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pdf2008 Instructions for Form 1120 U.S. Corporation
Income Tax Return
Purpose: This is the first circulated draft of the Instructions for 2008 Form 1120 for your review and
comments.
TPCC Meeting: None, but one may be arranged if requested.
Form: The 2008 Form 1120 was circulated earlier and is attached.
Prior Version: The 2007 Form 1120 is available at:
http://www.irs.gov/pub/irs-pdf/f1120.pdf.
Instructions: The 2007 Instructions for Form 1120 are available at:
http://www.irs.gov/pub/irs-pdf/i1120.pdf.
Other Products: Circulations of draft tax forms, instructions, notices, and publications are posted at:
http://taxforms.web.irs.gov/Circulations/index.htm.
Comments: Please email, fax, call, or mail any comments to me and email the
reviewer at [email protected] by September 30, 2008.
David L. Lupi-Sher
Tax Forms and Publications
SE:W:CAR:MP:T:B:C
Email: [email protected]
Major Changes to the Instructions for 2008 Form 1120
We updated the year references, page numbers, references to other products, and made other editorial
changes throughout the instructions, as applicable.
What’s New, p. 1
We noted important changes that affect corporations for the current tax year.
Extension of Time to File, p. 3
We changed the title of Form 7004 to reflect its current title, Application for Automatic Extension of Time
To File Certain Business Income Tax, Information, and Other Returns.
Where to File, p. 3
We changed the paper returns processing addresses for Tennessee and Georgia from Ogden, UT to
Cincinnati, OH.
Interest and Penalties, p. 4
Late filing of return.
We updated the minimum penalty for a return that is over 60 days late. Previously, the minimum penalty
was the smaller of the tax due or $100. It is now the smaller of the tax due or $135. The change is due to
Internal Revenue Code Section 6651(a)(3), as amended by section 303 of P.L. 110-245.
Accounting Methods, p. 5
Change in accounting method.
We clarified that there may be some instances when a corporation can obtain automatic consent from the
IRS to change to certain accounting methods. Rev. Proc. 2008-52, which clarifies, modifies, and supersedes
Rev. Proc. 2002-9.
Other Forms and Statements That May Be Required, p. 5-6
Reportable transaction disclosure statement.
We deleted a listing for certain transactions resulting in a tax credit of more than $250,000, if the
corporation held an asset generating the credit for 45 days or less. The listing is valid only for before
August 3, 2007. TA REF T.D. 9350; Reg. Sec. 1.6011-4; Form 8886 Instructions.
We also inserted a reference to the Instructions for Form 8886.
Reportable transactions by material advisors.
We clarified that material advisors who provide material aid, assistance, or advice with respect to any
reportable transaction must file Form 8918, Material Advisor Disclosure Statement, to disclose reportable
transactions in accordance with Reg. Section 301.6111-3.
Distributions under section 355, p. 6
We inserted the requirement that every corporation that makes distributions of stock or securities of a
controlled corporation must submit a statement required by Reg. Section 1.355-5 for the distribution year.
If the distributing corporation is a controlled foreign corporation under section 951(b), each U.S.
shareholder must include the statement on his or her return. Reg. Section 1.355-5; T.D. 9329.
Deductions
Limitations on Deductions
Transactions between related taxpayers, p. 8
We inserted a reference to the Instructions for Form 8926, Disqualified Corporate Interest Expense
Disallowed Under Section 163(j) and Related Information, for a discussion of related taxpayers and section
163(j).
Business start-up and organizational costs, p. 9
We rewrote the section to provide that business start-up and organizational costs after September 8, 2008,
will be deemed to be deducted or amortized. Prop. Reg. 1.195-1T and 1.248-1T; T.D. 9411. For expenses
on or before September 9, 2008, taxpayers will have to attach a statement and specifically identify the
amount deducted or amortized to make the election.
Reducing certain expenses for which credits are allowable, p. 9
We inserted references to the agricultural chemicals security credit and the credit for employer differential
wage payments. Sec. 45O and 45P.
Line 13. Salaries and Wages, p. 9
Employment credits, p. 10
We deleted references to Form 8845, Indian Employment Credit, since it expired. Sec. 45A(f).
We added a reference to new Form 8932, Credit for Employer Differential Wage Payments. Sec. 45P.
Line 16. Rents, p. 10
We updated the lease inclusion amount. Rev. Proc. 2008-22. We also clarified that inclusion amounts for
lease terms beginning in 2009 will be published in the Internal Revenue Bulletin in early 2009.
Line 18. Interest, p. 10
Special rules
We inserted reference to disqualified interest on certain indebtedness under section 163(j) and Form 8926,
Disqualified Corporate Interest Expense Disallowed Under Section 163(j) and Related Information, and the
related instructions.
Line 19. Charitable Contributions, p. 10
Other special rules, p. 11
We deleted references to a larger deduction for certain contributions of (1) inventory and other property, (2)
apparently wholesome food, and (3) computer technology and equipment for educational purposes. These
provisions have expired. Sec. 170(e).
Line 26. Other Deductions, p. 11-12
We deleted references to the limits for a small timber producer for qualified timber property located in the
GO Zone. Sec. 1400N(i).
We updated the reference to the deduction for certain energy efficient commercial building property to
incorporate Notice 2008-40, 2008-14 I.R.B. 725.
Line 29a. Net Operating Loss Deduction, p. 13
We inserted bullet points to incorporate (a) a five year period to replace converted property in the case of
property that is in the Kansas Disaster Zone and that is compulsorily or involuntarily converted on or after
May 4, 2007, and (b) public utility property casualty losses attributable to storms and tornadoes in the
Kansas Disaster Zone. Sec. 1400N(k) and (o); P.L. 110-234, sec. 15345(b) and (g).
Line 32g. Refundable Credits From Forms 3800 and 8827, p. 13
We inserted text to indicate that a corporation may elect to claim additional research and minimum tax
credits in lieu of claiming additional first-year depreciation under section 168(k) for certain property. If the
corporation elects to do so, the corporation enters on line 32g the amounts from line 19c of Form 3800 and
line 8c of Form 8827, if applicable.
We also renumbered the line sequence as needed.
Schedule A – Cost of Goods Sold, p. 14
Lines 9a Through 9f. Inventory Valuation Methods, p. 14
We explained that generally the average cost (rolling average) method of valuing inventories does not
conform to the requirements of the regulations. However, we clarified that if a corporation uses the average
cost method for financial accounting purposes, there are two safe harbors under which this method will be
deemed to clearly reflect income for federal income tax purposes. Rev. Proc. 2008-43, 2008-30 I.R.B. 186.
Schedule J – Tax Computation, p. 16
Line 2, p. 16-17
We inserted a reference to the new corporate rate reduction for qualified timber gains. Ref. P.L. 110-234,
section 15311. The details of the computation will be in the Instructions for Schedule D (Form 1120).
Line 5b, p. 17
We deleted references to the American Samoa Economic Development Credit and clarified that the amount
of the credit to be entered on the line is for qualified electric vehicle passive activity credits from prior
years allowed on Form 8810.
Line 5c, p. 17
We deleted references to, and listing of, Forms 5884, 6478, 8835, 8844, and 8846, since the allowable
general business credit from all the general business credit forms is now computed on Form 3800, General
Business Credits.
Line 5d, p. 17
We deleted references to Form 8827 regarding the disallowance of the qualified electric vehicle credit due
to the AMT.
Line 9, p. 17
Other, p. 17
In the bullet for tax and interest on a nonqualified withdrawal from a capital construction fund, we inserted
(g) in section 7518 for clarity.
Schedule K, p. 18-19
We revised and expanded the instructions for Questions 4 and 5 at the request of LMSB (in conjunction
with corresponding changes made on Schedule K). We added constructive ownership rules to facilitate
answering the questions provided to us by LMSB.
NOTE: Although we have deleted references to expired provisions, we will reinstate any provisions that
are extended by legislation.
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Instructions for Form 1120
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2008
Department of the Treasury
Internal Revenue Service
Instructions for Form 1120
U.S. Corporation 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
Direct Deposit of Refund . . . . . . . . . . . 2
How To Make a Contribution To
Reduce Debt Held by the
Public . . . . . . . . . . . . . . . . . . . . . . 2
How To Get Forms and
Publications . . . . . . . . . . . . . . . . . . 2
General Instructions . . . . . . . . . . . . . 2
Purpose of Form . . . . . . . . . . . . . . . . 2
Who Must File . . . . . . . . . . . . . . . . . . 2
Electronic Filing . . . . . . . . . . . . . . . . . 2
When To File . . . . . . . . . . . . . . . . . . . 3
Where To File . . . . . . . . . . . . . . . . . . 3
Who Must Sign . . . . . . . . . . . . . . . . . 3
Paid Preparer Authorization . . . . . . . . 3
Assembling the Return . . . . . . . . . . . . 4
Depository Methods of Tax
Payment . . . . . . . . . . . . . . . . . . . . 4
Estimated Tax Payments . . . . . . . . . . 4
Interest and Penalties . . . . . . . . . . . . . 4
Accounting Methods . . . . . . . . . . . . . . 5
Accounting Period . . . . . . . . . . . . . . . 5
Rounding Off To Whole Dollars . . . . . . 5
Recordkeeping . . . . . . . . . . . . . . . . . . 5
Other Forms and Statements
That May Be Required . . . . . . . . . . 5
Specific Instructions . . . . . . . . . . . . 6
Period Covered . . . . . . . . . . . . . . . . . 6
Name and Address . . . . . . . . . . . . . . 6
Identifying Information . . . . . . . . . . . . 6
Employer Identification Number
(EIN) . . . . . . . . . . . . . . . . . . . . . . . 7
Total Assets . . . . . . . . . . . . . . . . . . . 7
Initial Return, Final Return,
Name Change, Address
Change . . . . . . . . . . . . . . . . . . . . . 7
Income . . . . . . . . . . . . . . . . . . . . . . . 7
Deductions . . . . . . . . . . . . . . . . . . . . 8
Tax and Payments . . . . . . . . . . . . . . 13
Schedule A. Cost of Goods Sold . . . 14
Schedule C. Dividends and
Special Deductions . . . . . . . . . . . . 15
Worksheet for Schedule C . . . . . . . . 15
Schedule J. Tax Computation . . . . . . 16
Schedule K. Other Information . . . . . 18
Schedule L. Balance Sheets per
Books . . . . . . . . . . . . . . . . . . . . . 20
Schedule M-1. Reconciliation of
Income . . . . . . . . . . . . . . . . . . . . . 20
Principal Business Activity
Codes . . . . . . . . . . . . . . . . . . . . . 21
Index . . . . . . . . . . . . . . . . . . . . . . . . 24
What’s New
• The filing address for certain
corporations whose principal business
office or agency is located in Georgia and
Tennessee has changed. See Where To
File on page 3.
• A corporation can elect to claim
additional research and minimum tax
credits in lieu of claiming additional
first-year depreciation of certain qualified
property. See the instructions for line 32g.
• For start-up and organizational costs
paid or incurred after September 8, 2008,
a corporation is no longer required to
attach a statement on its return or
specifically identify the amount deducted
as organizational or start-up costs in
order for the election under sections
195(b) or 248(a) to be effective. See page
9 of the instructions.
• For tax years ending after May 22,
2008, and beginning on or before May 23,
2009, a maximum 15% alternative tax will
apply to the corporation’s qualified timber
gain (as defined under section
1202(b)(2)). The alternative tax applies
for both the regular tax and the alternative
minimum tax. See the instructions for
Schedule J, line 2.
• For information on temporary tax relief
for certain taxpayers in Kiowa County,
Kansas, and surrounding areas, see Pub.
4492-A, Information for Taxpayers
Affected by the May 4, 2007, Kansas
Storms and Tornadoes.
• The following credits are new for 2008.
For details, see the various credit forms
and instructions.
1. The cellulosic biofuel fuel credit is
reported on Form 6478, Alcohol and
Cellulosic Biofuel Fuels Credit.
2. Holders of qualified forestry
conservation bonds may be able to claim
a credit or a refund. See Form 8912,
Credit to Holders of Tax Credit Bonds.
Also see Notice 2008-70, 2008-36 I.R.B.
575.
3. The agricultural chemicals security
credit will be reported on Form 8931,
Agricultural Chemicals Security Credit.
4. The credit for employer differential
wage payments will be reported on Form
8932, Credit for Employer Differential
Wage Payments.
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
Cat. No. 11455T
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:
• An impartial and independent look at
your problem,
• Timely acknowledgment,
• The name and phone number of the
individual assigned to its case,
• Updates on progress,
• Time frames for action,
• Speedy resolution, and
• Courteous service.
When contacting the Taxpayer
Advocate, the corporation should be
prepared to provide the following
information.
• 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.
Page 2 of 25
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• Visit the website at www.irs.gov/
advocate.
Direct Deposit of Refund
To request a direct deposit of the
corporation’s income tax refund into an
account at a U.S. bank or other financial
institution, attach Form 8050, Direct
Deposit of Corporate Tax Refund. See
the instructions for line 36 on page 13.
How To Make a
Contribution To Reduce
Debt Held by the Public
To help reduce debt held by the public,
make a check payable to “Bureau of the
Public Debt.” Send it to Bureau of the
Public Debt, Department G, P.O. Box
2188, Parkersburg, WV 26106-2188. Or,
enclose a check with the income tax
return. Contributions to reduce debt held
by the public are deductible subject to the
rules and limitations for charitable
contributions.
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.
IRS Tax Products DVD. You can order
Pub. 1796, IRS Tax Products DVD, and
obtain:
• 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.
• Internal Revenue Code – Title 26.
• Fill-in, print, and save features for most
tax forms.
• Internal Revenue Bulletins.
• Toll-free and email technical support.
• Two releases during the year.
– The first release will ship the beginning
of January 2009.
– The final release will ship the beginning
of March 2009.
Purchase the DVD from the National
Technical Information Service (NTIS) at
www.irs.gov/cdorders for $30 (no
handling fee) or call 1-877-233 – 6767 toll
free to buy the DVD for $30 (plus a $5
handling fee). The price is discounted to
$25 for orders placed prior to December
1, 2008.
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.
General Instructions
Purpose of Form
Use Form 1120, U.S. Corporation Income
Tax Return, to report the income, gains,
losses, deductions, credits, and to figure
the income tax liability of a corporation.
Who Must File
Unless exempt under section 501, all
domestic corporations (including
corporations in bankruptcy) must file an
income tax return whether or not they
have taxable income. Domestic
corporations must file Form 1120 unless
they are required to file a special return.
See Special Returns for Certain
Organizations below.
Limited liability companies. If an entity
with more than one owner was formed as
a limited liability company (LLC) under
state law, it generally is treated as a
partnership for federal income tax
purposes and files Form 1065, U.S.
Return of Partnership Income. Generally,
a single-member LLC is disregarded as
an entity separate from its owner and
reports its income and deductions on its
owner’s federal income tax return. The
LLC can file a Form 1120 only if it has
filed Form 8832, Entity Classification
Election, to elect to be treated as an
association taxable as a corporation. For
more information about LLCs, see Pub.
3402, Tax Issues for Limited Liability
Companies.
Corporations engaged in farming. A
corporation (other than a corporation that
is a subchapter T cooperative) that
engages in farming should use Form
1120 to report the income (loss) from
such activities. Enter the income and
deductions of the corporation according to
the instructions for lines 1 through 10 and
12 through 29.
Ownership interest in a Financial
Asset Securitization Investment Trust
(FASIT). Special rules apply to a FASIT
in existence on October 22, 2004, to the
extent that regular interests issued by the
FASIT before October 22, 2004, continue
to remain outstanding in accordance with
their original terms.
If a corporation holds an ownership
interest in a FASIT to which these special
rules apply, it must report all items of
income, gain, deductions, losses, and
credits on the corporation’s income tax
return (except as provided in section
860H). Show a breakdown of the items on
an attached schedule. For more
information, see sections 860H and 860L.
Electronic Filing
Corporations can generally electronically
file (e-file) Form 1120, related forms,
schedules, and attachments, Form 7004,
-2-
Form 940 and 941 employment tax
returns. If there is a balance due, the
corporation can authorize an electronic
funds withdrawal while e-filing. Form 1099
and other information returns can also be
electronically filed.
However, the option to e-file does not
apply to certain returns, including:
• Returns with precomputed penalty and
interest,
• Returns with reasonable cause for
failing to file timely,
• Returns with reasonable cause for
failing to pay timely, and
• Returns with request for overpayment
to be applied to another account.
Required filers. Certain corporations
with total assets of $10 million or more
that file at least 250 returns a year are
required to e-file Form 1120. See
Regulations section 301.6011-5.
However, these corporations can request
a waiver of the electronic filing
requirements. See Notice 2005-88,
2005-48 I.R.B. 1060.
Visit www.irs.gov/efile for details.
Special Returns for
Certain Organizations
Instead of filing Form 1120, certain
organizations, as shown below, have to
file special returns.
If the organization is a:
File Form
Exempt organization with
unrelated trade or business
income
990-T
Religious or apostolic
organization exempt under
section 501(d)
1065
Entity formed as a limited
liability company under state
law and treated as a
partnership for federal
income tax purposes
1065
Subchapter T cooperative
association (including a
farmers’ cooperative)
Entity that elects to be treated
as a real estate mortgage
investment conduit (REMIC)
under section 860D
Interest charge domestic
international sales
corporation (section 992)
Foreign corporation (other
than life and property and
casualty insurance company
filing Form 1120-L or Form
1120-PC)
1120-C
1066
1120-IC-DISC
1120-F
Instructions for Form 1120
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Instructions for Form 1120
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Foreign sales corporation
(section 922)
1120-FSC
Condominium management,
residential real estate
management, or timeshare
association that elects to be
treated as a homeowners
association under section 528
1120-H
Extension of Time To File
1120-L
Fund set up to pay for
nuclear decommissioning
costs (section 468A)
1120-ND
File Form 7004, Application for Automatic
Extension of Time To File Certain
Business Income Tax, Information, and
Other Returns, to request a 6-month
extension of time to file. Generally, the
corporation must file Form 7004 by the
regular due date of the return.
Who Must Sign
Property and casualty
insurance company
(section 831)
1120-PC
Political organization
(section 527)
1120-POL
Real estate investment trust
(section 856)
1120-REIT
1120-RIC
S corporation (section 1361)
Settlement fund
(section 468B)
1120S
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, the paid preparer’s
space should remain blank. Anyone who
prepares Form 1120 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 2008 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
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
1120-SF
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 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.
Instructions for Form 1120
Private delivery services cannot
deliver items to P.O. boxes. You
CAUTION must use the U.S. Postal Service
to mail any item to an IRS P.O. box
address.
!
Life insurance company
(section 801)
Regulated investment
company (section 851)
The private delivery service can tell
you how to get written proof of the mailing
date.
Where To File
File the corporation’s return at the applicable IRS address listed below.
If the corporation’s principal And the total assets at
business, office, or agency the end of the tax year
is located in:
are:
Connecticut, Delaware, District Less than $10 million and
of Columbia, Georgia, Illinois, Schedule M-3 is not filed
Indiana, Kentucky, Maine,
Maryland, Massachusetts,
Michigan, New Hampshire,
New Jersey, New York, North
Carolina, Ohio, Pennsylvania,
$10 million or more or
Rhode Island, South Carolina,
Tennessee, Vermont, Virginia, less than $10 million and
Schedule M-3 is filed
West Virginia, Wisconsin
Alabama, Alaska, Arizona,
Arkansas, California, Colorado,
Florida, Hawaii, Idaho, Iowa,
Kansas, Louisiana, Minnesota,
Mississippi, Missouri, Montana,
Nebraska, Nevada, New
Mexico, North Dakota,
Oklahoma, Oregon, South
Dakota, Texas, Utah,
Washington, Wyoming
A foreign country or U.S.
possession
Use the following address:
Department of the Treasury
Internal Revenue Service Center
Cincinnati, OH 45999-0012
Department of the Treasury
Internal Revenue Service Center
Ogden, UT 84201-0012
Any amount
Department of the Treasury
Internal Revenue Service Center
Ogden, UT 84201-0012
Any amount
Internal Revenue Service Center
P.O. Box 409101
Ogden, UT 84409
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
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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
2009 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.
Assembling the Return
To ensure that the corporation’s tax return
is correctly processed, attach all
schedules and other forms after page 4 of
Form 1120 in the following order.
1. Schedule N (Form 1120).
2. Schedule O (Form 1120).
3. Form 4626.
4. Form 8050.
5. Form 4136.
6. Form 851.
7. Additional schedules in alphabetical
order.
8. Additional forms in numerical order.
Complete every applicable entry space
on Form 1120. 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
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.
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
the 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 EIN, the tax period to
which the deposit applies, and “Form
1120” 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 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, do not include the
CAUTION payment with the tax return.
Instead, mail or deliver the payment with
Form 8109 to an authorized depositary, or
use EFTPS, if applicable.
!
Electronic Deposit Requirement
Estimated Tax Payments
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 2009 if:
• The total deposits of such taxes in
2007 were more than $200,000 or
• The corporation was required to use
EFTPS in 2008.
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
-4-
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 32b and
32c.
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 2008 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 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 33.
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 $135. 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.
Instructions for Form 1120
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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;
• Form 941, Employer’s QUARTERLY
Federal Tax Return;
• Form 943, Employer’s Annual Federal
Tax Return for Agricultural Employees; 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, Pub. 15
(Circular E), Employer’s Tax Guide, or
Pub. 51 (Circular A), Agricultural
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.
use the mark-to-market accounting
method. See section 475.
Change in accounting method.
Generally, the corporation must get IRS
consent to change the method of
accounting used to report taxable income
(for income as a whole or for the
treatment of any material item). To do so,
the corporation generally must file Form
3115, Application for Change in
Accounting Method. See Form 3115 and
Pub. 538, Accounting Periods and
Methods, for more information.
Accounting Methods
See Form 1128 and Pub. 538 for more
information on accounting periods and tax
years.
Figure taxable income using the method
of accounting regularly used in keeping
the corporation’s books and records. In all
cases, the method used must clearly
show taxable income. Permissible
methods include cash, accrual, or any
other method authorized by the Internal
Revenue Code.
Generally, the following rules apply.
• A corporation (other than a qualified
personal service corporation) must use
the accrual method of accounting if its
average annual gross receipts exceed $5
million. However, see Nonaccrual
experience method on page 8.
• Unless it is a qualifying taxpayer or a
qualifying small business taxpayer, a
corporation must use the accrual method
for sales and purchases of inventory
items. See Schedule A. Cost of Goods
Sold on page 14.
• A corporation engaged in farming must
use the accrual method. For exceptions,
see section 447.
• Special rules apply to long-term
contracts. See section 460.
• Dealers in securities must use the
mark-to-market accounting method.
Dealers in commodities and traders in
securities and commodities can elect to
Instructions for Form 1120
There are some instances when the
corporation can obtain automatic consent
from the IRS to change to certain
accounting methods. See Rev. Proc.
2008-52, 2008-36 I.R.B. 1, as modified by
Announcement 2008-84, 2008-xx I.R.B.
1.
Accounting Period
A corporation must figure its taxable
income on the basis of a tax year. A tax
year is the annual accounting period a
corporation uses to keep its records and
report its income and expenses.
Generally, corporations can use a
calendar year or a fiscal year. Personal
service corporations, however, must use
a calendar year unless they meet one of
the exceptions discussed on page 6.
Change of tax year. Generally, a
corporation, including a personal service
corporation, must get the consent of the
IRS before changing its tax year by filing
Form 1128, Application To Adopt,
Change, or Retain a Tax Year. However,
under certain conditions, a corporation
can change its tax year without getting
consent.
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
-5-
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
Amended return. Use Form 1120X,
Amended U.S. Corporation Income Tax
Return, to correct a previously filed Form
1120.
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 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. Any transaction identified by the
IRS in published guidance as a
“transaction of interest” (a transaction that
the IRS believes has a potential for tax
avoidance or evasion, but has not yet
been identified as a listed transaction).
For more information, see the
Instructions for Form 8886.
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. Penalties also apply
under section 6707A if the corporation
fails to file Form 8886 with its corporate
return, fails to provide a copy of Form
8886 to the Office of Tax Shelter Analysis
(OTSA), or files a form that fails to include
all the information required (or includes
incorrect information). Other penalties,
such as an accuracy-related penalty
under section 6662A, may also apply.
See the Instructions for Form 8886 for
details on these and other penalties.
Reportable transactions by material
advisors. Material advisors who provide
material aid, assistance, or advice with
respect to any reportable transaction
must file Form 8918, Material Advisor
Disclosure Statement, to disclose
reportable transactions in accordance
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with Regulations section 301.6111-3.
Form 8918 replaces Form 8264, which
was previously used to disclose this
information.
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 corporation
(transferee) must each attach to their tax
returns the statements required by
Regulations section 1.351-3.
Distributions under section 355. Every
corporation that makes a distribution of
stock or securities of a controlled
corporation, as described in section 355
(or so much of section 356 as it relates to
section 355), must attach the statement
required by Regulations section 1.355-5
to its return for the year of the distribution.
If the distributing corporation is a
controlled foreign corporation, each U.S.
shareholder (within the meaning of
section 951(b)), must include the
statement on or with its return.
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 Regulations section
1.1503-2(g)(2).
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
File the 2008 return for calendar year
2008 and fiscal years that begin in 2008
and end in 2009. For a fiscal or short tax
year return, fill in the tax year space at the
top of the form.
The 2008 Form 1120 can also be
used if:
• The corporation has a tax year of less
than 12 months that begins and ends in
2009, and
• The 2009 Form 1120 is not available at
the time the corporation is required to file
its return.
The corporation must show its 2009
tax year on the 2008 Form 1120 and take
into account any tax law changes that are
effective for tax years beginning after
December 31, 2008.
Name and Address
Enter the corporation’s true name (as set
forth in the charter or other legal
document creating it), address, and EIN
on the appropriate lines. Enter the
address of the corporation’s principal
office or place of business. 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.
Note. Do not use the address of the
registered agent for the state in which the
corporation is incorporated. For example,
if a business is incorporated in Delaware
or Nevada and the corporation’s principal
office is located in Little Rock, AR, the
corporation should enter the Little Rock
address.
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.
If the corporation received a Form
1120 tax package, use the preprinted
label. Cross out any errors and print the
correct information on the label.
Item A. Identifying
Information
Consolidated Return
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 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.
-6-
Enter on Form 1120 the totals for each
item of income, gain, loss, expense, or
deduction, net of eliminating entries for
intercompany transactions between
corporations within the consolidated
group. Attach consolidated balance
sheets and a reconciliation of
consolidated retained earnings.
The corporation does not have to
TIP complete lines 3, 4, and 5 above,
if its total receipts (line 1a plus
lines 4 through 10 on page 1 of the
return) and its total assets at the end of
the tax year are less than $250,000.
For more information on consolidated
returns, see the regulations under section
1502.
Life-Nonlife Consolidated
Return
If the corporation is the common parent of
a consolidated group that includes a
life-nonlife insurance company, check box
1b of Item A. See Temporary Regulations
section 1.1502-47T(s).
Personal Holding Company
A personal holding company must attach
to Form 1120 a Schedule PH (Form
1120), U.S. Personal Holding Company
(PHC) Tax. See the instructions for
Schedule PH (Form 1120) for details.
Personal Service Corporation
A personal service corporation is a
corporation whose principal activity for the
testing period (generally the prior tax year
unless the corporation has just been
formed) for tax year is the performance of
personal services. Personal services
include any activity performed in the fields
of accounting, actuarial science,
architecture, consulting, engineering,
health, law, and the performing arts. The
services must be substantially performed
by employee-owners.
A personal service corporation must
use a calendar tax year unless:
• It elects to use a 52-53-week tax year
that ends with reference to the calendar
year or tax year elected under section
444;
• It can establish a business purpose for
a different tax year and obtains the
approval of the IRS (see Form 1128 and
Pub. 538); or
• It elects under section 444 to have a
tax year other than a calendar year. To
make the election, use Form 8716,
Election To Have a Tax Year Other Than
a Required Tax Year.
If a corporation makes the section 444
election, its deduction for certain amounts
paid to employee-owners may be limited.
See Schedule H (Form 1120), Section
280H Limitations for a Personal Service
Corporation (PSC), to figure the
maximum deduction.
If a section 444 election is terminated
and the termination results in a short tax
year, type or print at the top of the first
page of Form 1120 for the short tax year
“SECTION 444 ELECTION
TERMINATED.” See Temporary
Instructions for Form 1120
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Regulations section 1.444-1T(a)(5) for
more information.
For more information regarding a
personal service corporation, see Pub.
542.
Schedule M-3 (Form 1120)
A corporation with total assets
(non-consolidated or consolidated for all
corporations included within a tax
consolidation group) of $10 million or
more on the last day of the tax year must
complete Schedule M-3 (Form 1120), Net
Income (Loss) Reconciliation for
Corporations With Total Assets of $10
Million or More, instead of Schedule M-1.
A corporation filing Form 1120 that is not
required to file Schedule M-3 may
voluntarily file Schedule M-3 instead of
Schedule M-1.
If you are filing Schedule M-3, check
box 4 of Item A to indicate that Schedule
M-3 is attached. See the Instructions for
Schedule M-3 for more details.
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” and the date you applied in
the space for the EIN. For more details,
see the Instructions for Form SS-4.
• If this is the corporation’s final return
and it will no longer exist, check the “Final
return” box.
• If the corporation changed its name
since it last filed a return, check “Name
change” box. Generally, a corporation
also must have amended its articles of
incorporation and filed the amendment
with the state in which it was
incorporated.
• If the corporation has changed its
address since it last filed a return
(including a change to an “in care of”
address), check the “Address change”
box.
Note. If a change in address occurs after
the return is filed, use Form 8822,
Change of Address, to notify the IRS of
the new address.
Income
Except as otherwise provided in the
Internal Revenue Code, gross income
includes all income from whatever source
derived.
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.
Use Form 8902, Alternative Tax on
Qualifying Shipping Activities, to figure
the tax. Include the alternative tax on
Schedule J, line 9.
Line 1. Gross Receipts or Sales
check the “Initial return” box.
Enter gross receipts or sales from all
business operations except those that
must be reported on lines 4 through 10. In
general, advance payments are reported
in the year of receipt. To report income
from long-term contracts, see section
460. For special rules for reporting certain
advance payments for goods and
long-term contracts, see Regulations
section 1.451-5. For permissible methods
for reporting advance payments for
services and certain goods by an accrual
method corporation, see Rev. Proc.
2004-34, 2004-22 I.R.B. 991.
Installment sales. Generally, the
installment method cannot be used for
dealer dispositions of property. A “dealer
disposition” is any disposition of: (a)
personal property by a person who
regularly sells or otherwise disposes of
personal property of the same type on the
installment plan or (b) real property held
for sale to customers in the ordinary
course of the taxpayer’s trade or
business.
These restrictions on using the
installment method do not apply to
dispositions of property used or produced
Instructions for Form 1120
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Note. The online application process is
not yet available for corporations with
addresses in foreign countries or Puerto
Rico.
Item D. Total Assets
Enter the corporation’s total assets (as
determined by the accounting method
regularly used in keeping the
corporation’s books and records) at the
end of the tax year. If there are no assets
at the end of the tax year, enter -0-.
If the corporation is required to
complete Schedule L, enter total assets
from Schedule L, line 15, column (d) on
page 1, item D. If filing a consolidated
return, report total consolidated assets for
all corporations joining in the return.
Item E. Initial Return, Final
Return, Name Change, or
Address Change
• If this is the corporation’s first return,
in a farming business or sales of
timeshares and residential lots for which
the corporation elects to pay interest
under section 453(l)(3).
For sales of timeshares and residential
lots reported under the installment
method, the corporation’s income tax is
increased by the interest payable under
section 453(l)(3). Report this addition to
the tax on line 9, Schedule J.
Enter on line 1 (and carry to line 3), the
gross profit on collections from installment
sales for any of the following.
• Dealer dispositions of property before
March 1, 1986.
• Dispositions of property used or
produced in the trade or business of
farming.
• Certain dispositions of timeshares and
residential lots reported under the
installment method.
Attach a schedule showing the
following information for the current and
the 3 preceding years: (a) gross sales, (b)
cost of goods sold, (c) gross profits, (d)
percentage of gross profits to gross sales,
(e) amount collected, and (f) gross profit
on the amount collected.
Nonaccrual experience method.
Accrual method corporations are not
required to accrue certain amounts to be
received from the performance of
services that, on the basis of their
experience, will not be collected, if:
• The services are in the fields of health,
law, engineering, architecture,
accounting, actuarial science, performing
arts, or consulting, or
• The corporation’s average annual
gross receipts for the 3 prior tax years
does not exceed $5 million.
This provision does not apply to any
amount if interest is required to be paid
on the amount or if there is any penalty
for failure to timely pay the amount. For
more information, see Regulations
section 1.448-2.
Corporations that qualify to use the
nonaccrual experience method should
attach a schedule showing total gross
receipts, the amount not accrued as a
result of the application of section
448(d)(5), and the net amount accrued.
Enter the net amount on line 1a.
Line 2. Cost of Goods Sold
Enter the cost of goods sold on line 2,
page 1. Before making this entry,
complete Schedule A on page 2 of Form
1120. See the Schedule A instructions on
page 13.
Line 4. Dividends
See the instructions for Schedule C.
Then, complete Schedule C and enter on
line 4 the amount from Schedule C, line
19.
Line 5. Interest
Enter taxable interest on U.S. obligations
and on loans, notes, mortgages, bonds,
bank deposits, corporate bonds, tax
refunds, etc. Do not offset interest
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expense against interest income. Special
rules apply to interest income from certain
below-market-rate loans. See section
7872 for details.
Note. Report tax-exempt interest income
on Schedule K, item 9. Also, if required,
include the same amount on Schedule
M-1, line 7, or Schedule M-3 (Form 1120),
Part II, line 13, if applicable.
Line 6. Gross Rents
Enter the gross amount received for the
rental of property. Deduct expenses such
as repairs, interest, taxes, and
depreciation on the proper lines for
deductions. A rental activity held by a
closely held corporation or a personal
service corporation may be subject to the
passive activity loss rules. See Passive
activity limitations on page 9.
Line 10. Other Income
Enter any other taxable income not
reported on lines 1 through 9. List the
type and amount of income on an
attached schedule. If the corporation has
only one item of other income, describe it
in parentheses on line 10.
Examples of other income to report on
line 10 include the following.
1. Recoveries of bad debts deducted
in prior years under the specific
charge-off method.
2. The amount included in income
from Form 6478, Credit for Alcohol Used
as Fuel.
3. The amount included in income
from Form 8864, Biodiesel and
Renewable Diesel Fuels Credit.
4. Refunds of taxes deducted in prior
years to the extent they reduced income
subject to tax in the year deducted (see
section 111). Do not offset current year
taxes against tax refunds.
5. 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.
6. 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 26. 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.
7. Any LIFO recapture amount under
section 1363(d). The corporation may
have to include a LIFO recapture amount
in income if it:
a. Used the LIFO inventory method
for its last tax year before the first tax year
for which it elected to become an S
corporation or
b. Transferred LIFO inventory assets
to an S corporation in a nonrecognition
transaction in which those assets were
transferred basis property.
The LIFO recapture amount is the
amount by which the C corporation’s
inventory under the FIFO method
exceeds the inventory amount under the
LIFO method at the close of the
corporation’s last tax year as a C
corporation (or for the year of the transfer,
if (b) above applies). For more
information, see Regulations section
1.1363-2 and Rev. Proc. 94-61, 1994-2
C.B. 775. Also see the instructions for
Schedule J, line 10.
8. Any net positive section 481(a)
adjustment. The corporation may have to
make an adjustment under section 481(a)
to prevent amounts of income or expense
from being duplicated or omitted. The
section 481(a) adjustment period is
generally 1 year for a net negative
adjustment and 4 years for a net positive
adjustment. However, a corporation can
elect to use a 1-year adjustment period if
the net section 481(a) adjustment for the
change is less than $25,000. The
corporation must complete the
appropriate lines of Form 3115 to make
this election. Also, under certain other
conditions, the corporation can modify the
period for taking into account a net
positive section 481 adjustment. See Rev.
Proc. 2007-67, 2007-48 I.R.B. 1072. If the
net section 481(a) adjustment is negative,
report it on line 26.
9. Part or all of the proceeds received
from certain corporate-owned life
insurance contracts issued after August
17, 2006. See section 101(j) for details.
Deductions
Limitations on Deductions
Section 263A uniform capitalization
rules. The uniform capitalization rules of
section 263A generally require
corporations to capitalize, or include in
inventory, certain costs incurred in
connection with:
• The production of real property and
tangible personal property held in
inventory or held for sale in the ordinary
course of business.
• Real property or personal property
(tangible and intangible) acquired for
resale.
• The production of real property and
tangible personal property by a
corporation for use in its trade or business
or in an activity engaged in for profit.
Tangible personal property produced
by a corporation includes a film, sound
recording, videotape, book, or similar
property.
Corporations subject to the section
263A uniform capitalization rules are
required to capitalize:
1. Direct costs and
2. An allocable part of most indirect
costs (including taxes) that (a) benefit the
assets produced or acquired for resale or
(b) are incurred because of the
performance of production or resale
activities.
For inventory, some of the indirect
expenses that must be capitalized are:
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•
•
•
•
•
Administration expenses;
Taxes;
Depreciation;
Insurance;
Compensation paid to officers
attributable to services;
• Rework labor; and
• Contributions to pension, stock bonus,
and certain profit-sharing, annuity, or
deferred compensation plans.
Regulations section 1.263A-1(e)(3)
specifies other indirect costs that relate to
production or resale activities that must
be capitalized and those that may be
currently deductible.
Interest expense paid or incurred
during the production period of
designated property must be capitalized
and is governed by special rules. For
more details, see Regulations sections
1.263A-8 through 1.263A-15.
The costs required to be capitalized
under section 263A are not deductible
until the property (to which the costs
relate) is sold, used, or otherwise
disposed of by the corporation.
Exceptions. Section 263A does not
apply to the following.
• Personal property acquired for resale if
the corporation’s (or any predecessors)
average annual gross receipts for the 3
prior tax years were $10 million or less.
• Timber.
• Most property produced under a
long-term contract.
• Certain property produced in a farming
business.
• Research and experimental costs
under section 174.
• Geological and geophysical costs
amortized under section 167(h).
• Capital costs incurred to comply with
EPA sulfur regulations.
• Intangible drilling costs for oil, gas, and
geothermal property.
• Mining exploration and development
costs.
• Inventoriable items accounted for in the
same manner as materials and supplies
that are not incidental. See Cost of Goods
Sold on page 13.
For more details on the uniform
capitalization rules, see Regulations
sections 1.263A-1 through 1.263A-3. See
Regulations section 1.263A-4 for rules for
property produced in a farming business.
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 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.
Also see the Instructions for Form
8926 with respect to section 163(j).
Section 291 limitations. Corporations
may be required to adjust deductions for
depletion of iron ore and coal, intangible
drilling and exploration and development
costs, certain deductions for financial
institutions, and the amortizable basis of
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pollution control facilities. 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. For business start-up costs and
organization paid or incurred after
September 8, 2008, a corporation can
deduct up to $5,000 of such cost for the
year it begins business (unless the
corporation elects to capitalize all such
costs). The $5,000 deduction is reduced
(but not below zero) by the amount the
total costs exceed $50,000. If the costs
are $55,000 or more, the deduction is
reduced to zero. Any cost not deducted
must be amortized ratably over a
180-month period, beginning with the
month the corporation begins business.
The election to deduct or capitalize costs
is irrevocable. See Temporary
Regulations sections 1.195-1T and
1.248-1T.
For business start-up and organization
costs paid before September 9, 2008, and
before October 23, 2004, a corporation
can elect to deduct up to $5,000 of such
costs for the year it begins business
(reduced (but not below zero) by the
amount the total cost exceeds $50,000). If
the total costs are $55,000 or more, the
deduction is reduced to zero. Any costs
not deducted must be amortized ratably
over a 180-month period, beginning with
the month the corporation begins
business. If the election is made, the
corporation must attach any statement
required by Regulations sections
1.195-1(b) and 1.248-1(c).
For business start-up and organization
costs paid or incurred before October 23,
2004, a corporation can elect to amortize
such costs over a period of 60-months or
more.
Note. For start-up and organization
costs paid or incurred after September 8,
2008, the corporation is not required to
attach a statement or specifically identify
the amount deducted in order for the
election to be effective. The corporation
may also apply the provisions of
Temporary Regulations sections 1.195-1T
and 1.248-1T to expenses that occurred
after October 22, 2004 and before
September 8., 2008.
Report the deductible amount of such
costs and any amortization on line 26. For
amortization that begins during the 2008
tax year, complete and attach Form 4562.
For more details on business start-up and
organization costs, see Pub 535.
Passive activity limitations. Limitations
on passive activity losses and credits
under section 469 apply to personal
Instructions for Form 1120
service corporations (defined on page 6)
and closely held corporations (defined
below).
Generally, the two kinds of passive
activities are:
• Trade or business activities in which
the corporation did not materially
participate for the tax year; and
• Rental activities, regardless of its
participation.
For exceptions, see Form 8810,
Corporate Passive Activity Loss and
Credit Limitations.
Corporations subject to the passive
activity limitations must complete Form
8810 to compute their allowable passive
activity loss and credit. Before completing
Form 8810, see Temporary Regulations
section 1.163-8T, which provides rules for
allocating interest expense among
activities. If a passive activity is also
subject to the earnings stripping rules of
section 163(j), the at-risk rules of section
465, or the tax-exempt use loss rules of
section 470, those rules apply before the
passive loss rules.
For more information, see section 469,
the related regulations, and Pub. 925,
Passive Activity and At-Risk Rules.
Closely held corporations. A
corporation is a closely held corporation
if:
• At any time during the last half of the
tax year more than 50% in value of its
outstanding stock is directly or indirectly
owned by or for not more than five
individuals, and
• The corporation is not a personal
service corporation.
Certain organizations are treated as
individuals for purposes of this test. See
section 542(a)(2). For rules for
determining stock ownership, see section
544 (as modified by section 465(a)(3)).
Reducing certain expenses for which
credits are allowable. If the corporation
claims any of the following credits, it may
need to reduce the otherwise allowable
deductions for expenses used to figure
the credit.
• Employment credits. See the
instructions for line 13.
• Research credit.
• Orphan drug credit.
• Disabled access 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.
• Mine rescue team training credit.
• Agricultural chemicals security credit.
• Credit for employer differential wage
payments.
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 form used to
figure the applicable credit.
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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 12. Compensation of
Officers
Enter deductible officers’ compensation
on line 12. See Employment credits in the
instructions for line 13 for a list of
employment credits that may reduce your
deduction for officers’ compensation. Do
not include compensation deductible
elsewhere on the return, such as amounts
included in cost of goods sold, 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.
Complete Schedule E if the total
receipts (line 1a, plus lines 4 through 10)
are $500,000 or more. Include only the
deductible part of each officer’s
compensation on Schedule E. See
Disallowance of deduction for employee
compensation in excess of $1 million
below. Complete Schedule E, line 1,
columns (a) through (f), for all officers.
The corporation determines who is an
officer under the laws of the state where it
is incorporated.
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 compensation to a
“covered employee” to the extent that the
compensation exceeds $1 million.
Generally, a covered employee is:
• The principal 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 three highest
compensated officers for that tax year
(other than the principal 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.
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The $1 million limit is reduced by
amounts disallowed as excess parachute
payments under section 280G.
For details, see section 162(m) and
Regulations section 1.162-27. Also see
Notice 2007-49, 2007-25 I.R.B. 1429.
Line 13. Salaries and Wages
Enter the total salaries and wages paid
for the tax year. Do not include salaries
and wages deductible elsewhere on the
return, such as amounts included in
officers’ compensation, cost of goods
sold, 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 the corporation provided taxable
fringe benefits to its employees,
CAUTION such as personal use of a car, do
not deduct as wages the amount
allocated for depreciation and other
expenses claimed on lines 20 and 26.
Employment credits. If the corporation
claims a credit on any of the following
forms, it may need to reduce its deduction
for officer’s compensation and salaries
and wages. See the applicable form for
details.
• Form 5884, Work Opportunity Credit;
• Form 8844, Empowerment Zone and
Renewal Community Employment Credit;
• Form 8861, Welfare-to-Work Credit;
and
• Form 8932, Credit for Employer
Differential Wage Payments.
!
Line 14. Repairs and
Maintenance
Enter the cost of incidental repairs and
maintenance not claimed elsewhere on
the return, such as labor and supplies,
that do not add to the value of the
property or appreciably prolong its life.
New buildings, machinery, or permanent
improvements that increase the value of
the property are not deductible. They
must be depreciated or amortized.
Line 15. Bad Debts
Enter the total debts that became
worthless in whole or in part during the
tax year. A small bank or thrift institution
using the reserve method of section 585
should attach a schedule showing how it
figured the current year’s provision. A
cash basis taxpayer cannot claim a bad
debt deduction unless the amount was
previously included in income.
Line 16. Rents
If the corporation rented or leased a
vehicle, enter the total annual rent or
lease expense paid or incurred during the
year. Also complete Part V of Form 4562,
Depreciation and Amortization. If the
corporation leased a vehicle for a term of
30 days or more, the deduction for vehicle
lease expense may have to be reduced
by an amount called the inclusion
amount. The corporation may have an
inclusion amount if:
The lease term began:
And the
vehicle’s
FMV on
the first
day of
the lease
exceeded:
After 12/31/07 but before 1/1/09 . . $18,500
After 12/31/06 but before 1/1/08 . . $15,500
After 12/31/04 but before 1/1/07 . . $15,200
After 12/31/03 but before 1/1/05 . . $17,500
If the lease term began before January 1, 2004, see
Pub. 463, Travel, Entertainment, Gift, and Car
Expenses, to find out if the corporation has an
inclusion amount. The inclusion amount for lease
terms beginning in 2009 will be published in the
Internal Revenue Bulletin in early 2009.
See Pub. 463 for instructions on
figuring the inclusion amount.
Line 17. Taxes and Licenses
Enter taxes paid or accrued during the tax
year, but do not include the following.
• Federal income taxes.
• Foreign or U.S. possession income
taxes if a foreign tax credit is claimed.
• Taxes not imposed on the corporation.
• Taxes, including state or local sales
taxes, that are paid or incurred in
connection with an acquisition or
disposition of property (these taxes must
be treated as a part of the cost of the
acquired property or, in the case of a
disposition, as a reduction in the amount
realized on the disposition).
• Taxes assessed against local benefits
that increase the value of the property
assessed (such as for paving, etc.).
• Taxes deducted elsewhere on the
return, such as those reflected in cost of
goods sold.
See section 164(d) for apportionment
of taxes on real property between seller
and purchaser.
Line 18. Interest
Note. Do not offset interest income
against interest expense.
The corporation must make an interest
allocation if the proceeds of a loan were
used for more than one purpose (for
example, to purchase a portfolio
investment and to acquire an interest in a
passive activity). See Temporary
Regulations section 1.163-8T for the
interest allocation rules.
Mutual savings banks, building and
loan associations, and cooperative banks
can deduct the amounts paid or credited
to the accounts of depositors as
dividends, interest, or earnings. See
section 591.
Do not deduct the following interest.
• Interest on indebtedness incurred or
continued to purchase or carry obligations
if the interest is wholly exempt from
income tax. For exceptions, see section
265(b).
• For cash basis taxpayers, prepaid
interest allocable to years following the
current tax year. For example, a cash
basis calendar year taxpayer who in 2008
-10-
prepaid interest allocable to any period
after 2008 can deduct only the amount
allocable to 2008.
• Interest and carrying charges on
straddles. Generally, these amounts must
be capitalized. See section 263(g).
• Interest on debt allocable to the
production of designated property by a
corporation for its own use or for sale.
The corporation must capitalize this
interest. Also capitalize any interest on
debt allocable to an asset used to
produce the property. See section 263A(f)
and Regulations sections 1.263A-8
through 1.263A-15 for definitions and
more information.
• Interest paid or incurred on any portion
of an underpayment of tax that is
attributable to an understatement arising
from an undisclosed listed transaction or
an undisclosed reportable avoidance
transaction (other than a listed
transaction) entered into in tax years
beginning after October 22, 2004.
Special rules apply to:
• Disqualified interest on certain
indebtedness under section 163(j). See
Form 8926, Disqualified Corporate
Interest Expense Disallowed Under
Section 163(j) and Related Information,
and the related instructions.
• Interest on which no tax is imposed
(see section 163(j)). A corporation that
owns an interest in a partnership, directly
or indirectly, must treat its distributive
share of the partnership liabilities, interest
income, and interest expense as
liabilities, income, and expenses of the
corporation for purposes of applying the
earnings stripping rules. For more details,
see section 163(j)(8).
• Foregone interest on certain
below-market-rate loans (see section
7872).
• Original issue discount on certain
high-yield discount obligations. (See
section 163(e) to figure the disqualified
portion.)
• Interest which is allocable to
unborrowed policy cash values of life
insurance, endowment, or annuity
contracts issued after June 8, 1997. See
section 264(f). Attach a statement
showing the computation of the
deduction.
Line 19. Charitable
Contributions
Enter 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).
Corporations reporting taxable income
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.
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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. See Regulations
section 1.170A-11.
Limitation on deduction. The total
amount claimed cannot be more than
10% of taxable income (line 30)
computed without regard to the following.
• Any deduction for contributions.
• The special deductions on line 29b.
• The deduction allowed under section
249.
• The domestic production activities
deduction under section 199.
• Any net operating loss (NOL) carryback
to the tax year under section 172.
• Any capital loss carryback to the tax
year under section 1212(a)(1).
Suspension of 10% limitation for
farmers and ranchers. A corporation
that is a qualified farmer or rancher (as
defined in section 170(b)(1)(E)) that does
not have publicly traded stock, can deduct
contributions of qualified conservation
property without regard to the general
10% limit. The total amount of the
contribution claimed for the qualified
conservation property cannot exceed
100% of the excess of the corporation’s
taxable income (as computed above
substituting “100%” for “10%”) over all
other allowable charitable contributions.
Any excess qualified conservation
contributions can be carried over to the
next 15 years subject to the 100%
limitation. See section 170(b)(2)(B).
Contributed conservation property that
is used in agriculture or livestock
production must remain available for such
production.
Carryover. Charitable contributions over
the 10% limitation cannot be deducted for
the tax year but can be carried over to the
next 5 tax years.
Special rules apply if the corporation
has an NOL carryover to the tax year. In
figuring the charitable contributions
deduction for the current tax year, the
10% limit is applied using the taxable
income after taking into account any
deduction for the NOL.
To figure the amount of any remaining
NOL carryover to later years, taxable
income must be modified (see section
172(b)). To the extent that contributions
are used to reduce taxable income for this
purpose and increase an NOL carryover,
a contributions carryover is not allowed.
See section 170(d)(2)(B).
Cash contributions. For contributions
of cash, check, or other monetary gifts
(regardless of the amount), the
corporation must maintain a bank record,
or a receipt, letter, or other written
communication from the donee
organization indicating the name of the
organization, the date of the contribution,
and the amount of the contribution.
Contributions of $250 or more.
Generally, no deduction is allowed for any
Instructions for Form 1120
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.
Contributions of property other than
cash. If a corporation (other than a
closely held or personal service
corporation) contributes 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, Noncash Charitable
Contributions, 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.
Qualified conservation
contributions. Special rules apply to
qualified conservation contributions,
including contributions of certain
easements on buildings located in a
registered historic district. See section
170(h) and Pub. 526, Charitable
Contributions.
Other special rules. The corporation
must reduce its deduction for
contributions of certain capital gain
property. See sections 170(e)(1) and
170(e)(5).
A larger deduction is allowed for
certain contributions of:
• 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)).
For more information on charitable
contributions, including substantiation and
recordkeeping requirements, see section
170 and the related regulations and Pub.
526, Charitable Contributions. For other
special rules that apply to corporations,
see Pub. 542.
Line 20. Depreciation
Include on line 20 depreciation and the
cost of certain property that the
corporation elected to expense under
section 179. See Form 4562 and its
instructions.
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Line 21. Depletion
See sections 613 and 613A for
percentage depletion rates applicable to
natural deposits. Also see section 291 for
the limitation on the depletion deduction
for iron ore and coal (including lignite).
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.
See Pub. 535 for more information on
depletion.
Line 23. Pension,
Profit-Sharing, etc., Plans
Enter 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.
Line 24. Employee Benefit
Programs
Enter contributions to employee benefit
programs not claimed elsewhere on the
return (for example, insurance, health and
welfare programs, etc.) that are not an
incidental part of a pension, profit-sharing,
etc., plan included on line 23.
Line 26. Other Deductions
Attach a schedule, listing by type and
amount, all allowable deductions that are
not deductible elsewhere on Form 1120.
Enter the total on line 26.
Examples of other deductions include
the following. See Pub. 535 and Pub. 542
for details on other deductions that may
apply to corporations.
• Amortization. See Part IV of Form
4562.
• Certain costs of qualified film or
television productions that the corporation
elects to deduct. See section 181 and
Temporary regulations section 1.181-1T.
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• Certain business start-up and
organizational costs. See page 9 of these
instructions.
• Reforestation costs. The corporation
can elect to deduct up to $10,000 of
qualifying reforestation expenses for each
qualified timber property. The corporation
can elect to amortize over 84 months any
amount not deducted. See Pub. 535.
• Insurance premiums.
• Legal and professional fees.
• Supplies used and consumed in the
business.
• Travel, meals, and entertainment
expenses. Special rules apply (discussed
below).
• 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 10.
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 52).
• Any negative net section 481(a)
adjustment. See the instructions for line
10.
• Deduction for certain energy efficient
commercial building property placed in
service before January 1, 2009. See
section 179D, Notice 2008-40, 2008-14
I.R.B. 725 , and Notice 2006-52, 2006-26
I.R.B. 1175.
• Dividends paid in cash on stock held by
an employee stock ownership plan.
However, a deduction can only be taken
for the dividends above 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 1or 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.
Do not deduct the following.
• Fines or penalties paid to a government
for violating any law.
• Any amount that is allocable to a class
of exempt income. See section 265(b) for
exceptions.
• Lobbying expenses. However, see
exceptions (discussed later).
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 for
details.
Travel. The corporation cannot
deduct travel expenses of any 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
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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 28. Taxable Income Before
NOL Deduction and Special
Deductions
At-risk rules. Generally, special at-risk
rules under section 465 apply to closely
held corporations (see Passive activity
limitations on page 9) engaged in any
activity as a trade or business or for the
production of income. These corporations
may have to adjust the amount on line 28.
(See below.)
The at-risk rules do not apply to:
• Holding real property placed in service
by the taxpayer before 1987;
• Equipment leasing under sections
465(c)(4), (5), and (6); or
• Any qualifying business of a qualified
corporation under section 465(c)(7).
However, the at-risk rules do apply to
the holding of mineral property.
If the at-risk rules apply, adjust the
amount on this line for any section 465(d)
losses. These losses are limited to the
amount for which the corporation is at risk
for each separate activity at the close of
the tax year. If the corporation is involved
in one or more activities, any of which
incurs a loss for the year, report the
losses for each activity separately. Attach
Form 6198, At-Risk Limitations, showing
the amount at risk and gross income and
deductions for the activities with the
losses.
If the corporation sells or otherwise
disposes of an asset or its interest (either
total or partial) in an activity to which the
at-risk rules apply, determine the net
profit or loss from the activity by
combining the gain or loss on the sale or
disposition with the profit or loss from the
activity. If the corporation has a net loss, it
may be limited because of the at-risk
rules.
Treat any loss from an activity not
allowed for the tax year as a deduction
allocable to the activity in the next tax
year.
Instructions for Form 1120
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Line 29a. Net Operating Loss
Deduction
A corporation can use the NOL incurred
in one tax year to reduce its taxable
income in another tax year. Enter on line
29a the total NOL carryovers from other
tax years, but do not enter more than the
corporation’s taxable income (after
special deductions). Attach a schedule
showing the computation of the NOL
deduction. Complete item 12 on Schedule
K.
The following special rules apply.
• A personal service corporation may not
carry back an NOL to or from any tax year
to which an election under section 444 to
have a tax year other than a required tax
year applies.
• A corporate equity reduction interest
loss may not be carried back to a tax year
preceding the year of the equity reduction
transaction (see section 172(b)(1)(E)).
• 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
include the information statement as
provided in Regulations section
1.382-11(a), with its income tax return for
each tax year that it is a loss corporation
in which an ownership shift, equity
structures shift, or other transaction
described in Temporary Regulations
section 1.382-2T(a)(2)(i) occur. If the
corporation makes the
closing-of-the-books election, see
Regulations section 1.382-6(b).
• If a corporation acquires control of
another corporation (or acquires its
assets in a reorganization), the amount of
pre-acquisition losses that may offset
recognized built-in gain may be limited
(see section 384).
• 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).
• A corporation has a 5-year period to
replace converted property in the case of
property that is in the Kansas Disaster
Zone and that is compulsorily or
involuntarily converted on or after May 4,
2007, by reason of the May 4, 2007,
storms and tornadoes. See section
1400N(k) for details.
• Corporations incurring casualty losses
attributable to storms and tornadoes with
respect to public utility property located in
the Kansas Disaster Zone may elect to
take such losses into account in the fifth
tax year, instead of the first tax year,
immediately preceding the tax year in
which the loss occurred. If the election
results in the creation or increase of a
NOL for the year in which the casualty
loss is taken into account, the NOL may
be carried back or carried over under
Instructions for Form 1120
section 172. See section 1400N(o) for
details.
• Certain qualified GO Zone losses may
be eligible for a special 5-year carryback
period. See section 1400N(k).
• A corporation may elect to treat any
GO Zone public utility casualty loss as a
specified liability loss to which the 10-year
carryback period applies. See section
1400N(j) and the Instructions for Form
1139.
For more details on the NOL
deduction, see section 172, the
Instructions for Form 1139, and Pub. 542.
Line 29b. Special Deductions
See the instructions for Schedule C
beginning on page 14.
Tax and Payments
Line 30. Taxable Income
Minimum taxable income. The
corporation’s taxable income cannot be
less than the largest of the following
amounts.
• 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 (Form
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.
Net operating loss (NOL). If line 30
(figured without regard to the items listed
above under minimum taxable income), is
zero or less, the corporation may have an
NOL that can be carried back or forward
as a deduction to other tax years.
Generally, a corporation first carries back
an NOL 2 tax years. However, the
corporation can elect to waive the
carryback period and instead carry the
NOL forward to future tax years. To make
the election, see the instructions for
Schedule K, item 11 on page 18.
See Form 1139 for details, including
other elections that may be available,
which must be made no later than 6
months after the due date (excluding
extensions) of the corporation’s tax
return.
Merchant Marine capital construction
fund. To take a deduction for amounts
contributed to a capital construction fund
(CCF), reduce the amount that would
otherwise be entered on line 30 by the
amount of the deduction. On the dotted
line next to the entry space, enter “CCF”
and the amount of the deduction. For
more information, see section 7518.
Line 32b. Estimated Tax
Payments
Enter any estimated tax payments the
corporation made for the tax year.
Beneficiaries of trusts. If the
corporation is the beneficiary of a trust,
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and the trust makes a section 643(g)
election to credit its estimated tax
payments to its beneficiaries, include the
corporation’s share of the payment in the
total for line 32b. Enter “T” and the
amount on the dotted line next to the
entry space.
Special estimated tax payments for
certain life insurance companies. If
the corporation is required to make or
apply special estimated tax payments
(SETP) under section 847 in addition to
its regular estimated tax payments, enter
on line 32b, the corporation’s total
estimated tax payments. In the margin
near line 32b, enter “Form 8816” and the
amount. Attach a schedule showing your
computation of estimated tax payments.
See sections 847(2) and 847(8) and Form
8816, Special Loss Discount Account and
Special Estimated Tax Payments for
Insurance Companies, for more
information.
Line 32c. 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 32f
Credit from Form 2439. Enter any
credit from Form 2439, Notice to
Shareholder of Undistributed 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.
Credit for federal tax on fuels. Enter
any credit from Form 4136, Credit for
Federal Tax Paid on Fuels. Attach Form
4136 to Form 1120.
Credit for tax on ozone-depleting
chemicals. Include on line 32f 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 32g. Refundable Credits
From Forms 3800 and 8827.
The corporation may elect to claim
additional research and minimum tax
credits in lieu of claiming additional
first-year depreciation under section
168(k) for certain property. If the
corporation makes the election, enter on
line 32g the amounts from line 19c of
Form 3800 and line 8c of Form 8827, if
applicable. See the instructions for these
forms.
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Line 32h. Total Payments
Add the amounts on lines 32d through
32g and enter the total on line 32h.
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 32h. Enter the amount
withheld and the words “Backup
Withholding” in the blank space above
line 32h.
Line 33. Estimated Tax Penalty
If Form 2220 is attached, check the box
on line 33, and enter the amount of any
penalty on this line.
Line 36
Direct deposit of refund. If the
corporation wants its refund directly
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 8050 and attach it to the
corporation’s tax return.
Schedule A.
Cost of Goods Sold
Generally, inventories are required at the
beginning and end of each tax year if the
production, purchase, or sale of
merchandise is an income-producing
factor.
However, if the corporation is a
qualifying taxpayer or a qualifying small
business taxpayer, it can adopt or change
its accounting method to account for
inventoriable items in the same manner
as materials and supplies that are not
incidental, unless its business is a tax
shelter as defined in section 448(d)(3).
A qualifying taxpayer is a taxpayer
that, for each prior tax year ending after
December 16, 1998, has average annual
gross receipts of $1 million or less for the
3 prior tax years.
A qualifying small business taxpayer is
a taxpayer (a) that, for each prior tax year
ending on or after December 31, 2000,
has average annual gross receipts of $10
million or less for the 3 prior tax years,
and (b) whose principal business activity
is not an ineligible activity.
Under this accounting method,
inventory costs for raw materials
purchased for use in producing finished
goods and merchandise purchased for
resale are deductible in the year the
finished goods or merchandise are sold
(but not before the year the corporation
paid for the raw materials or
merchandise, if it is also using the cash
method). For additional guidance on this
method of accounting for inventoriable
items, see Pub. 538 and the Instructions
for Form 3115.
Enter amounts paid for all raw
materials and merchandise during the tax
year on line 2. The amount the
corporation can deduct for the tax year is
figured on line 8.
All filers not using the cash method of
accounting should see Section 263A
uniform capitalization rules on page 8
before completing Schedule A.
Line 1. Inventory at Beginning
of Year
If the corporation is changing its method
of accounting for the current tax year, it
must refigure last year’s closing inventory
using its new method of accounting and
enter the result on line 1. If there is a
difference between last year’s closing
inventory and the refigured amount,
attach an explanation and take it into
account when figuring the corporation’s
section 481(a) adjustment.
Line 4. Additional Section 263A
Costs
An entry is required on this line only for
corporations that have elected a
simplified method of accounting.
For corporations that have elected the
simplified production method, additional
section 263A costs are generally those
costs, other than interest, that were not
capitalized under the corporation’s
method of accounting immediately prior to
the effective date of section 263A but are
now required to be capitalized under
section 263A. For details, see
Regulations section 1.263A-2(b).
For corporations that have elected the
simplified resale method, additional
section 263A costs are generally those
costs incurred with respect to the
following categories.
• Off-site storage or warehousing.
• Purchasing.
• Handling, such as processing,
assembling, repackaging, and
transporting.
• General and administrative costs
(mixed service costs).
For details, see Regulations section
1.263A-3(d).
Enter on line 4 the balance of section
263A costs paid or incurred during the tax
year not includible on lines 2, 3, and 5.
Line 5. Other Costs
Enter on line 5 any costs paid or incurred
during the tax year not entered on lines 2
through 4.
Line 7. Inventory at End of Year
See Regulations sections 1.263A-1
through 1.263A-3 for details on figuring
the amount of additional section 263A
costs to be included in ending inventory. If
the corporation accounts for inventoriable
items in the same manner as materials
and supplies that are not incidental, enter
on line 7 the portion of its raw materials
and merchandise purchased for resale
that is included on line 6 and was not sold
during the year.
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Lines 9a Through 9f.
Inventory Valuation Methods
Inventories can be valued at:
• Cost;
• Cost or market value (whichever is
lower); or
• Any other method approved by the IRS
that conforms to the requirements of the
applicable regulations cited below.
However, if the corporation is using the
cash method of accounting, it is required
to use cost.
Corporations that account for
inventoriable items in the same manner
as materials and supplies that are not
incidental can currently deduct
expenditures for direct labor and all
indirect costs that would otherwise be
included in inventory costs.
Generally, the average cost (rolling
average) method of valuing inventories
does not conform to the requirements of
the regulations. See Rev. Rul. 71-234,
1971-1 C.B. 148. However, if a
corporation uses the average cost
method for financial accounting purposes,
there are two safe harbors under which
this method will be deemed to clearly
reflect income for federal income tax
purposes. See Rev. Proc. 2008-43,
2008-30 I.R.B. 186, for details.
Corporations that use erroneous
valuation methods must change to a
method permitted for federal income tax
purposes. Use Form 3115 to make this
change.
On line 9a, check the method(s) used
for valuing inventories. Under lower of
cost or market, the term “market” (for
normal goods) means the current bid
price prevailing on the inventory valuation
date for the particular merchandise in the
volume usually purchased by the
taxpayer. For a manufacturer, market
applies to the basic elements of
cost — raw materials, labor, and burden. If
section 263A applies to the taxpayer, the
basic elements of cost must reflect the
current bid price of all direct costs and all
indirect costs properly allocable to goods
on hand at the inventory date.
Inventory may be valued below cost
when the merchandise is unsalable at
normal prices or unusable in the normal
way because the goods are subnormal
due to damage, imperfections, shopwear,
etc., within the meaning of Regulations
section 1.471-2(c). The goods may be
valued at the bona fide selling price,
minus direct cost of disposition (but not
less than scrap value). Bona fide selling
price means actual offering of goods
during a period ending not later than 30
days after inventory date.
If this is the first year the Last-in,
First-out (LIFO) inventory method was
either adopted or extended to inventory
goods not previously valued under the
LIFO method provided in section 472,
attach Form 970, Application To Use
LIFO Inventory Method, or a statement
with the information required by Form
Instructions for Form 1120
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970. Also check the LIFO box on line 9c.
On line 9d, enter the amount or the
percent of total closing inventories
covered under section 472. Estimates are
acceptable.
If the corporation changed or extended
its inventory method to LIFO and had to
write up the opening inventory to cost in
the year of election, report the effect of
the write-up as other income (line 10,
page 1), proportionately over a 3-year
period that begins with the year of the
LIFO election (section 472(d)).
Note. Corporations using the LIFO
method that make an S corporation
election or transfer LIFO inventory to an S
corporation in a nonrecognition
transaction may be subject to an
additional tax attributable to the LIFO
recapture amount. See the instructions for
Schedule J, line 10, on page 16, and line
10, Other Income, on page 8.
For more information on inventory
valuation methods, see Pub. 538.
Schedule C. Dividends
and Special Deductions
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) 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 C.
Corporations filing a consolidated
return must not report as dividends on
Schedule C 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.,
Instructions for Form 1120
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
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 to Form
1120 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%
-15-
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
section 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).
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.
Line 9, Column (c)
Generally, line 9, column (c), cannot
exceed the amount from the worksheet
below. However, in a year in which an
NOL occurs, this limitation does not apply
even if the loss is created by the
dividends-received deduction. See
sections 172(d) and 246(b).
Line 10, Columns (a) and (c)
Small business investment companies
operating under the Small Business
Investment Act of 1958 (see 15 U.S.C.
661 and following) must enter dividends
that are received from domestic
corporations subject to income tax even
though a deduction is allowed for the
entire amount of those dividends. To
claim the 100% deduction on line 10,
column (c), the company must file with its
return a statement that it was a federal
licensee under the Small Business
Investment Act of 1958 at the time it
received the dividends.
Line 11, Columns (a) and (c)
Enter only dividends that qualify under
section 243(b) for the 100%
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dividends-received deduction described in
section 243(a)(3). Corporations taking this
deduction are subject to the provisions of
section 1561.
The 100% deduction does not apply to
affiliated group members that are joining
in the filing of a consolidated return.
former DISC (as defined in section
992(a)) to the extent the dividend:
• Is paid out of the corporation’s
accumulated IC-DISC income or
previously taxed income, or
• Is a deemed distribution under section
995(b)(1).
Line 12, Column (a)
Line 17, Column (a)
Enter 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).
Include the following.
1. 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.
2. Dividends from tax-exempt
organizations.
3. Dividends (other than capital gain
distributions) received from a REIT that,
for the tax year of the trust in which the
dividends are paid, qualifies under
sections 856 through 860.
4. 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 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.
Line 13, Column (a)
Enter foreign dividends not reportable on
lines 3, 6, 7, 8, 11, or 12 of column (a).
Include on line 13 the corporation’s share
of the ordinary earnings of a qualified
electing fund from line 1c of Form 8621,
Return by a Shareholder of a Passive
Foreign Investment Company or
Qualifying Electing Fund. Exclude
distributions of amounts constructively
taxed in the current year or in prior years
under subpart F (sections 951 through
964).
Line 14, Column (a)
Include income constructively received
from CFCs under subpart F. This amount
should equal the total subpart F income
reported on Schedule I of Form 5471,
Information Return of U.S. Persons With
Respect to Certain Foreign Corporations.
Line 15, Column (a)
Include gross-up for taxes deemed paid
under sections 902 and 960.
Line 16, Column (a)
Enter taxable distributions from an
IC-DISC or former DISC that are
designated as not eligible for a
dividends-received deduction.
No deduction is allowed under section
243 for a dividend from an IC-DISC or
Keep for Your
Records
Worksheet for Schedule C, line 9
1. Refigure line 28, page 1, Form 1120, 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) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2. Complete lines 10, 11, and 12, column (c), and enter the total here
3. Subtract line 2 from line 1 . . . . . . . . . . . . . . . . . . . . . . . . . . .
4. Multiply line 3 by 80% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5. Add lines 2, 5, 7, and 8, column (c), and the part of the deduction
on line 3, column (c), that is attributable to dividends from
20%-or-more-owned corporations . . . . . . . . . . . . . . . . . . . . . .
6. Enter the smaller of line 4 or 5. If line 5 is greater than line 4, stop
here; enter the amount from line 6 on line 9, column (c), and do not
complete the rest of this worksheet . . . . . . . . . . . . . . . . . . . . .
7. Enter the total amount of dividends from 20%-or-more-owned
corporations that are included on lines 2, 3, 5, 7, and 8, column (a)
8. Subtract line 7 from line 3 . . . . . . . . . . . . . . . . . . . . . . . . . . .
9. Multiply line 8 by 70% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10. Subtract line 5 above from line 9, column (c) . . . . . . . . . . . . . . .
11. Enter the smaller of line 9 or line 10 . . . . . . . . . . . . . . . . . . . . .
12. Dividends-received deduction after limitation (sec. 246(b)). Add
lines 6 and 11. Enter the result here and on line 9, column (c) . . .
-16-
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
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 respect to positions
in substantially similar or related property.
5. Any other taxable dividend income
not properly reported above.
If patronage dividends or per-unit
retain allocations are included on line 17,
identify the total of these amounts in a
schedule attached to Form 1120.
Line 18, Column (c)
Section 247 allows public utilities a
deduction of 40% of the smaller of
(a) dividends paid on their preferred stock
during the tax year, or (b) taxable income
computed without regard to this
deduction. In a year in which an NOL
occurs, compute the deduction without
regard to section 247(a)(1)(B). See
section 172(d).
Schedule J.
Tax Computation
Line 1
If the corporation is a member of a
controlled group, check the box on line 1.
Complete and attach Schedule O (Form
1120), Consent Plan and Apportionment
Schedule for a Controlled Group.
Members of a controlled group must use
Schedule O to report the apportionment
of taxable income, income tax, and
certain tax benefits between the members
of the group. See Schedule O and its
Instructions for more information.
Line 2
If the corporation is a member of a
controlled group, enter the corporation’s
tax from Part III of Schedule O (Form
1120). Most corporations that are not
members of a controlled group and not
filing a consolidated return figure their tax
by using the Tax Rate Schedule below.
Qualified personal service corporations
should see the instructions later.
Tax Rate Schedule
If taxable income (line 30, Form 1120) on page 1
is:
Over —
But not
over —
Tax is:
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
Qualified personal service corporation.
A qualified personal service corporation
is taxed at a flat rate of 35% on taxable
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income. If the corporation is a qualified
personal service corporation, check the
box on line 2 even if the corporation has
no tax liability.
A corporation is a qualified personal
service corporation if it meets both of the
following tests.
1. Substantially all of the corporation’s
activities involve the performance of
services in the fields of health, law,
engineering, architecture, accounting,
actuarial science, performing arts, or
consulting.
2. At least 95% of the corporation’s
stock, by value, is directly or indirectly
owned by
a. Employees performing the
services,
b. Retired employees who had
performed the services listed above,
c. Any estate of an employee or
retiree described above, or
d. Any person who acquired the stock
of the corporation as a result of the death
of an employee or retiree (but only for the
2-year period beginning on the date of the
employee’s or retiree’s death).
Alternative tax for corporations with
qualified timber gains. A corporation
that has net capital gain and qualified
timber gain (as defined in section
1201(b)(2)) is subject to an alternative tax
computation. The alternative tax applies
for tax years ending after May 22, 2008,
and beginning on or before May 22, 2009.
The tax is figured on Part IV of Schedule
D (Form 1120). Enter on line 2, Schedule
J, the tax from line 23 of Part IV,
Schedule D (Form 1120).
Mutual savings bank conducting life
insurance business. The tax under
section 594 consists of the sum of (a) a
partial tax computed on Form 1120 on the
taxable income of the bank determined
without regard to income or deductions
allocable to the life insurance department,
and (b) a partial tax on the taxable
income computed on Form 1120-L of the
life insurance department. Enter the
combined tax on line 2. Attach Form
1120-L as a schedule (and identify it as
such), together with the annual
statements and schedules required to be
filed with Form 1120-L. See Regulations
section 1.6012-2(c)(1)(ii). An exception
applies for insurance companies that
electronically file their returns. See
Regulations section 1.6012-2(c)(4).
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 increase in taxes due under
section 1291(c)(2) in the total for line 2.
On the dotted line next to line 2, enter
“Section 1291” and the amount.
Do not include on line 2 any interest
due under section 1291(c)(3). Instead,
show the amount of interest owed in the
bottom margin of page 1, Form 1120, and
Instructions for Form 1120
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 2. On the
dotted line next to line 2, enter “Section
197” and the amount.
Line 3
A corporation that is not a small
corporation exempt from the AMT
CAUTION 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. The corporation
must file Form 4626 if its taxable income
(or loss) before the NOL deduction,
combined with these adjustments and tax
preference items is more than the smaller
of $40,000 or the corporation’s allowable
exemption amount (from Form 4626). For
this purpose, taxable income does not
include the NOL deduction.
!
See Form 4626 for definitions and
details on how to figure the tax.
Line 5a
To find out when a corporation can take
the credit for payment of income tax to a
foreign country or U.S. possession, see
Form 1118.
Line 5b
Enter the amount of any credit from Form
8834, Qualified Electric Vehicle Credit, for
qualified electric vehicle passive activity
credits from prior years allowed on Form
8810.
Line 5c
Enter on line 5c the corporation’s total
general business credit.
The corporation is required to file Form
3800, General Business Credit, to claim
certain business credits. For a list of
allowable credits, see Form 3800. Enter
the allowable credit from Part II, line 32,
of Form 3800, on line 5c. Also, see the
applicable credit form and its instructions.
Line 5d
To figure the minimum tax credit and any
carryforward of that credit, use Form
8827, Credit for Prior Year Minimum
Tax — Corporations.
Line 5e
Enter the amount of any credit from Form
8860, Qualified Zone Academy Bond
Credit, or from Form 8912, Credit to
Holders of Tax Credit Bonds. Check the
applicable box(es) and include the
amount of the credit in the total for line
5e.
-17-
Line 8
A corporation is taxed as a personal
holding company under section 542 if:
• At least 60% of its adjusted ordinary
gross income for the tax year is personal
holding company income, and
• At any time during the last half of the
tax year more than 50% in value of its
outstanding stock is directly or indirectly
owned by five or fewer individuals.
See Schedule PH (Form 1120) for
definitions and details on how to figure
the tax.
Line 9
Include any of the following taxes and
interest in the total on line 9. Check the
appropriate box(es) for the form, if any,
used to compute 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.
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.
Interest due under the look-back
methods. If the corporation used the
look-back method for certain long-term
contracts, see Form 8697, Interest
Computation Under the Look-Back
Method for Completed Long-Term
Contracts, for information on figuring the
interest the corporation may have to
include.
The corporation may also have to
include interest due under the look-back
method for property depreciated under
the income forecast method. See Form
8866, Interest Computation Under the
Look-Back Method for Property
Depreciated Under the Income Forecast
Method.
Alternative tax on qualifying shipping
activities. Enter any alternative tax on
qualifying shipping activities from Form
8902. Check the box for Form 8902.
Other. Additional taxes and interest
amounts can be included in the total
entered on line 9. 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
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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).
• Tax and interest on a nonqualified
withdrawal from a capital construction
fund (section 7518(g)).
• Interest on deferred tax attributable to
(a) installment sales of certain timeshares
and residential lots (section 453(l)(3)) and
(b) 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 9
and identify the applicable Code section
and the type of tax or interest.
Line 10
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 10. See Form 8621, Part V, and How
to report, below.
Subtract the following amounts from
the total for line 10.
• Deferred tax on the corporation’s share
of undistributed earnings of a qualified
electing fund (see Form 8621, Part II).
• Deferred LIFO recapture tax (section
1363(d)). This tax is the part of the LIFO
recapture tax that will be deferred and
paid with Form 1120S in the future. To
figure the deferred tax, first figure the total
LIFO recapture tax. Follow the steps
below to figure the total LIFO recapture
tax and the deferred amount. Also see the
instructions regarding LIFO recapture
amount on page 8 under Line 10. Other
Income.
Step 1. Figure the tax on the
corporation’s income including the LIFO
recapture amount. (Complete Schedule J
through line 9, but do not enter a total on
line 10 yet.)
Step 2. Using a separate worksheet,
complete Schedule J again, but do not
include the LIFO recapture amount in the
corporation’s taxable income.
Step 3. Compare the tax in Step 2 to
the tax in Step 1. (The difference between
the two is the LIFO recapture tax.)
Step 4. Multiply the amount figured in
Step 3 by 75%. (The result is the deferred
LIFO recapture tax.)
How to report. Attach a schedule
showing the computation of each item
included in, or subtracted from, the total
for line 10. On the dotted line next to line
10, specify (a) the applicable Code
section, (b) the type of tax, and (c) enter
the amount of tax. For example, if the
corporation is deferring a $100 LIFO
recapture tax, subtract this amount from
the total on line 10, then enter “Section
1363-Deferred Tax-$100” on the dotted
line next to line 10.
Schedule K.
Other Information
Complete all items that apply to the
corporation.
Question 3
Check the “Yes” box for question 3 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. For a
definition of a parent-subsidiary controlled
group, see the Instructions for Schedule
O (Form 1120).
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 one or more of the other includible
corporations.
For this purpose, the term “stock”
generally does not include any stock that
(a) is nonvoting, (b) is nonconvertible,
(c) is limited and preferred as to 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 4
Constructive Ownership of the
Corporation
For purposes of question 4, the
constructive ownership rules of section
-18-
267(c) (excluding section 267(c)(3)) apply
to ownership of interests in corporate
stock and ownership of interests in the
profit, loss, or capital of a partnership. An
interest in the corporation owned directly
or indirectly by or for another entity
(corporation, partnership, estate, or trust)
is considered to be owned proportionately
by the owners (shareholders, partners, or
beneficiaries) of the owning entity. Also,
under section 267(c), an individual is
considered to own an interest owned
directly or indirectly by or for his or her
family. The family of an individual
includes only that individual’s spouse,
brothers, sisters, ancestors, and lineal
descendants. An interest will be attributed
from an individual under the family
attribution rules only if the person to
whom the interest is attributed owns a
direct or an indirect interest in the
corporation under section 267(c)(1), (2),
or (5). However, for purposes of these
instructions, an individual will not be
considered to own, under section
267(c)(2), an interest in the corporation
owned, directly or indirectly, by a family
member unless the individual also owns
an interest in the corporation either
directly or indirectly through a corporation,
partnership or trust.
Constructive ownership examples for
questions 4 and 5 follow the instructions
for questions 4b and 5b.
Question 4a
List each foreign or domestic corporation,
partnership, or trust owning, at the end of
the tax year, directly 20% or more, or
owning, directly or indirectly, 50% or more
of the total voting power of all classes of
the corporation’s stock entitled to vote.
Indicate the name of the entity, EIN (if
any), type of entity (corporation,
partnership, or trust), country of
organization, and the percentage owned,
directly or indirectly, of the voting stock of
the corporation. For an affiliated group
filing a consolidated tax return, list the
parent corporation rather than the
subsidiary members. List the entity owner
of a disregarded entity rather than the
disregarded entity. If the owner of a
disregarded entity is an individual rather
than an entity, list the individual under
question 4b.
Question 4b
List each individual or estate owning, at
the end of the tax year, directly 20% or
more, or owning, directly or indirectly,
50% or more, of the total voting power of
all classes of the corporation’s stock
entitled to vote. Indicate the name of the
individual or estate, TIN (if any), country
of citizenship (for an estate, the
citizenship of the decedent), and the
percentage owned, directly or indirectly of
the voting stock of the corporation.
Example 1. Corporation A owns,
directly, a 50% interest in the profit, loss,
or capital of Partnership B. Corporation A
also owns, directly, a 15% interest in the
profit, loss, or capital of Partnership C and
owns, directly, 15% of the voting stock of
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Corporation D. Partnership B owns,
directly, a 70% interest in the profit, loss,
or capital of Partnership C and owns,
directly, 70% of the voting stock of
Corporation D. Corporation A owns,
indirectly, through Partnership B, a 35%
interest (50% of 70%) in the profit, loss, or
capital of Partnership C and owns,
indirectly, 35% of the voting stock of
Corporation D. Corporation A owns,
directly or indirectly, a 50% interest in the
profit, loss, or capital of Partnership C
(15% directly and 35% indirectly), and
owns, directly or indirectly, 50% of the
voting stock of Corporation D (15%
directly and 35% indirectly).
Corporation D reports in its answer to
question 4a that its voting stock is owned,
directly or indirectly, 50% by Corporation
A and is owned, directly, 70% by
Partnership B.
Example 2. A owns, directly, 50% of
the voting stock of Corporation X. B, the
daughter of A, does not own, directly, any
interest in Corporation X and does not
own, indirectly, any interest in Corporation
X through any entity (corporation,
partnership, trust, or estate). Therefore,
the family attribution rules do not apply
and, for the purposes of question 4b, the
50% interest of A in Corporation X is not
attributed to B.
Example 3. A owns, directly, 50% of
the voting stock of Corporation X. B, the
daughter of A, does not own, directly, any
interest in X but does own, indirectly, 10%
of the voting stock of Corporation X
through Trust T of which she is the sole
beneficiary. No other family member of A
or B owns, directly, any interest in
Corporation X nor does any own,
indirectly, any interest in Corporation X
through any entity. Neither A nor B owns
any other interest in Corporation X
through any entity.
For the purposes of question 4b, the
50% interest of A in the voting stock of
Corporation X is attributed to B and the
10% interest of B in the voting stock of
Corporation X is attributed to A. A owns,
directly or indirectly, 60% of the voting
stock of Corporation X, 50% directly and
10% indirectly through B. B owns, directly
or indirectly, 60% of the voting stock of
Corporation X (50% indirectly through A
and 10% indirectly through Trust T).
Question 5
Constructive Ownership of Other
Entities
For purposes of determining the
corporation’s constructive ownership of
other entities, the constructive ownership
rules of section 267(c) (excluding section
267(c)(3)) apply to ownership of interests
in partnerships and trusts as well as
corporate stock. Generally, if an entity (a
corporation, partnership, or trust) is
owned, directly or indirectly, by or for
another entity (corporation, partnership,
estate, or trust), the owned entity is
considered to be owned proportionately
by or for the owners (shareholders,
Instructions for Form 1120
partners, or beneficiaries) of the owning
entity.
Question 5a
List each foreign or domestic corporation
not included on Form 851, Affiliations
Schedule, in which the corporation, at the
end of the tax year, owned directly 20%
or more, or owned, directly or indirectly,
50% or more of the total voting power of
all classes of stock entitled to vote.
Indicate the name of the corporation, EIN
(if any), country of incorporation, and the
percentage interest owned, directly or
indirectly, in the total voting power. List
the parent corporation of an affiliated
group of corporations filing a consolidated
tax return rather than the subsidiary
members except for subsidiary members
in which an interest is owned, directly or
indirectly, independent of the interest
owned, directly or indirectly, in the parent
corporation. List a corporation owned
through a disregarded entity rather than
the disregarded entity.
Question 5b
List each foreign or domestic partnership
in which the corporation, at the end of the
tax year, owned directly an interest of
20% or more, or owned, directly or
indirectly, an interest of 50% or more in
the profit, loss, or capital of the
partnership. List each trust in which the
corporation, at the end of the tax year,
owned directly an interest of 20% or
more, or owned, directly or indirectly, an
interest of 50% or more in the trust
beneficial interest. Indicate the name, EIN
(if any), country of organization, and the
maximum percentage interest owned,
directly or indirectly, in the profit, loss, or
capital of the partnership at the end of the
partnership tax year, or, for a trust, the
percentage interest owned in the trust
beneficial interest. List a partnership or
trust owned through a disregarded entity
rather than the disregarded entity.
Maximum percentage owned in
partnership profit, loss, or capital. For
the purposes of question 5b, the term
“maximum percentage owned” means the
highest percentage of interest in a
partnership’s profit, loss, or capital as of
the end of the partnership’s tax year, as
determined under the partnership
agreement, when taking into account the
constructive ownership rules above. If the
partnership agreement does not express
the partner’s share of profit, loss, and
capital as fixed percentages, use a
reasonable method in arriving at the
percentage items for the purposes of
completing question 5b. Such method
must be consistent with the partnership
agreement. The method used to compute
a percentage share of profit, loss, and
capital must be applied consistently from
year to year. Maintain records to support
the determination of the share of profits,
losses, and share of capital.
Example 4. Assuming the same facts
as Example 1, Corporation A reports in its
answer to question 5a that it owns,
directly or indirectly, 50% of the voting
-19-
stock of Corporation D. Corporation A
reports in its answer to question 5b that it
owns, directly, an interest of 50% in the
profit, loss, or capital of Partnership B and
owns, directly or indirectly, 50% of the
profit, loss, or capital of Partnership C.
Question 7
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 7a the percentage owned
by the foreign person specified in
question 7. On line 7b, enter the name of
the owner’s country.
Note. If there is more than one
25%-or-more foreign owner, complete
lines 7a and 7b for the foreign person with
the highest percentage of ownership.
Foreign person. The term “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,” it may have to
file Form 5472, Information Return of a
25% Foreign Owned U.S. Corporation or
a Foreign Corporation Engaged in a U.S.
Trade or Business. 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 9
Show any tax-exempt interest received or
accrued. Include any exempt-interest
dividends received as a shareholder in a
mutual fund or other RIC. Also, if
required, include the same amount on
Schedule M-1, line 7 (or Schedule M-3,
Part II, line 13, if applicable).
Item 11
If the corporation has an NOL for its 2008
tax year, it can elect to waive the entire
carryback period for the NOL and instead
carry the NOL forward to future tax years.
To do so, check the box on line 11 and
Page 20 of 25
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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
Form 1139 for more details.
Corporations filing a consolidated
return must also attach the statement
required by Regulations section
1.1502-21(b)(3).
Item 12
Enter the amount of the NOL 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 NOLs generated in prior years
but not used to offset income (either as a
carryback or carryover) to a tax year prior
to 2008. Do not reduce the amount by
any NOL deduction reported on line 29a.
Schedule L.
Balance Sheet per Books
The balance sheet should agree with the
corporation’s books and records.
Corporations with total receipts (line 1a
plus lines 4 through 10 on page 1) and
total assets at the end of the tax year less
than $250,000 are not required to
complete Schedules L, M-1, and M-2 if
the “Yes” box on Schedule K, question
13, is checked. If the corporation is
required to complete Schedule L, include
total assets reported on Schedule L, line
15, column (d), on page 1, item D.
Corporations with total assets
non-consolidated (or consolidated for all
corporations included within the tax
consolidation group) of $10 million or
more on the last day of the tax year must
complete Schedule M-3 (Form 1120)
instead of Schedule M-1. See the
separate Instructions for Schedule M-3
(Form 1120) for provisions that also affect
Schedule L.
If filing a consolidated return, report
total consolidated assets, liabilities, and
shareholder’s equity for all corporations
joining in the return. See Consolidated
Return on page 6 of these instructions.
Schedule M-1.
Reconciliation of Income
(Loss) per Books With
Income per Return
Corporations with total receipts (line 1a
plus lines 4 through 10 on page 1) and
total assets at the end of the tax year less
than $250,000 are not required to
complete Schedules L, M-1, and M-2 if
the “Yes” box on Schedule K, question
13, is checked.
Line 1
Include certificates of deposit as cash on
this line.
Line 5
Include on this line:
• State and local government obligations,
the interest on which is excludable from
gross income under section 103(a) and
• Stock in a mutual fund or other RIC that
distributed exempt-interest dividends
during the tax year of the corporation.
Line 26
Some examples of adjustments to report
on this line include:
• Unrealized gains and losses on
securities held “available for sale.”
• Foreign currency translation
adjustments.
• The excess of additional pension
liability over unrecognized prior service
cost.
• Guarantees of employee stock (ESOP)
debt.
• Compensation related to employee
stock award plans.
If the total adjustment to be entered on
line 26 is a negative amount, enter the
amount in parentheses.
Corporations with total assets
non-consolidated (or consolidated for all
corporations included within the tax
consolidation group) of $10 million or
more on the last day of the tax year must
complete Schedule M-3 (Form 1120)
instead of Schedule M-1. A corporation
filing Form 1120 that is not required to file
Schedule M-3 may voluntarily file
Schedule M-3 instead of Schedule M-1.
See the Instructions for Schedule M-3
(Form 1120) for more information.
Line 5c
Include any of the following.
• Meal and entertainment expenses not
deductible under section 274(n).
• Expenses for the use of an
entertainment facility.
• The part of business gifts over $25.
• Expenses of an individual over $2,000,
which are allocable to conventions on
cruise ships.
• Employee achievement awards over
$400.
• The cost of entertainment tickets over
face value (also subject to 50% limit
under section 274(n)).
• The cost of skyboxes over the face
value of nonluxury box seat tickets.
Privacy Act and Paperwork Reduction Act Notice. We ask for the information on these forms to carry out the Internal Revenue
laws of the United States. You are required to give us the information. We need it to ensure that you are complying with these laws
and to allow us to figure and collect the right amount of tax. 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 the following forms will vary depending on individual circumstances. The estimated average
times are:
Form
1120
Sch. D (1120)
Sch. H (1120)
Sch. M-3 (1120)
Sch. N (1120)
Sch. O (1120)
Sch. PH (1120)
Recordkeeping
Learning about
the law or the form
Preparing the form
Copying,
assembling,
and sending the
form to the IRS
65 hr., 45 min.
6 hr., 13 min.
5 hr., 44 min.
78 hr., 55 min.
3 hr., 21 min.
10 hr., 45 min.
13 hr., 23 min.
42 hr., 1 min.
3 hr., 55 min.
35 min.
3 hr., 40 min.
1 hr., 30 min.
2 hr., 5 min.
4 hr., 18 min.
72 hr., 52 min.
6 hr., 3 min.
43 min.
5 hr., 7 min.
4 hr., 24 min.
2 hr., 21 min.
6 hr., 34 min.
8 hr., 2 min.
32 min.
--------48 min.
----32 min.
If you have comments concerning the accuracy of these time estimates or suggestions for making this form and related
schedules simpler, we would be happy to hear from you. You can write to Internal Revenue Service, Tax Products Coordinating
Committee, SE:W:CAR:MP:T:T:SP, 1111 Constitution Ave. NW, IR-6526, Washington, DC 20224. Do not send the tax form to this
address. Instead, see Where To File on page 3.
-20-
Instructions for Form 1120
Page 21 of 25
Instructions for Form 1120
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• The part of luxury water travel
expenses not deductible under section
274(m).
• Expenses for travel as a form of
education.
Instructions for Form 1120
• Other nondeductible travel and
entertainment expenses.
For more information, see Pub. 542.
-21-
Line 7
Report any tax exempt interest received
or accrued, including any exempt-interest
dividends received as a shareholder in a
mutual fund or other RIC. Also report this
same amount on Schedule K, item 9.
Page 22 of 25
Instructions for Form 1120
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Principal Business Activity
Codes
This list of principal business activities and their
associated codes is designed to classify an
enterprise by the type of activity in which it is
engaged to facilitate the administration of the
Internal Revenue Code. These principal business
activity codes are based on the North American
Industry Classification System.
Using the list of activities and codes below,
determine from which activity the company derives
the largest percentage of its “total receipts.” Total
receipts is defined as the sum of gross receipts or
sales (page 1, line 1a) plus all other income (page 1,
lines 4 through 10). If the company purchases raw
materials and supplies them to a subcontractor to
produce the finished product, but retains title to the
product, the company is considered a manufacturer
and must use one of the manufacturing codes
(311110-339900).
Once the principal business activity is determined,
entries must be made on Form 1120, Schedule K,
lines 2a, 2b, and 2c. For the business activity code
number, enter the six digit code selected from the list
below. On the next line (Form 1120, Schedule K, line
2b), enter a brief description of the company’s
business activity. Finally, enter a description of the
principal product or service of the company on Form
1120, Schedule K, line 2c.
Code
Code
Code
Code
Agriculture, Forestry, Fishing
and Hunting
Heavy and Civil Engineering
Construction
237100 Utility System Construction
237210 Land Subdivision
237310 Highway, Street, & Bridge
Construction
237990 Other Heavy & Civil
Engineering Construction
Specialty Trade Contractors
238100 Foundation, Structure, &
Building Exterior Contractors
(including framing carpentry,
masonry, glass, roofing, &
siding)
238210 Electrical Contractors
238220 Plumbing, Heating, &
Air-Conditioning Contractors
238290 Other Building Equipment
Contractors
238300 Building Finishing
Contractors (including
drywall, insulation, painting,
wallcovering, flooring, tile, &
finish carpentry)
238900 Other Specialty Trade
Contractors (including site
preparation)
Wood Product Manufacturing
321110 Sawmills & Wood
Preservation
321210 Veneer, Plywood, &
Engineered Wood Product
Mfg
321900 Other Wood Product Mfg
Paper Manufacturing
322100 Pulp, Paper, & Paperboard
Mills
322200 Converted Paper Product Mfg
Printing and Related Support
Activities
323100 Printing & Related Support
Activities
Petroleum and Coal Products
Manufacturing
324110 Petroleum Refineries
(including integrated)
324120 Asphalt Paving, Roofing, &
Saturated Materials Mfg
324190 Other Petroleum & Coal
Products Mfg
Chemical Manufacturing
325100 Basic Chemical Mfg
325200 Resin, Synthetic Rubber, &
Artificial & Synthetic Fibers &
Filaments Mfg
325300 Pesticide, Fertilizer, & Other
Agricultural Chemical Mfg
325410 Pharmaceutical & Medicine
Mfg
325500 Paint, Coating, & Adhesive
Mfg
325600 Soap, Cleaning Compound, &
Toilet Preparation Mfg
325900 Other Chemical Product &
Preparation Mfg
Plastics and Rubber Products
Manufacturing
326100 Plastics Product Mfg
326200 Rubber Product Mfg
Nonmetallic Mineral Product
Manufacturing
327100 Clay Product & Refractory
Mfg
327210 Glass & Glass Product Mfg
327300 Cement & Concrete Product
Mfg
327400 Lime & Gypsum Product Mfg
327900 Other Nonmetallic Mineral
Product Mfg
Primary Metal Manufacturing
331110 Iron & Steel Mills & Ferroalloy
Mfg
331200 Steel Product Mfg from
Purchased Steel
331310 Alumina & Aluminum
Production & Processing
331400 Nonferrous Metal (except
Aluminum) Production &
Processing
331500 Foundries
Fabricated Metal Product
Manufacturing
332110 Forging & Stamping
332210 Cutlery & Handtool Mfg
332300 Architectural & Structural
Metals Mfg
332400 Boiler, Tank, & Shipping
Container Mfg
332510 Hardware Mfg
332610 Spring & Wire Product Mfg
332700 Machine Shops; Turned
Product; & Screw, Nut, & Bolt
Mfg
332810 Coating, Engraving, Heat
Treating, & Allied Activities
332900 Other Fabricated Metal
Product Mfg
Machinery Manufacturing
333100 Agriculture, Construction, &
Mining Machinery Mfg
333200 Industrial Machinery Mfg
333310 Commercial & Service
Industry Machinery Mfg
333410 Ventilation, Heating,
Air-Conditioning, &
Commercial Refrigeration
Equipment Mfg
333510 Metalworking Machinery Mfg
333610 Engine, Turbine & Power
Transmission Equipment Mfg
333900 Other General Purpose
Machinery Mfg
Computer and Electronic Product
Manufacturing
334110 Computer & Peripheral
Equipment Mfg
334200 Communications Equipment
Mfg
334310 Audio & Video Equipment
Mfg
334410 Semiconductor & Other
Electronic Component Mfg
334500 Navigational, Measuring,
Electromedical, & Control
Instruments Mfg
334610 Manufacturing &
Reproducing Magnetic &
Optical Media
Electrical Equipment, Appliance, and
Component Manufacturing
335100 Electric Lighting Equipment
Mfg
335200 Household Appliance Mfg
335310 Electrical Equipment Mfg
335900 Other Electrical Equipment &
Component Mfg
Transportation Equipment
Manufacturing
336100 Motor Vehicle Mfg
336210 Motor Vehicle Body & Trailer
Mfg
336300 Motor Vehicle Parts Mfg
336410 Aerospace Product & Parts
Mfg
336510 Railroad Rolling Stock Mfg
336610 Ship & Boat Building
336990 Other Transportation
Equipment Mfg
Furniture and Related Product
Manufacturing
337000 Furniture & Related Product
Manufacturing
Miscellaneous Manufacturing
339110 Medical Equipment &
Supplies Mfg
339900 Other Miscellaneous
Manufacturing
Crop Production
111100 Oilseed & Grain Farming
111210 Vegetable & Melon Farming
(including potatoes & yams)
111300 Fruit & Tree Nut Farming
111400 Greenhouse, Nursery, &
Floriculture Production
111900 Other Crop Farming
(including tobacco, cotton,
sugarcane, hay, peanut,
sugar beet & all other crop
farming)
Animal Production
112111 Beef Cattle Ranching &
Farming
112112 Cattle Feedlots
112120 Dairy Cattle & Milk
Production
112210 Hog & Pig Farming
112300 Poultry & Egg Production
112400 Sheep & Goat Farming
112510 Aquaculture (including
shellfish & finfish farms &
hatcheries)
112900 Other Animal Production
Forestry and Logging
113110 Timber Tract Operations
113210 Forest Nurseries & Gathering
of Forest Products
113310 Logging
Fishing, Hunting and Trapping
114110 Fishing
114210 Hunting & Trapping
Support Activities for Agriculture
and Forestry
115110 Support Activities for Crop
Production (including cotton
ginning, soil preparation,
planting, & cultivating)
115210 Support Activities for Animal
Production
115310 Support Activities For
Forestry
Mining
211110
212110
212200
212310
212320
Oil & Gas Extraction
Coal Mining
Metal Ore Mining
Stone Mining & Quarrying
Sand, Gravel, Clay, &
Ceramic & Refractory
Minerals Mining & Quarrying
212390 Other Nonmetallic Mineral
Mining & Quarrying
213110 Support Activities for Mining
Utilities
221100 Electric Power Generation,
Transmission & Distribution
221210 Natural Gas Distribution
221300 Water, Sewage & Other
Systems
221500 Combination Gas & Electric
Construction
Construction of Buildings
236110 Residential Building
Construction
236200 Nonresidential Building
Construction
Manufacturing
Food Manufacturing
311110 Animal Food Mfg
311200 Grain & Oilseed Milling
311300 Sugar & Confectionery
Product Mfg
311400 Fruit & Vegetable Preserving
& Specialty Food Mfg
311500 Dairy Product Mfg
311610 Animal Slaughtering and
Processing
311710 Seafood Product Preparation
& Packaging
311800 Bakeries & Tortilla Mfg
311900 Other Food Mfg (including
coffee, tea, flavorings &
seasonings)
Beverage and Tobacco Product
Manufacturing
312110 Soft Drink & Ice Mfg
312120 Breweries
312130 Wineries
312140 Distilleries
312200 Tobacco Manufacturing
Textile Mills and Textile Product
Mills
313000 Textile Mills
314000 Textile Product Mills
Apparel Manufacturing
315100 Apparel Knitting Mills
315210 Cut & Sew Apparel
Contractors
315220 Men’s & Boys’ Cut & Sew
Apparel Mfg
315230 Women’s & Girls’ Cut & Sew
Apparel Mfg
315290 Other Cut & Sew Apparel Mfg
315990 Apparel Accessories & Other
Apparel Mfg
Leather and Allied Product
Manufacturing
316110 Leather & Hide Tanning &
Finishing
316210 Footwear Mfg (including
rubber & plastics)
316990 Other Leather & Allied
Product Mfg
-22-
Wholesale Trade
Merchant Wholesalers, Durable
Goods
423100 Motor Vehicle & Motor
Vehicle Parts & Supplies
423200 Furniture & Home
Furnishings
423300 Lumber & Other Construction
Materials
423400 Professional & Commercial
Equipment & Supplies
Instructions for Form 1120
Page 23 of 25
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Principal Business Activity Codes (continued)
Code
Code
Code
423500 Metal & Mineral (except
Petroleum)
423600 Electrical & Electronic Goods
423700 Hardware, & Plumbing &
Heating Equipment &
Supplies
423800 Machinery, Equipment, &
Supplies
423910 Sporting & Recreational
Goods & Supplies
423920 Toy & Hobby Goods &
Supplies
423930 Recyclable Materials
423940 Jewelry, Watch, Precious
Stone, & Precious Metals
423990 Other Miscellaneous Durable
Goods
Merchant Wholesalers, Nondurable
Goods
424100 Paper & Paper Products
424210 Drugs & Druggists’ Sundries
424300 Apparel, Piece Goods, &
Notions
424400 Grocery & Related Products
424500 Farm Product Raw Materials
424600 Chemical & Allied Products
424700 Petroleum & Petroleum
Products
424800 Beer, Wine, & Distilled
Alcoholic Beverages
424910 Farm Supplies
424920 Book, Periodical, &
Newspapers
424930 Flower, Nursery Stock, &
Florists’ Supplies
424940 Tobacco & Tobacco Products
424950 Paint, Varnish, & Supplies
424990 Other Miscellaneous
Nondurable Goods
Wholesale Electronic Markets and
Agents and Brokers
425110 Business to Business
Electronic Markets
425120 Wholesale Trade Agents &
Brokers
445120
445210
445220
445230
445291
445292
445299
Truck Transportation
484110 General Freight Trucking,
Local
484120 General Freight Trucking,
Long-distance
484200 Specialized Freight Trucking
Transit and Ground Passenger
Transportation
485110 Urban Transit Systems
485210 Interurban & Rural Bus
Transportation
485310 Taxi Service
485320 Limousine Service
485410 School & Employee Bus
Transportation
485510 Charter Bus Industry
485990 Other Transit & Ground
Passenger Transportation
Pipeline Transportation
486000 Pipeline Transportation
Scenic & Sightseeing Transportation
487000 Scenic & Sightseeing
Transportation
Support Activities for Transportation
488100 Support Activities for Air
Transportation
488210 Support Activities for Rail
Transportation
488300 Support Activities for Water
Transportation
488410 Motor Vehicle Towing
488490 Other Support Activities for
Road Transportation
488510 Freight Transportation
Arrangement
488990 Other Support Activities for
Transportation
Couriers and Messengers
492110 Couriers
492210 Local Messengers & Local
Delivery
Warehousing and Storage
493100 Warehousing & Storage
(except lessors of
miniwarehouses &
self-storage units)
Retail Trade
Motor Vehicle and Parts Dealers
441110 New Car Dealers
441120 Used Car Dealers
441210 Recreational Vehicle Dealers
441221 Motorcycle Dealers
441222 Boat Dealers
441229 All Other Motor Vehicle
Dealers
441300 Automotive Parts,
Accessories, & Tire Stores
Furniture and Home Furnishings
Stores
442110 Furniture Stores
442210 Floor Covering Stores
442291 Window Treatment Stores
442299 All Other Home Furnishings
Stores
Electronics and Appliance Stores
443111 Household Appliance Stores
443112 Radio, Television, & Other
Electronics Stores
443120 Computer & Software Stores
443130 Camera & Photographic
Supplies Stores
Building Material and Garden
Equipment and Supplies Dealers
444110 Home Centers
444120 Paint & Wallpaper Stores
444130 Hardware Stores
444190 Other Building Material
Dealers
444200 Lawn & Garden Equipment &
Supplies Stores
Food and Beverage Stores
445110 Supermarkets and Other
Grocery (except
Convenience) Stores
Instructions for Form 1120
Convenience Stores
Meat Markets
Fish & Seafood Markets
Fruit & Vegetable Markets
Baked Goods Stores
Confectionery & Nut Stores
All Other Specialty Food
Stores
445310 Beer, Wine, & Liquor Stores
Health and Personal Care Stores
446110 Pharmacies & Drug Stores
446120 Cosmetics, Beauty Supplies,
& Perfume Stores
446130 Optical Goods Stores
446190 Other Health & Personal
Care Stores
Gasoline Stations
447100 Gasoline Stations (including
convenience stores with gas)
Clothing and Clothing Accessories
Stores
448110 Men’s Clothing Stores
448120 Women’s Clothing Stores
448130 Children’s & Infants’ Clothing
Stores
448140 Family Clothing Stores
448150 Clothing Accessories Stores
448190 Other Clothing Stores
448210 Shoe Stores
448310 Jewelry Stores
448320 Luggage & Leather Goods
Stores
Sporting Goods, Hobby, Book, and
Music Stores
451110 Sporting Goods Stores
451120 Hobby, Toy, & Game Stores
451130 Sewing, Needlework, & Piece
Goods Stores
451140 Musical Instrument &
Supplies Stores
451211 Book Stores
451212 News Dealers & Newsstands
451220 Prerecorded Tape, Compact
Disc, & Record Stores
General Merchandise Stores
452110 Department Stores
452900 Other General Merchandise
Stores
Miscellaneous Store Retailers
453110 Florists
453210 Office Supplies & Stationery
Stores
453220 Gift, Novelty, & Souvenir
Stores
453310 Used Merchandise Stores
453910 Pet & Pet Supplies Stores
453920 Art Dealers
453930 Manufactured (Mobile) Home
Dealers
453990 All Other Miscellaneous Store
Retailers (including tobacco,
candle, & trophy shops)
Nonstore Retailers
454110 Electronic Shopping &
Mail-Order Houses
454210 Vending Machine Operators
454311 Heating Oil Dealers
454312 Liquefied Petroleum Gas
(Bottled Gas) Dealers
454319 Other Fuel Dealers
454390 Other Direct Selling
Establishments (including
door-to-door retailing, frozen
food plan providers, party
plan merchandisers, &
coffee-break service
providers)
Transportation and
Warehousing
Air, Rail, and Water Transportation
481000 Air Transportation
482110 Rail Transportation
483000 Water Transportation
Information
Publishing Industries (except
Internet)
511110 Newspaper Publishers
511120 Periodical Publishers
511130 Book Publishers
511140 Directory & Mailing List
Publishers
511190 Other Publishers
511210 Software Publishers
Motion Picture and Sound
Recording Industries
512100 Motion Picture & Video
Industries (except video
rental)
512200 Sound Recording Industries
Broadcasting (except Internet)
515100 Radio & Television
Broadcasting
515210 Cable & Other Subscription
Programming
Telecommunications
517000 Telecommunications
(including paging, cellular,
satellite, cable & other
program distribution,
resellers, other
telecommunications, &
internet service providers)
Data Processing Services
518210 Data Processing, Hosting, &
Related Services
Other Information Services
519100 Other Information Services
(including news syndicates,
libraries, internet publishing &
broadcasting)
-23-
Code
Finance and Insurance
Depository Credit Intermediation
522110 Commercial Banking
522120 Savings Institutions
522130 Credit Unions
522190 Other Depository Credit
Intermediation
Nondepository Credit Intermediation
522210 Credit Card Issuing
522220 Sales Financing
522291 Consumer Lending
522292 Real Estate Credit (including
mortgage bankers &
originators)
522293 International Trade Financing
522294 Secondary Market Financing
522298 All Other Nondepository
Credit Intermediation
Activities Related to Credit
Intermediation
522300 Activities Related to Credit
Intermediation (including loan
brokers, check clearing, &
money transmitting)
Securities, Commodity Contracts,
and Other Financial Investments and
Related Activities
523110 Investment Banking &
Securities Dealing
523120 Securities Brokerage
523130 Commodity Contracts
Dealing
523140 Commodity Contracts
Brokerage
523210 Securities & Commodity
Exchanges
523900 Other Financial Investment
Activities (including portfolio
management & investment
advice)
Insurance Carriers and Related
Activities
524140 Direct Life, Health, & Medical
Insurance & Reinsurance
Carriers
524150 Direct Insurance &
Reinsurance (except Life,
Health & Medical) Carriers
524210 Insurance Agencies &
Brokerages
524290 Other Insurance Related
Activities (including
third-party administration of
insurance and pension funds)
Funds, Trusts, and Other Financial
Vehicles
525100 Insurance & Employee
Benefit Funds
525910 Open-End Investment Funds
(Form 1120-RIC)
525920 Trusts, Estates, & Agency
Accounts
525990 Other Financial Vehicles
(including mortgage REITs &
closed-end investment funds)
“Offices of Bank Holding Companies”
and “Offices of Other Holding
Companies” are located under
Management of Companies (Holding
Companies) on page 22.
Real Estate and Rental and
Leasing
Real Estate
531110 Lessors of Residential
Buildings & Dwellings
(including equity REITs)
531114 Cooperative Housing
(including equity REITs)
531120 Lessors of Nonresidential
Buildings (except
Miniwarehouses) (including
equity REITs)
531130 Lessors of Miniwarehouses &
Self-Storage Units (including
equity REITs)
Page 24 of 25
Instructions for Form 1120
10:35 - 11-SEP-2008
The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
Principal Business Activity Codes (continued)
Code
Code
Code
Code
531190 Lessors of Other Real Estate
Property (including equity
REITs)
531210 Offices of Real Estate Agents
& Brokers
531310 Real Estate Property
Managers
531320 Offices of Real Estate
Appraisers
531390 Other Activities Related to
Real Estate
Rental and Leasing Services
532100 Automotive Equipment Rental
& Leasing
532210 Consumer Electronics &
Appliances Rental
532220 Formal Wear & Costume
Rental
532230 Video Tape & Disc Rental
532290 Other Consumer Goods
Rental
532310 General Rental Centers
532400 Commercial & Industrial
Machinery & Equipment
Rental & Leasing
Lessors of Nonfinancial Intangible
Assets (except copyrighted works)
533110 Lessors of Nonfinancial
Intangible Assets (except
copyrighted works)
541920 Photographic Services
541930 Translation & Interpretation
Services
541940 Veterinary Services
541990 All Other Professional,
Scientific, & Technical
Services
621391 Offices of Podiatrists
621399 Offices of All Other
Miscellaneous Health
Practitioners
Outpatient Care Centers
621410 Family Planning Centers
621420 Outpatient Mental Health &
Substance Abuse Centers
621491 HMO Medical Centers
621492 Kidney Dialysis Centers
621493 Freestanding Ambulatory
Surgical & Emergency
Centers
621498 All Other Outpatient Care
Centers
Medical and Diagnostic Laboratories
621510 Medical & Diagnostic
Laboratories
Home Health Care Services
621610 Home Health Care Services
Other Ambulatory Health Care
Services
621900 Other Ambulatory Health
Care Services (including
ambulance services & blood
& organ banks)
Hospitals
622000 Hospitals
Nursing and Residential Care
Facilities
623000 Nursing & Residential Care
Facilities
Social Assistance
624100 Individual & Family Services
624200 Community Food & Housing,
& Emergency & Other Relief
Services
624310 Vocational Rehabilitation
Services
624410 Child Day Care Services
721120 Casino Hotels
721191 Bed & Breakfast Inns
721199 All Other Traveler
Accommodation
721210 RV (Recreational Vehicle)
Parks & Recreational Camps
721310 Rooming & Boarding Houses
Food Services and Drinking Places
722110 Full-Service Restaurants
722210 Limited-Service Eating
Places
722300 Special Food Services
(including food service
contractors & caterers)
722410 Drinking Places (Alcoholic
Beverages)
Professional, Scientific, and
Technical Services
Legal Services
541110 Offices of Lawyers
541190 Other Legal Services
Accounting, Tax Preparation,
Bookkeeping, and Payroll Services
541211 Offices of Certified Public
Accountants
541213 Tax Preparation Services
541214 Payroll Services
541219 Other Accounting Services
Architectural, Engineering, and
Related Services
541310 Architectural Services
541320 Landscape Architecture
Services
541330 Engineering Services
541340 Drafting Services
541350 Building Inspection Services
541360 Geophysical Surveying &
Mapping Services
541370 Surveying & Mapping (except
Geophysical) Services
541380 Testing Laboratories
Specialized Design Services
541400 Specialized Design Services
(including interior, industrial,
graphic, & fashion design)
Computer Systems Design and
Related Services
541511 Custom Computer
Programming Services
541512 Computer Systems Design
Services
541513 Computer Facilities
Management Services
541519 Other Computer Related
Services
Other Professional, Scientific, and
Technical Services
541600 Management, Scientific, &
Technical Consulting
Services
541700 Scientific Research &
Development Services
541800 Advertising & Related
Services
541910 Marketing Research & Public
Opinion Polling
Management of Companies
(Holding Companies)
551111 Offices of Bank Holding
Companies
551112 Offices of Other Holding
Companies
Administrative and Support
and Waste Management and
Remediation Services
Administrative and Support Services
561110 Office Administrative
Services
561210 Facilities Support Services
561300 Employment Services
561410 Document Preparation
Services
561420 Telephone Call Centers
561430 Business Service Centers
(including private mail centers
& copy shops)
561440 Collection Agencies
561450 Credit Bureaus
561490 Other Business Support
Services (including
repossession services, court
reporting, & stenotype
services)
561500 Travel Arrangement &
Reservation Services
561600 Investigation & Security
Services
561710 Exterminating & Pest Control
Services
561720 Janitorial Services
561730 Landscaping Services
561740 Carpet & Upholstery Cleaning
Services
561790 Other Services to Buildings &
Dwellings
561900 Other Support Services
(including packaging &
labeling services, &
convention & trade show
organizers)
Waste Management and
Remediation Services
562000 Waste Management &
Remediation Services
Educational Services
611000 Educational Services
(including schools, colleges,
& universities)
Health Care and Social
Assistance
Offices of Physicians and Dentists
621111 Offices of Physicians (except
mental health specialists)
621112 Offices of Physicians, Mental
Health Specialists
621210 Offices of Dentists
Offices of Other Health Practitioners
621310 Offices of Chiropractors
621320 Offices of Optometrists
621330 Offices of Mental Health
Practitioners (except
Physicians)
621340 Offices of Physical,
Occupational & Speech
Therapists, & Audiologists
Arts, Entertainment, and
Recreation
Performing Arts, Spectator Sports,
and Related Industries
711100 Performing Arts Companies
711210 Spectator Sports (including
sports clubs & racetracks)
711300 Promoters of Performing Arts,
Sports, & Similar Events
711410 Agents & Managers for
Artists, Athletes, Entertainers,
& Other Public Figures
711510 Independent Artists, Writers,
& Performers
Museums, Historical Sites, and
Similar Institutions
712100 Museums, Historical Sites, &
Similar Institutions
Amusement, Gambling, and
Recreation Industries
713100 Amusement Parks & Arcades
713200 Gambling Industries
713900 Other Amusement &
Recreation Industries
(including golf courses, skiing
facilities, marinas, fitness
centers, & bowling centers)
Accommodation and Food
Services
Accommodation
721110 Hotels (except Casino Hotels)
& Motels
-24-
Other Services
Repair and Maintenance
811110 Automotive Mechanical &
Electrical Repair &
Maintenance
811120 Automotive Body, Paint,
Interior, & Glass Repair
811190 Other Automotive Repair &
Maintenance (including oil
change & lubrication shops &
car washes)
811210 Electronic & Precision
Equipment Repair &
Maintenance
811310 Commercial & Industrial
Machinery & Equipment
(except Automotive &
Electronic) Repair &
Maintenance
811410 Home & Garden Equipment &
Appliance Repair &
Maintenance
811420 Reupholstery & Furniture
Repair
811430 Footwear & Leather Goods
Repair
811490 Other Personal & Household
Goods Repair & Maintenance
Personal and Laundry Services
812111 Barber Shops
812112 Beauty Salons
812113 Nail Salons
812190 Other Personal Care
Services (including diet &
weight reducing centers)
812210 Funeral Homes & Funeral
Services
812220 Cemeteries & Crematories
812310 Coin-Operated Laundries &
Drycleaners
812320 Drycleaning & Laundry
Services (except
Coin-Operated)
812330 Linen & Uniform Supply
812910 Pet Care (except Veterinary)
Services
812920 Photofinishing
812930 Parking Lots & Garages
812990 All Other Personal Services
Religious, Grantmaking, Civic,
Professional, and Similar
Organizations
813000 Religious, Grantmaking,
Civic, Professional, & Similar
Organizations (including
condominium and
homeowners associations)
Instructions for Form 1120
Page 25 of 25
Instructions for Form 1120
10:35 - 11-SEP-2008
The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
Index
A
Accounting methods . . . . . . . . . . . 5
Accounting period (Tax
Year) . . . . . . . . . . . . . . . . . . . . . . . 5
Address change . . . . . . . . . . . . . . . 7
Affiliated group . . . . . . . . . . . . . . . 18
Amended return . . . . . . . . . . . . . . . 5
Amortization . . . . . . . . . . . . . . . . . . 9
Assembling the return . . . . . . . . . 4
At-risk rules . . . . . . . . . . . . . . . . . . 12
B
Backup withholding . . . . . . . . . . . 14
Bad debts . . . . . . . . . . . . . . . . . . . . 10
Balance sheets . . . . . . . . . . . . . . . 20
Business startup expenses . . . . . 9
C
Capital construction fund (See
Merchant Marine capital
construction fund)
Closely held corporations . . . . . . 9
Compensation of officers . . . . . . . 9
Consolidated return . . . . . . . . . 6, 19
Contributions to reduce debt held
by the public . . . . . . . . . . . . . . . . 2
Contributions, charitable . . . . . . 10
Controlled group . . . . . . . . . . . . . 16
Cost of goods sold . . . . . . . . . . 7, 14
Credits against tax . . . . . . . . . . . . 17
D
Deductions . . . . . . . . . . . . . . . . . . . . 8
Depletion . . . . . . . . . . . . . . . . . . . . 11
Depository methods of tax
payment . . . . . . . . . . . . . . . . . . . . 4
Depreciation . . . . . . . . . . . . . . . . . 11
Direct deposit of refund . . . . . 2, 14
Disclosure statement . . . . . . . . . . 5
Dividend income . . . . . . . . . . . . . . 7
Dividends-received
deduction . . . . . . . . . . . . . . . 15-16
Dues, membership and
other . . . . . . . . . . . . . . . . . . . . . . 12
E
Electronic Federal Tax Payment
System (EFTPS) . . . . . . . . . . . . 4
Instructions for Form 1120
Electronic filing . . . . . . . . . . . . . . . . 2
Employee benefit
programs . . . . . . . . . . . . . . . . . . 11
Employer identification number
(EIN) . . . . . . . . . . . . . . . . . . . . . . . 7
Estimated tax:
Penalty . . . . . . . . . . . . . . . . . . 4, 14
Estimated tax payments . . . . . . . 4
Extension of time to file . . . . . . . . 3
F
Farming, corporations engaged
in . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Final return . . . . . . . . . . . . . . . . . . . . 7
Financial asset securitization
investment trust (FASIT) . . . . . 2
Foreign person (defined) . . . . . . 19
Foreign tax credit . . . . . . . . . . . . . 17
Forms and publications, how to
get . . . . . . . . . . . . . . . . . . . . . . . . . 2
G
General business credit . . . . . . . 17
Golden parachute
payments . . . . . . . . . . . . . . . . . . . 9
Gross receipts . . . . . . . . . . . . . . . . . 7
I
Income . . . . . . . . . . . . . . . . . . . . . . . 7
Installment sales . . . . . . . . . . . . . . 7
Interest due:
Late payment of tax . . . . . . . . . 4
Look-back method . . . . . . . . . . 17
Interest expense . . . . . . . . . . . . . 10
Interest expense (relating to
section 263A) . . . . . . . . . . . . . . . 8
Interest income:
Taxable . . . . . . . . . . . . . . . . . . . . . 7
Tax-exempt . . . . . . . . . . . . 19, 21
Inventory:
Section 263A uniform
capitalization rules . . . . . 8, 14
Valuation methods . . . . . . . . . 14
L
LIFO recapture:
Tax on . . . . . . . . . . . . . . . . . . . . . 18
Where to report . . . . . . . . . . . . . 8
Limitations on deductions . . . . . . 8,
11
Limited liability companies . . . . . 2
Lobbying expenses,
nondeductibility . . . . . . . . . . . . 12
M
Merchant Marine capital
construction fund:
Deduction for
contributions . . . . . . . . . . . . . 13
Tax on nonqualified
withdrawal . . . . . . . . . . . . . . . 18
Minimum tax:
Alternative . . . . . . . . . . . . . . . . . 17
Prior year, credit for . . . . . . . . 17
Mutual savings banks conducting
life insurance business . . . . . 17
N
Name change . . . . . . . . . . . . . . . . . 7
Net operating loss . . . . . 13, 19, 20
Nonaccrual experience
method . . . . . . . . . . . . . . . . . . . . . 7
O
Other deductions . . . . . . . . . . . . . 11
Other income . . . . . . . . . . . . . . . . . 8
Other taxes . . . . . . . . . . . . . . . . . . 17
Overpaid estimated tax . . . . . . . 13
P
Partnership income (loss) . . . . . . 8,
12
Passive activity limitations . . . . . . 9
Penalties . . . . . . . . . . . . . . . . . . . 4, 14
Pension, profit-sharing, etc.
plans . . . . . . . . . . . . . . . . . . . . . . 11
Personal holding company . . . . . 6
Personal holding company
tax . . . . . . . . . . . . . . . . . . . . . . . . 17
Personal service
corporation . . . . . . . . . . . . . . . . . 6
Preparer, tax return . . . . . . . . . . . . 3
Private delivery services . . . . . . . 3
Q
Qualified personal service
corporation . . . . . . . . . . . . . . . . 16
-25-
R
Recapture taxes . . . . . . . . . . . . . . 17
Reconciliation of income . . . . . . 20
Recordkeeping . . . . . . . . . . . . . . . . 5
Refundable credits . . . . . . . . . . . 13
Related party transactions . . . . . 8
Rents (expense) . . . . . . . . . . . . . . 10
Rents (income) . . . . . . . . . . . . . . . . 8
Repairs and maintenance . . . . . 10
S
Salaries and wages . . . . . . . . . . . 10
Schedule:
A . . . . . . . . . . . . . . . . . . . . . . . . . . 14
C . . . . . . . . . . . . . . . . . . . . . . . . . . 15
J . . . . . . . . . . . . . . . . . . . . . . . . . . 16
K . . . . . . . . . . . . . . . . . . . . . . . . . . 18
L . . . . . . . . . . . . . . . . . . . . . . . . . . 20
M-1 . . . . . . . . . . . . . . . . . . . . . . . . 20
M-3 . . . . . . . . . . . . . . . . . . . . . . 7, 20
O . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 263A costs . . . . . . . . . 8, 14
Shareholders’ equity
adjustments . . . . . . . . . . . . . . . . 20
Signature . . . . . . . . . . . . . . . . . . . . . 3
Special returns for certain
organizations . . . . . . . . . . . . . . . 2
T
Tax issues, unresolved . . . . . . . . 1
Tax rate schedule . . . . . . . . . . . . 16
Taxes and licenses . . . . . . . . . . . 10
Tax-exempt securities . . . . . . . . 20
Travel, meals, and
entertainment . . . . . . . . . . . . . . 12
W
When to file . . . . . . . . . . . . . . . . . . . 3
Where to file . . . . . . . . . . . . . . . . . . 3
Who must file . . . . . . . . . . . . . . . . . 2
Who must sign . . . . . . . . . . . . . . . . 3
Worksheets . . . . . . . . . . . . . . . . . . 16
Schedule C . . . . . . . . . . . . . . . . 16
■
Version A, cycle 5
1120
Form
Department of the Treasury
Internal Revenue Service
A Check if:
1a Consolidated return
(attach Form 851)
.
b Life/nonlife consolidated return .
.
.
2 Personal holding co.
(attach Sch. PH) .
.
U.S. Corporation Income Tax Return
For calendar year 2008 or tax year beginning
See
OMB No. 1545-0123
, 2008, ending
, 20
B Employer identification number
Use IRS
label.
Number, street, and room or suite no. If a P.O. box, see instructions.
Otherwise,
print or
City or town, state, and ZIP code
type.
C Date incorporated
D Total assets (see instructions)
3 Personal service corp.
(see instructions) .
Income
Deductions (See instructions for limitations on deductions.)
Tax and Payments
$
.
4 Schedule M-3 attached
2008
separate instructions.
Name
E Check if: (1)
(2)
Initial return
(3)
Final return
(4)
Name change
Address change
c Bal
b Less returns and allowances
Gross receipts or sales
1c
1a
2
3
4
Cost of goods sold (Schedule A, line 8) .
Gross profit. Subtract line 2 from line 1c .
Dividends (Schedule C, line 19)
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Interest
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Gross rents
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11
Gross royalties . . . . . . . . . . . . . . . .
Capital gain net income (attach Schedule D (Form 1120)) . . . .
Net gain or (loss) from Form 4797, Part II, line 17 (attach Form 4797)
Other income (see instructions—attach schedule) . . . . . .
Total income. Add lines 3 through 10 . . . . . . . . .
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12
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Compensation of officers (Schedule E, line 4)
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14
15
16
Salaries and wages (less employment credits)
Repairs and maintenance . . . . . .
Bad debts . . . . . . . . . . .
Rents . . . . . . . . . . . .
11
12
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19
Taxes and licenses . .
Interest
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Charitable contributions .
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20
21
Depreciation from Form 4562 not claimed on Schedule A or elsewhere on return (attach Form 4562)
Depletion . . . . . . . . . . . . . . . . . . . . . . . . . . .
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22
23
24
25
Advertising
. . . . . . . . . . . . . .
Pension, profit-sharing, etc., plans
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Employee benefit programs
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Domestic production activities deduction (attach Form 8903)
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28
Other deductions (attach schedule) . . .
Total deductions. Add lines 12 through 26 .
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Taxable income before net operating loss deduction and special deductions. Subtract line 27 from line 11
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27
28
29
Less: a Net operating loss deduction (see instructions)
b Special deductions (Schedule C, line 20) . .
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Taxable income. Subtract line 29c from line 28 (see instructions)
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DRAFT AS OF
August 27, 2008
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Preparer’s
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31
32g
Refundable credits from Form 3800, line 19c, and Form 8827, line 8c . . .
Estimated tax penalty (see instructions). Check if Form 2220 is attached
. . . . . .
Amount owed. If line 32h is smaller than the total of lines 31 and 33, enter amount owed .
Overpayment. If line 32h is larger than the total of lines 31 and 33, enter amount overpaid .
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31 Total tax (Schedule J, line 10) . .
32a 2007 overpayment credited to 2008
b 2008 estimated tax payments . .
c 2008 refund applied for on Form 4466 .
e Tax deposited with Form 7004 . .
f Credits: (1) Form 2439
g
33
34
35
36
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32a
32b
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(2) Form 4136
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) d Bal
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32c (
Enter amount from line 35 you want: Credited to 2009 estimated tax
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32d
32e
32f
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. . . .
Refunded
32h
33
34
35
36
Under penalties of perjury, I declare that I have examined this return, including accompanying schedules and statements, and to the best of my knowledge and belief, it is true,
correct, and complete. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge.
May the IRS discuss this return
with the preparer shown below
(see instructions)?
No
Yes
Signature of officer
Preparer’s
signature
Firm’s name (or yours if
self-employed), address,
and ZIP code
Date
Title
Date
For Privacy Act and Paperwork Reduction Act Notice, see separate instructions.
Check if selfemployed
Preparer’s SSN or PTIN
EIN
Phone no.
Cat. No. 11450Q
Form 1120 (2008)
Version A, cycle 5
Page 2
Form 1120 (2008)
Schedule A
Cost of Goods Sold (see instructions)
1
2
3
Inventory at beginning of year
Purchases
. . . . . .
Cost of labor . . . . . .
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1
2
3
4
5
6
Additional section 263A costs (attach schedule)
Other costs (attach schedule) . . . . . .
Total. Add lines 1 through 5 . . . . . .
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4
5
6
7 Inventory at end of year
. . . . . . . . . . . . . . . . .
8 Cost of goods sold. Subtract line 7 from line 6. Enter here and on page 1, line 2
9a Check all methods used for valuing closing inventory:
(i)
Cost
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7
8
(ii)
(iii)
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DRAFT AS OF
August 27, 2008
Lower of cost or market
Other (Specify method used and attach explanation.)
b Check if there was a writedown of subnormal goods . . . . . . . . . . . . . . . . .
c Check if the LIFO inventory method was adopted this tax year for any goods (if checked, attach Form 970) .
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d If the LIFO inventory method was used for this tax year, enter percentage (or amounts) of closing
inventory computed under LIFO . . . . . . . . . . . . . . . . . . . . . . 9d
e If property is produced or acquired for resale, do the rules of section 263A apply to the corporation? . . . . . .
f Was there any change in determining quantities, cost, or valuations between opening and closing inventory? If “Yes,”
attach explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Schedule C
Dividends and Special Deductions (see instructions)
(a) Dividends
received
1
Dividends from less-than-20%-owned domestic corporations (other than debt-financed
stock) . . . . . . . . . . . . . . . . . . . . . . . . .
2
3
4
Dividends from 20%-or-more-owned domestic corporations (other than debt-financed
stock) . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends on debt-financed stock of domestic and foreign corporations . . . . .
Dividends on certain preferred stock of less-than-20%-owned public utilities . . . .
5
6
7
Dividends on certain preferred stock of 20%-or-more-owned public utilities .
Dividends from less-than-20%-owned foreign corporations and certain FSCs .
Dividends from 20%-or-more-owned foreign corporations and certain FSCs .
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Dividends from wholly owned foreign subsidiaries . . . .
Total. Add lines 1 through 8. See instructions for limitation .
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8
9
10
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Yes
No
Yes
No
(b) %
(c) Special deductions
(a) (b)
80
see
instructions
42
48
70
80
100
11
12
13
14
15
Dividends from foreign corporations not included on lines 3, 6, 7, 8, 11, or 12 . . .
Income from controlled foreign corporations under subpart F (attach Form(s) 5471) .
Foreign dividend gross-up . . . . . . . . . . . . . . . . . .
16
17
18
IC-DISC and former DISC dividends not included on lines 1, 2, or 3 . . . . . . .
Other dividends . . . . . . . . . . . . . . . . . . . . . .
Deduction for dividends paid on certain preferred stock of public utilities . . . . .
Total dividends. Add lines 1 through 17. Enter here and on page 1, line 4 . . .
Total special deductions. Add lines 9, 10, 11, 12, and 18. Enter here and on page 1, line 29b
Schedule E
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70
Dividends from domestic corporations received by a small business
company operating under the Small Business Investment Act of 1958 . .
Dividends from affiliated group members
. . . . . . . . . .
Dividends from certain FSCs . . . . . . . . . . . . . .
19
20
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investment
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100
100
100
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Compensation of Officers (see instructions for page 1, line 12)
Note: Complete Schedule E only if total receipts (line 1a plus lines 4 through 10 on page 1) are $500,000 or more.
(a) Name of officer
(c) Percent of Percent of corporation stock owned
time devoted to
(d) Common (e) Preferred
business
(b) Social security number
1
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
2
Total compensation of officers
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3
4
Compensation of officers claimed on Schedule A and elsewhere on return .
Subtract line 3 from line 2. Enter the result here and on page 1, line 12 . .
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(f) Amount of compensation
Form
1120
(2008)
Version A, cycle 5
Page 3
Form 1120 (2008)
Schedule J
1
2
3
Tax Computation (see instructions)
Check if the corporation is a member of a controlled group (attach Schedule O (Form 1120))
Income tax. Check if a qualified personal service corporation (see instructions) . . . .
Alternative minimum tax (attach Form 4626) . . . . . . . . . . . . . . .
4 Add lines 2 and 3
. . . . . . . . . .
5a Foreign tax credit (attach Form 1118)
. . . .
b Credit from Form 8834 . . . . . . . . .
c General business credit (attach Form 3800) . . .
d Credit for prior year minimum tax (attach Form 8827)
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2
3
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5a
5b
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4
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e Bond credits from:
Form 8860
Form 8912
6 Total credits. Add lines 5a through 5e . . . . . . . . .
7 Subtract line 6 from line 4 . . . . . . . . . . . . .
8 Personal holding company tax (attach Schedule PH (Form 1120)) .
9 Other taxes. Check if from:
Form 4255
Form 8611
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DRAFT AS OF
August 27, 2008
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7
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Form 8697
Other (attach schedule)
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10
10
Form 8866
Form 8902
Total tax. Add lines 7 through 9. Enter here and on page 1, line 31 .
Schedule K
1
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5c
5d
5e
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9
Other Information (see instructions)
Check accounting method:
a
Cash
b
Accrual
c
Other (specify)
Yes
No
2 See the instructions and enter the:
a Business activity code no.
b Business activity
c Product or service
3 Is the corporation a subsidiary in an affiliated group or a parent-subsidiary controlled group?
If “Yes,” enter name and EIN of the parent corporation
4
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At the end of the tax year:
a Did any foreign or domestic corporation, partnership (including any entity treated as a partnership), or trust own directly 20% or
more, or own, directly or indirectly, 50% or more of the total voting power of all classes of the corporation’s stock entitled to vote?
For rules of constructive ownership, see instructions. If “Yes,” complete (i) through (v).
(i) Name of Entity
(ii) Employer
Identification Number
(if any)
(iii) Type of Entity
(iv) Country of
Organization
(v) Percentage Owned
in Voting Stock
b Did any individual or estate own directly 20% or more, or own, directly or indirectly, 50% or more of the total voting power of all
classes of the corporation’s stock entitled to vote?
. . . . . . . . . . . . . . . . . . . . . . .
For rules of constructive ownership, see instructions. If “Yes,” complete (i) through (iv).
(i) Name of Individual or Estate
(ii) Identifying Number
(if any)
(iii) Country of Citizenship
(see instructions)
(iv) Percentage
Owned in Voting
Stock
Form
1120
(2008)
Version A, cycle 5
Page 4
Form 1120 (2008)
Schedule K
5
Continued
Yes
At the end of the tax year, did the corporation:
No
a Own directly 20% or more, or own, directly or indirectly, 50% or more of the total voting power of all classes of stock entitled to vote of any
foreign or domestic corporation not included on Form 851, Affiliations Schedule? For rules of constructive ownership, see instructions
.
If “Yes,” complete (i) through (iv).
(i) Name of Corporation
(ii) Employer
Identification Number
(if any)
(iv) Percentage
Owned in Voting
Stock
(iii) Country of
Incorporation
DRAFT AS OF
August 27, 2008
b Own directly an interest of 20% or more, or own, directly or indirectly, an interest of 50% or more in any foreign or domestic partnership
(including an entity treated as a partnership) or in the beneficial interest of a trust? For rules of constructive ownership, see instructions
.
If “Yes,” complete (i) through (iv).
(i) Name of Entity
6
(ii) Employer
Identification Number
(if any)
(iv) Maximum
Percentage Owned in
Profit, Loss, or Capital
(iii) Country of Organization
During this tax year, did the corporation pay dividends (other than stock dividends and distributions in exchange for stock) in
excess of the corporation’s current and accumulated earnings and profits? (See sections 301 and 316.) . . . . . . . .
If "Yes," file Form 5452, Corporate Report of Nondividend Distributions.
If this is a consolidated return, answer here for the parent corporation and on Form 851 for each subsidiary.
7
At any time during the tax year, did one foreign person own, directly or indirectly, at least 25% of (a) the total voting power of all
classes of the corporation’s stock entitled to vote or (b) the total value of all classes of the corporation’s stock? . . . . .
For rules of attribution, see section 318. If “Yes,” enter:
(i) Percentage owned
and (ii) Owner’s country
9
10
(c) The corporation may have to file Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign
Corporation Engaged in a U.S. Trade or Business. Enter the number of Forms 5472 attached
Check this box if the corporation issued publicly offered debt instruments with original issue discount
. . . . . .
If checked, the corporation may have to file Form 8281, Information Return for Publicly Offered Original Issue Discount Instruments.
Enter the amount of tax-exempt interest received or accrued during the tax year $
Enter the number of shareholders at the end of the tax year (if 100 or fewer)
11
If the corporation has an NOL for the tax year and is electing to forego the carryback period, check here .
8
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If the corporation is filing a consolidated return, the statement required by Regulations section 1.1502-21(b)(3) must be attached or
the election will not be valid.
12
Enter the available NOL carryover from prior tax years (do not reduce it by any deduction on line 29a.)
13
Are the corporation’s total receipts (line 1a plus lines 4 through 10 on page 1) for the tax year and its total assets at the end of the
tax year less than $250,000? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
If “Yes,” the corporation is not required to complete Schedules L, M-1, and M-2 on page 5. Instead, enter the total amount of cash
distributions and the book value of property distributions (other than cash) made during the tax year. $
Form
1120
(2008)
Version A, cycle 5
Page 5
Form 1120 (2008)
Schedule L
Balance Sheets per Books
Beginning of tax year
(a)
(b)
Assets
1
Cash .
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2a
b
3
4
Trade notes and accounts receivable .
Less allowance for bad debts . . .
Inventories . . . . . . . .
U.S. government obligations . . .
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5
6
7
Tax-exempt securities (see instructions) .
Other current assets (attach schedule) .
Loans to shareholders . . . . . .
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8 Mortgage and real estate loans . .
9 Other investments (attach schedule) .
10a Buildings and other depreciable assets
b Less accumulated depreciation . .
11a Depletable assets . . . . . .
b Less accumulated depletion . . .
(
End of tax year
(c)
)
(d)
(
)
DRAFT AS OF
August 27, 2008
12 Land (net of any amortization) . .
13a Intangible assets (amortizable only)
b Less accumulated amortization .
14 Other assets (attach schedule)
.
15 Total assets . . . . . . .
(
)
(
)
(
)
(
)
(
)
(
)
Liabilities and Shareholders’ Equity
16
17
18
Accounts payable . . . . . . . . .
Mortgages, notes, bonds payable in less than 1 year
Other current liabilities (attach schedule) . . .
19
20
21
Loans from shareholders . . . . . . .
Mortgages, notes, bonds payable in 1 year or more
Other liabilities (attach schedule) . . . . .
Capital stock: a Preferred stock . . . . .
b Common stock . . . . .
22
23
Additional paid-in capital
24
25
26
Retained earnings—Appropriated (attach schedule)
Retained earnings—Unappropriated . . . .
Adjustments to shareholders’ equity (attach schedule)
27
28
Less cost of treasury stock
. . . .
Total liabilities and shareholders’ equity .
Schedule M-1
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(
(
)
)
Reconciliation of Income (Loss) per Books With Income per Return
Note: Schedule M-3 required instead of Schedule M-1 if total assets are $10 million or more—see instructions
1
2
Net income (loss) per books .
Federal income tax per books .
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3
Excess of capital losses over capital gains .
.
4
Income subject to tax not recorded on books this
year (itemize):
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7
Income recorded on books this year not
included on this return (itemize):
$
Tax-exempt interest
8
Deductions on this return not charged
against book income this year (itemize):
a Depreciation . . . $
b Charitable contributions $
9
10
Add lines 7 and 8 . . . . . .
Income (page 1, line 28)—line 6 less line 9
5
Expenses recorded on books this year not
deducted on this return (itemize):
a Depreciation . . . . . $
b Charitable contributions
. $
c Travel and entertainment . $
6
Add lines 1 through 5
Schedule M-2
1
2
3
4
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Analysis of Unappropriated Retained Earnings per Books (Line 25, Schedule L)
Balance at beginning of year
Net income (loss) per books
Other increases (itemize):
Add lines 1, 2, and 3
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5
6
7
8
Distributions:
a Cash
b Stock
c Property
Other decreases (itemize):
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Add lines 5 and 6 . . . . . .
Balance at end of year (line 4 less line 7)
Form
1120
(2008)
| File Type | application/pdf |
| File Title | 2008 Instructions for Form 1120 U |
| Author | David L. Lupi-Sher |
| File Modified | 2008-09-12 |
| File Created | 2008-09-10 |