operating loss
forward to years following the year of
the loss. To make this election, check
the box in line 12, Schedule M. To be
valid, the election must be made by
the due date (including extensions)
for filing Form 1120-L. If the life
insurance company is a new
company for the loss year, the loss
may be carried over to each of the 18
years following the year of the loss.
After applying the operating loss to
the first tax year to which it may be
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carried, the portion of the loss the
corporation may carry to each of the
remaining tax years is the excess, if
any, of the loss over the sum of the
offsets for each of the prior tax years
to which the corporation may carry
the loss. See section 810(b)(2).
See section 810 for special rules,
limitations, and definitions pertaining
to operating loss carrybacks and
carryovers.
If an ownership change occurs, the
amount of the taxable income of a
loss corporation that may be offset by
the pre-change NOL carryovers may
be limited (see section 382 and the
related regulations). A loss
corporation must file an information
statement with its income tax return
for each tax year that certain
ownership shifts occur (see
Temporary Regulations section
1.382-2T(a)(2)(ii) for details). See
Regulations section 1.382-6(b) for
details on how to make the
closing-of-the-books election.
If a corporation elects the
alternative tax on qualifying shipping
activities under section 1354, no
deduction is allowed for an NOL
attributable to the qualifying shipping
activities to the extent that the loss is
carried forward from a tax year
preceding the first tax year for which
the alternative tax election was made.
See section 1358(b)(2).
See section 844 for special loss
carryover rules for an insurance
company that has changed its form of
organization or has had a change in
the nature of its insurance business.
Line 27. Total taxable income. The
total taxable income reported on line
27 cannot be less than line 26 of the
Form 1120-L.
Also, line 27 cannot be less than
the largest of the following amounts.
• The amount of nondeductible CFC
dividends under section 965. This
amount is equal to the difference
between columns (a) and (c) of Form
1120-L, Schedule A, line 14.
• The inversion gain of the
corporation for the tax year, if the
corporation is an expatriated entity or
a partner in an expatriated entity. For
details, see section 7874.
• The sum of the corporation’s
excess inclusions from Schedules Q
(1066), line 2c, and the corporation’s
taxable income determined solely
with respect to its ownership and
high-yield interests in FASITs. For
details, see sections 860E(a) and
860J.
Instructions for Form 1120-L

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Instructions for Form 1120-L

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Tax and Payments
Line 29b. Prior year(s) special
estimated tax payments to be
applied. The amount entered on line
29b must agree with the amount(s)
from Form 8816, Part III, line 11. See
Form 8816 and section 847(2) for
additional information.
Line 29c. Estimated tax payments.
Enter any estimated tax payments the
corporation made for the tax year. Do
not include any amount being applied
on line 29d.
Line 29d. Special estimated tax
payments. If the deduction under
section 847 is claimed on line 17,
page 1, special estimated tax
payments must be made in an
amount equal to the tax benefit of the
deduction. These payments must be
made on or before the due date
(without regard to extensions) of this
tax return. See Form 8816 and
section 847(2) for additional
information.
Tax benefit rule. Section 847(8)
requires that if a corporation carries
back net operating losses or capital
losses that arise in years after a year
in which a section 847 deduction was
claimed, then the corporation must
recompute the tax benefit attributable
to the previously claimed section 847
deduction taking into account the loss
carrybacks. Tax benefits also include
those derived from filing a
consolidated return with another
insurance company (without regard to
section 1503(c)).
Therefore, if the recomputation
changes the amount of the section
847 tax benefit, then the taxpayer
must provide a computation schedule
and attach it to Form 8816.
Line 29e. Overpaid estimated tax.
If the corporation overpaid estimated
tax, it may be able to get a quick
refund by filing Form 4466. The
overpayment must be at least 10% of
the corporation’s expected income
tax liability and at least $500. File
Form 4466 after the end of the
corporation’s tax year, and no later
than the 15th day of the third month
after the end of the tax year. Form
4466 must be filed before the
corporation files its tax return.
Line 29f. Enter the total of lines 29a
through 29c less line 29e. Do not
include line 29d in the total for line
29f.
Line 29h. Credit for tax paid on
undistributed capital gains. Enter
the credit from Form 2439, Notice to
Shareholder of Undistributed
Instructions for Form 1120-L

Long-Term Capital Gains, for the
corporation’s share of the tax paid by
a regulated investment company
(RIC) or a real estate investment trust
(REIT) on undistributed long-term
capital gains included in the
corporation’s income. Attach Form
2439 to Form 1120-L.
Line 29i. Credit for federal tax paid
on fuels. Enter any credit from Form
4136, Credit for Federal Tax Paid on
Fuels. Attach Form 4136 to Form
1120-L.
Line 29j. U.S. income tax paid or
withheld at source. Enter the
amount of any U.S. income tax paid
or withheld as reported on Form
1042-S.
Line 29k. Total payments. Add the
amounts on lines 29f through 29j and
enter the total on line 29k.
Backup withholding. If the
corporation had federal income tax
withheld from any payments it
received because, for example, it
failed to give the payer its correct
EIN, include the amount withheld in
the total for line 29k. Write the
amount withheld and the words
“Backup Withholding” in the blank
space above line 29k.
Credit for tax on ozone-depleting
chemicals. Include on line 29k any
credit the corporation is claiming
under section 4682(g)(2) for tax on
ozone-depleting chemicals. Enter
“ODC” next to the entry space.
Line 30. Estimated tax penalty. If
Form 2220 is attached, check the box
on line 30 and enter the amount of
any penalty on that line.
Line 33. Electronic deposit of tax
refund of $1 million or more. If the
corporation is due a refund of $1
million or more and wants it
electronically deposited into its
checking or savings account at any
U.S. bank or other financial institution
instead of having a check sent to the
corporation, complete Form 8302 and
attach it to the corporation’s tax
return.

Schedule A—Dividend
Income and
Dividends-Received
Deduction
For purposes of the 20% ownership
test on lines 1 through 7, the
percentage of stock owned by the
corporation is based on voting power
and value of the stock. Preferred
stock described in section 1504(a)(4)
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is not taken into account.
Corporations filing a consolidated
return should see Regulations
sections 1.1502-13, 1.1502-26, and
1.1502-27 before completing
Schedule A.
Corporations filing a consolidated
return must not report as dividends
on Schedule A any amounts received
from corporations within the tax
consolidation group. Such dividends
are eliminated in consolidation rather
than offset by the dividends-received
deduction.
Line 1, column (a). Enter dividends
(except those received on
debt-financed stock acquired after
July 18, 1984 (see section 246A))
that are:
• Received from less-than-20%owned domestic corporations subject
to income tax, and
• Qualified for the 70% deduction
under section 243(a)(1).
Also include on line 1 the following.
• Taxable distributions from an
IC-DISC or former DISC that are
designated as eligible for the 70%
deduction and certain dividends of
Federal Home Loan Banks. See
section 246(a)(2).
• Dividends (except those received
on debt-financed stock acquired after
July 18, 1984) from a regulated
investment company (RIC). The
amount of dividends eligible for the
dividends-received deduction under
section 243 is limited by section
854(b). The corporation should
receive a notice from the RIC
specifying the amount of dividends
that qualify for the deduction.
Report so-called dividends or
earnings received from mutual
savings banks, etc., as interest. Do
not treat them as dividends.
Line 2, column (a). Enter on line 2:
• Dividends (except those received
on debt-financed stock acquired after
July 18, 1984) that are received from
20%-or-more-owned domestic
corporations subject to income tax
and that are subject to the 80%
deduction under section 243(c), and
• Taxable distributions from an
IC-DISC or former DISC that are
considered eligible for the 80%
deduction.
Line 3, column (a). Enter the
following.
• Dividends received on
debt-financed stock acquired after
July 18, 1984, from domestic and
foreign corporations subject to
income tax that would otherwise be
subject to the dividends-received

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deduction under section 243(a)(1),
243(c), or 245(a). Generally,
debt-financed stock is stock that the
corporation acquired by incurring a
debt (for example, it borrowed money
to buy the stock).
• Dividends received from a RIC on
debt-financed stock. The amount of
dividends eligible for the
dividends-received deduction is
limited by section 854(b). The
corporation should receive a notice
from the RIC specifying the amount of
dividends that qualify for the
deduction.
Line 3, columns (b) and (c).
Dividends received on debt-financed
stock acquired after July 18, 1984,
are not entitled to the full 70% or 80%
dividends-received deduction. The
70% or 80% deduction is reduced by
a percentage that is related to the
amount of debt incurred to acquire
the stock. See section 246A. Also,
see section 245(a) before making this
computation for an additional
limitation that applies to dividends
received from foreign corporations.
Attach a schedule showing how the
amount on line 3, column (c), was
figured.
Line 4, column (a). Enter dividends
received on preferred stock of a
less-than-20%-owned public utility
that is subject to income tax and is
allowed the deduction provided in
section 247 for dividends paid.
Line 5, column (a). Enter dividends
received on preferred stock of a
20%-or-more-owned public utility that
is subject to income tax and is
allowed the deduction provided in
section 247 for dividends paid.
Line 6, column (a). Enter the
U.S.-source portion of dividends that:
• Are received from
less-than-20%-owned foreign
corporations, and
• Qualify for the 70% deduction
under section 245(a). To qualify for
the 70% deduction, the corporation
must own at least 10% of the stock of
the foreign corporation by vote and
value.
Also include dividends received
from a less-than-20%-owned FSC
that:
• Are attributable to income treated
as effectively connected with the
conduct of a trade or business within
the United States (excluding foreign
trade income), and
• Qualify for the 70% deduction
under 245(c)(1)(B).
Line 7, column (a). Enter the
U.S.-source portion of dividends that:

• Are received from 20%-or-more-

owned foreign corporations, and
• Qualify for the 80% deduction
under section 245(a).
Also include dividends received
from a 20%-or-more-owned FSC that:
• Are attributable to income treated
as effectively connected with the
conduct of a trade or business within
the United States (excluding foreign
trade income), and
• Qualify for the 80% deduction
under section 245(c)(1)(B).
Line 8, column (a). Enter dividends
received from wholly owned foreign
subsidiaries that are eligible for the
100% deduction under section 245(b)
but that do not qualify as “100%
dividends” under section
805(a)(4)(C).
In general, the deduction under
section 245(b) applies to dividends
paid out of the earnings and profits of
a foreign corporation for a tax year
during which:
• All of its outstanding stock is
directly or indirectly owned by the
domestic corporation receiving the
dividends, and
• All of its gross income from all
sources is effectively connected with
the conduct of a trade or business
within the United States.
Do not include dividends received
from a life insurance company.
Also, include on line 8, column (a),
dividends from FSCs that are
attributable to foreign trade income
and that are eligible for the 100%
deduction provided in section
245(c)(1)(A).
Line 9, column (a). Enter only those
dividends that qualify under section
243(b) for the 100% dividendsreceived deduction described in
section 243(a)(3) but that do not
qualify as “100% dividends” under
section 805(a)(4)(C). Corporations
taking this deduction are subject to
the provisions of section 1561. Do not
include dividends received from a life
insurance company.
The 100% deduction does not
apply to affiliated group members that
are joining in the filing of a
consolidated return.
Line 10, column (c). Limitation on
dividends-received deduction.
Generally, line 10 of column (c)
cannot exceed the amount from the
worksheet on the next page.
However, in a year in which a loss
from operations occurs, this limitation
does not apply even if the loss is
created by the dividends-received
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deduction. See sections 246(b) and
810.
Line 13, column (a). In general,
enter “100% dividends” as defined in
section 805(a)(4)(C). That is, in
general, enter dividends that qualify
for the 100% dividends-received
deduction under sections 243, 244,
and 245(b) and were not reported on
line 8 or 9 because they were (a) not
distributed out of tax-exempt interest
or out of dividends that do not qualify
as 100% dividends or (b) paid by a
life insurance company.
Note. Certain dividends received by
a foreign corporation are not subject
to proration. Attach a schedule
showing computations.
Line 14, column (a). Enter qualifying
dividends from line 11 of Form 8895,
One-Time Dividends Received
Deduction for Certain Cash Dividends
from Controlled Foreign Corporations.
Line 15, column (a). Include the
following.
1. Foreign dividends not
reportable on lines 3, 6, 7, 8, or 14,
column (a). Include on line 15 the
corporation’s share of the ordinary
earnings of a qualified electing fund
from line 1c of Form 8621. Exclude
distributions of amounts
constructively taxed in the current
year or in prior years under subpart F
(sections 951 through 964).
2. Income constructively received
from CFCs under subpart F. This
amount should equal the total subpart
F income reported on Schedule I,
Form 5471, Information Return of
U.S. Persons With Respect to Certain
Foreign Corporations.
3. Gross-up of dividends for taxes
deemed paid under sections 902 and
960.
4. Dividends (other than capital
gain distributions reported on
Schedule D (Form 1120) and
exempt-interest dividends) that are
received from RICs and that are not
subject to the 70% deduction.
5. Dividends from tax-exempt
organizations.
6. Dividends (other than capital
gain dividends) received from a REIT
that, for the tax year of the trust in
which the dividends are paid,
qualifies under sections 856 through
860.
7. Dividends not eligible for a
dividends-received deduction, which
include the following.
a. Dividends received on any
share of stock held for less than 46
days during the 91-day period
beginning 45 days before the
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2. In all other cases, under the
regulations.

Worksheet for Schedule A, line 10
(keep for your records)
1. Refigure line 8, page 1, without any domestic production
activities deduction, any adjustment under section 1059,
and without any capital loss carryback to the tax year under
section 1212(a)(1). Add this refigured line 8 amount to the
amount on line 25, page 1. Subtract from that total the sum
of lines 9 through 18, page 1 . . . . . . . . . . . . . . . . . . . . . .
2. Complete line 13, column (c) and enter the total of that
amount, line 9, column (c), and the portion of the deduction
on line 8, column (c), that is attributable to dividends from
FSCs that are attributable to foreign trade income . . . . . . .
3. Subtract line 2 from line 1 . . . . . . . . . . . . . . . . . . . . . . . . .
4. Multiply line 3 by 80% . . . . . . . . . . . . . . . . . . . . . . . . . . .
5. Add lines 2, 5, and 7, column (c); the portion of the
deduction on line 8, column (c) that is attributable to wholly
owned foreign subsidiaries; and the portion of the
deduction on line 3, column (c) that is attributable to
dividends received from 20%-or-more-owned corporations
6. Enter the smaller of line 4 or line 5. If line 5 is greater than
line 4, stop here and enter the amount from line 6 on line
10, column (c), and do not complete the rest of the
worksheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7. Enter the total amount of dividends from
20%-or-more-owned corporations that are included on lines
2, 3, 5, and 7, column (a), and the portion of the deduction
on line 8, column (a), that is attributable to wholly owned
subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8. Subtract line 7 from line 3 . . . . . . . . . . . . . . . . . . . . . . . . .
9. Multiply line 8 by 70% . . . . . . . . . . . . . . . . . . . . . . . . . . .
10. Subtract line 5 above from line 10 of column (c) . . . . . . . .
11. Enter the smaller of line 9 or line 10 . . . . . . . . . . . . . . . . .
12. Dividends-received deduction after limitation (section
246(b)). Add lines 6 and 11. Enter the result here and on
line 10, column (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ex-dividend date. When counting the
number of days the corporation held
the stock, you cannot count certain
days during which the corporation’s
risk of loss was diminished. See
section 246(c)(4) and Regulations
section 1.246-5 for more details.
b. Dividends attributable to
periods totaling more than 366 days
that the corporation received on any
share of preferred stock held for less
than 91 days during the 181-day
period that began 90 days before the
ex-dividend date. When counting the
number of days the corporation held
the stock, you cannot count certain
days during which the corporation’s
risk of loss was diminished. See
section 246(c)(4) and Regulations
section 1.246-5 for more details.
Preferred dividends attributable to
periods totaling less than 367 days
are subject to the 46-day holding
period rule above.
c. Dividends on any share of stock
to the extent the corporation is under
an obligation (including a short sale)
to make related payments with
Instructions for Form 1120-L

respect to positions in substantially
similar or related property.
8. Any other taxable dividend
income not properly reported above
(including distributions under section
936(h)(4)).

Schedule B—Gross
Investment Income
Line 1. Interest. Enter the total
taxable interest received or accrued
during the tax year, less any
amortization of premium, plus any
accrual of discount required by
section 811(b). Generally, the
appropriate amortization of premium
and accrual of discount for the tax
year on bonds, notes, debentures, or
other evidence of indebtedness held
by a life insurance company should
be determined:
1. Under the method regularly
employed by the company, if
reasonable, and
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For bonds (as defined in section
171(d)) issued after September 27,
1985, the appropriate amount of
amortization of premium must be
determined using the yield to maturity
method described in section
171(b)(3). Market discount is not
required to be accrued under section
811(b). Attach a statement showing
the method and computation used.
Note. The Small Business Job
Protection Act of 1996 repealed
section 133, which provided for the
50% interest income exclusion with
respect to ESOP loans. The Act also
repealed section 812(g), which
provided for the exclusion of interest
income from ESOP loans for
company/policyholder proration. The
repeal of these exclusions is effective
for ESOP loans made after August
20, 1996. See Act section 1602 for
special rules for binding contract
agreements in effect prior to June 10,
1996, and certain refinancings made
after August 20, 1996.
Line 3. Gross rents. Enter the gross
rents received or accrued during the
tax year. Related expenses, such as
repairs, taxes, and depreciation
should be reported as “Other
deductions” on line 18, page 1.
Line 4. Gross royalties. Enter the
gross royalties received or accrued
during the tax year. Report the
depletion deduction on line 18, page
1.
Line 5. Leases, terminations, etc.
Enter the gross income received from
entering into, altering, or terminating
any lease, mortgage, or other
instrument from which the corporation
derives interest, rents, or royalties.
Line 6. Excess of net short-term
capital gain over net long-term
capital loss. See the instructions for
line 5, page 1, on page 8, for a
definition of capital assets.
Line 7. Gross income from a trade
or business other than insurance.
Enter the gross income from a trade
or business (other than insurance
carried on by the life insurance
company or by a partnership of which
the life insurance company is a
partner). Include section 1245,
section 1250, and other ordinary
gains on assets used in a
noninsurance business from Form
4797. Report expenses related to any
trade or business other than
insurance on line 18, page 1.

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Line 10. The increase in policy
cash value of section 264(f)
policies as defined in section
805(a)(4)(F). Generally, this applies
to contracts issued after June 8,
1997, in tax years ending after that
date. However, it also applies to
contracts issued prior to June 9,
1997, that have been subject to a
material increase in death benefits or
other material change. See section
1084(d) of the Taxpayer Relief Act of
1997.
Line 12. 100% qualifying dividends.
Enter the total amount of dividends if
the percentage used to determine the
deduction allowable under sections
243, 244, and 245(b) is 100%. Do not
include dividends to the extent they
are funded with tax-exempt interest or
dividends that would not qualify as
100% dividends in the hands of the
corporation. See section 812(e).
Note. Multi-tiered corporate
arrangements cannot be used to
change the character of the
tax-exempt interest income and
dividends received in an attempt to
avoid exclusion.

Schedule F—Increase
(Decrease) in Reserves
and Company/
Policyholder Share
Percentage
Schedule F is used to figure:
1. The company’s share
percentage used in determining the
company’s share of the dividendsreceived deduction under section
805(a)(4);
2. The policyholders’ share
percentage used in determining the
policyholders’ share of tax-exempt
interest for determining the increase
or decrease in reserves under section
807 (and the increase in policy cash
value of section 264(f) policies as
defined in section 805(a)(4)(F)); and
3. To determine if, under section
807, certain reserves decreased or
increased for the tax year. A net
decrease will be includible in gross
income, while a net increase will be a
deduction in computing LICTI.
The net increase or net decrease
in reserves is figured by comparing
the opening balance for reserves to
the closing balance for reserves
reduced by the policyholders’ share
of tax-exempt interest (and the
increase in policy cash value of

section 264(f) policies as defined in
section 805(a)(4)(F)).
Reserve adjustments are not
treated as interest expenses for
allocation purposes under section
864(c). See section 818(f).
There are special rules for
computing reserves of unearned
premiums of certain nonlife contracts.
See section 807(e)(7)(A).
Note. If the basis for determining the
amount of any item referred to in
section 807(c) (life insurance
reserves, etc.) at the end of the tax
year differs from the basis for the
determination at the beginning of the
tax year, see section 807(f).
Line 1. Life insurance reserves.
For rules on how to compute life
insurance reserves, see sections
807(d) and (e). Section 807(d)(2)(B)
provides that the interest rate used to
compute life insurance reserves is the
greater of the applicable federal
interest rate (AFIR) or the prevailing
state assumed interest rate (SAIR).
The applicable rates for tax years
beginning in 2005 will be published in
the Internal Revenue Bulletin when
available. The applicable rates for tax
years beginning in 2004 are available
at Rev. Rul. 2005-29, 2005-21 I.R.B.
1080. For modified guaranteed
contracts described in section 817A,
see Notice 97-32, 1997-1 C.B. 420.
Note. A change in a life insurance
company’s computation of existing
life insurance reserves for annuity
contracts to take into account specific
factors issued by the NAIC is a
change in basis subject to section
807(f). See Rev. Rul. 2002-6, 2002-6
I.R.B. 460.
Line 2. Unearned premiums and
unpaid losses. For purposes of
sections 807 and 805(a)(1), the
amount of the unpaid losses (other
than losses on life insurance
contracts) must be the amount of the
discounted unpaid losses determined
under section 846.
Section 846 provides that the
amount of the discounted unpaid
losses must be figured separately by
each line of business (multiple peril
lines must be treated as a single line
of business) and by each accident
year and must be equal to the
present value of those losses
determined by using the:
1. Amount of the undiscounted
unpaid losses,
2. Applicable interest rate, and
3. Applicable loss payment
pattern.
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Special rules apply with respect to
unpaid losses related to disability
insurance (other than credit disability
insurance), noncancelable accident
and health insurance, cancelable
accident and health insurance, and to
the international and reinsurance
lines of business. With regard to the
special rules for discounting unpaid
losses on accident and health
insurance (other than disability
income insurance), unpaid losses are
assumed to be paid in the middle of
the year following the accident year.
Generally, the amount of
undiscounted unpaid losses means
the unpaid losses shown in the
annual statement. The amount of
discounted unpaid losses with
respect to any line of business for an
accident year cannot exceed the total
amount of unpaid losses with respect
to any line of business for an accident
year as reported on the annual
statement.
The applicable interest rate for
each calendar year and the
applicable loss payment patterns for
each accident year for each line of
business are determined by the IRS.
The applicable interest rate and loss
payment patterns for 2005 are
published in Rev. Proc. 2005-72,
2005-49 I.R.B. 1078. The applicable
interest rate and loss payment
patterns for 2003 and 2004 are
published in Rev. Proc. 2004-9,
2004-2 I.R.B. 275, and Rev. Proc.
2004-69, 2004-49 I.R.B. 906,
respectively.
Corporations having sufficient
historical experience to determine a
loss payment pattern may, under
certain circumstances, elect under
section 846(e) to use their own
historical experience (instead of the
loss payment patterns determined by
the IRS). If this election is made, the
loss payment patterns will be based
on the most recent calendar year for
which an annual statement was filed
before the beginning of the accident
year. The election will not apply to
any international or reinsurance line
of business. If the corporation makes
this election, check the “Yes” column
for question 9 in Schedule M, Other
Information. For more information,
see section 846(e), Regulations
section 1.846-2, and Rev. Proc.
92-76, 1992-2 C.B. 453.
Section 807(d)(4)(A)(ii) permits an
election to recompute the federal
interest rate every 5 years. In
general, a life insurance company
would apply the greater of the AFIR
or the prevailing SAIR for the
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calendar year in which the contract is
issued and the following 4 calendar
years. In the 5th calendar year after
the calendar year in which the
contract was issued, the life
insurance company would begin
using the AFIR in effect for that 5th
calendar year or the prevailing SAIR
for the calendar year in which the
contract was issued, whichever is
greater. This rate would then remain
in effect for the 4 subsequent years.
For each subsequent 5-year period, a
similar recomputation would be
required. Once made, the election is
effective for contracts issued during
that calendar year and any
subsequent years, and may only be
revoked with the consent of the IRS.
Line 3. Supplementary contracts.
Enter the amount (discounted at the
appropriate rate of interest)
necessary to satisfy the obligations
under insurance and annuity
contracts, but only if the obligations
do not involve (at the time the
computation is made) life, accident,
or health contingencies.
For this item, the appropriate rate
of interest is the higher of the
prevailing SAIR at the time the
obligation first did not involve life,
accident, or health contingencies or
the rate of interest assumed by the
corporation (at that time) in
determining the guaranteed benefit.
However, the amount of any contract
may not be less than the net
surrender value of the contract.
Line 4. Dividend accumulations
and other amounts. Enter the total
dividend accumulations and other
amounts held at interest in
connection with insurance and
annuity contracts.
Line 5. Advance premiums. Enter
the total premiums received in
advance and liabilities for premium
deposit funds. See section
807(e)(7)(A) for special rules for
treatment of certain nonlife reserves.
Line 6. Special contingency
reserves. Enter the total reasonable
special contingency reserves under
contracts of group term life insurance
or group accident and health
insurance which are established and
maintained for the provision of
insurance on retired lives, premium
stabilization, or for a combination
thereof.
Line 8. Increase (decrease) in
reserves. In figuring the amount on
line 8, any decrease in reserves must
be computed without any reduction of
the closing balance of section 807
Instructions for Form 1120-L

reserves by the policyholders’ share
of tax-exempt interest.
Note. In figuring the company’s and
policyholders’ share percentages,
carry the computations to enough
decimal places to ensure substantial
accuracy and to eliminate any
significant error in the resulting tax.
Lines 9 and 12. Do not include any
of the interest income received on an
ESOP loan made prior to August 21,
1996. For binding contract and
refinancing rules, see section 1602 of
the Small Business Job Protection
Act of 1996.
Line 12. If there is an increase in
reserves, enter the amount from page
1, line 8. If there is a decrease in
reserves, see the instructions for line
2, page 1.
Line 13. Do not include the exempt
portion of any of the interest income
received on an ESOP loan made
prior to August 21,1996. For binding
contract and refinancing rules, see
section 1602 of the Small Business
Job Protection Act of 1996.
Line 16. In computing the amount
entered on line 16, any decrease in
reserves must be figured without any
reduction of the closing balance of
section 807 reserve items by the
policyholders’ share of tax-exempt
interest.
Line 18a. A policyholder dividend is
any dividend or similar distribution to
policyholders in their capacity as
such.
Enter on line 18a policyholder
dividends paid or credited (including
an increase in benefits) where the
amount is not fixed in the contract but
depends on the corporation’s
experience or management’s
discretion.
Also, under section 808(e), any
policyholder dividend which (a)
increases either the cash surrender
value of the contract or other benefits
payable under the contract or (b)
reduces the premium otherwise
required to be paid, is treated as paid
to and returned by the policyholder to
the company as a premium. Include
these amounts in income on line 1,
page 1.
Line 18b. Excess interest means
any amount in the nature of interest:
• Paid or credited to policyholders in
their capacity as such and
• In excess of interest determined at
the prevailing SAIR for such contract.
Line 18c. Premium adjustment
means any reduction in the premium
under an insurance or annuity
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contract which (except for the
reduction) would have been required
to be paid under the contract.
Line 18d. Experience-rated refund
means any refund or credit based on
the experience of the contract or
group involved.
Line 28. Multiply gross investment
income (line 9) by 90% or, in the case
of gross investment income related to
assets held in segregated asset
accounts under variable contracts, by
95%. Enter the result on line 28.

Schedule G—Policy
Acquisition Expenses
For purposes of section 848(b), all life
insurance company members of the
same controlled group are treated as
one company. Any deduction
determined for the group must be
allocated among the life insurance
companies in the group in such a
manner as the IRS may prescribe.
Line 1. Gross premiums and other
consideration. Generally, gross
premiums and other consideration is
the total of:
1. All premiums and other
consideration (other than amounts on
reinsurance agreements) and
2. Net positive consideration for
any reinsurance agreement (see
Regulations section 1.848-2(b)).
Also include on this line:

• Advanced premiums,
• Amounts in a premium deposit fund
or similar account, as permitted by
Regulations section 1.848-2(b)(3),
• Fees,
• Assessments,
• Amounts that the insurance
company charges itself representing
premiums with respect to benefits for
its employees (including full-time
insurance salesmen treated as
employees under section
7701(a)(20)), and
• The value of a new contract issued
in an exchange described in
Regulations section 1.848-2(c)(2) or
(3).
Line 2. Return premiums and
premiums and other consideration
incurred for reinsurance. For
purposes of section 848(d)(1)(B) and
Regulations section 1.848-2(e), return
premiums means amounts (other
than policyholder dividends or claims
and benefit payments) returned or
credited to the policyholder. See
Regulations sections 1.848-2(f) and
1.848-3 for how to treat amounts
returned to another insurance

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company under a reinsurance
agreement.
Line 5. The entries in columns 5(a),
(b), or (c) may be positive or
negative.
Line 6. If the sum of columns 5(a),
(b), and (c) is negative, enter this
negative amount on line 6 and enter
-0- on lines 7 and 8. The result is a
negative capitalization amount under
section 848(f).
Line 9. General deductions. These
are deductions under sections 161
through 198, relating to itemized
deductions, and sections 401 through
424, relating to pension,
profit-sharing, stock bonus plans, etc.
Also, include on this line ceding
commissions incurred for the
reinsurance of a specified insurance
contract. Do not include amortization
deductions of specified policy
acquisition expenses under sections
848(a) or (b). Skip line 9 if the
corporation has elected out of the
general deductions limitation. See
Regulations section 1.848-2(g)(8).
Note. If interest expense is included
on line 9, do not also include it on
page 1, line 15a.
Line 13. Unamortized specified
policy acquisition expenses from
prior years. Enter the balance of
unamortized specified policy
acquisition expenses from prior years
as of the beginning of the tax year.
See section 848(f)(1)(B).
Line 16. Phase-out amount. The
amount of amortization for members
of a controlled group and the
phase-out of the group’s specified
policy acquisition expenses under
section 848(b) must be allocated to
each member in proportion to that
member’s specified policy acquisition
expenses for the tax year.

Schedule H—Small Life
Insurance Company
Deduction
To qualify for the small life insurance
company deduction, a life insurance
company must have less than:
• $15 million of tentative LICTI and
• $500 million in assets.
The deduction for qualifying small
life insurance companies is 60% of
the first $3 million of tentative LICTI
for the tax year. If tentative LICTI
exceeds $3 million, the deduction is
phased out. The reduction in the
deduction is equal to 15% of the
tentative LICTI for the tax year that
exceeds $3 million.

In computing the small life
insurance company deduction, all life
insurance company members of the
same controlled group are treated as
one company. Any small life
insurance company deduction
determined for the group must be
allocated among the life insurance
companies in the group in proportion
to their respective tentative LICTIs.
Do not include any items from
noninsurance businesses when
figuring tentative LICTI for purposes
of computing the small life insurance
company deduction.
Noninsurance business generally
means any activity which is not an
insurance business. However, under
section 806(b)(3)(B), any activity
which is not an insurance business
shall be treated as an insurance
business if:
1. It is of a type traditionally
carried on by life insurance
companies for investment purposes,
but only if the carrying on of the
activity (other than real estate) does
not constitute the active conduct of a
trade or business or
2. It involves the performance of
administrative services in connection
with plans providing life insurance,
pension, or accident and health
benefits.
For the assets test, the assets of
all members of a controlled group, as
defined in section 806(c)(3), must be
included, whether or not they are life
insurance companies. For information
regarding the valuation of assets, see
the instructions for Schedule L, Part I.

Schedule I—Limitation
on Noninsurance Losses
Section 806(b)(3)(C) provides that, in
computing LICTI, any loss from
noninsurance business (defined
above in the instructions for Schedule
H) is limited to the smaller of:
• 35% of the loss or
• 35% of LICTI (computed by
excluding any noninsurance loss
included in arriving at LICTI on line
24, page 1).
For more information on either the
computation of the allowable loss
deduction or on applicable carryback
provisions, see section 1503(c).

Schedule J
Section 705 of the American Jobs
Creation Act of 2004 added section
815(g), which provides special rules
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for distributions to shareholders of
stock life insurance companies from
the Policyholders Surplus Account
(PSA) during 2005 and 2006. For any
tax year of a stock life insurance
company beginning after December
31, 2004, and before January 1,
2007, the following rules apply.
1. Section 815(g)(1) treats direct
and indirect distributions from the
pre-1984 PSA (as described in
section 815(a)(2)) as zero, and
2. Section 815(g)(2) changed the
ordering of distributions from the
Shareholders Surplus Account (SSA)
and PSA accounts. For 2005 and
2006, distributions are treated as
made first out of the PSA, then out of
the SSA, and finally out of other
accounts.
As required by sections 815(g)(1)
and (g)(2), the following changes
have been made to the Form 1120-L
Schedule J for 2005.
1. Lines 9a and 9b of the previous
Part II —Policyholders Surplus
Account (Part I for 2005) have been
deleted since direct and indirect
distributions (as described in section
815(a)(2)) from the PSA account are
not taxable for 2005 and 2006.
2. The order of Parts I and II of
Schedule J has been reversed as
distributions are treated as made first
out of the PSA, then out of the SSA,
and finally out of other accounts.
3. Line numbers, line references,
and computational instructions have
been made to conform to the
changes noted in (1) and (2) above.
Note. Subtractions from the PSA
under pre-1984 sections 815(d)(1)
and (4) and 815(d)(2) remain taxable
under section 705 of the American
Jobs Creation Act of 2004.

Part I—Policyholders
Surplus Account
Any stock life insurance company that
had an existing PSA on December
31, 1983, will continue to maintain the
account. See section 815(d)(1). While
no additions can be made to this
account, it must be decreased by
amounts specified in section
815(d)(3). Also, section 815(f)
provides that, in general, the
provisions of subsections (d), (e), (f),
and (g) of section 815 as in effect
before the enactment of the Tax
Reform Act of 1984 (“Act of 1984”)
continue to apply to any PSA that had
a balance as of December 31,1983.
Direct or indirect distributions from
the PSA are not taxable for 2005 and
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2006. Subtractions from the PSA
under pre-1984 sections 815(d)(1)
and (4) and section 815(d)(2) are
added to LICTI and are subject to tax
under section 801.
Line 1. If the balance at the end of
the preceding tax year differs from
the balance at the beginning of the
current tax year (for example, due to
section 815(d)(5) as in effect prior to
the Act of 1984), attach a schedule
showing the adjustments made. Prior
to the Act of 1984, section 815(d)(5)
provided that, if any addition to the
PSA increases or creates a loss from
operations and part or all of the loss
cannot be used in any other year to
reduce LICTI, then the loss will
reduce the PSA at the time that the
addition was made. In this case, the
beginning balance of the PSA must
be adjusted before any subtractions
for the current tax year are made.
Line 2a. To figure the amount to
enter on line 2a:
1. Determine the total amount to
be subtracted from the PSA under
sections 815(d)(1) and 815(d)(4) as in
effect prior to the Act of 1984,
2. Add 100% to the corporation’s
tax rate,
3. Divide the result of step 1 by
the result of step 2, and
4. Enter the result of step 3 on line
2a. The amount entered on line 2a
must be added to the SSA at the
beginning of the next tax year.
Line 2b. Subtract the result of step 3,
line 2a, from the result of step 1, line
2a. Enter the result on line 2b.
Line 2c. Enter the total amount to be
subtracted from the PSA under
section 815(d)(2) as in effect prior to
the Act of 1984. At that time, section
815(d)(2) provided that if, for any tax
year, a corporation was not an
insurance company, or if for any 2
successive tax years a corporation
was not a life insurance company,
then any balance remaining in the
PSA at the end of the last tax year
that the corporation was a life
insurance company must be included
in taxable income for that tax year.

Part II—Shareholders
Surplus Account
Any stock life insurance company that
had a policyholders surplus account
(PSA) on December 31, 1983, will
continue to maintain a shareholders
surplus account (SSA). See section
815(c)(1) for more information.
Line 8d. Do not include the increase
in cash value for section 264(f)
policies.
Instructions for Form 1120-L

Line 10. In figuring the tax liability on
line 10, adjustments must be made
for any year in which the alternative
minimum tax is imposed or the
minimum tax credit has been taken.
Line 12. Enter all amounts treated
under section 815 as distributions to
shareholders. Any distribution to
shareholders is treated as having
been made first out of the PSA, to the
extent thereof.

Schedule K—Tax
Computation
If the corporation is making a
section 965 election, see the
CAUTION instructions for Parts III and IV
of Form 8895 before completing
Schedule K.
Line 1. Members of a controlled
group. A member of a controlled
group must check the box on line 1
and complete lines 2a and 2b of
Schedule K, Form 1120-L. The term
“controlled group” means any
parent-subsidiary group,
brother-sister group, or combined
group. See the definitions below.
Parent-subsidiary group. A
parent-subsidiary group is one or
more chains of corporations
connected through stock ownership
with a common parent corporation if:
• Stock possessing at least 80% of
the total combined voting power of all
classes of stock entitled to vote or at
least 80% of the total value of shares
of all classes of stock of each of the
corporations, except the common
parent corporation, is directly or
indirectly owned by one or more of
the other corporations; and
• The common parent corporation
directly or indirectly owns stock
possessing at least 80% of the total
combined voting power of all classes
of stock entitled to vote or at least
80% of the total value of shares of all
classes of stock of at least one of the
other corporations, excluding, in
figuring such voting power or value,
stock owned directly by such other
corporations.
Brother-sister group. A
brother-sister group is two or more
corporations if 5 or fewer persons
who are individuals, estates, or trusts
directly or indirectly own stock
possessing:
1. At least 80% of the total
combined voting power of all classes
of stock entitled to vote or at least
80% of the total value of shares of all

!

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classes of the stock of each
corporation, and
2. More than 50% of the total
combined voting power of all classes
of stock entitled to vote or more than
50% of the total value of shares of all
classes of stock of each corporation,
taking into account the stock
ownership of each such person only
to the extent such stock ownership is
identical with respect to each such
corporation.
The definition of brother-sister
group does not include (1) above, for
purposes of the taxable income
brackets, alternative minimum tax
exemption amounts, and
accumulated earnings credit.
Combined group. A combined
group is three or more corporations
each of which is a member of a
parent-subsidiary group or a
brother-sister group, and one of
which is:
• A common parent corporation
included in a group of corporations in
a parent-subsidiary group, and also
• Included in a group of corporations
in a brother-sister group.
For more details on controlled
groups, see section 1563.
Line 2a. Members of a controlled
group are entitled to one $50,000,
one $25,000, and one $9,925,000
taxable income bracket amount (in
that order) on line 2a.
When a controlled group adopts or
later amends an apportionment plan,
each member must attach to its tax
return a copy of its consent to this
plan. The copy (or an attached
statement) must show the part of the
amount in each taxable income
bracket apportioned to that member.
See Regulations section 1.1561-3(b)
for other requirements and for the
time and manner of making the
consent.
Unequal apportionment plan.
Members of a controlled group can
elect an unequal apportionment plan
and divide the taxable income
brackets as they want. There is no
need for consistency among taxable
income brackets. Any member may
be entitled to all, some, or none of the
taxable income bracket. However, the
total amount for all members cannot
be more than the total amount in
each taxable income bracket.
Equal apportionment plan. If no
apportionment plan is adopted,
members of a controlled group must
divide the amount in each taxable
income bracket equally among

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themselves. For example, Controlled
Group AB consists of Corporation A
and Corporation B. They do not elect
an apportionment plan. Therefore,
each corporation is entitled to:
• $25,000 (one-half of $50,000) on
line 2a(1),
• $12,500 (one-half of $25,000) on
line 2a(2), and
• $4,962,500 (one-half of
$9,925,000) on line 2a(3).
Line 2b. Members of a controlled
group are treated as one group to
figure the applicability of the
additional 5% tax and the additional
3% tax. If an additional tax applies,
each member will pay that tax based
on the part of the amount used in
each taxable income bracket to
reduce that member’s tax. See
section 1561(a). If an additional tax
applies, attach a schedule showing
the taxable income of the entire group
and how the corporation figured its
share of the additional tax.
Line 2b(1). Enter the corporation’s
share of the additional 5% tax on line
2b(1).
Line 2b(2). Enter the corporation’s
share of the additional 3% tax on line
2b(2).
Line 3. Most corporations figure their
tax by using the Tax Rate Schedule,
below. Exceptions apply to members
of a controlled group. See the Tax
Computation Worksheet for Members
of a Controlled Group. Members of a
controlled group must attach a
statement showing the computation
of the tax entered on line 3.
Tax Rate Schedule
If taxable income on line 27, page 1 is:

Over —

But not
over —

Tax is:

line 3, write “Tax differential rate of
31.6% used” and the amount.
Deferred tax under section 1291.
If the corporation was a shareholder
in a passive foreign investment
company (PFIC) and received an
excess distribution or disposed of its
investment in the PFIC during the
year, it must include the total increase
in taxes due under section 1291(c)(2)
in the total for line 3. On the dotted
line to the left of line 3, enter “Section
1291” and the amount.
Do not include on line 3 any
interest due under section 1291(c)(3).
Instead, show the amount of interest
owed in the bottom margin of page 1,
Form 1120-L, and enter “Section
1291 interest.” For details, see Form
8621.
Additional tax under section
197(f). A corporation that elects to
pay tax on the gain from the sale of
an intangible under the related
person exception to the anti-churning
rules should include any additional
tax due under section 197(f)(9)(B) in
the total for line 3. On the dotted line

next to line 3, enter “Section 197” and
the amount.
Line 4. Alternative minimum tax
(AMT).
A corporation that is not a
small corporation exempt from
CAUTION the AMT (see page 21) may
be required to file Form 4626 if it
claims certain credits, even though it
does not owe any AMT. See Form
4626 for details.

!

Unless the corporation is treated
as a small corporation exempt from
the AMT, it may owe the AMT if it has
any of the adjustments and tax
preference items listed on Form
4626. A life insurance company must
file Form 4626 if its LICTI before the
operations loss deduction, combined
with these adjustments and tax
preference items, is more than the
smaller of $40,000 or the life
insurance company’s allowable
exemption amount (from Form 4626).
See Form 4626 and its instructions
for details.

Tax Computation Worksheet for Members of a Controlled Group
(keep for your records)
Note. Each member of a controlled group must compute its tax using this worksheet.

1. Enter taxable income (line 27, page 1) . . . . . . . . . . . . . . . . . . .
2. Enter line 1 or the corporation’s share of the $50,000 taxable
income bracket, whichever is less . . . . . . . . . . . . . . . . . . . . . . .
3. Subtract line 2 from line 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4. Enter line 3 or the corporation’s share of the $25,000 taxable
income bracket, whichever is less . . . . . . . . . . . . . . . . . . . . . . .
5. Subtract line 4 from line 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Of the
amount
over —

$0
$50,000
15%
$0
50,000
75,000
$ 7,500 + 25%
50,000
75,000
100,000
13,750 + 34%
75,000
100,000
335,000
22,250 + 39%
100,000
335,000 10,000,000
113,900 + 34%
335,000
10,000,000 15,000,000 3,400,000 + 35% 10,000,000
15,000,000 18,333,333 5,150,000 + 38% 15,000,000
18,333,333
----35%
0

Note. Gain recognized by a life
insurance company from the
redemption of market discount bonds
issued before July 19, 1984, and
acquired on or before September 25,
1985, is taxed at a rate of 31.6% only
if it is less than the tax that otherwise
would be imposed. See section
1011(d) of the Tax Reform Act of
1986 as amended by The Technical
and Miscellaneous Revenue Act of
1988. On the dotted line to the left of

6. Enter line 5 or the corporation’s share of the $9,925,000 taxable
income bracket, whichever is less . . . . . . . . . . . . . . . . . . . . . . .
7. Subtract line 6 from line 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8. Multiply line 2 by 15% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9. Multiply line 4 by 25% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10. Multiply line 6 by 34% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11. Multiply line 7 by 35% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12. If the taxable income of the controlled group exceeds $100,000,
enter this member’s share of the smaller of: 5% of the taxable
income in excess of $100,000, or $11,750 (see instructions for
Schedule K, line 2b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13. If the taxable income of the controlled group exceeds $15
million, enter this member’s share of the smaller of 3% of the
taxable income in excess of $15 million, or $100,000 (see
instructions for Schedule K, line 2b). . . . . . . . . . . . . . . . . . . . . .
14. Total. Add lines 8 through 13. Enter here and on line 3,
Schedule K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Note. See section 56(g)(4)(B)(ii) for
special rules for life insurance
companies for the computation of
adjusted current earnings.
Exemption for small corporation.
A corporation is treated as a small
corporation exempt from the AMT for
its tax year beginning in 2005 if that
year is the corporation’s first tax year
in existence (regardless of its gross
receipts) or:
1. It was treated as a small
corporation exempt from the AMT for
all prior tax years beginning after
1997 and
2. Its average annual gross
receipts for the 3-tax-year period (or
portion thereof during which the
corporation was in existence) ending
before its tax year beginning in 2005
did not exceed $7.5 million ($5 million
if the corporation had only 1 prior tax
year).
Line 6a. Foreign tax credit. To find
out if a corporation can take this
credit for payment of income tax to a
foreign country or U.S. possession,
see Form 1118.
Line 6b. Specified credits. Include
any other credits on line 6b. On the
dotted line to the left of the entry
space, write the amount of the credit
and identify it.
Possessions tax credit. The
Small Business Job Protection Act of
1996 repealed the possessions
credit. However, existing credit
claimants may qualify for a credit
under the transitional rules. See Form
5735, Possessions Corporation Tax
Credit (Under Sections 936 and 30A).
Nonconventional source fuel
credit (calendar year filers only).
For tax years ending on December
31, 2005, use Form 8907,
Nonconventional Source Fuel Credit,
to figure the credit for the sale of
qualified fuels produced from a
nonconventional source. Include the
amount from line 23 in the total for
line 6b.
Note. For tax years ending after
December 31, 2005, the
nonconventional source fuel credit is
a general business credit included on
Form 3800.
Qualified electric vehicle (QEV)
credit. Use Form 8834, Qualified
Electric Vehicle Credit, if the
corporation can claim a credit for the
purchase of a new qualified electric
vehicle. Vehicles that qualify for this
credit are not eligible for the
deduction for clean-fuel vehicles
under section 179A.
Instructions for Form 1120-L

Line 6c. General business credit.
Enter on line 6c the corporation’s total
general business credit.
If the corporation is filing Form
8844, Empowerment Zone and
Renewal Community Employment
Credit; Form 6478, Credit for Alcohol
Used as Fuel; or Form 8835 (see list
below) with a credit from Section B;
check the “Form(s)” box, enter the
form number in the space provided,
and include the allowable credit on
line 6c.
If the corporation is required to file
Form 3800, General Business Credit,
check the “Form 3800” box and
include the allowable credit on line
6c.
If the corporation is not required to
file Form 3800, check the “Form(s)”
box, enter the form number in the
space provided, and include on line
6c the allowable credit from the
applicable form listed below.
• Investment Credit (Form 3468).
• Work Opportunity Credit (Form
5884).
• Welfare-to-Work Credit (Form
8861).
• Credit for Increasing Research
Activities (Form 6765).
• Low-Income Housing Credit (Form
8586).
• Enhanced Oil Recovery Credit
(Form 8830).
• Disabled Access Credit (Form
8826).
• Renewable Electricity, Refined
Coal, and Indian Coal Production
Credit (Form 8835).
• Indian Employment Credit (Form
8845).
• Credit for Employer Social Security
and Medicare Taxes Paid on Certain
Employee Tips (Form 8846).
• Orphan Drug Credit (Form 8820).
• New Markets Credit (Form 8874).
• Credit for Small Employer Pension
Plan Startup Costs (Form 8881).
• Credit for Employer-Provided
Childcare Facilities and Services
(Form 8882).
• Qualified Railroad Track
Maintenance Credit (Form 8900).
• Biodiesel and Renewable Diesel
Fuels Credit (Form 8864).
• Low Sulfur Diesel Fuel Production
Credit (Form 8896).
• Credit for Contributions to Selected
Community Development
Corporations (Form 8847).
Line 6d. Credit for prior year
minimum tax. To figure the
minimum tax credit and any
carryforward of that credit, use Form
8827, Credit for Prior Year Minimum
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Tax —Corporations. Also see Form
8827 if any of the corporation’s 2004
nonconventional source fuel credit or
qualified electric vehicle credit was
disallowed solely because of the
tentative minimum tax limitation. See
section 53(d).
Line 6e. Bond credits. Enter the
amount of any credit from Form 8860,
Qualified Zone Academy Bond Credit,
or from Form 8912, Clean Renewable
Energy Bond Credit and Gulf Bond
Credit, and check the applicable box.
Line 9. Foreign corporations. A
foreign corporation carrying on a life
insurance business in the United
States is taxed as a domestic life
insurance company on its income
effectively connected with the
conduct of a trade or business in the
United States (see sections 864(c)
and 897 for definition).
Generally, any other U.S.-source
income received by the foreign
corporation is taxed at 30% (or at a
lower treaty rate) under section 881.
If the corporation has this income,
attach a schedule showing the kind
and amount of income, the tax rate,
and the amount of tax. Enter the tax
on line 9. However, see Reduction of
section 881 tax below.
Note. Interest received from certain
portfolio debt investments that were
issued after July 18, 1984, is not
subject to the tax. See section 881(c)
for details.
See section 842 for more
information.
Minimum effectively connected
investment income. See section
842(b) and Notice 89-96, 1989-2 C.B.
417, for the general rules for
computing this amount. Also, see
Rev. Proc. 2005-64, 2005-36 I.R.B.
492, for the domestic asset/liability
percentages and domestic yields
needed to compute this amount.
Any additional income required by
section 842(b) must be included in
LICTI (for example, line 7, page 1).
Reduction of section 881 tax.
Additional taxes resulting from the net
investment income adjustment may
offset a corporation’s section 881 tax
on U.S.-source income. The tax
reduction is determined by multiplying
the section 881 tax by the ratio of the
amount of income adjustment to
income subject to the section 881 tax,
computed without the exclusion for
interest on state and local bonds or
income exempted from taxation by
treaty (section 842(c)(2)). Attach a
statement showing how the reduction
of section 881 tax was figured. Enter

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the net tax imposed by section 881
on line 9.
Note. Section 842(c)(1) requires that
foreign life insurance companies
make the investment income
adjustment before claiming a small
life insurance company deduction.
Line 10. Other taxes. Include any of
the following taxes and interest in the
total on line 10. Check the
appropriate box(es) for the form, if
any, used to figure the total.
Recapture of investment credit.
If the corporation disposed of
investment credit property or changed
its use before the end of its useful life
or recovery period, it may owe a tax.
See Form 4255, Recapture of
Investment Credit, for details.
Recapture of low-income
housing credit. If the corporation
disposed of property (or there was a
reduction in the qualified basis of the
property) for which it took the
low-income housing credit, it may
owe a tax. See Form 8611,
Recapture of Low-Income Housing
Credit.
Alternative tax on qualifying
shipping activities. Enter any
alternative tax on qualifying shipping
activities from Form 8902. Check the
“Other” box and attach Form 8902.
Other. Additional taxes and
interest amounts can be included in
the total entered on line 10. Check
the box for “Other” if the corporation
includes any additional taxes and
interest such as the items discussed
below. See How to report below for
details on reporting these amounts on
an attached schedule.
• Recapture of qualified electric
vehicle (QEV) credit. The corporation
must recapture part of the QEV credit
it claimed in a prior year if, within 3
years of the date the vehicle was
placed in service, it ceases to qualify
for the credit. See Regulations
section 1.30-1 for details on how to
figure the recapture.
• Recapture of Indian employment
credit. Generally, if an employer
terminates the employment of a
qualified employee less than 1 year
after the date of initial employment,
any Indian employment credit allowed
for a prior tax year because of wages
paid or incurred to that employee
must be recaptured. For details, see
Form 8845 and section 45A.
• Recapture of new markets credit
(see Form 8874).
• Recapture of employer-provided
childcare facilities and services credit
(see Form 8882).

• Interest on deferred tax attributable

to certain nondealer installment
obligations (section 453A(c)).
• Interest due on deferred gain
(section 1260(b)).
How to report. If the corporation
checked the “Other” box, attach a
schedule showing the computation of
each item included in the total for line
10 and identify the applicable Code
section and the type of tax or interest.
Line 11. Total Tax. Include any
deferred tax on the termination of a
section 1294 election applicable to
shareholders in a qualified electing
fund in the amount entered on line
11. See Form 8621, Part V, and How
to report, below.
Subtract any deferred tax on the
corporation’s share of undistributed
earnings of a qualified electing fund
(see Form 8621, Part II).
How to report. Attach a schedule
showing the computation of each item
included in, or subtracted from, the
total for line 11. On the dotted line
next to line 11, specify (a) the
applicable Code section, (b) the type
of tax, and (c) the amount of tax.

Schedule L
All filers must complete Parts I and II
of Schedule L.
Note. Foreign life insurance
companies should report assets and
insurance liabilities for their U.S.
business only.

Part I—Total Assets
For Schedule L, assets means all
assets of the corporation. In valuing
real property and stocks, use fair
market value; for other assets, use
the adjusted basis as determined
under section 1011 and related
sections, without regard to section
818(c). An interest in a partnership or
trust is not itself treated as an asset
of the corporation. Instead, the
corporation is treated as actually
owning its proportionate share of the
assets held by the partnership or
trust. The value of the corporation’s
share of these assets should be listed
on line 3.

Part II—Total Assets and
Total Insurance Liabilities
Foreign life insurance companies
must maintain a minimum surplus of
U.S. assets over their U.S. insurance
liabilities. The minimum required
surplus is determined by multiplying
their U.S. insurance liabilities by a
percentage determined by the IRS.
-22-

The IRS determines the percentage
from data supplied by domestic life
insurance companies in Schedule L,
Part II. See section 842.
For Schedule L, total insurance
liabilities means the sum of the
following amounts as of the end of
the tax year:
1. Total reserves as defined in
section 816(c); plus
2. The items referred to in
paragraphs (3), (4), (5), and (6) of
section 807(c), to the extent such
amounts are not included in total
reserves.
Foreign life insurance companies,
see Notice 89-96 for more information
on determining total insurance
liabilities on U.S. business.

Schedule M—Other
Information
Complete the items that apply to the
corporation.
Question 6. Check the “Yes” box if:
• The corporation is a subsidiary in
an affiliated group (defined below),
but is not filing a consolidated return
for the tax year with that group, or
• The corporation is a subsidiary in a
parent-subsidiary controlled group
(defined on page 19).
Any corporation that meets either
of the requirements above should
check the “Yes” box. This applies
even if the corporation is a subsidiary
member of one group and the parent
corporation of another.
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. An affiliated group
is one or more chains of includible
corporations (section 1504(a))
connected through stock ownership
with a common parent corporation.
The common parent must be an
includible corporation and the
following requirements must be met.
1. The common parent must own
directly stock that represents at least
80% of the total voting power and at
least 80% of the total value of the
stock of at least one 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 of the other
corporations (except for the common
parent) must be owned directly by
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one or more of the other includible
corporations.
For this purpose, “stock” generally
does not include any stock that (a) is
nonvoting, (b) is nonconvertible, (c) is
limited and preferred as to dividends
and does not participate significantly
in corporate growth, and (d) has
redemption and liquidation rights that
do not exceed the issue price of the
stock (except for a reasonable
redemption or liquidation premium).
See section 1504(a)(4). See section
1563(d)(1) for the definition of stock
for purposes of determining stock
ownership above.
Question 8. Check the “Yes” box if
one foreign person owned at least
25% of (a) the total voting power of
all classes of stock of the corporation
entitled to vote, or (b) the total value
of all classes of stock of the
corporation.
The constructive ownership rules
of section 318 apply in determining if
a corporation is foreign owned. See
section 6038A(c)(5) and the related
regulations.
Enter on line 8a the percentage
owned by the foreign person
specified in question 8. On line 8b,
write the name of the owner’s
country.

Note. If there is more than one
25%-or-more foreign owner, complete
lines 8a and 8b for the foreign person
with the highest percentage of
ownership.
Foreign person. The term “foreign
person” means:
• A foreign citizen or nonresident
alien,
• An individual who is a citizen of a
U.S. possession (but who is not a
U.S. citizen or resident),
• A foreign partnership,
• A foreign corporation,
• Any foreign estate or trust within
the meaning of section 7701(a)(31),
or
• A foreign government (or one of its
agencies or instrumentalities) to the
extent that it is engaged in the
conduct of a commercial activity as
described in section 892.
Owner’s country. For individuals,
the term “owner’s country” means the
country of residence. For all others, it
is the country where incorporated,
organized, created, or administered.
Requirement to file Form 5472. If
the corporation checked “Yes” to
Question 8, it may have to file Form
5472. Generally, a 25%
foreign-owned corporation that had a
reportable transaction with a foreign
or domestic related party during the
tax year must file Form 5472.

See Form 5472 for filing
instructions and penalties for failure
to file.
Item 12. If the corporation has an
operations loss deduction (OLD), it
may elect under section 810(b)(3) to
waive the entire carryback period for
the OLD and instead carry the OLD
forward to future tax years. To do so,
check the box on line 12 and file the
tax return by its due date, including
extensions (do not attach the
statement described in Temporary
Regulations section 301.9100-12T).
Once made, the election is
irrevocable. See Pub. 542, section
810, and Form 1139 for more details.
Corporations filing a consolidated
return must also attach the statement
required by Temporary Regulations
section 1.1502-21T(b)(3).
Item 13. Enter the amount of the
operations loss carryover to the tax
year from prior years, even if some of
the loss is used to offset income on
this return. The amount to enter is the
total of all operating losses generated
in prior years but not used to offset
income (either as a carryback or
carryover) in a tax year prior to 2005.
Do not reduce the amount by any
OLD reported on line 20, page 1.

Privacy Act and Paperwork Reduction Act Notice. We ask for the information on this form to carry out the Internal
Revenue laws of the United States. You are required to give us the information. We need it to ensure that you are
complying with these laws and to allow us to figure and collect the right amount of tax. Section 6109 requires return
preparers to provide their identifying numbers on the return.
You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act
unless the form displays a valid OMB control number. Books or records relating to a form or its instructions must be
retained as long as their contents may become material in the administration of any Internal Revenue law. Generally,
tax returns and return information are confidential, as required by section 6103.
The time needed to complete and file this form will vary depending on individual circumstances. The estimated
average time is:
Recordkeeping . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

73 hr., 10 min.

Learning about the law or the form . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

37 hr., 54 min.

Preparing the form . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

61 hr., 14 min.

Copying, assembling, and sending the form to the IRS . . . . . . . . . . . . . .

5 hr., 54 min.

If you have comments concerning the accuracy of these time estimates or suggestions for making this form simpler,
we would be happy to hear from you. You can write to the Internal Revenue Service, Tax Products Coordinating
Committee, SE:W:CAR:MP:T:T:SP, 1111 Constitution Ave. NW, IR-6406, Washington, DC 20224.
Do not send the tax form to this office. Instead, see Where To File on page 3.

Instructions for Form 1120-L

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Page 24 of 24

Instructions for Form 1120-L

15:08 - 27-FEB-2006

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

Index

A
Accounting methods:
Change in accounting
method . . . . . . . . . . . . . . . . 6
Accounting period (Tax
Year) . . . . . . . . . . . . . . . . . . . . . 6
Address change . . . . . . . . . . . . 7
Affiliated group . . . . . . . . . . . . 22
Amended return . . . . . . . . . . . . 7
Amortization . . . . . . . . . . . . . . . . 9
Apportionment plan . . . . . . . . 19
Assembling the return . . . . . . 4
B
Backup withholding . . . . . . . . 13
Business startup costs . . . . . . 9
C
Charitable
contributions . . . . . . . . . . . . 11
Consolidated return . . . . . . 4, 7
Controlled group:
Brother-Sister . . . . . . . . . . . 19
Combined group . . . . . . . . 19
Member of . . . . . . . . . . . . . . 19
Parent-Subsidiary . . . . . . 19,
22
D
Deductions . . . . . . . . . . . . . . . . . 8
Definitions:
Insurance company . . . . . . . 2
Life insurance
company . . . . . . . . . . . . . . . 2
Reserves test . . . . . . . . . . . . 3
Depository methods of tax
payment . . . . . . . . . . . . . . . . . . 4
Disclosure statement . . . . . . . 6
Dues, membership and
other . . . . . . . . . . . . . . . . . . . . 11
E
Electronic deposit of tax
refund of $1 million or
more . . . . . . . . . . . . . . . . . . . . 13
Electronic Federal Tax
Payment System
(EFTPS) . . . . . . . . . . . . . . . . . 5

Employer identification
number (EIN) . . . . . . . . . . . . . 7
Estimated tax:
Penalty . . . . . . . . . . . . . . . . . . 13
Estimated tax
payments . . . . . . . . . . . . . . . 13
Estimated tax penalty . . . . . . . 5
Excess interest . . . . . . . . . . . . 17
Experience-rated
refund . . . . . . . . . . . . . . . . . . . 17
Extension of time to file . . . . . 3
F
Final return . . . . . . . . . . . . . . . . . 7
Foreign corporations . . . . . . . 21
Foreign person . . . . . . . . . . . . 23
Foreign tax credit . . . . . . . . . . 21
Forms and Publications, how
to get . . . . . . . . . . . . . . . . . . . . 2
G
General business
credit . . . . . . . . . . . . . . . . . . . . 21
Golden parachute
payments . . . . . . . . . . . . . . . . 9
Gross premiums and other
consideration . . . . . . . . . . . . . 8
I
Interest due:
Late payment of tax . . . . . . 5
L
Life Insurance Company
Taxable Income . . . . . . . . . . 7
Limitation on
dividends-received
deduction . . . . . . . . . . . . . . . 14
Limitations on
deductions . . . . . . . . . . . . . . . 8
Lobbying expenses,
nondeductibility . . . . . . . . . . 12
Losses incurred . . . . . . . . . . . . 9
M
Minimum tax:
Alternative . . . . . . . . . . . . . . . 20
Prior year, credit for . . . . . 21

N
NAIC Annual Statement . . . . 4
Name change . . . . . . . . . . . . . . 7
O
Operations loss
deduction . . . . . . . . . . . . . . . 12
Other deductions . . . . . . . . . . 10
Other taxes . . . . . . . . . . . . . . . . 22
Overpaid . . . . . . . . . . . . . . . . . . 13
Owner’s country . . . . . . . . . . . 23
Ozone-depleting chemicals,
credit for tax on . . . . . . . . . . 13
P
Paid preparer
authorization . . . . . . . . . . . . . 4
Penalties . . . . . . . . . . . . . 5, 6, 13
Pension, profit-sharing, etc.
plans . . . . . . . . . . . . . . . . . . . . 11
Period covered . . . . . . . . . . . . . 7
Policyholder dividends . . . . . 17
Possessions tax credit . . . . . 21
Premium adjustment . . . . . . . 17
Private delivery services . . . . 3
R
Reconciliation . . . . . . . . . . . . . . 4
Recordkeeping . . . . . . . . . . . . . 6
Return premiums . . . . . . . . . . . 8
S
Schedule:
A . . . . . . . . . . . . . . . . . . . . . . . . 13
B . . . . . . . . . . . . . . . . . . . . . . . . 15
F . . . . . . . . . . . . . . . . . . . . . . . . 16
G . . . . . . . . . . . . . . . . . . . . . . . 17
H . . . . . . . . . . . . . . . . . . . . . . . . 18
I . . . . . . . . . . . . . . . . . . . . . . . . . 18
J, Part I . . . . . . . . . . . . . . . . . 18
J, Part II . . . . . . . . . . . . . . . . . 19
K . . . . . . . . . . . . . . . . . . . . . . . . 19
L, Part I . . . . . . . . . . . . . . . . . 22
L, Part II . . . . . . . . . . . . . . . . . 22
M . . . . . . . . . . . . . . . . . . . . . . . 22
Section 953 Elections . . . . . . . 7

-24-

Special estimated tax
payments:
Prior year(s) special
estimated tax payments
to be applied . . . . . . . . . . 13
Tax benefit rule . . . . . . . . . . 13
T
Tax and payments:
Estimated tax
payments . . . . . . . . . . . . . 13
Prior year(s) special
estimated tax payments
to be applied . . . . . . . . . . 13
Special estimated tax
payments . . . . . . . . . . . . . 13
Tax computation worksheet
for members of a controlled
group . . . . . . . . . . . . . . . . . . . 20
Tax rate schedule . . . . . . . . . 20
Transactions between related
taxpayers . . . . . . . . . . . . . . . . 8
Travel, meals, and
entertainment . . . . . . . . . . . 11
U
Unresolved tax issues . . . . . . 1
W
When to file:
Extension . . . . . . . . . . . . . . . . 3
Where to file . . . . . . . . . . . . . . . . 3
Who must file:
Foreign life insurance
companies . . . . . . . . . . . . . 2
Mutual savings banks
conducting life insurance
business . . . . . . . . . . . . . . . 2
Other insurance
companies . . . . . . . . . . . . . 2
Who must sign . . . . . . . . . . . . . 3
Worksheets:
Members of a controlled
group, tax
computation . . . . . . . . . . . 20
Schedule A . . . . . . . . . . . . . . 14

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Instructions for Form 1120-L