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Department of the Treasury 2020 Internal Instructions for Form 1120 U.S. Income Return

Section references are to the Internal Revenue enacted after they were published, go to allowed a 100% deduction for certain Code unless otherwise noted. IRS.gov/Form1120. meal expenses paid or incurred Contents Page in 2021 and 2022. See Travel, meals, and entertainment. Future Developments ...... 1 What’s New What’s New ...... 1 New payroll credit for required paid Modifications to net operating losses. Photographs of Missing Children ....1 sick leave or family leave. Under the Losses that occurred in 2018, 2019, or The Taxpayer Advocate Service .....1 Families First Coronavirus Response Act 2020 generally can be carried back up to 5 Direct Deposit of Refund ...... 2 (FFCRA), as amended, an eligible tax years preceding the year of the loss. Special rules apply to farming losses. See How To Make a Contribution To employer can take a credit against payroll Reduce Debt Held by the owed for amounts paid for qualified the instructions for line 30. Public ...... 2 sick leave or family leave if incurred during How To Get Forms and the allowed period. However, there is no Photographs of Publications ...... 2 double tax benefit allowed and the Missing Children General Instructions ...... 2 amounts claimed are reportable as The is a proud Purpose of Form ...... 2 income on . See the instructions for partner with the National Center for Who Must File ...... 2 line 10. Missing & Exploited Children® (NCMEC). When To File ...... 3 New employee retention credit. The Photographs of missing children selected Where To File ...... 4 Coronavirus Aid, Relief, and Economic by the Center may appear in instructions Who Must Sign ...... 3 Security Act (CARES Act) allows a new on pages that would otherwise be blank. Paid Preparer Authorization ...... 3 employee retention credit for qualified You can help bring these children home Assembling the Return ...... 4 wages. Any qualified wages for which an by looking at the photographs and calling Tax Payments ...... 4 eligible employer claims against payroll 1-800-THE-LOST (1-800-843-5678) if you Estimated Tax Payments ...... 4 taxes for the new employee retention recognize a child. Interest and Penalties ...... 5 credit may not be taken into account for Accounting Methods ...... 5 purposes of determining other credits. The Taxpayer Advocate Accounting Period ...... 6 Temporary suspension of limitations Service Rounding Off to Whole Dollars ...... 6 on certain contributions. Under the The Taxpayer Advocate Service (TAS) is Recordkeeping ...... 6 CARES Act, a corporation may elect to an independent organization within the Other Forms and Statements That deduct certain qualified cash contributions IRS that helps taxpayers and protects May Be Required ...... 6 made in 2020 and 2021 without regard to taxpayer rights. TAS's job is to ensure that Specific Instructions ...... 7 the 10% limit. The total every taxpayer is treated fairly and knows Period Covered ...... 7 amount of the contribution claimed cannot and understands their rights under the Name and Address ...... 7 exceed 25% of the excess of the Taxpayer Bill of Rights. Identifying Information ...... 7 corporation's taxable income over all other Employer Identification Number allowable charitable contributions. See the As a taxpayer, the corporation has (EIN) ...... 8 instructions for line 19. rights that the IRS must abide by in its dealings with the corporation. TAS can Total Assets ...... 8 Disaster relief charitable contribu- help the corporation if: Initial Return, Final Return, Name tions. The 10% limit on the deduction for A problem is causing financial difficulty Change, or Address Change ....8 charitable contributions does not apply to • for the business; Income ...... 8 contributions made after December 31, The business is facing an immediate Deductions ...... 10 2019, and before February 26, 2021, to • threat of adverse action; or Schedule C. Dividends, Inclusions, certain charitable organizations for relief in The corporation has tried repeatedly to and Special Deductions ...... 16 qualified disaster areas. See Temporary • contact the IRS but no one has Schedule J. Tax Computation and suspension of 10% limitation for certain responded, or the IRS hasn't responded Payment ...... 19 disaster-related contributions, later. by the date promised. Schedule K. Other Information ..... 21 Increase in limits on contributions of Schedule L. Balance Sheets per TAS has offices in every state, the Books ...... 24 food inventory. For any charitable contribution of food during 2020 and 2021 District of Columbia, and Puerto Rico. Schedule M-1. Reconciliation of Local advocates' numbers are in their Income (Loss) per Books With to which section 170(e)(3)(C) applies, a Income per Return ...... 24 corporation can deduct qualified local directories and at TaxpayerAdvocate.IRS.gov. The Principal Business Activity Codes ... 27 contributions of up to 25% of their corporation can also call TAS at Index ...... 30 aggregate net income from all or from which the contributions 1-877-777-4778. were made or up to 25% of their taxable Future Developments income. See the instructions for line 19. TAS also works to resolve large-scale or systemic problems that affect many For the latest information about Temporary allowance of 100% for taxpayers. If the corporation knows of one developments related to Form 1120 and business meals. A corporation is of these broad issues, please report it to its instructions, such as legislation

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TAS through the Systemic Advocacy rules apply, it must report all items of Management System at IRS.gov/SAMS. General Instructions income, gain, deductions, losses, and credits on the corporation's For more information, go to IRS.gov/ return (except as provided in section Advocate. Purpose of Form Use Form 1120, U.S. Corporation Income 860H). Show a breakdown of the items on Direct Deposit of Refund Tax Return, to report the income, gains, an attached statement. For more losses, deductions, credits, and to figure information, see sections 860H and 860L To request a direct deposit of the (repealed with certain exceptions). corporation's income into an the income tax liability of a corporation. account at a U.S. bank or other financial Foreign-owned domestic disregarded institution, attach Form 8050, Direct Who Must File entities. If a foreign person, including a Deposit of Refund. See the Unless exempt under section 501, all , wholly owns a instructions for line 37. domestic (including domestic disregarded entity (DE), the corporations in bankruptcy) must file an domestic DE is treated as a domestic How To Make a income tax return whether or not they corporation separate from its owner (the have taxable income. Domestic foreign corporation) for the limited Contribution To Reduce corporations must file Form 1120, unless purposes of the requirements under Debt Held by the Public they are required, or elect to file a special section 6038A that apply to 25% foreign-owned domestic corporations. To help reduce debt held by the public, return. See Special Returns for Certain While a DE is not required to file a U.S. make a check payable to “Bureau of the Organizations below. income tax return, a DE covered by these Fiscal Service.” Send it to: Entities electing to be taxed as corpo- rules may be required to file a pro forma rations. A domestic entity electing to be Form 1120 with Form 5472 attached by Bureau of the Fiscal Service classified as an association taxable as a Attn: Dept G the due date (including extensions) of the corporation must file Form 1120, unless it return. See the Instructions for Form 5472 P.O. Box 2188 is required to or elects to file a special Parkersburg, WV 26106-2188 for additional information and coordination return listed under Special Returns for with Form 5472 reporting by the domestic Certain Organizations below. The entity DE. Or, enclose the check with the must also file Form 8832, Entity corporation's income tax return. In the Classification Election, and attach a copy Qualified opportunity fund. To be memo section of the check, make a note of Form 8832 to Form 1120 (or the certified as a qualified opportunity fund that it is a gift to reduce the debt held by applicable return) for the year of the (QOF), the corporation must file Form the public. For information on how to make election. For more information, see Form 1120 and attach Form 8996, even if the this type of contribution online, go to 8832 and its instructions. corporation had no income or expenses to www.treasurydirect.gov and click on “How report. See Schedule K, Question 25. to Make a Contribution to Reduce the (LLC). If an Also, see the Instructions for Form 8996. Debt.” entity with more than one owner was formed as an LLC under state law, it is Qualified opportunity investment. If Do not add the contributions to any tax generally treated as a for the corporation held a qualified investment the corporation may owe. See the federal income tax purposes and files in a QOF at any time during the year, the instructions for line 35 for details on how to Form 1065, U.S. Return of Partnership corporation must file its return with Form pay any tax the corporation owes. Income. Generally, a single-member LLC 8997, Initial and Annual Statement of Contributions to reduce debt held by the is disregarded as an entity separate from Qualified Opportunity Fund Investments public are deductible subject to the rules its owner and reports its income and attached. See the instructions for Form and limitations for charitable contributions. deductions on its owner's federal income 8997. tax return. The LLC can file a Form 1120 Special Returns for How To Get Forms only if it has filed Form 8832 to elect to be and Publications treated as an association taxable as a Certain Organizations corporation. For more information about Internet. You can access the IRS website LLCs, see Pub. 3402, Taxation of Limited Instead of filing Form 1120, certain organizations, 24 hours a day, 7 days a week, at IRS.gov Liability Companies. as shown below, file special returns. to: If the organization is a: File Form • Download forms, instructions, and Corporations engaged in farming. A publications; corporation (other than a corporation that ▼ ▼ • Order IRS products online; is a subchapter T ) that engages in farming should use Form 1120 Exempt organization • Research your tax questions online; with unrelated or 990-T to report the income (loss) from such • Search publications online by topic or business income keyword; activities. Enter the income and • View Internal Revenue Bulletins (IRBs) deductions of the corporation according to Religious or apostolic published in recent years; and the instructions for lines 1 through 10 and organization exempt 1065 • Sign up to receive local and national tax 12 through 29. under section 501(d) news by email. Ownership interest in a Financial As- Entity formed as a Tax forms and publications. The set Securitization Investment Trust limited liability (FASIT). Special rules apply to a FASIT in under state law and corporation can download or print all of the 1065 treated as a partnership forms and publications it may need on existence on October 22, 2004, to the extent that regular interests issued by the for federal income tax IRS.gov/FormsPubs. Otherwise, the purposes corporation can go to IRS.gov/ FASIT before October 22, 2004, continue OrderForms to place an order and have to remain outstanding in accordance with forms mailed to it. The IRS will process their original terms. your order for forms and publications as If a corporation holds an ownership soon as possible. interest in a FASIT to which these special

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does not, however, apply to certain • The president, vice president, treasurer, Subchapter T returns. assistant treasurer, chief accounting cooperative association 1120-C officer; or (including a farmers' Certain corporations with total assets of Any other corporate officer (such as tax cooperative) • $10 million or more that file at least 250 officer) authorized to sign. returns a year are required to e-file Form Entity that elects to be If a return is filed on behalf of a treated as a real estate 1120. See Regulations section 301.6011-5. However, these corporations corporation by a receiver, trustee, or mortgage investment 1066 assignee, the fiduciary must sign the conduit (REMIC) under can request a waiver of the electronic filing section 860D requirements. See Notice 2010-13, return, instead of the corporate officer. 2010-4 I.R.B. 327. Returns and forms signed by a receiver or Interest charge domestic trustee in bankruptcy on behalf of a international sales 1120-IC-DISC For more information, visit IRS.gov/ corporation must be accompanied by a corporation (section 992) Businesses. copy of the order or instructions of the court authorizing signing of the return or Foreign corporation form. (other than life or When To File property and casualty If an employee of the corporation 1120-F Generally, a corporation must file its insurance company filing income tax return by the 15th day of the completes Form 1120, the paid preparer Form 1120-L or Form 4th month after the end of its tax year. A space should remain blank. Anyone who 1120-PC) new corporation filing a short-period return prepares Form 1120 but does not charge the corporation should not complete that Foreign sales must generally file by the 15th day of the 1120-FSC corporation (section 922) 4th month after the short period ends. A section. Generally, anyone who is paid to corporation that has dissolved must prepare the return must sign it and fill in Condominium generally file by the 15th day of the 4th the “Paid Preparer Use Only” area. management, residential month after the date it dissolved. The paid preparer must complete the real estate required preparer information and: management, or However, a corporation with a fiscal tax Sign the return in the space provided timeshare association 1120-H year ending June 30 must file by the 15th • for the preparer's signature, and that elects to be treated day of the 3rd month after the end of its Give a copy of the return to the as a homeowners tax year. A corporation with a short tax • association under taxpayer. year ending anytime in June will be section 528 treated as if the short year ended on June A paid preparer may sign original Life insurance company 30, and must file by the 15th day of the 3rd TIP or amended returns by rubber 1120-L (section 801) month after the end of its tax year. stamp, mechanical device, or computer software program. Fund set up to pay for If the due date falls on a Saturday, nuclear 1120-ND Sunday, or legal holiday, the corporation decommissioning costs can file on the next business day. Paid Preparer (section 468A) Private Delivery Services Authorization If the corporation wants to allow the IRS to Property and casualty Corporations can use certain private insurance company 1120-PC discuss its 2020 tax return with the paid delivery services (PDS) designated by the (section 831) preparer who signed it, check the “Yes” IRS to meet the “timely mailing as timely box in the signature area of the return. Political organization filing” rule for tax returns. Go to IRS.gov/ 1120-POL This authorization applies only to the (section 527) PDS. individual whose signature appears in the Real estate investment The PDS can tell you how to get written “Paid Preparer Use Only” section of the 1120-REIT trust (section 856) proof of the mailing date. return. It does not apply to the firm, if any, shown in that section. Regulated investment 1120-RIC For the IRS mailing address to use if company (section 851) If the “Yes” box is checked, the you’re using a PDS, go to IRS.gov/ corporation is authorizing the IRS to call PDSstreetAddresses. (section the paid preparer to answer any questions 1120-S 1361) Private delivery services can't that may arise during the processing of its deliver items to P.O. boxes. You return. The corporation is also authorizing Settlement fund ! 1120-SF CAUTION must use the U.S. Postal Service the paid preparer to: (section 468B) to mail any item to an IRS P.O. box • Give the IRS any information that is address. missing from the return; • Call the IRS for information about the Electronic Filing Extension of Time To File processing of the return or the status of Corporations can generally electronically any related refund or payment(s); and File Form 7004, Application for Automatic file (e-file) Form 1120, related forms, Respond to certain IRS notices about Extension of Time To File Certain • schedules, and attachments; Form 7004 math errors, offsets, and return Business Income Tax, Information, and (automatic extension of time to file); and preparation. Other Returns, to request an extension of Forms 940, 941, and 944 (employment tax time to file. Generally, the corporation The corporation is not authorizing the returns). If there is a balance due, the must file Form 7004 by the regular due paid preparer to receive any refund check, corporation can authorize an electronic date of the return. See the Instructions for bind the corporation to anything (including funds withdrawal while e-filing. Form 1099 Form 7004. any additional tax liability), or otherwise and other information returns can also be represent the corporation before the IRS. electronically filed. The option to e-file Who Must Sign The authorization will automatically end The return must be signed and dated by: no later than the due date (excluding

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extensions) for filing the corporation's 2021 tax return. If the corporation wants to Where To File expand the paid preparer's authorization or revoke the authorization before it ends, File the corporation's return at the applicable IRS address listed below. see Pub. 947, Practice Before the IRS and Power of Attorney. If the corporation's principal And the total assets at business, office, or agency the end of the tax year Assembling the Return is located in: are: Use the following address: To ensure that the corporation's tax return Connecticut, Delaware, District Less than $10 million Department of the Treasury is correctly processed, attach all of Columbia, Georgia, Illinois, and Schedule M-3 is not Internal Revenue Service Center schedules and other forms after page 6 of Indiana, Kentucky, Maine, filed Kansas City, MO 64999-0012 Maryland, Massachusetts, Form 1120 in the following order. $10 million or more, or Department of the Treasury Michigan, New Hampshire, less than $10 million and Internal Revenue Service Center 1. Schedule N (Form 1120). New Jersey, New York, North Schedule M-3 is filed Ogden, UT 84201-0012 2. Schedule D (Form 1120). Carolina, Ohio, Pennsylvania, 3. Form 8949. Rhode Island, South Carolina, Tennessee, Vermont, Virginia, 4. Form 8996. West Virginia, Wisconsin 5. Form 8050. Alabama, Alaska, Arizona, 6. Form 1125-A. Arkansas, California, 7. Form 4136. Colorado, Florida, Hawaii, 8. Form 8978. Idaho, Iowa, Kansas, Louisiana, Minnesota, Department of the Treasury 9. Form 965-B. Mississippi, Missouri, Any amount Internal Revenue Service Center 10. Form 8941. Montana, Nebraska, Nevada, Ogden, UT 84201-0012 11. Form 3800. New Mexico, North Dakota, Oklahoma, Oregon, South 12. Form 6252. Dakota, Texas, Utah, 13. Additional schedules in Washington, Wyoming alphabetical order. A foreign country or U.S. Internal Revenue Service Center 14. Additional forms in numerical order. possession Any amount P.O. Box 409101 15. Supporting statements and Ogden, UT 84409 attachments. A group of corporations with members located in more than one service center area will often Complete every applicable entry space keep all the books and records at the principal office of the managing corporation. In this case, on Form 1120. Do not enter “See the tax returns of the corporations may be filed with the service center for the area in which the Attached” or “Available Upon Request” principal office of the managing corporation is located. instead of completing the entry spaces. If more space is needed on the forms or schedules, attach separate sheets using due on the next day that isn't a Saturday, Depositing on time. For any deposit the same size and format as the printed Sunday, or legal holiday. made by EFTPS to be on time, the forms. Electronic Deposit corporation must submit the deposit by 8 p.m. Eastern time the day before the date If there are supporting statements and Requirement attachments, arrange them in the same the deposit is due. If the corporation uses order as the schedules or forms they Corporations must use electronic funds a third party to make deposits on its support and attach them last. Show the transfer to make all federal tax deposits behalf, they may have different cutoff totals on the printed forms. Enter the (such as deposits of employment, , times. and corporate income tax). Generally, corporation's name and EIN on each Same-day wire payment option. If the supporting statement or attachment. electronic funds transfers are made using the Electronic Federal Tax Payment corporation fails to submit a deposit transaction on EFTPS by 8 p.m. Eastern Note. If the corporation had tax withheld System (EFTPS). However, if the corporation does not want to use EFTPS, time the day before the date a deposit is under Chapter 3 or 4 of the Internal due, it can still make its deposit on time by Revenue Code and received a Form it can arrange for its tax professional, financial institution, payroll service, or using the Federal Tax Collection Service 1042-S, Form 8805, or Form 8288-A (FTCS). To use the same-day wire showing the amount of income tax other trusted third party to make deposits on its behalf. Also, it may arrange for its payment method, the corporation will need withheld, attach such form(s) to the to make arrangements with its financial corporation’s income tax return to claim a financial institution to submit a same-day payment (discussed below) on its behalf. institution ahead of time regarding withholding credit. The corporation should availability, deadlines, and costs. report the tax withheld on Schedule J, Part EFTPS is a free service provided by the Department of the Treasury. Services Financial institutions may charge a fee for III, line 20d. See the instructions for payments made this way. To learn more Schedule J, Part III, line 20d. provided by a tax professional, financial institution, payroll service, or other third about the information the corporation will party may have a fee. need to provide to its financial institution to Tax Payments make a same-day wire payment, go to Generally, the corporation must pay any To get more information about EFTPS IRS.gov/SameDayWire. tax due in full no later than the due date for or to enroll in EFTPS, visit EFTPS.gov or filing its tax return (not including call 1-800-555-4477 (TTY/TDD Estimated Tax Payments extensions). See the instructions for 1-800-733-4829). line 35. If the due date falls on a Saturday, Generally, the following rules apply to the Sunday, or legal holiday, the payment is corporation's payments of estimated tax.

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• The corporation must make installment part of a month the return is late, up to a (defined in section 448(d)(3)) payments of estimated tax if it expects its maximum of 25% of the unpaid tax. The may never use the cash method. See total tax for the year (less applicable minimum penalty for a return that is more sections 448(a)(1) through (a)(3). credits) to be $500 or more. than 60 days late is the smaller of the tax However, see Nonaccrual experience • The installments are due by the 15th due or $435. The penalty will not be method for service providers in the day of the 4th, 6th, 9th, and 12th months imposed if the corporation can show that instructions for line 1a. of the tax year. If any date falls on a the failure to file on time was due to • Unless it is a small business taxpayer Saturday, Sunday, or legal holiday, the reasonable cause. See Caution, earlier. (defined below), a corporation must use installment is due on the next regular an accrual method for sales and Late payment of tax. A corporation that business day. purchases of inventory items. See the does not pay the tax when due may • The corporation must use electronic instructions for Form 1125-A. generally be penalized 1/2 of 1% of the funds transfer to make installment A corporation engaged in farming must unpaid tax for each month or part of a • payments of estimated tax. use an accrual method. For exceptions, month the tax is not paid, up to a Use Form 1120-W, Estimated Tax for see section 447 and Pub. 225. • maximum of 25% of the unpaid tax. See Corporations, as a worksheet to compute Special rules apply to long-term Caution, earlier. • estimated tax. See the Instructions for . See section 460. Form 1120-W. Trust fund recovery penalty. This • Dealers in securities must use the • Penalties may apply if the corporation penalty may apply if certain excise, mark-to-market accounting method. does not make required estimated tax income, social security, and Medicare Dealers in commodities and traders in payment deposits. See Estimated tax taxes that must be collected or withheld securities and commodities can elect to penalty below. are not collected or withheld, or these use the mark-to-market accounting • If the corporation overpaid estimated taxes are not paid. These taxes are method. See section 475. tax, it may be able to get a quick refund by generally reported on: Small business taxpayer. For tax years filing Form 4466, Corporation Application Form 720, Quarterly Federal Excise • beginning in 2020, a corporation qualifies for Quick Refund of Overpayment of Tax Return; as a small business taxpayer if (a) it has Estimated Tax. See the instructions for Form 941, Employer's QUARTERLY • average annual gross receipts of $26 Schedule J, Part III, , later. Federal Tax Return; million or less for the 3 prior tax years, and Form 943, Employer's Annual Federal Estimated tax penalty. A corporation • (b) it is not a tax shelter (as defined in Tax Return for Agricultural Employees; that does not make estimated tax section 448(d)(3)). Form 944, Employer's ANNUAL payments when due may be subject to an • Federal Tax Return; or A small business taxpayer can adopt or underpayment penalty for the period of Form 945, Annual Return of Withheld change its accounting method to account underpayment. Generally, a corporation is • Federal Income Tax. for inventories (a) in the same manner it subject to the penalty if its tax liability is would use to adopt or change its method The trust fund recovery penalty may be $500 or more and it did not timely pay at of accounting for non-incidental material imposed on all persons who are least the smaller of: and supplies, or (b) to conform to its determined by the IRS to have been • Its tax liability for the current year, or treatment of inventories in an applicable responsible for collecting, accounting for, • Its prior year's tax. financial statement (as defined in section or paying over these taxes, and who acted Use Form 2220, Underpayment of 451(b)(3)). If it does not have an willfully in not doing so. The penalty is Estimated Tax by Corporations, to see if applicable financial statement, it can use equal to the full amount of the unpaid trust the corporation owes a penalty and to the method of accounting used in its fund tax. See the Instructions for Form figure the amount of the penalty. If Form books and records prepared according to 720, Pub. 15 (Circular E), Employer's Tax 2220 is completed, enter the penalty on its accounting procedures. Guide, or Pub. 51 (Circular A), Agricultural line 34. See the instructions for line 34. Employer's Tax Guide, for details, Change in accounting method. including the definition of responsible Generally, the corporation must get IRS Interest and Penalties persons. consent to change either an overall method of accounting or the accounting If the corporation receives a notice Other penalties. Other penalties can be treatment of any material item for income about penalties after it files its imposed for negligence, substantial ! tax purposes. To obtain consent, the CAUTION return, send the IRS an understatement of tax, reportable corporation must generally file Form 3115, explanation and we will determine if the transaction understatements, and fraud. Application for Change in Accounting corporation meets reasonable-cause See sections 6662, 6662A, and 6663. criteria. Do not attach an explanation Method, during the tax year for which the when the corporation's return is filed. change is requested. See the Instructions for Form 3115 and Pub. 538 for more Interest. Interest is charged on taxes Accounting Methods information and exceptions. Figure taxable income using the method of paid late even if an extension of time to file Section 481(a) adjustment. If the is granted. Interest is also charged on accounting regularly used in keeping the corporation's books and records. In all corporation's taxable income for the penalties imposed for failure to file, current tax year is figured under a method negligence, fraud, substantial valuation cases, the method used must clearly show taxable income. Permissible methods of accounting different from the method misstatements, substantial used in the preceding tax year, the understatements of tax, and reportable include cash, accrual, or any other method authorized by the Internal Revenue Code. corporation may have to make an transaction understatements from the due adjustment under section 481(a) to date (including extensions) to the date of Generally, the following rules apply. For prevent amounts of income or expense payment. The interest charge is figured at from being duplicated or omitted. The a rate determined under section 6621. more information, see Pub. 538, Accounting Periods and Methods. section 481(a) adjustment period is Late filing of return. A corporation that • A corporation, or a partnership that has generally 1 year for a net negative does not file its tax return by the due date, a corporation as a partner, cannot use the adjustment and 4 years for a net positive including extensions, may be penalized cash method of accounting unless it is a adjustment. For an eligible terminated S 5% of the unpaid tax for each month or small business taxpayer (defined later). A corporation, the section 481(a) adjustment

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period is generally 6 years for a negative or credit on the return must be kept for 3 (OTSA), or files a form that fails to include or positive adjustment that is attributable years from the date the return is due or all the information required (or includes to the S corporation's revocation of its filed, whichever is later. Keep records that incorrect information). Other penalties, election under section 1362(a) after verify the corporation's basis in property such as an accuracy-related penalty under December 21, 2017, and before for as long as they are needed to figure section 6662A, may also apply. See the December 22, 2019. See section 481(d). the basis of the original or replacement Instructions for Form 8886 for details on In some cases, a corporation can elect property. these and other penalties. to modify the section 481(a) adjustment The corporation should keep copies of Reportable transactions by material period. The corporation may have to all filed returns. They help in preparing advisors. Material advisors to any complete the appropriate lines of Form future and amended returns and in the reportable transaction must disclose 3115 to make an election. See the calculation of earnings and profits. certain information about the reportable Instructions for Form 3115 for more transaction by filing Form 8918, Material information and exceptions. Other Forms and Advisor Disclosure Statement, with the If the net section 481(a) adjustment is Statements That May Be IRS. For details, see the Instructions for positive, report the ratable portion on Form Form 8918. Required 1120, line 10, as other income. If the net Transfers to a corporation controlled section 481(a) adjustment is negative, Amended return. Use Form 1120-X, by the transferor. Every significant report the ratable portion on line 26 as a Amended U.S. Corporation Income Tax transferor (as defined in Regulations deduction. Return, to correct a previously filed Form section 1.351-3(d)) that receives stock of 1120. a corporation in exchange for property in a Accounting Period nonrecognition event must include the Reportable transaction disclosure A corporation must figure its taxable statement required by Regulations section statement. Disclose information for each income on the basis of a tax year. A tax 1.351-3(a) on or with the transferor's tax reportable transaction in which the year is the annual accounting period a return for the tax year of the exchange. corporation participated. Form 8886, corporation uses to keep its records and The transferee corporation must include Reportable Transaction Disclosure report its income and expenses. the statement required by Regulations Statement, must be filed for each tax year Generally, corporations can use a section 1.351-3(b) on or with its return for that the federal income tax liability of the calendar year or a fiscal year. Personal the tax year of the exchange, unless all the corporation is affected by its participation service corporations, however, must use a required information is included in any in the transaction. The following are calendar year unless they meet one of the statement(s) provided by a significant reportable transactions. exceptions discussed later under Personal transferor that is attached to the same Service Corporation. 1. Any listed transaction, which is a return for the same section 351 exchange. transaction that is the same as or If the transferor or transferee corporation Change of tax year. Generally, a substantially similar to one of the types of is a controlled foreign corporation, each corporation, including a personal service transactions that the IRS has determined U.S. shareholder (within the meaning of corporation, must get the consent of the to be a transaction and section 951(b)) must include the required IRS before changing its tax year by filing identified by notice, regulation, or other statement on or with its return. Form 1128, Application To Adopt, published guidance as a listed Change, or Retain a Tax Year. However, transaction. Distributions under section 355. Every exceptions may apply. See the corporation that makes a distribution of Instructions for Form 1128 and Pub. 538 2. Any transaction offered under stock or securities of a controlled for more information. conditions of confidentiality for which the corporation, as described in section 355 corporation (or a related party) paid an (or so much of section 356 as it relates to Rounding Off to advisor a fee of at least $250,000. section 355), must include the statement 3. Certain transactions for which the required by Regulations section Whole Dollars corporation (or a related party) has 1.355-5(a) on or with its return for the year The corporation may enter decimal points contractual protection against of the distribution. A significant distributee and cents when completing its return. disallowance of the tax benefits. (as defined in Regulations section However, the corporation should round off 4. Certain transactions resulting in a 1.355-5(c)) that receives stock or cents to whole dollars on its return, forms, loss of at least $10 million in any single securities of a controlled corporation must and schedules to make completing its year or $20 million in any combination of include the statement required by return easier. The corporation must either years. Regulations section 1.355-5(b) on or with round off all amounts on its return to whole its return for the year of receipt. If the 5. Any transaction identified by the dollars, or use cents for all amounts. To distributing or distributee corporation is a IRS by notice, regulation, or other round, drop amounts under 50 cents and controlled foreign corporation, each U.S. published guidance as a “transaction of increase amounts from 50 to 99 cents to shareholder (within the meaning of section interest.” the next dollar. For example, $8.40 rounds 951(b)) must include the statement on or to $8 and $8.50 rounds to $9. For more information, see Regulations with its return. section 1.6011-4. Also, see the If two or more amounts must be added Dual consolidated losses. If a domestic Instructions for Form 8886. to figure the amount to enter on a line, corporation incurs a dual consolidated include cents when adding the amounts Penalties. The corporation may have loss (as defined in Regulations section and round off only the total. to pay a penalty if it is required to disclose 1.1503-2(c)(5)), the corporation (or a reportable transaction under section consolidated group) may need to attach Recordkeeping 6011 and fails to properly complete and an elective relief agreement and/or an Keep the corporation's records for as long file Form 8886. Penalties may also apply annual certification, as provided in as they may be needed for the under section 6707A if the corporation Regulations section 1.1503-2(g)(2). administration of any provision of the fails to file Form 8886 with its corporate Election to reduce basis under section Internal Revenue Code. Usually, records return, fails to provide a copy of Form 362(e)(2)(C). If property is transferred to that support an item of income, deduction, 8886 to the Office of Tax Shelter Analysis

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a corporation subject to section 362(e)(2), end in 2021. For a fiscal or short tax year File supporting statements for each the transferor and the acquiring return, fill in the tax year space at the top corporation included in the consolidated corporation may elect, under section of the form. return. Do not use Form 1120 as a 362(e)(2)(C), to reduce the transferor's supporting statement. On the supporting The 2020 Form 1120 can also be used basis in the stock received instead of statement, use columns to show the if: reducing the acquiring corporation's basis following, both before and after • The corporation has a tax year of less in the property transferred. Once made, adjustments. than 12 months that begins and ends in the election is irrevocable. For more 2021, and 1. Items of and information, see section 362(e)(2) and • The 2021 Form 1120 is not available at deductions. Regulations section 1.362-4. If an election the time the corporation is required to file is made, a statement must be filed in 2. A computation of taxable income. its return. accordance with Regulations section 3. Balance sheets, as of the beginning The corporation must show its 2021 tax 1.362-4(d)(3). and end of the tax year. year on the 2020 Form 1120 and take into Annual information reporting by speci- account any changes that are 4. A reconciliation of income per fied domestic entities under section effective for tax years beginning after books with income per return. 6038D. For tax years beginning after December 31, 2020. 5. A reconciliation of retained December 31, 2015, domestic earnings. corporations that are formed or availed of Name and Address to hold specified foreign financial assets Enter on Form 1120 the totals for each Enter the corporation's true name (as set item of income, gain, loss, expense, or (“specified domestic entities”) must file forth in the charter or other legal document Form 8938. Form 8938 must be filed each deduction, net of eliminating entries for creating it), address, and EIN on the intercompany transactions between year the value of the corporation's appropriate lines. Enter the address of the specified foreign financial assets meets or corporations within the consolidated corporation's principal office or place of group. Attach consolidated balance exceeds the reporting threshold. For more business. Include the suite, room, or other information on domestic corporations that sheets and a reconciliation of unit number after the street address. If the consolidated retained earnings. are specified domestic entities and the post office does not deliver mail to the types of foreign financial assets that must street address and the corporation has a The corporation does not have to be reported, see the Instructions for Form P.O. box, show the box number instead. TIP provide the information requested 8938, generally, and in particular, Who in (3), (4), and (5), above, if its Must File, Specified Domestic Entity, Note. Do not use the address of the total receipts (line 1a plus lines 4 through Reporting Thresholds, Specified Foreign for the state in which the 10 on page 1 of the return) and its total Financial Assets, Interests in Specified corporation is incorporated. For example, assets at the end of the tax year Foreign Financial Assets, Assets Not if a business is incorporated in Delaware (Schedule L, line 15(d)) are less than Required To Be Reported, and Exceptions or Nevada and the corporation's principal $250,000. See Schedule K, Question 13. to Reporting. office is located in Little Rock, Arkansas, In addition, a domestic corporation the corporation should enter the Little For more information on consolidated required to file Form 8938 with its Form Rock address. returns, see the regulations under section 1120 for the taxable year should check If the corporation receives its mail in 1502. “Yes” to Schedule N (Form 1120), care of a third party (such as an Life–Nonlife Consolidated Question 8, and also include that schedule accountant or an attorney), enter on the with its Form 1120. street address line “C/O” followed by the Return Form 8975. Certain U.S. persons that are third party's name and street address or If Item A, box 1a, is checked and the the ultimate parent entity of a U.S. P.O. box. corporation is the common parent of a consolidated group that includes a life multinational enterprise group with annual If the corporation has a foreign insurance company, also check box 1b. revenue for the preceding reporting period address, include the city or town, state or See Regulations section 1.1502-47(s) for of $850 million or more are required to file province, country, and foreign postal the filing requirements of a life–nonlife Form 8975. Form 8975 and Schedule A code. Do not abbreviate the country consolidated return. (Form 8975) must be filed with the income name. Follow the country's practice for tax return of the ultimate parent entity of a entering the name of the state or province Personal U.S. multinational enterprise group for the and postal code. tax year in or within which the reporting A personal holding company must check Item A, box 2, and attach Schedule PH period covered by Form 8975 ends. For Item A. Identifying more information, see Form 8975, (Form 1120), U.S. Personal Holding Schedule A (Form 8975) and the Information Company (PHC) Tax. See the Instructions for Schedule PH (Form 1120) for details. Instructions for Form 8975 and Consolidated Return Schedule A (Form 8975). Personal Service Corporation Corporations filing a consolidated return Other forms and statements. See Pub. must check Item A, box 1a, and attach If the corporation is a personal service 542, Corporations, for a list of other forms Form 851, Affiliations Schedule, and other corporation, check Item A, box 3. A and statements a corporation may need to supporting statements to the return. Also, personal service corporation is a file in addition to the forms and statements for the first year a subsidiary corporation is corporation whose principal activity for the discussed throughout these instructions. being included in a consolidated return, testing period is the performance of attach Form 1122, Authorization and personal services. The testing period for a Specific Instructions Consent of Subsidiary Corporation To Be tax year is generally the prior tax year Included in a Consolidated Income Tax unless the corporation has just been Return, to the parent's consolidated formed. Personal services include any Period Covered return. Attach a separate Form 1122 for activity performed in the fields of File the 2020 return for calendar year 2020 each new subsidiary being included in the accounting, actuarial science, and fiscal years that begin in 2020 and consolidated return. architecture, consulting, engineering,

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health, law, and the performing arts. The If you are filing Schedule M-3, check • If the corporation changed its name services must be substantially performed Item A, box 4, to indicate that since it last filed a return, check the “Name by employee–owners. Schedule M-3 is attached. change” box. Generally, a corporation must also have amended its articles of A personal service corporation must Item B. Employer and filed the amendment use a calendar tax year unless: with the state in which it was incorporated. • It elects to use a 52-53-week tax year Identification Number • If the corporation has changed its that ends with reference to the calendar (EIN) address since it last filed a return year or tax year elected under section Enter the corporation's EIN. If the (including a change to an “in care of” 444; corporation does not have an EIN, it must address), check the “Address change” • It can establish a business purpose for apply for one. An EIN can be applied for: box. a different tax year and obtains the • Online—Go to IRS.gov/EIN. The EIN is approval of the IRS (see the Instructions issued immediately once the application Note. If a change in address or for Form 1128 and Pub. 538); or information is validated. responsible party occurs after the return is • It elects under section 444 to have a tax • By faxing or mailing Form SS-4, filed, use Form 8822-B, Change of year other than a calendar year. To make Application for Employer Identification Address or Responsible Party— the election, use Form 8716, Election To Number. Business, to notify the IRS. See the Have a Tax Year Other Than a Required instructions for Form 8822-B for details. Tax Year. Corporations located in the United ! States or U.S. possessions can If a corporation makes the section 444 CAUTION use the online application. Foreign Income election, its deduction for certain amounts corporations should call 1-267-941-1099 Except as otherwise provided in the paid to employee–owners may be limited. (not a toll free number) for more Internal Revenue Code, gross income See Schedule H (Form 1120), Section information on obtaining an EIN. See the includes all income from whatever source 280H Limitations for a Personal Service Instructions for Form SS-4. derived. Corporation (PSC), to figure the maximum deduction. EIN applied for, but not received. If the Exception for income from qualifying corporation has not received its EIN by the shipping activities. Gross income does If a section 444 election is terminated time the return is due, enter “Applied For” not include income from qualifying and the termination results in a short tax and the date the corporation applied in the shipping activities if the corporation makes year, type or print at the top of the first space for the EIN. However, if the an election under section 1354 to be taxed page of Form 1120 for the short tax year corporation is filing its return electronically, on its notional shipping income (as “SECTION 444 ELECTION an EIN is required at the time the return is defined in section 1353) at the highest TERMINATED.” filed. An exception applies to subsidiaries corporate . If the election is made, of corporations whose returns are filed the corporation generally may not claim Schedule M-3 (Form 1120) with the parent's electronically filed any loss, deduction, or credit with respect A corporation with total assets consolidated Form 1120. These to qualifying shipping activities. A (nonconsolidated or consolidated for all subsidiaries should enter “Applied For” in corporation making this election may also corporations included within a the space for the EIN on their returns. The elect to defer gain on the disposition of a consolidated tax group) of $10 million or subsidiaries' returns are identified under qualifying vessel. more on the last day of the tax year must the parent corporation's EIN. Use Form 8902, Alternative Tax on file Schedule M-3 (Form 1120), Net Qualifying Shipping Activities, to figure the Income (Loss) Reconciliation for For more information, see the tax. Include the alternative tax on Corporations With Total Assets of $10 Instructions for Form SS-4. Schedule J, Part I, line 9e. Million or More, instead of Schedule M-1. A corporation filing Form 1120 that is not Item D. Total Assets . Gross Receipts or Sales required to file Schedule M-3 may Enter the corporation's total assets (as Line 1a. Gross receipts or sales. Enter voluntarily file Schedule M-3 instead of determined by the accounting method on line 1a gross receipts or sales from all Schedule M-1. regularly used in keeping the corporation's business operations, except for amounts books and records) at the end of the tax that must be reported on lines 4 through Corporations that (a) are required to file year. If there are no assets at the end of 10. Schedule M-3 (Form 1120) and have less the tax year, enter -0-. than $50 million total assets at the end of Special rules apply to certain income, the tax year, or (b) are not required to file If the corporation is required to as discussed below. Schedule M-3 (Form 1120) and voluntarily complete Schedule L, enter the total Advance payments. In general, file Schedule M-3 (Form 1120), must assets from Schedule L, line 15, column advance payments are reported in the either (i) complete Schedule M-3 (Form (d), on page 1, Item D. If filing a year of receipt. For exceptions to this 1120) entirely, or (ii) complete consolidated return, report total general rule for corporations that use the Schedule M-3 (Form 1120) through Part I, consolidated assets for all corporations accrual method of accounting, see the and complete Form 1120, Schedule M-1, joining in the return. following. instead of completing Parts II and III of • To report income from long-term Schedule M-3 (Form 1120). If the Item E. Initial Return, Final contracts, see section 460. corporation chooses to complete Return, Name Change, or • For rules that allow a limited deferral of Schedule M-1 instead of completing Parts advance payments beyond the current tax II and III of Schedule M-3, the amount on Address Change year, see the "Applicability Dates" Schedule M-1, line 1, must equal the • If this is the corporation's first return, discussion in the final regulations under amount on Schedule M-3, Part I, line 11. check the “Initial return” box. section 451(c), T.D. 9941. See the Instructions for Schedule M-3 • If this is the corporation's final return • For information on adopting or (Form 1120) for more details. Also, see and it will no longer exist, check the “Final changing to a permissible method for the instructions for Schedule M-1, later. return” box. reporting advance payments for services

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and certain goods by an accrual method Rev. Proc. 2011-46, 2011-42 I.R.B. 518, Examples of other income to report on corporation, see the Instructions for Form as modified by Rev. Proc. 2016-29, line 10 include the following. 3115. 2016-21 I.R.B. 880. Also, see the • Recoveries of bad debts deducted in Instructions for Form 3115 for procedures prior years under the specific charge-off Installment sales. Generally, the to obtain automatic consent to change to method. installment method cannot be used for this method or make certain changes • The amount included in income from dealer dispositions of property. A “dealer within this method. Form 6478, Biofuel Producer Credit. disposition” is any disposition of: (a) Corporations that qualify to use the • The amount included in income from personal property by a person who Form 8864, Biodiesel and Renewable regularly sells or otherwise disposes of nonaccrual experience method should attach a statement showing total gross Diesel Fuels Credit. personal property of the same type on the • Refunds of taxes deducted in prior installment plan, or (b) real property held receipts, the amount not accrued because of the application of section 448(d)(5), and years to the extent they reduced the for sale to customers in the ordinary amount of tax imposed. See section 111 course of the taxpayer's trade or business. the net amount accrued. Enter the net amount on line 1a. and the related regulations. Do not offset The restrictions on using the current year taxes against tax refunds. installment method do not apply to the Line 1b. Returns and allowances. • Ordinary income from trade or business following. Enter cash and credit refunds the activities of a partnership (from • Dispositions of property used or corporation made to customers for Schedule K-1 (Form 1065)). Do not offset produced in the trade or business of returned merchandise, rebates, and other ordinary losses against ordinary income. farming. allowances made on gross receipts or Instead, include the losses on line 26. • Certain dispositions of timeshares and sales. Show the partnership's name, address, residential lots reported under the Line 2. Cost of Goods Sold and EIN on a separate statement attached installment method for which the to this return. If the amount entered is from corporation elects to pay interest under Complete and attach Form 1125-A, Cost more than one partnership, identify the section 453(I)(3). of Goods Sold, if applicable. Enter on amount from each partnership. Form 1120, line 2, the amount from Form Enter on line 1a (and carry to ), • Reduction amount that is includible in 1125-A, line 8. See Form 1125-A and its the gross profit on collections from these income if the corporation made an election instructions. installment sales. Attach a statement under section 965(n). See Line 29a. Net showing the following information for the . Dividends and Operating Loss Deduction, later. • The transferred loss amount identified current and the 3 preceding years: (a) Inclusions gross sales, (b) cost of goods sold, (c) as “Section 91 Transferred Loss Amount,” gross profits, (d) percentage of gross See the instructions for Schedule C, later. which is required to be recognized when profits to gross sales, (e) amount Then, complete Schedule C and enter on substantially all the assets of a foreign collected, and (f) gross profit on the line 4 the amount from Schedule C, branch are transferred to a specified 10% amount collected. line 23, column (a). owned foreign corporation (as defined in section 245A(b)) with respect to which the For sales of timeshares and residential . Interest corporation was a U.S. shareholder lots reported under the installment Enter taxable interest on U.S. obligations immediately after the transfer. See section method, if the corporation elects to pay and on loans, notes, mortgages, bonds, 91. interest under section 453(I)(3), the bank deposits, corporate bonds, tax Any LIFO recapture amount under corporation's income tax is increased by • refunds, etc. Do not offset interest section 1363(d). The corporation may the interest payable under section 453(l) expense against interest income. Special have to include a LIFO recapture amount (3). Report this addition to the tax on rules apply to interest income from certain in income if it: Schedule J, Part I, line 9g. below-market-rate loans. See section 1. Used the LIFO inventory method 7872 for details. Nonaccrual experience method for for its last tax year before the first tax year service providers. Accrual method Note. Report tax-exempt interest on for which it elected to become an S corporations are not required to accrue corporation, or certain amounts to be received from the Schedule K, item 9. Also, if required, 2. Transferred LIFO inventory assets performance of services that, based on include the same amount on to an S corporation in a nonrecognition their experience, will not be collected, if: Schedule M-1, , or Schedule M-3 transaction in which those assets were • The services are in the fields of health, (Form 1120), Part II, line 13, if applicable. transferred basis property. law, engineering, architecture, accounting, . Gross Rents actuarial science, performing arts, or Enter the gross amount received for the The LIFO recapture amount is the consulting; or rental of property. Deduct expenses such amount by which the 's • The corporation meets the definition of as repairs, interest, taxes, and inventory under the FIFO method exceeds a small business taxpayer (discussed depreciation on the proper lines for the inventory amount under the LIFO earlier). For more details, see section deductions. A rental activity held by a method at the close of the corporation's 448(d)(5) and section 448(c). closely held corporation or a personal last tax year as a C corporation (or for the This provision does not apply to any service corporation may be subject to the year of the transfer, if (2) above applies). amount if interest is required to be paid on passive activity loss rules. See Passive Also, see the instructions for Schedule J, the amount or if there is any penalty for activity limitations, later. Part I, line 11. failure to timely pay the amount. See • The ratable portion of any net positive Regulations section 1.448-2 for Line 10. Other Income section 481(a) adjustment. See Section information on the nonaccrual experience Enter any other taxable income not 481(a) adjustment, earlier. method, including information on safe reported on lines 1 through 9. List the type • Part or all of the proceeds received harbor methods. For information on a and amount of income on an attached from certain corporate-owned life book safe harbor method of accounting for statement. If the corporation has only one insurance contracts issued after August corporations that use the nonaccrual item of other income, describe it in 17, 2006. Corporations that own one or experience method of accounting, see parentheses on line 10. more employer-owned life insurance

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contracts issued after this date must file See section 263A(i). Also, see Change in of the amended return. File the amended Form 8925, Report of Employer-Owned accounting method, earlier. return at the same address the corporation Life Insurance Contracts. See section filed its original return. The election 101(j) for details. For more information on the uniform applies when figuring taxable income for • Income from cancellation of debt (COD) capitalization rules, see Pub. 538. For the current tax year and all subsequent from the repurchase of a debt instrument information on non-small business years. for less than its adjusted issue price. taxpayers, see Regulations sections The corporation can choose to forgo • The corporation's share of the following 1.263A-1 through 1.263A-3. See section the elections above by affirmatively income from Form 8621, Information 263A(d), Regulations section 1.263A-4, electing to capitalize its start-up or Return by a Shareholder of a Passive and Pub. 225 for rules for property organizational costs on its income tax Foreign Investment Company or Qualified produced in a farming business. return filed by the due date (including Electing Fund. Transactions between related taxpay- extensions) for the tax year in which the 1. Ordinary earnings of a qualified ers. Generally, an accrual basis taxpayer active trade or business begins. electing fund. can only deduct business expenses and 2. Gain or loss from marking passive interest owed to a related party in the year Note. The election to either amortize or foreign investment company (PFIC) stock the payment is included in the income of capitalize start-up costs is irrevocable and to market. the related party. See sections 163(e)(3) applies to all start-up costs that are related and 267(a)(2) for limitations on deductions to the trade or business. 3. Gain or loss from sale or other for unpaid interest and expenses. disposition of section 1296 stock. Report the deductible amount of start-up and organizational costs and any 4. Excess distributions from a section Limitations on business interest ex- pense. Business interest expense is amortization on line 26. For amortization 1291 fund allocated to the current year that begins during the current tax year, and pre-PFIC years, if any. limited for tax years beginning after 2017. See section 163(j) and Form 8990. Also, complete and attach Form 4562, See Form 8621 and the Instructions for see Form 1120, Schedule K, Questions 23 Depreciation and Amortization. Form 8621 for details. and 24, later. Passive activity limitations. Limitations • The amount of payroll taken Section 291 limitations. Corporations on passive activity losses and credits by an employer on its employment tax under section 469 apply to personal returns (Forms 941, 943, and 944) for may be required to adjust deductions for depletion of iron ore and coal, intangible service corporations (defined earlier) and qualified paid sick and qualified paid closely held corporations (defined later). family leave under FFCRA (both the drilling and exploration and development Generally, the two kinds of passive nonrefundable and refundable portions). costs, certain deductions for financial activities are: These amounts must be included in gross institutions, and the amortizable basis of Trade or business activities in which the income for the tax year that includes the pollution control facilities. See section 291 • corporation did not materially participate last day of the calendar quarter in which to determine the amount of the for the tax year; and the credit is allowed. adjustment. • Rental activities, regardless of its Election to deduct business start-up participation. and organizational costs. A corporation Deductions For exceptions, see Form 8810, Corporate can elect to deduct a limited amount of Passive Activity Loss and Credit Limitations on Deductions start-up and organizational costs it paid or Limitations. incurred. Any remaining costs must Uniform capitalization rules. The generally be amortized over a 180-month Corporations subject to the passive uniform capitalization rules of section period. See sections 195 and 248 and the activity limitations must complete Form 263A require corporations to capitalize related regulations. 8810 to compute their allowable passive certain costs to inventory or other activity loss and credit. Before completing Time for making an election. The property. Corporations subject to the Form 8810, see Temporary Regulations corporation generally elects to deduct section 263A uniform capitalization rules section 1.163-8T, which provides rules for start-up or organizational costs by are required to capitalize: allocating interest expense among claiming the deduction on its income tax activities. If a passive activity is also 1. Direct costs of assets produced or return filed by the due date (including subject to the at-risk rules of section 465 acquired for resale, and extensions) for the tax year in which the or the tax-exempt use loss rules of section 2. Certain indirect costs (including active trade or business begins. However, 470, those rules apply before the passive taxes) that are properly allocable to for start-up or organizational costs paid or loss rules. property produced or property acquired for incurred before September 9, 2008, the For more information, see section 469, resale. corporation is required to attach a the related regulations, and Pub. 925, statement to its return to elect to deduct Passive Activity and At-Risk Rules. The corporation cannot deduct the costs such costs. required to be capitalized under section For more details, including special Closely held corporations. A 263A until it sells, uses, or otherwise corporation is a closely held corporation if: disposes of the property (to which the rules for costs paid or incurred before September 9, 2008, see the Instructions • At any time during the last half of the tax costs relate). The corporation recovers year more than 50% in value of its these costs through depreciation, for Form 4562. Also, see Pub. 535, Business Expenses. outstanding stock is directly or indirectly amortization, or cost of goods sold. owned by or for not more than five If the corporation timely filed its return individuals, and Note. A small business taxpayer (defined for the year without making an election, it • The corporation is not a personal earlier) is not required to capitalize costs can still make an election by filing an service corporation. under section 263A. A small business amended return within 6 months of the taxpayer that wants to discontinue due date of the return (excluding Certain organizations are treated as capitalizing costs under section 263A extensions). Clearly indicate the election individuals for purposes of this test. See must change its method of accounting. on the amended return and write “Filed section 542(a)(2). For rules for pursuant to section 301.9100-2” at the top

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determining stock ownership, see section deductible in the tax year during which the prolong its life. See Regulations section 544 (as modified by section 465(a)(3)). services were performed and 1.162-4. The corporation may elect to remuneration for services during the year capitalize certain repair and maintenance Reducing certain expenses for which that is deductible in a future tax year costs consistent with its books and credits are allowable. If the corporation (called "deferred deduction records. See Regulations section claims certain credits, it may need to remuneration"). The $500,000 limitation is 1.263(a)-3(n) for information on how to reduce the otherwise allowable reduced by any amounts disallowed as make the election. deductions for expenses used to figure the excess parachute payments. See section credit. This applies to credits such as the 162(m)(6) and Regulations section New buildings, machinery, or following. 1.162-31 for definitions and other special permanent improvements that increase Work opportunity credit (Form 5884). • rules. Also, see Notice 2011-2, 2011-2 the value of the property are not Employee retention credit (Form • I.R.B. 260. deductible as repair and maintenance 5884-A). expenses. These expenses must be • Credit for increasing research activities . Compensation of capitalized and depreciated or amortized. (Form 6765). Officers However, amounts paid for routine • Orphan drug credit (Form 8820). maintenance on property, including • Disabled access credit (Form 8826). Enter deductible officers' compensation buildings, may be deductible. See • Empowerment zone employment credit on line 12. Do not include compensation Regulations section 1.263(a)-3(i). (Form 8844). deductible elsewhere on the return, such • Indian employment credit (Form 8845). as amounts included in cost of goods sold, Line 15. Bad Debts • Credit for employer social security and elective contributions to a section 401(k) Enter the total debts that became Medicare taxes paid on certain employee cash or deferred arrangement, or amounts worthless in whole or in part during the tax tips (Form 8846). contributed under a salary reduction SEP year. A small bank or thrift institution using • Credit for small employer pension plan agreement or a SIMPLE IRA plan. the reserve method of section 585 should start-up costs (Form 8881). If the corporation's total receipts attach a statement showing how it figured • Credit for employer-provided childcare (line 1a, plus lines 4 through 10) are the current year's provision. A corporation facilities and services (Form 8882). $500,000 or more, complete Form that uses the cash method of accounting • Low sulfur diesel fuel production credit 1125-E, Compensation of Officers. Enter cannot claim a bad debt deduction unless (Form 8896). on Form 1120, line 12, the amount from the amount was previously included in • Mine rescue team training credit (Form Form 1125-E, line 4. income. 8923). • Credit for employer differential wage Line 13. Salaries and Wages Line 16. Rents payments (Form 8932). Enter the total salaries and wages paid for If the corporation rented or leased a • Credit for small employer health the tax year. Do not include salaries and vehicle, enter the total annual rent or lease insurance premiums (Form 8941). wages deductible elsewhere on the return, expense paid or incurred during the year. • Employer credit for paid family and such as amounts included in officers' Also, complete Part V of Form 4562. If the medical leave (Form 8994). compensation, cost of goods sold, corporation leased a vehicle for a term of If the corporation has any of the credits elective contributions to a section 401(k) 30 days or more, the deduction for vehicle listed above, figure the current year credit cash or deferred arrangement, or amounts lease expense may have to be reduced by before figuring the deduction for expenses contributed under a salary reduction SEP an amount includible in income called the on which the credit is based. If the agreement or a SIMPLE IRA plan. inclusion amount. The corporation may have an inclusion amount if: corporation capitalized any costs on which If the corporation provided taxable it figured the credit, it may need to reduce fringe benefits to its employees, such as the amount capitalized by the credit personal use of a car, do not deduct as attributable to these costs. wages the amount allocated for See the instructions for the form used depreciation and other expenses claimed to figure the applicable credit for more on lines 20 and 26. details. If the corporation claims a credit Limitations on deductions related to ! for any wages paid or incurred, it property leased to tax-exempt entities. CAUTION may need to reduce any If a corporation leases property to a corresponding deduction for officers' governmental or other tax-exempt entity, compensation and salaries and wages. the corporation cannot claim deductions See Reducing certain expenses for which related to the property to the extent that credits are allowable, earlier. they exceed the corporation's income from the lease payments. This disallowed Also, reduce the amounts tax-exempt use loss can be carried over to deducted as compensation of the next tax year and treated as a officers and salaries and wages deduction with respect to the property for by the nonrefundable and refundable that tax year. See section 470(d) for portions of the new CARES Act employee exceptions. retention credit claimed on the corporation's employment tax return(s). Limitation on tax benefits for remuner- ation under the Patient Protection and . Repairs and Affordable Care Act. The $1 million compensation limit is reduced to $500,000 Maintenance for remuneration for services provided by Enter the cost of repairs and maintenance individuals for or on behalf of certain not claimed elsewhere on the return, such health insurance providers. The $500,000 as labor and supplies, that do not add to limitation applies to remuneration that is the value of the property or appreciably

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And the vehicle's returns: (1) the nonrefundable and • Forgone interest on certain FMV on the first refundable portions of the CARES Act below-market-rate loans (see section day of the lease employee retention credit (ERC), and (2) 7872). The lease term began: exceeded: the nonrefundable and refundable • Original issue discount (OID) on certain portions of the FFCRA credits for qualified high yield discount obligations. See Cars (excluding trucks sick and family leave wages. Instead, item section 163(e)(5) to determine the amount and vans) (1) reduces the deductions for of the deduction for OID that is deferred After 12/31/17 but before compensation of officers and salaries and and the amount that is disallowed on a 1/1/21 ...... $50,000 wages on lines 12 and 13, and item (2) high yield discount obligation. The rules After 12/31/12 but before must be reported as income on line 10. under section 163(e)(5) do not apply to 1/1/18 ...... $19,000 certain high yield discount obligations Line 18. Interest issued after August 31, 2008, and before After 12/31/07 but before January 1, 2011. See section 163(e)(5) 1/1/13 ...... $18,500 Note. Do not offset interest income (F). Also, see Notice 2010-11, 2010-4 Trucks and vans against interest expense. I.R.B. 326. After 12/31/17 but before The corporation must make an interest • Interest which is allocable to 1/1/21 ...... $50,000 allocation if the proceeds of a loan were unborrowed policy cash values of life used for more than one purpose (for insurance, endowment, or annuity After 12/31/13 but before contracts issued after June 8, 1997. See 1/1/18 ...... $19,500 example, to purchase a portfolio investment and to acquire an interest in a section 264(f). Attach a statement After 12/31/09 but before passive activity). See Temporary showing the computation of the deduction. 1/1/14 ...... $19,000 Regulations section 1.163-8T for the Line 19. Charitable After 12/31/08 but before interest allocation rules. 1/1/10 ...... $18,500 Contributions Mutual savings banks, building and Enter contributions or gifts actually paid After 12/31/07 but before loan associations, and cooperative banks 1/1/09 ...... $19,000 within the tax year to or for the use of can deduct the amounts paid or credited charitable and governmental to the accounts of depositors as organizations described in section 170(c) dividends, interest, or earnings. See and any unused contributions carried over section 591. from prior years. Special rules and limits Do not deduct the following interest. apply to contributions to organizations • Interest on indebtedness incurred or conducting lobbying activities. See section See Pub. 463, Travel, Gift, and Car continued to purchase or carry obligations 170(f)(9). Expenses, for instructions on figuring the if the interest is wholly exempt from inclusion amount. income tax. See section 265(b) for special Corporations reporting taxable income rules and exceptions for financial on the accrual method can elect to treat as Note. The inclusion amount for lease institutions. Also, see section 265(b)(7) for paid during the tax year any contributions terms beginning in 2021 will be published a de minimis exception for financial paid by the due date for filing the in the Internal Revenue Bulletin in early institutions for certain tax-exempt bonds corporation’s tax return (not including 2021. issued in 2009 and 2010. extensions), if the contributions were authorized by the board of directors during Line 17. Taxes and Licenses • For cash basis taxpayers, prepaid interest allocable to years following the the tax year. Attach a declaration to the Enter taxes paid or accrued during the tax current tax year. For example, a cash return stating that the resolution year, but do not include the following. basis calendar year taxpayer who in 2020 authorizing the contributions was adopted • Federal income taxes. prepaid interest allocable to any period by the board of directors during the tax • Foreign or U.S. possession income after 2020 can deduct only the amount year. The declaration must include the taxes if a is claimed. allocable to 2020. date the resolution was adopted. See • Taxes not imposed on the corporation. • Interest and carrying charges on section 170(a)(2)(B). Taxes, including state or local sales • straddles. Generally, these amounts must Limitation on deduction. Generally, the taxes, that are paid or incurred in be capitalized. See section 263(g). total amount claimed cannot be more than connection with an acquisition or • Interest on debt allocable to the 10% of taxable income (line 30) computed disposition of property (these taxes must production of designated property by a without regard to the following. be treated as a part of the cost of the corporation for its own use or for sale. The Any deduction for contributions. acquired property or, in the case of a • corporation must capitalize this interest. The special deductions on line 29b disposition, as a reduction in the amount • Also, capitalize any interest on debt other than the section 965(c) deduction on realized on the disposition). allocable to an asset used to produce the Schedule C, line 15, column (c). Taxes assessed against local benefits • property. See section 263A(f) and The limitation under section 249 on the that increase the value of the property • Regulations sections 1.263A-8 through deduction for bond premium. assessed (such as for paving, etc.). 1.263A-15 for definitions and more Any net operating loss (NOL) carryback Taxes deducted elsewhere on the • • information. to the tax year under section 172. return, such as those reflected in cost of • Interest paid or incurred on any portion Any capital loss carryback to the tax goods sold. • of an underpayment of tax that is year under section 1212(a)(1). See section 164(d) for information on attributable to an understatement arising • Deduction for income attributable to apportionment of taxes on real property from an undisclosed listed transaction or domestic production activities of specified between seller and purchaser. an undisclosed reportable avoidance agricultural or horticultural . transaction (other than a listed Do not reduce the corporation's transaction) entered into in tax years Carryover. Charitable contributions over ! deduction for social security and beginning after October 22, 2004. the 10% limitation (or the 25% limitation, if CAUTION Medicare taxes by the following elected, see Temporary suspension of amounts claimed on its employment tax Special rules apply to: limitations on certain contributions, later)

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cannot be deducted for the tax year but deduct qualified cash contributions corporations must generally complete and can be carried over to the next 5 tax years. without regard to the 10% taxable income attach Form 8283 to their returns for See the exception below for farmers and limit. Qualified contributions are any contributions of property (other than ranchers and certain Native Corporations. charitable contributions that were made money) if the total claimed deduction for Special rules apply if the corporation after December 31, 2019, and before all property contributed was more than has an NOL carryover to the tax year. In February 26, 2021, to an organization $5,000. Special rules apply to the figuring the charitable contributions described in section 170(b)(1)(A) (other contribution of certain property. See the deduction for the current tax year, the 10% than certain private foundations described Instructions for Form 8283. limit is applied using the taxable income in section 509(a)(3) or donor-advised funds described in section 4966(d)(2)) for Qualified conservation after taking into account any deduction for contributions. Special rules apply to the NOL. relief efforts in one or more qualified disaster areas. The corporation must qualified conservation contributions, To figure the amount of any remaining obtain contemporaneous written including contributions of certain NOL carryover to later years, taxable acknowledgment (within the meaning of easements on buildings located in a income must be modified (see section section 170(f)(8)) from the qualified registered historic district. See section 172(b)). To the extent that contributions charitable organization that the 170(h) and Pub. 526, Charitable are used to reduce taxable income for this contribution was used or is to be used for Contributions. purpose and increase an NOL carryover, a disaster relief efforts. contributions carryover is not allowed. See Other special rules. The corporation section 170(d)(2)(B). The total amount of the contribution must reduce its deduction for contributions claimed for disaster relief efforts cannot of certain capital gain property. See Suspension of 10% limitation for - exceed 100% of the excess of the sections 170(e)(1) and 170(e)(5). ers and ranchers and certain Native corporation's taxable income (as A larger deduction is allowed for certain Corporations. Certain corporations can computed above substituting "100%" for contributions including: deduct contributions of qualified "10%" ) over all other allowable charitable • Inventory and other property to certain conservation property without regard to contributions. Any excess qualified organizations for use in the care of the ill, the general 10% limit. This applies to: contributions are carried over to the next 5 needy, or infants (see section 170(e)(3)), • A qualified farmer or rancher (as years. including qualified contributions of defined in section 170(b)(1)(E)(v)) that “apparently wholesome food” (discussed does not have publicly traded stock; and Cash contributions. For contributions of cash, check, or other monetary gifts below); and • A Native Corporation (as defined in • Scientific equipment used for research section 170(b)(2)(C)(iii)) that contributes (regardless of the amount), the corporation must maintain a bank record, to institutions of higher learning or to property which was land conveyed under certain scientific research organizations the Alaska Native Claims Settlement Act. or a receipt, letter, or other written communication from the donee (other than by personal holding The total amount of the contribution organization indicating the name of the companies and service organizations). claimed for the qualified conservation organization, the date of the contribution, See section 170(e)(4). property cannot exceed 100% of the and the amount of the contribution. excess of the corporation's taxable Increase in limits on contributions income (as computed above substituting Contributions of $250 or more. A of food inventory. For any charitable “100%” for “10%” ) over all other allowable corporation can deduct a contribution of contribution of food during 2020 or 2021 to charitable contributions. Any excess $250 or more only if it gets a written which section 170(e)(3)(C) applies, a qualified conservation contributions can acknowledgment from the donee corporation can deduct qualified be carried over to the next 15 years, organization that shows the amount of contributions of up to 25% of their subject to the 100% limitation. See cash contributed, describes any property aggregate net income from all trades or sections 170(b)(2)(B) and (C). contributed (but not its value), and either businesses from which the contributions gives a description and a good faith were made or up to 25% of their taxable Temporary suspension of limitations estimate of the value of any goods or income. on certain contributions. The CARES services provided in return for the Act allows a corporation to elect to deduct For more information on charitable contribution or states that no goods or contributions, including substantiation and qualified cash contributions without regard services were provided in return for the to the 10% taxable income limit. Qualified recordkeeping requirements, see section contribution. The acknowledgment must 170 and the related regulations and Pub. contributions are charitable contributions be obtained by the due date (including that were made during calendar year 2020 526. For other special rules that apply to extensions) of the corporation's return, or, corporations, see Pub. 542. or 2021 to an organization described in if earlier, the date the return is filed. Do not section 170(b)(1)(A) (other than certain attach the acknowledgment to the tax Line 20. Depreciation private foundations described in section return, but keep it with the corporation's Include on line 20 depreciation and the 509(a)(3) or donor-advised funds records. described in section 4966(d)(2)). The total cost of certain property that the amount of the contribution claimed cannot Contributions of property other than corporation elected to expense under exceed 25% of the excess of the cash. If a corporation (other than a section 179 from Form 4562. Include corporation's taxable income (as closely held or personal service amounts not claimed on Form 1125-A or computed above substituting “25%” for corporation) contributes property other elsewhere on the return. See Form 4562 “10%” ) over all other allowable charitable than cash and claims over a $500 and the Instructions for Form 4562. contributions. Contributions over the 25% deduction for the property, it must attach a Line 21. Depletion limitation cannot be deducted for the tax statement to the return describing the kind year, but can be carried over to the next 5 of property contributed and the method See sections 613 and 613A for tax years. used to determine its FMV. Closely held percentage depletion rates applicable to corporations and personal service natural deposits. Also, see section 291 for Temporary suspension of 10% limita- corporations must complete Form 8283, the limitation on the depletion deduction tion for certain disaster-related contri- Noncash Charitable Contributions, and for iron ore and coal (including lignite). butions. A corporation may elect to attach it to their returns. All other

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Attach Form T (Timber), Forest Line 26. Other Deductions • Dividends paid in cash on stock held by Activities Schedule, if a deduction for an employee stock ownership plan. Attach a statement, listing by type and depletion of timber is taken. However, a deduction may be taken for amount, all allowable deductions that are these dividends only if, according to the not deductible elsewhere on Form 1120. Foreign intangible drilling costs and plan, the dividends are: foreign exploration and development costs Enter the total on line 26. must either be added to the corporation's 1. Paid in cash directly to the plan Examples of other deductions include basis for cost depletion purposes or be participants or beneficiaries; the following. See Pub. 535 for details on deducted ratably over a 10-year period. 2. Paid to the plan, which distributes other deductions that may apply to See sections 263(i), 616, and 617 for them in cash to the plan participants or corporations. details. their beneficiaries no later than 90 days Amortization. See Part VI of Form 4562. • after the end of the plan year in which the Certain costs of a qualified film, See Pub. 535 for more information on • dividends are paid; depletion. television, or live theatrical production commencing before January 1, 2026 (after 3. At the election of such participants Line 23. Pension, December 31, 2015, and before January or their beneficiaries (a) payable as Profit-Sharing, etc., Plans 1, 2026, for a live theatrical production). provided under (1) or (2) above, or (b) paid to the plan and reinvested in Enter the deduction for contributions to This deduction does not apply to any qualifying employer securities; or qualified pension, profit-sharing, or other portion of the aggregate cost of the funded deferred compensation plans. production above $15 million. There is a 4. Used to make payments on a loan Employers who maintain such a plan must higher allowance for production in certain described in section 404(a)(9). generally file one of the forms listed below areas. See section 181 and the related regulations. See section 404(k) for more details and unless exempt from filing under the limitation on certain dividends. regulations or other applicable guidance, Note. Certain film, television, or live even if the plan is not a qualified plan theatrical productions acquired and Do not deduct expenses such as the under the Internal Revenue Code. The placed in service after September 27, following. filing requirement applies even if the 2017 (for which a deduction would have • Amounts paid or incurred to, or at the corporation does not claim a deduction for been allowable under section 181 without direction of, a government or the current tax year. There are penalties regard to the dollar limitation), are governmental entity for the violation, or for failure to file these forms on time and qualified property eligible for the special investigation or inquiry into the potential for overstating the pension plan deduction. depreciation allowance under section violation, of a law. However, see Fines or See sections 6652(e) and 6662(f). Also, 168(k). See the Instructions for Form similar penalties, later. see the instructions for the applicable 4562. • Any amount that is allocable to a class form. • Certain business start-up and of exempt income. See section 265(b) for organizational costs (discussed earlier, exceptions. Form 5500, Annual Return/Report of under Limitations on Deductions). Lobbying expenses. However, see Employee Benefit Plan. • • Reforestation costs. The corporation exceptions discussed later. Form 5500-SF, Short Form Annual can elect to deduct up to $10,000 of • Amounts paid or incurred for any Return/Report of Small Employee Benefit qualifying reforestation expenses for each settlement, payout, or attorney fees Plan. File this form instead of Form 5500 qualified timber property. The corporation related to sexual harassment or sexual generally if there were under 100 can elect to amortize over 84 months any abuse, if such payments are subject to a participants at the beginning of the plan amount not deducted. See Pub. 535. nondisclosure agreement. See section year. • Insurance premiums. 162(q). • Legal and professional fees. Note. Form 5500 and Form 5500-SF • Supplies used and consumed in the Travel, meals, and entertainment. must be filed electronically under the business. Subject to limitations and restrictions computerized ERISA Filing Acceptance • Travel, meals, and entertainment discussed below, a corporation can System (EFAST2). For more information, expenses. Special rules apply (discussed deduct ordinary and necessary travel, see the EFAST2 website at later). meal, and non-entertainment expenses www.efast.dol.gov. • Utilities. paid or incurred in its trade or business. • Ordinary losses from trade or business Generally, entertainment expenses, Form 5500-EZ, Annual Return of activities of a partnership (from membership dues, and facilities used in One-Participant (Owners/Partners and Schedule K-1 (Form 1065)). Do not offset connection with these activities cannot be Their Spouses) Retirement Plan or a ordinary income against ordinary losses. deducted. In addition, no deduction is Foreign Plan. File this form for a plan that Instead, include the income on line 10. generally allowed for qualified only covers the owner (or the owner and Show the partnership's name, address, transportation fringe benefits. Special his or her spouse) or a foreign plan that is and EIN on a separate statement attached rules apply to deductions for gifts, luxury required to file an annual return and does to this return. If the amount is from more water travel, and convention expenses. not file the annual return electronically on than one partnership, identify the amount See section 274, Pub. 463, and Pub. 535 Form 5500-SF. See the Instructions for from each partnership. for details. Form 5500-EZ. • Any extraterritorial income exclusion Travel. The corporation cannot deduct Line 24. Employee Benefit (from Form 8873). travel expenses of any individual Programs • Any net negative section 481(a) accompanying a corporate officer or adjustment, or in the case of an eligible employee, including a spouse or Enter contributions to employee benefit terminated S corporation, the ratable dependent of the officer or employee, programs not claimed elsewhere on the portion of any negative section 481(a) unless: return (for example, insurance or health adjustment. See Section 481(a) That individual is an employee of the and welfare programs) that are not an • adjustment, earlier. corporation, and incidental part of a pension, profit-sharing, • Any applicable deduction under section etc., plan included on line 23. 179D for costs of energy efficient commercial building property.

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• His or her travel is for a bona fide deduct otherwise nondeductible as a trade or business or for the business purpose and would otherwise be entertainment, amusement, or recreation production of income. These corporations deductible by that individual. expenses if the amounts are treated as may have to adjust the amount on line 28. compensation to the recipient and (See below.) Meals. Generally, the corporation can reported on Form W-2 for an employee or deduct only 50% of the amount otherwise The at-risk rules do not apply to: on Form 1099-NEC for an independent • Holding real property placed in service allowable for non-entertainment related contractor. meal expenses paid or incurred in its trade by the taxpayer before 1987; or business. However, the corporation can However, if the recipient is an officer, • Equipment leasing under sections deduct 100% of business meal expenses director, beneficial owner (directly or 465(c)(4), (5), and (6); or for food and beverages provided by a indirectly), or other “specified individual” • Any qualifying business of a qualified restaurant. This applies only to amounts (as defined in section 274(e)(2)(B) and corporation under section 465(c)(7). paid or incurred after December 31, 2020. Regulations section 1.274-9(b)), special However, the at-risk rules do apply to rules apply. See section 274(e)(2) and the holding of mineral property. Meals not separately stated from Regulations sections 1.274-9 and entertainment are generally not 1.274-10. If the at-risk rules apply, adjust the deductible. In addition (subject to amount on this line for any section 465(d) exceptions under section 274(k)(2)): Fines or similar penalties. Generally, losses. These losses are limited to the • Meals must not be lavish or no deduction is allowed for fines or similar amount for which the corporation is at risk extravagant, and penalties paid or incurred to, or at the for each separate activity at the close of • An employee of the corporation must direction of, a government or the tax year. If the corporation is involved be present at the meal. governmental entity for violating any law, in one or more activities, any of which See section 274(n)(3) for a special rule or for the investigation or inquiry into the incurs a loss for the year, report the losses that applies to expenses for meals potential violation of a law, except: for each activity separately. Attach Form consumed by individuals subject to the • Amounts that constitute restitution or 6198, At-Risk Limitations, showing the hours of service limits of the Department remediation of property, amount at risk and gross income and of Transportation. • Amounts paid to come into compliance deductions for the activities with the with the law, losses. Qualified transportation fringes • Amounts paid or incurred as the result If the corporation sells or otherwise (QTFs). Generally, no deduction is of orders or agreements in which no disposes of an asset or its interest (either allowed under section 274(a)(4) for QTFs government or governmental entity is a total or partial) in an activity to which the provided by employers to their employees. party, and at-risk rules apply, determine the net profit QTFs are defined in section 132(f)(1) and • Amounts paid or incurred for taxes due. or loss from the activity by combining the include: No deduction is allowed unless the gain or loss on the sale or disposition with • Transportation in a commuter highway amounts are specifically identified in the the profit or loss from the activity. If the vehicle between the employee's residence order or agreement and the corporation corporation has a net loss, it may be and place of employment, establishes that the amounts were paid for limited because of the at-risk rules. • Any transit pass, and that purpose. Also, any amount paid or • Qualified parking. Treat any loss from an activity not incurred as reimbursement to the allowed for the tax year as a deduction See section 274, Pub. 15-B and Pub. government for the costs of any allocable to the activity in the next tax 535 for details. investigation or litigation are not eligible for year. the exceptions and are nondeductible. Membership dues. The corporation See section 162(f). Line 29a. Net Operating Loss can deduct amounts paid or incurred for membership dues in civic or public service Lobbying expenses. Generally, Deduction organizations, professional organizations lobbying expenses are not deductible. A corporation can use the NOL incurred in (such as bar and medical associations), These expenses include: one tax year to reduce its taxable income business leagues, trade associations, • Amounts paid or incurred in connection in another tax year. Enter on line 29a the chambers of commerce, boards of trade, with influencing federal, state, or local total NOL carryovers from other tax years, and real estate boards. However, no legislation; or but do not enter more than the deduction is allowed if a principal purpose • Amounts paid or incurred in connection corporation's taxable income (after special of the organization is to entertain or with any communication with certain deductions). Attach a statement showing provide entertainment facilities for federal executive branch officials in an the computation of the NOL deduction. members or their guests. In addition, attempt to influence the official actions or Complete item 12 on Schedule K. corporations cannot deduct membership positions of the officials. See Regulations The following special rules apply. dues in any club organized for business, section 1.162-29 for the definition of • The corporation may elect under pleasure, recreation, or other social “influencing legislation.” section 965(n) to determine the amount of purpose. This includes country clubs, golf Dues and other similar amounts paid to the NOL for a tax year and the amount of and athletic clubs, airline and hotel clubs, certain tax-exempt organizations may not taxable income to be reduced by NOL and clubs operated to provide meals be deductible. If certain in-house lobbying carryovers or carrybacks to that tax year under conditions favorable to business expenditures do not exceed $2,000, they without regard to the reduction amount. discussion. are deductible. The reduction amount is equal to the Entertainment facilities. Generally, Line 28. Taxable Income Before amount of the section 965(a) inclusions for the corporation cannot deduct an expense such tax year (net of the section 965(c) paid or incurred for a facility (such as a NOL Deduction and Special deduction) plus, in the case of a domestic yacht or hunting lodge) used for an activity Deductions corporation that claims a credit for deemed paid foreign taxes, the section 78 usually considered entertainment, At-risk rules. Generally, special at-risk gross ups with respect to the foreign taxes amusement, or recreation. rules under section 465 apply to closely deemed paid with respect to the section held corporations (see Passive activity Amounts treated as compensation. 965(a) inclusions. If, as a result of an limitations, earlier) engaged in any activity Generally, the corporation may be able to election under section 965(n), the amount

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of the NOL for the tax year is determined expatriated entity or a partner in an installment agreement online. The without regard to the reduction amount, expatriated entity. See section 7874(a). corporation can apply for an installment the reduction amount is included in other • The sum of the corporation's excess agreement online if: income on line 10. If, as a result of an inclusions from its residual interest in a • It cannot pay the full amount shown on election under section 965(n), the taxable REMIC from Schedules Q (Form 1066), line 35, income reduced by NOL carryovers or line 2c, and the corporation's taxable • The total amount owed is $25,000 or carrybacks is reduced, the NOL deduction income determined solely with respect to less, and on line 29a is reduced by the reduction its ownership and high-yield interests in • The corporation can pay the liability in amount. See section 965(n) and FASITs. See sections 860E(a) and 860J full in 24 months. Regulations section 1.965-7(e) for more (repealed). To apply using the Online Payment information. Agreement Application, go to IRS.gov/ Net operating loss (NOL). If line 30 If an ownership change (described in OPA. • (figured without regard to the items listed section 382(g)) occurs, the amount of the above under minimum taxable income) is taxable income of a loss corporation that Under an installment agreement, the zero or less, the corporation may have an may be offset by the pre-change NOL corporation can pay what it owes in NOL that can be carried back or forward carryovers may be limited. See section monthly installments. There are certain as a deduction to other tax years. 382 and the related regulations. A loss conditions that must be met to enter into corporation must include the information An NOL incurred in a tax year and maintain an installment agreement, statement as provided in Regulations beginning in 2018, 2019, or 2020 can be such as paying the liability within 24 section 1.382-11(a) with its income tax carried back 5 years preceding the year of months and making all required deposits return for each tax year that it is a loss the loss. For NOLs that can be carried and timely filing tax returns during the corporation in which an ownership shift, back, the corporation can elect to waive length of the agreement. equity structure shift, or other transaction the carryback period and instead carry the described in Temporary Regulations NOL forward to future tax years. If the installment agreement is section 1.382-2T(a)(2)(i) occurs. If the See Special rules for farming loss accepted, the corporation will be charged corporation makes the NOLs, below. See the instructions for a fee and it will be subject to penalties and closing-of-the-books election, see Schedule K, Item 11 for information on interest on the amount of tax not paid by Regulations section 1.382-6(b). making the election to waive the entire the due date of the return. The limitations under section 382 do carryback period for 2020. See the Line 37 not apply to certain ownership changes Instructions for Form 1139 for other special rules and elections. Enter the amount of any overpayment that after February 17, 2009, made pursuant to should be refunded or applied to next a restructuring plan under the Emergency Special rules for farming loss NOLs. year's estimated tax. Economic Stabilization Act of 2008. See If the corporation has an NOL from a section 382(n). farming loss (as defined in section 172(b) Note. This election to apply some or all of For guidance in applying section 382 to (1)(B)(ii) for a tax year beginning in 2018, the overpayment amount to the loss corporations whose instruments were 2019, or 2020, the corporation can elect to corporation's 2021 estimated tax cannot acquired by Treasury under certain disregard the amendments made by the be changed at a later date. programs under the Emergency Economic CARES Act, section 2303(a) and (b). Direct deposit of refund. If the Stabilization Act of 2008, see Notice corporation wants its refund directly 2010-2, 2010-2 I.R.B. 251. Merchant Marine capital construction deposited into its checking or savings If a corporation acquires control of fund. To take a deduction for amounts • account at any U.S. bank or other financial another corporation (or acquires its assets contributed to a capital construction fund institution instead of having a check sent in a reorganization), the amount of (CCF), reduce the amount that would to the corporation, complete Form 8050, pre-acquisition losses that may offset otherwise be entered on line 30 by the Direct Deposit of Corporate Tax Refund, recognized built-in gain may be limited amount of the deduction. On the dotted and attach it to the corporation's tax (see section 384). line next to the entry space, enter “CCF” return. • If a corporation elects the alternative tax and the amount of the deduction. For on qualifying shipping activities under more information, see section 7518. section 1354, no deduction is allowed for Line 34. Estimated Tax Penalty Schedule C. Dividends, an NOL attributable to the qualifying Generally, the corporation does not have shipping activities to the extent that the Inclusions, and Special to file Form 2220 because the IRS can loss is carried forward from a tax year figure the penalty amount, if any, and bill Deductions preceding the first tax year for which the the corporation. However, even if the For purposes of the 20% ownership test alternative tax election was made. See corporation does not owe the penalty, it on lines 1 through 7, the percentage of section 1358(b)(2). must complete and attach Form 2220 if: stock owned by the corporation is based For more details on the NOL deduction, • The annualized income or adjusted on voting power and value of the stock. see section 172 and the Instructions for method is used, or Preferred stock described in section Form 1139. • The corporation is a large corporation 1504(a)(4) is not taken into account. Line 29b. Special Deductions (as defined in the Instructions for Form Consolidated returns. Corporations 2220) computing its first required filing a consolidated return should see See the instructions for Schedule C. installment based on the prior year's tax. Regulations sections 1.1502-13, Line 30. Taxable Income 1.1502-26, and 1.1502-27 before If Form 2220 is attached, check the box completing Schedule C. Minimum taxable income. The on line 34, and enter any penalty on this Corporations filing a consolidated corporation's taxable income cannot be line. return must not report as dividends on less than the largest of the following Line 35. Amount Owed Schedule C any amounts received from amounts. corporations within the consolidated The inversion gain of the corporation for If the corporation cannot pay the full • group. Such dividends are eliminated in the tax year, if the corporation is an amount of tax owed, it can apply for an

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consolidation rather than offset by the Line 3, Columns (b) and (c) • Qualify for the 65% deduction under dividends-received deduction. section 245(c)(1)(B). Dividends received on certain Line 1, Column (a) debt-financed stock acquired after July 18, Line 8, Column (a) Enter dividends (except those received on 1984, are not entitled to the full 50% or Enter dividends received from wholly certain debt-financed stock acquired after 65% dividends-received deduction under owned foreign subsidiaries that are July 18, 1984—see section 246A) that section 243 or 245(a). The 50% or 65% eligible for the 100% deduction under are: deduction is reduced by a percentage that section 245(b). • Received from less-than-20%-owned is related to the amount of debt incurred to acquire the stock. See section 246A. Also, In general, the deduction under section domestic corporations subject to income 245(b) applies to dividends paid out of the tax, and see section 245(a) before making this computation for an additional limitation earnings and profits of a foreign • Qualified for the 50% deduction under corporation for a tax year during which: section 243(a)(1). that applies to certain dividends received from foreign corporations. Attach a • All of its outstanding stock is directly or Also, include on line 1 the following. statement to Form 1120 showing how the indirectly owned by the domestic • Taxable distributions from an IC-DISC amount on line 3, column (c), was figured. corporation receiving the dividends, and or former DISC that are designated as • All of its gross income from all sources eligible for the 50% deduction and certain Line 4, Column (a) is effectively connected with the conduct dividends of Federal Home Loan Banks. Enter dividends received on preferred of a trade or business within the United See section 246(a)(2). stock of a less-than-20%-owned public States. • Dividends (except those received on utility that is subject to income tax and is , Column (c) certain debt-financed stock acquired after allowed the 23.3% deduction provided in July 18, 1984) from a regulated sections 244 and 247 (as affected by Generally, line 9, column (c), cannot investment company (RIC). The amount of P.L.113-295, Div. A, section 221(a)(41) exceed the amount from the Worksheet dividends eligible for the (A), Dec. 19, 2014, 128 Stat. 4043) for for Schedule C, line 9. However, in a year dividends-received deduction under dividends paid. in which an NOL occurs, this limitation does not apply even if the loss is created section 243 is limited by section 854(b). Line 5, Column (a) The corporation should receive a notice by the dividends-received deduction. See from the RIC specifying the amount of Enter dividends received on preferred sections 172(d) and 246(b). dividends that qualify for the deduction. stock of a 20%-or-more-owned public Line 10, Columns (a) and (c) utility that is subject to income tax and is Report so-called dividends or earnings allowed the 26.7% deduction provided in Small business investment companies received from mutual savings banks, etc., sections 244 and 247 (as affected by operating under the Small Business as interest. Do not treat them as P.L.113-295, Div. A, section 221(a)(41) Investment Act of 1958 must enter dividends. (A), Dec. 19, 2014, 128 Stat. 4043) for dividends that are received from domestic dividends paid. corporations subject to income tax even Line 2, Column (a) though a deduction is allowed for the Enter on line 2: Line 6, Column (a) entire amount of those dividends. To claim • Dividends (except those received on Enter the U.S.-source portion of dividends the 100% deduction on line 10, column certain debt-financed stock acquired after that: (c), the company must file with its return a July 18, 1984) that are received from • Are received from statement that it was a federal licensee 20%-or-more-owned domestic less-than-20%-owned foreign under the Small Business Investment Act corporations subject to income tax and corporations, and of 1958 at the time it received the that are subject to the 65% deduction • Qualify for the 50% deduction under dividends. under section 243(c), and section 245(a). To qualify for the 50% Line 11, Columns (a) and (c) • Taxable distributions from an IC-DISC deduction, the corporation must own at or former DISC that are considered least 10% of the stock of the foreign Enter only dividends that qualify under eligible for the 65% deduction. corporation by vote and value. section 243(b) for the 100% dividends-received deduction described in Line 3, Column (a) Also, include dividends received from a section 243(a)(3). Corporations taking this Enter the following. less-than-20%-owned FSC that: deduction are subject to the provisions of • Dividends received on certain • Are attributable to income treated as section 1561. effectively connected with the conduct of a debt-financed stock acquired after July 18, The 100% deduction does not apply to 1984, from domestic and foreign trade or business within the United States (excluding foreign trade income), and affiliated group members that are joining in corporations subject to income tax that the filing of a consolidated return. would otherwise be subject to the • Qualify for the 50% deduction under dividends-received deduction under section 245(c)(1)(B). Line 12, Column (a) section 243(a)(1), 243(c), or 245(a). Line 7, Column (a) Enter dividends from FSCs that are Generally, debt-financed stock is stock Enter the U.S.-source portion of dividends attributable to foreign trade income and that the corporation acquired by incurring that: that are eligible for the 100% deduction a debt (for example, it borrowed money to Are received from 20%-or-more-owned provided in section 245(c)(1)(A). buy the stock). • foreign corporations, and • Dividends received from a RIC on Line 13, Column (a) Qualify for the 65% deduction under debt-financed stock. The amount of • sections 243 and 245(a). Enter the foreign-source portion of dividends eligible for the dividends that: dividends-received deduction is limited by Also, include dividends received from a • Are received from specified section 854(b). The corporation should 20%-or-more-owned FSC that: 10%-owned foreign corporations (as receive a notice from the RIC specifying • Are attributable to income treated as defined in section 245A(b)), including gain the amount of dividends that qualify for the effectively connected with the conduct of a from the sale of stock of a foreign deduction. trade or business within the United States corporation that is treated as a dividend (excluding foreign trade income), and under sections 1248(a) and (j); and

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domestic in which the corporation has an interest. Keep for Your Records Worksheet for Schedule C, line 9 Line 18, Column (a) 1. Refigure Form 1120, page 1, line 28, without any adjustment under Include gross-up for taxes deemed paid section 1059 and without any capital loss carryback to the tax year under under sections 902 (for dividends paid in

section 1212(a)(1) ...... 1. pre-2020 tax years of foreign 2. Complete lines 10, 11, 12, 13, and 15, column (c), and enter the total corporations) and 960. here ...... 2. 3. Subtract line 2 from line 1 ...... 3. Line 19, Column (a) 4. Multiply line 3 by 65% (0.65) ...... 4. Enter taxable distributions from an IC-DISC or former DISC that are 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 designated as not eligible for a 20%-or-more-owned corporations ...... 5. dividends-received deduction. 6. Enter the smaller of line 4 or line 5. If line 5 is greater than line 4, stop No deduction is allowed under section here; enter the amount from line 6 on line 9, column (c), and do not 243 for a dividend from an IC-DISC or

complete the rest of this worksheet ...... 6. former DISC (as defined in section 992(a)) 7. Enter the total amount of dividends from 20%-or-more-owned to the extent the dividend: corporations that are included on lines 2, 3, 5, 7, and 8, column • Is paid out of the corporation's (a) ...... 7. accumulated IC-DISC income or 8. Subtract line 7 from line 3 ...... 8. previously taxed income, or 9. Multiply line 8 by 50% (0.50) ...... 9. • Is a deemed distribution under section 995(b)(1). 10. Subtract line 5 from line 9, column (c) ...... 10. 11. Enter the smaller of line 9 or line 10 ...... 11. Line 20, Column (a) 12. Dividends-received deduction after limitation (sec. 246(b)). Add Include the following.

lines 6 and 11. Enter the result here and on line 9, column (c) ...... 12. 1. Dividends (other than capital gain distributions reported on Schedule D (Form 1120) and exempt-interest • Qualify for the section 245A deduction. Line 16a, Column (a) dividends) that are received from RICs Enter the foreign-source portion of any and that are not subject to the 50% Line 14, Column (a) deduction. Enter the foreign dividends not reportable subpart F inclusions attributable to the 2. Dividends from tax-exempt on line 3, 6, 7, 8, 11, 12, or 13 of column sale or exchange by a controlled foreign organizations. (a). corporation (CFC) of stock in another foreign corporation described in section 3. Dividends (other than capital gain Include on line 14 the foreign-source 964(e)(4). This should equal the U.S. distributions) received from a REIT that, portion of any dividend that does not shareholder's pro rata share of the amount for the tax year of the trust in which the qualify for the section 245A deduction (for reported on Form(s) 5471, Schedule I, dividends are paid, qualifies under example, hybrid dividends within the line 1a. (Do not include on line 16a any sections 856 through 860. meaning of section 245A(e), ineligible portion of such subpart F inclusion that is 4. Dividends not eligible for a amounts of dividends within the meaning not eligible for the section 245A deduction dividends-received deduction, which of Regulations section 1.245A-5(b), pursuant to Regulation section include the following. dividends that fail to meet the holding 1.245A-5(g)(2). Include such amounts on period requirement under section 246(c) Line 16c.) a. Dividends received on any share of (5), etc.). stock held for less than 46 days during the Line 16b, Column (a) 91-day period beginning 45 days before Also, include on line 14 the Enter the total subpart F inclusions the ex-dividend date. When counting the corporation's share of distributions from a attributable to tiered hybrid dividends. This number of days the corporation held the section 1291 fund from Form 8621, to the should equal the sum of the amounts stock, you cannot count certain days extent that the amounts are taxed as reported by the U.S. shareholder on during which the corporation's risk of loss dividends under section 301. See Form Form(s) 5471, Schedule I, line 1b. was diminished. See section 246(c)(4) 8621 and the Instructions for Form 8621. and Regulations section 1.246-5 for more Line 16c, Column (a) details. Attach a statement identifying the Enter all other amounts included in income amount of each dividend reported on b. Dividends received on any share of under section 951. This should equal the Line 14 and the provision pursuant to preferred stock which are attributable to U.S. shareholder's pro rata share of the which a deduction is not allowed with periods totaling more than 366 days if sum of the amounts reported on Form respect to such dividend. such stock was held for less than 91 days 5471, Schedule I, lines 1(c) through 1(h), during the 181-day period that began 90 Line 15, Column (a) 2, and 4. days before the ex-dividend date. When Enter the 2020 section 965(a) inclusion Line 17, Column (a) counting the number of days the amount from Form 965, line 3. Complete corporation held the stock, you cannot Enter amounts included in income under and attach Form 965 and any applicable count certain days during which the section 951A. See Form 8992, Part II, schedules. Also, complete and attach corporation's risk of loss was diminished. line 5, and the Instructions for Form 8992. Form 965-B. See section 246(c)(4) and Regulations Also, if applicable, attach Form(s) 5471. section 1.246-5 for more details. Preferred Line 15, Column (c) dividends attributable to periods totaling Note. Consider the applicability of section Enter in column (c) the 2020 section less than 367 days are subject to the 951A with respect to CFCs owned by 965(c) deduction amount from Form 965, 46-day holding period rule discussed line 17. above.

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c. Dividends on any share of stock to and schedules required to be filed with Line 5 the extent the corporation is under an Form 1120-L. See Regulations section obligation (including a short sale) to make 1.6012-2(c)(1)(ii). Line 5a. To find out when a corporation related payments with respect to positions can take the credit for payment of income in substantially similar or related property. Exception for insurance companies tax to a foreign country or U.S. filing their federal income tax returns 5. Any other taxable dividend income possession, see Form 1118, Foreign Tax electronically. If an insurance company Credit—Corporations. not properly reported elsewhere on files its income tax return electronically, it Schedule C. should not include the annual statements Line 5b. Enter any qualified electric vehicle passive activity credits from prior If patronage dividends or per-unit retain and schedules required to be filed with years allowed for the current tax year from allocations are included on line 20, identify Form 1120-L. However, such statements Form 8834, Qualified Electric Vehicle the total of these amounts in a statement must be available at all times for Credit, line 7. Attach Form 8834. If attached to Form 1120. inspection by the IRS and retained for so long as such statements may be material applicable, include on line 5b any credits Line 21, Column (c) in the administration of any Internal from Form 5735, American Samoa Section 247 (as affected by P.L.113-295, Revenue law. Economic Development Credit. See the Div. A, section 221(a)(41)(A), Dec. 19, Instructions for Form 5735. Attach Form Deferred tax under section 1291. If the 5735. 2014, 128 Stat. 4043) allows public corporation was a shareholder in a PFIC utilities a deduction of 40% of the smaller and received an excess distribution or Line 5c. Enter on line 5c the allowable of (a) dividends paid on their preferred disposed of its investment in the PFIC credit from Form 3800, Part II, line 38. stock during the tax year, or (b) taxable during the year, it must include the The corporation is required to file Form income computed without regard to this increase in taxes due under section 3800, General Business Credit, to claim deduction. In a year in which an NOL 1291(c)(2) (from Form 8621) in the total any of the business credits. See the occurs, compute the deduction without for line 2. On the dotted line next to line 2, Instructions for Form 3800 for exceptions. regard to section 247(a)(1)(B). enter “Section 1291” and the amount. For a list of allowable credits, see Form Line 22, Column (c) Do not include on line 2 any interest 3800. Also, see the applicable credit form and its instructions. Enter the section 250 deduction claimed due under section 1291(c)(3). Instead, for FDII and GILTI. This should equal the include the amount of interest owed on Line 5d. Enter any allowable credit from sum of the amounts on Form 8993, Part Schedule J, Part I, line 9f. Form 8827, Credit for Prior Year Minimum IV, lines 8 and 9. For more information on reporting the Tax—Corporations. Complete and attach deferred tax and interest, see the Form 8827. Instructions for Form 8621. Schedule J. Line 5e. Enter the allowable credits from Increase in tax attributable to partner's Form 8912, Credit to Holders of Tax Credit Tax Computation and audit liability under section 6226. If the Bonds, line 12. Payment corporation is filing Form 8978 to report adjustments shown on Form 8986 they Line 6 Part I—Tax Computation received from partnerships that have been Add lines 5a through 5e. Enter the total on Line 1 audited and have elected to push out imputed underpayments to their partners, line 6. If the corporation is a member of a include any increase in taxes due from Decrease attributable to partner's au- controlled group, check the box on line 1. Form 8978, line 14, in the total for Form dit liability under section 6226. If the Complete and attach Schedule O (Form 1120, Schedule J, line 2. On the dotted corporation is filing Form 8978 to report 1120), Consent Plan and Apportionment line next to line 2, enter "FROM FORM adjustments shown on Form 8986 they Schedule for a Controlled Group. 8978" and the amount. Attach Form 8978. received from partnerships that have been Component members of a controlled If Form 8978, line 14, shows a decrease in audited and have elected to push out group must use Schedule O to report the tax, see the instructions for Schedule J, imputed underpayments to their partners, apportionment of certain tax benefits line 6. include any decrease in taxes due between the members of the group. See Additional tax under section 197(f). A (negative amount) from Form 8978, Schedule O and the Instructions for line 14, in the total for Form 1120, Schedule O for more information. corporation that elects to recognize gain and pay tax on the sale of a section 197 Schedule J, line 6. On the dotted line next intangible under the related person to line 6, enter "FROM FORM 8978" and Line 2 exception to the anti-churning rules should the amount. Attach Form 8978. If Form Multiply taxable income (page 1, line 30) include any additional tax due in the total 8978, line 14, shows an increase in tax, by 21%. Enter this amount on line 2. for line 2. On the dotted line next to line 2, see the instructions for Schedule J, line 2. enter “Section 197” and the amount. See Mutual savings bank conducting life section 197(f)(9)(B)(ii). Line 8 insurance business. The tax under section 594 consists of the sum of (a) a A corporation is taxed as a personal partial tax computed on Form 1120 on the Line 3 holding company under section 542 if: taxable income of the bank, determined If the corporation had gross receipts of at • At least 60% of its adjusted ordinary without regard to income or deductions least $500 million in any one of the 3 tax gross income for the tax year is personal allocable to the life insurance department, years preceding the current tax year, holding company income, and and (b) a partial tax on the taxable income complete and attach Form 8991. Enter on • At any time during the last half of the tax computed on Form 1120-L of the life line 3 the base erosion minimum tax year more than 50% in value of its insurance department. Enter the amount from Form 8991, Part IV, line 5e. outstanding stock is directly or indirectly combined tax on line 2. Attach Form See section 59A and the Instructions for owned by five or fewer individuals. 1120-L as a schedule (and identify it as Form 8991. Also, see Schedule K, such), together with the annual statements Question 22, later.

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See Schedule PH (Form 1120) for Code section and the type of tax or included in, or subtracted from, the total definitions and details on how to figure the interest. for line 11. On the dotted line next to tax. • Recapture of Indian employment credit. line 11, specify (a) the applicable Code Generally, if an employer terminates the section, (b) the type of tax, and (c) enter Line 9 employment of a qualified employee less the amount of tax. For example, if the than 1 year after the date of initial corporation is deferring a $100 LIFO Include any of the following taxes and employment, any Indian employment recapture tax, subtract this amount from interest. credit allowed for a prior tax year because the total on line 11, then enter “Section Line 9a. Recapture of investment cred- of wages paid or incurred to that employee 1363-Deferred Tax-$100” on the dotted it. If the corporation disposed of must be recaptured. For details, see Form line next to line 11. 8845 and section 45A. investment credit property or changed its Part II—Section 965 Payments use before the end of its useful life or • Recapture of new markets credit (see recovery period, or is required to Form 8874, New Markets Credit, and recapture a qualifying therapeutic Form 8874-B, Notice of Recapture Event Line 12 for New Markets Credit). discovery project grant, enter the increase Complete and attach Form 965-B. Enter Recapture of employer-provided in tax from Form 4255, Recapture of • the amount from Form 965-B, Part II, childcare facilities and services credit (see Investment Credit. See the Instructions for column (k), line 4, on Schedule J, Part II, Form 8882). Form 4255. line 12. Also, enter this amount on page 1, Tax and interest on a nonqualified • line 32. Line 9b. Recapture of low-income withdrawal from a capital construction housing credit. If the corporation fund (section 7518(g)). Part III—Payments, Refundable disposed of property (or there was a • Interest due on deferred gain (section Credits, and Section 965 Net reduction in the qualified basis of the 1260(b)). property) for which it took the low-income • Interest due under section 1291(c)(3). Tax Liability housing credit, and the corporation did not See Form 8621 and the Instructions for follow the procedures that would have Form 8621. Line 14 prevented recapture of the credit, it may owe a tax. See Form 8611, Recapture of Enter any estimated tax payments the Low-Income Housing Credit. Line 11 corporation made for the tax year. Include any deferred tax on the Line 9c. Interest due under the Beneficiaries of trusts. If the termination of a section 1294 election look-back method—completed corporation is the beneficiary of a trust, applicable to shareholders in a qualified long-term contracts. If the corporation and the trust makes a section 643(g) electing fund in the amount entered on used the percentage-of-completion election to credit its estimated tax line 11. method under section 460(b) for certain payments to its beneficiaries, include the long-term contracts, figure any interest corporation's share of the payment in the Subtract the following amounts from due or to be refunded using the look-back total for line 14. Enter “T” and the amount the total for line 11. method, described in section 460(b)(2). on the dotted line next to the entry space. Deferred tax on the corporation's share Use Form 8697 to figure any interest due • of undistributed earnings of a qualified or to be refunded. See the Instructions for electing fund. See the Instructions for Line 15 Form 8697. Include any interest due on Form 8621. If the corporation overpaid estimated tax, it line 9c. • Deferred LIFO recapture tax (section may be able to get a quick refund by filing Line 9d. Interest due under the 1363(d)). This tax is the part of the LIFO Form 4466. The overpayment must be at look-back method—income forecast recapture tax that will be deferred and least 10% of the corporation's expected method. If the corporation used the paid with Form 1120-S in the future. To income tax liability and at least $500. File income forecast method to depreciate figure the deferred tax, first figure the total Form 4466 after the end of the property, it must figure any interest due or LIFO recapture tax. Follow the steps corporation's tax year, and no later than to be refunded using the look-back below to figure the total LIFO recapture tax the due date for filing the corporation’s tax method, described in section 167(g)(2). and the deferred amount. Also, see return (not including extensions). Form Use Form 8866 to figure any interest due Line 10. Other Income, earlier. 4466 must be filed before the corporation or to be refunded. See the Instructions for files its tax return. See the instructions for Form 8866. Include any interest due on Step 1. Figure the tax on the Form 4466. line 9d. corporation's income including the LIFO recapture amount. Complete Schedule J, Line 9e. Alternative tax on qualifying Line 18 Part I, lines 1 through 10. shipping activities. Enter any alternative If the corporation had federal income tax tax on qualifying shipping activities from Step 2. Using a separate worksheet, withheld from any payments it received Form 8902. complete Schedule J again, but do not because, for example, it failed to give the Line 9f. Interest/tax due under Section include the LIFO recapture amount in the payer its correct EIN or was otherwise 453A(c) and/or Section 453(l). Include corporation's taxable income. subjected to back-up withholding, include any interest on deferred tax attributable to the amount withheld in the total for line 18. certain nondealer installment obligations Step 3. Compare the tax in Step 2 to (section 453A(c)) and dealer installment the tax in Step 1. The difference between Line 20. Refundable Credits obligations (section 453(l)). the two is the LIFO recapture tax. Line 20a. Credit from Form 2439. Enter Line 9g. Other. Include on line 9g Step 4. Multiply the amount figured in any credit from Form 2439, Notice to additional taxes and interest such as the Step 3 by 75% (0.75). The result is the Shareholder of Undistributed Long-Term following. Attach a statement showing the deferred LIFO recapture tax. Capital Gains, for the corporation's share computation of each item included in the of the tax paid by a regulated investment total for line 9g and identify the applicable How to report. Attach a statement company (RIC) or a real estate investment showing the computation of each item

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trust (REIT) on undistributed long-term Any corporation that meets either of the another entity (corporation, partnership, capital gains included in the corporation's requirements above should check the estate, or trust), the owned entity is income. Attach Form 2439. “Yes” box. This applies even if the considered to be owned proportionately corporation is a subsidiary member of one by or for the owners (shareholders, Line 20b. Credit for federal tax on group and the parent corporation of partners, or beneficiaries) of the owning fuels. Enter the total income tax credit another. entity. claimed on Form 4136, Credit for Federal Tax Paid on Fuels. Attach Form 4136. Note. If the corporation is an “excluded Question 5a Line 20c. Reserved for future use. member” of a controlled group (see definition in the Instructions for List each foreign or domestic corporation Line 20d. Other. Include on line 20d any Schedule O (Form 1120)), it is still not included on Form 851, Affiliations other refundable credit the corporation is considered a member of a controlled Schedule, in which the corporation, at the claiming, including the following. Attach a group for this purpose. end of the tax year, owned directly 20% or statement listing the type of credit and the more, or owned, directly or indirectly, 50% amount of the credit. Affiliated group. An affiliated group is or more of the total voting power of all • Credit for tax withheld under Chapter 3 one or more chains of includible classes of stock entitled to vote. Indicate or 4 of the Internal Revenue Code that is corporations (section 1504(a)) connected the name of the corporation, EIN (if any), shown on Form 1042-S, Form 8805, or through stock ownership with a common country of incorporation, and the Form 8288-A. Attach the applicable form. parent corporation. The common parent percentage interest owned, directly or • Credit for tax on ozone-depleting must be an includible corporation and the indirectly, in the total voting power. List the chemicals. See section 4682(g)(2). following requirements must be met. parent corporation of an affiliated group of • Credit under section 960(c) (section 1. The common parent must own corporations filing a consolidated tax 960(b) for pre-2018 taxable years of directly stock that represents at least 80% return rather than the subsidiary members foreign corporations). If an increase in the of the total voting power and at least 80% except for subsidiary members in which limitation under section 960(c) (section of the total value of the stock of at least an interest is owned, directly or indirectly, 960(b) (pre-2018)) exceeds the total tax one of the other includible corporations. independent of the interest owned, directly on Schedule J, Part I, line 11, for the tax 2. Stock that represents at least 80% or indirectly, in the parent corporation. List year, the amount of the excess is deemed of the total voting power and at least 80% a corporation owned through a an overpayment of tax for the tax year. of the total value of the stock of each of disregarded entity rather than the See section 960(c) (section 960(b) the other corporations (except for the disregarded entity. (pre-2018)) for more information regarding common parent) must be owned directly the circumstances under which such an by one or more of the other includible excess arises. Question 5b corporations. List each foreign or domestic partnership Line 22 For this purpose, the term “stock” in which the corporation, at the end of the generally does not include any stock that tax year, owned directly an interest of 20% Complete and attach Form 965-B. Enter (a) is nonvoting, (b) is nonconvertible, or more, or owned, directly or indirectly, an the amount from Form 965-B, Part I, (c) is limited and preferred as to dividends interest of 50% or more in the profit, loss, column (d), line 4. and does not participate significantly in or capital of the partnership. List each trust corporate growth, and (d) has redemption in which the corporation, at the end of the and liquidation rights that do not exceed tax year, owned directly an interest of 20% Schedule K. the issue price of the stock (except for a or more, or owned, directly or indirectly, an Other Information reasonable redemption or liquidation interest of 50% or more in the trust Complete all items that apply to the premium). See section 1504(a)(4). beneficial interest. Indicate the name, EIN corporation. (if any), country of organization, and the Question 4. Constructive maximum percentage interest owned, Question 2 Ownership of the Corporation directly or indirectly, in the profit, loss, or See the list of Principal Business Activity For purposes of question 4, the capital of the partnership at the end of the Codes later in the instructions. Using the constructive ownership rules of section partnership tax year, or, for a trust, the list of codes and activities, determine from 267(c) (excluding section 267(c)(3)) apply percentage interest owned in the trust which activity the corporation derives the to ownership of interests in corporate beneficial interest. List a partnership or highest percentage of its total receipts. stock and ownership of interests in the trust owned through a disregarded entity Enter on lines 2a, 2b, and 2c the principal profit, loss, or capital of a partnership. If rather than the disregarded entity. business activity code number, the the corporation checked “Yes” to question Maximum percentage owned in part- corporation's business activity, and a 4a or 4b, complete and attach Schedule G nership profit, loss, or capital. For the description of the principal product or (Form 1120), Information on Certain purposes of question 5b, the term service of the corporation. Persons Owning the Corporation's Voting “maximum percentage owned” means the Question 3 Stock. highest percentage of interest in a partnership's profit, loss, or capital as of Check the “Yes” box for question 3 if: Question 5. Constructive the end of the partnership's tax year, as • The corporation is a subsidiary in an Ownership of Other Entities determined under the partnership affiliated group (defined below), but is not For purposes of determining the agreement, when taking into account the filing a consolidated return for the tax year corporation's constructive ownership of constructive ownership rules earlier. If the with that group; or other entities, the constructive ownership partnership agreement does not express • The corporation is a subsidiary in a rules of section 267(c) (excluding section the partner's share of profit, loss, and parent–subsidiary controlled group. For a 267(c)(3)) apply to ownership of interests capital as fixed percentages, use a definition of a parent–subsidiary controlled in partnerships and trusts as well as reasonable method in arriving at the group, see the Instructions for Schedule O corporate stock. Generally, if an entity (a percentage items for the purposes of (Form 1120). corporation, partnership, or trust) is completing question 5b. Such method owned, directly or indirectly, by or for must be consistent with the partnership

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agreement. The method used to compute • Any foreign estate or trust within the Item 12 a percentage share of profit, loss, and meaning of section 7701(a)(31); or Enter the amount of the NOL carryover to capital must be applied consistently from A foreign government (or one of its • the tax year from prior years, even if some year to year. Maintain records to support agencies or instrumentalities) to the extent of the loss is used to offset income on this the determination of the share of profits, that it is engaged in the conduct of a return. The amount to enter is the total of losses, and share of capital. commercial activity, as described in all NOLs generated in prior years but not section 892. Example. Corporation A owns, used to offset income (either as a directly, a 50% interest in the profit, loss, However, the term "foreign person" carryback or carryover) to a tax year prior or capital of Partnership B. Corporation A does not include any foreign person who to 2020. Do not reduce the amount by any also owns, directly, a 15% interest in the consents to the filing of a joint U.S. income NOL deduction reported on line 29a. profit, loss, or capital of Partnership C and tax return. Question 14 owns, directly, 15% of the voting stock of Owner's country. For individuals, the Corporation D. Partnership B owns, term “owner's country” means the country A corporation that files Form 1120 must directly, a 70% interest in the profit, loss, of residence. For all others, it is the file Schedule UTP (Form 1120), Uncertain or capital of Partnership C and owns, country where incorporated, organized, Tax Position Statement, with its 2020 directly, 70% of the voting stock of created, or administered. income tax return if: Corporation D. Corporation A owns, • For 2020, the corporation's total assets indirectly, through Partnership B, a 35% Requirement to file Form 5472. If the equal or exceed $10 million; interest (50% of 70%) in the profit, loss, or corporation checked “Yes,” it may have to • The corporation or a related party capital of Partnership C and owns, file Form 5472, Information Return of a issued audited financial statements indirectly, 35% of the voting stock of 25% Foreign-Owned U.S. Corporation or reporting all or a portion of the Corporation D. Corporation A owns, a Foreign Corporation Engaged in a U.S. corporation's operations for all or a portion directly or indirectly, a 50% interest in the Trade or Business. Generally, a 25% of the corporation's tax year; and profit, loss, or capital of Partnership C foreign-owned corporation that had a • The corporation has one or more tax (15% directly and 35% indirectly), and reportable transaction with a foreign or positions that must be reported on owns, directly or indirectly, 50% of the domestic related party during the tax year Schedule UTP. voting stock of Corporation D (15% must file Form 5472. See the Instructions directly and 35% indirectly). for Form 5472, for filing instructions and Attach Schedule UTP to the corporation's income tax return. Do not file Corporation A reports in its answer to penalties for failure to file. it separately. A taxpayer that files a question 5a that it owns, directly or Item 9 protective Form 1120 must also file indirectly, 50% of the voting stock of Show any tax-exempt interest received or Schedule UTP if it satisfies the Corporation D. Corporation A reports in its accrued. Include any exempt-interest requirements set forth above. answer to question 5b that it owns, dividends received as a shareholder in a directly, an interest of 50% in the profit, mutual fund or other RIC. Also, if required, For details, see the Instructions for loss, or capital of Partnership B and owns, include the same amount on Schedule UTP. directly or indirectly, 50% of the profit, Schedule M-1, line 7 (or Schedule M-3, loss, or capital of Partnership C. Questions 15a and 15b Part II, line 13, if applicable). Question 7 If the corporation made any payment in Item 11 2020 that would require the corporation to Check the “Yes” box if one foreign person Generally, if the corporation has an NOL file any Form(s) 1099, check the “Yes” box owned at least 25% of the total voting for 2020, it can generally elect to waive the for question 15a and answer question power of all classes of stock of the entire carryback period for the NOL and 15b. Otherwise, check the “No” box for corporation entitled to vote or at least 25% instead carry the NOL forward to future tax question 15a and skip question 15b. See of the total value of all classes of stock of years. To do so, check the box on line 11 Am I Required to File a Form 1099 or the corporation. and file the tax return by its due date, Other Information Return? on IRS.gov. The constructive ownership rules of including extensions. Do not attach the Question 19 section 318 apply in determining if a statement described in Temporary If the corporation made any payments in corporation is foreign owned. See section Regulations section 301.9100-12T. 2020 that would require the corporation to 6038A(c)(5) and the related regulations. Generally, once made, the election is irrevocable. See Special rules for farming file any Forms 1042 and 1042-S, check Enter on line 7a the percentage owned loss NOLs, earlier. the “Yes” box. See the Instructions for by the foreign person specified in question Form 1042 and Instructions for Form 7. On line 7b, enter the name of the If the corporation timely filed its return 1042-S for information regarding who is owner’s country. for the loss year without making the required to file Forms 1042 and 1042-S election, it can make the election on an and what types of payments are subject to Note. If there is more than one amended return filed within 6 months of reporting on Forms 1042 and 1042-S. 25%-or-more foreign owner, complete the due date of the loss year return Question 21 question 7 for the foreign person with the (excluding extensions). Attach the election highest percentage of ownership. to the amended return and write "Filed If the corporation paid or accrued (including through a partnership) any Foreign person. The term “foreign pursuant to section 301.9100-2" on the interest or royalty for which a deduction is person” means: election statement. See the Instructions not allowed under section 267A, check An individual who is not a citizen or for Form 1139. • "Yes" for question 21 and enter the total resident of the United States; amount for which a deduction is not An individual who is a citizen or resident Corporations filing a consolidated • allowed. of a U.S. possession who is not otherwise return that elect to waive the entire a citizen or resident of the United States; carryback period for the group must also Payments to which section 267A ap- • Any partnership, association, company, attach the statement required by plies. Interest or royalty paid or accrued or corporation that is not created or Regulations section 1.1502-21(b)(3) or the by a domestic corporation (including, in organized in the United States; election will not be valid. the case of a domestic corporation that is

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a partner in a partnership, the domestic meets certain specified exceptions. A not a tax shelter (as defined in section corporation's allocable share of interest or taxpayer may elect out of the limitation for 448(d)(3)), and (b) meets the gross royalty paid or accrued by the partnership) certain businesses otherwise subject to receipts test of section 448(c), discussed is subject to section 267A. Section 267A the business interest expense limitation. next. generally applies to interest or royalty paid Gross receipts test. A taxpayer meets or accrued according to a hybrid Certain real property trades or the gross receipts test if the taxpayer has arrangement (such as, for example, a businesses and farming businesses average annual gross receipts of $26 payment according to a hybrid instrument, qualify to make an election not to limit million or less for the 3 prior tax years. A or a payment to a reverse hybrid), business interest expense. This is an taxpayer's average annual gross receipts provided that the payment or accrual is to irrevocable election. If you make this for the 3 prior tax years is determined by a related party (or according to a election, you are required to use the adding the gross receipts for the 3 prior structured arrangement). In addition, alternative depreciation system to tax years and dividing the total by 3. Gross under an imported mismatch rule, section depreciate any nonresidential real receipts include the aggregate gross 267A generally applies to interest or property, residential rental property, and receipts from all persons treated as a royalties paid or accrued according to a qualified improvement property for an single employer, such as a controlled non-hybrid arrangement where the income electing real property trade or business, group of corporations, commonly attributable to that payment or accrual is and any property with a recovery period of controlled partnerships, or proprietorships, directly or indirectly offset by certain 10 years or more for an electing farming and affiliated service groups. See section deductions involving hybridity incurred by business. See section 168(g)(1)(F). Also, 448(c) and the Instructions for Form 8990 a related party or according to a structured you are not entitled to the special for additional information. arrangement. However, section 267A depreciation allowance for that property. does not apply if a de minimis exception is For a taxpayer with more than one Question 25 satisfied. See Regulations section qualifying business, the election is made with respect to each business. To be certified as a qualified opportunity 1.267A-1(c). For purposes of section fund, the corporation must file Form 1120 267A, interest and royalties are defined Additionally, see Rev. Proc. 2020-22, 2020-18 I.R.B. 745, which provides an and attach Form 8996, even if the broadly. For additional information about corporation had no income or expenses to arrangements subject to section 267A, automatic extension of time for certain taxpayers to file a real property trade or report. If the corporation is attaching Form see Regulations sections 1.267A-2 and 8996, check the “Yes” box for question 25. 1.267A-4. Also, see the anti-avoidance business election or a farming business election for tax years 2018, 2019, or 2020. On the line following the dollar sign, enter rule under Regulations section the amount from Form 8996, line 15. 1.267A-5(b)(6). Rev. Proc. 2020-22 also provides an opportunity for certain taxpayers to Extent to which deduction is disal- withdraw a prior election. Rev. Proc. The penalty reported on this line from lowed. When section 267A applies to 2020-22 does not apply to utility trades or Form 8996, line 15, is not due with the interest or royalties paid or accrued businesses. filing of this form. The IRS will separately pursuant to a hybrid arrangement, it send to you a notice setting forth the due generally disallows a deduction for the Check “Yes” if the corporation has an date for the penalty payment and where amount to the extent that, under the election in effect to exclude a real property that payment should be sent. trade or business or a farming business foreign tax law, there is not a Question 26 corresponding income inclusion (including from section 163(j). For more information, long-term deferral). However, the see section 163(j) and the Instructions for Check the “Yes” box if: deduction is not disallowed to the extent Form 8990. 1. On or after December 22, 2017, a the amount is directly or indirectly included Question 24 foreign corporation directly or indirectly in income in the United States, such as if acquired substantially all of the properties the amount is taken into account with Generally, a taxpayer with a trade or held directly or indirectly by the respect to a U.S. shareholder under business must file Form 8990 to claim a corporation; and deduction for business interest. In section 951(a) or section 951A. For 2. The ownership percentage with additional information, see Regulations addition, Form 8990 must be filed by any taxpayer that owns an interest in a respect to the acquisition was greater than sections 1.267A-2 through 1.267A-4. For 50% (by vote or by value). examples illustrating the application of partnership with current year, or prior year section 267A, see Regulations section carryover, excess business interest If “Yes” is checked, also enter in the 1.267A-7. expense allocated from the partnership. space provided the ownership percentage both by vote and by value. If there are Question 22 Exclusions from filing. A taxpayer is not required to file Form 8990 if the taxpayer multiple acquisitions that must be If the corporation had gross receipts of at is a small business taxpayer (defined reported, enter the ownership for the most least $500 million in any one of the 3 below) and does not have excess recent acquisition. Attach a statement preceding tax years, complete and attach business interest expense from a reporting the ownership percentage by Form 8991. For this purpose, the partnership. A taxpayer also is not vote and by value for the other corporation's gross receipts include the required to file Form 8990 if the taxpayer acquisitions. gross receipts of all persons aggregated only has business interest expense from with the corporation, as specified in these excepted trades or businesses: Section 7874 applies in certain cases section 59A(e)(3). See the Instructions for • An electing real property trade or in which a foreign corporation directly or Form 8991 to determine if the corporation business, indirectly acquires substantially all of the is subject to the base erosion minimum • An electing farming business, or properties of a domestic corporation. tax. • Certain utility businesses. Generally, it applies when three requirements are satisfied. Question 23 Small business taxpayer. A small 1. Pursuant to a plan or series of business taxpayer is not subject to the The limitation on business interest related transactions, a foreign corporation business interest expense limitation and is expense applies to every taxpayer with a must acquire directly or indirectly not required to file Form 8990. A small trade or business, unless the taxpayer substantially all of the properties held business taxpayer is a taxpayer that (a) is

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directly or indirectly by a domestic If filing a consolidated return, report • A corporation filing Form 1120 that is corporation. total consolidated assets, liabilities, and not required to file Schedule M-3 may 2. After the acquisition, the ownership shareholder's equity for all corporations voluntarily file Schedule M-3 instead of percentage (by vote or value) must be at joining in the return. See Consolidated Schedule M-1. See the Instructions for least 60%. Return, earlier. Schedule M-3 (Form 1120) for more information. 3. After the acquisition, the expanded Line 1 • Corporations that (a) are required to file affiliated group that includes the foreign Include certificates of deposit as cash on Schedule M-3 (Form 1120) and have less acquiring corporation must not have this line. than $50 million total assets at the end of substantial business activities in the the tax year, or (b) are not required to file foreign country in which the foreign Line 5 Schedule M-3 (Form 1120) and voluntarily acquiring corporation is created or Include on this line: file Schedule M-3 (Form 1120), must organized. • State and local government obligations, either (i) complete Schedule M-3 (Form When section 7874 applies, the tax the interest on which is excludable from 1120) entirely or (ii) complete treatment of the acquisition depends on gross income under section 103(a), and Schedule M-3 (Form 1120) through Part I, the ownership percentage. If the • Stock in a mutual fund or other RIC that and complete Form 1120, Schedule M-1, ownership percentage is at least 80%, distributed exempt-interest dividends instead of completing Parts II and III of then the foreign acquiring corporation is during the tax year of the corporation. Schedule M-3 (Form 1120). If the treated as a domestic corporation for all Line 26 corporation chooses to complete purposes of the Internal Revenue Code. Schedule M-1 instead of completing Parts Some examples of adjustments to report See section 7874(b). If the ownership II and III of Schedule M-3, the amount on on this line include: percentage is at least 60% but less than Schedule M-1, line 1, must equal the 80%, then the foreign acquiring • Unrealized gains and losses on amount on Schedule M-3, Part I, line 11. corporation is respected as a foreign securities held “available for sale,” See the Instructions for Schedule M-3 Foreign currency translation corporation, but the domestic corporation • (Form 1120) for more information. adjustments, and certain other persons are subject to The excess of additional pension Line 5c special rules that reduce the tax benefits • liability over unrecognized prior service of the acquisition. See section 7874(a). Include any of the following applicable cost, expenses. See the regulations under section 7874 • Guarantees of employee stock (ESOP) • Entertainment expenses not deductible for rules regarding the computation of the debt, and under section 274(a). ownership percentage. See sections • Compensation related to employee • Meal expenses not deductible under 59A(d)(4) and 965(l) for additional rules stock award plans. section 274(n). regarding the tax treatment of certain • Qualified transportation fringes not expatriated entities. If the total adjustment to be entered on deductible under 274(a)(4). line 26 is a negative amount, enter the • Expenses for the use of an amount in parentheses. entertainment facility. Schedule L. • The part of business gifts over $25. Balance Sheets per Books Schedule M-1. • Expenses of an individual over $2,000, The balance sheets should agree with the allocable to conventions on cruise ships. corporation's books and records. Reconciliation of Income • Employee achievement awards of (Loss) per Books With nontangible or tangible property over $400 Corporations with total receipts ($1,600 if part of a qualified plan). (page 1, line 1a plus lines 4 through 10) Income per Return • The cost of skyboxes. and total assets at the end of the tax year In completing Schedule M-1, the following • Nondeductible club dues. less than $250,000 are not required to apply. • The part of luxury water travel expenses complete Schedules L, M-1, and M-2 if the • Corporations with total receipts (page 1, not deductible under section 274(m). “Yes” box on Schedule K, question 13, is line 1a plus lines 4 through 10) and total • Expenses for travel as a form of checked. assets at the end of the tax year less than education. Corporations with total assets $250,000 are not required to complete • Other nondeductible travel and non-consolidated (or consolidated for all Schedules L, M-1, and M-2 if the “Yes” entertainment expenses. corporations included within the box on Schedule K, question 13, is consolidated tax group) of $10 million or checked. For more information, see Pub. 535. • Corporations with total assets more on the last day of the tax year must Line 7 file Schedule M-3 (Form 1120) instead of non-consolidated (or consolidated for all Schedule M-1. However, see the corporations included within the Report any tax-exempt interest received instructions for Schedule M-1 below. See consolidated tax group) of $10 million or or accrued, including any exempt-interest the separate Instructions for Schedule M-3 more on the last day of the tax year must dividends received as a shareholder in a (Form 1120) for provisions that also affect file Schedule M-3 (Form 1120) instead of mutual fund or other RIC. Also, report this Schedule L. Schedule M-1. same amount on Schedule K, item 9.

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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.

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.

Estimates of Taxpayer Burden. The following tables show burden estimates based on current statutory requirements as of December 2020 for taxpayers filing 2020 Forms 1065, 1066, 1120, 1120-C, 1120-F, 1120-H, 1120-ND, 1120-S, 1120-SF, 1120-FSC, 1120-L, 1120-PC, 1120-REIT, 1120-RIC, 1120-POL, and related attachments. Time spent and out-of-pocket costs are presented separately. Time burden is broken out by taxpayer activity, with reporting representing the largest component. Out-of-pocket costs include any expenses incurred by taxpayers to prepare and submit their tax returns. Examples include tax return preparation and submission fees, postage and photocopying costs, and tax preparation software costs. While these estimates do not include burden associated with post-filing activities, IRS operational data indicate that electronically prepared and filed returns have fewer arithmetic errors, implying lower post-filing burden.

Tables 1, 2, and 3 below show the burden model estimates for each of the three classifications of business taxpayers: Partnerships (Table 1), corporations (Table 2) and S corporations (Table 3). As the tables show, the average filing compliance is different for the three forms of business. Showing a combined average burden for all businesses would understate the burden for corporations and overstate the burden for the two pass-through entities (partnerships and corporations). In addition, the burden for small and large businesses is shown separately for each type of business entity in order to clearly convey the substantially higher burden faced by the largest businesses.

Table 1 – Taxpayer Burden for Entities Taxed as Partnerships

Forms 1065, 1066, and all attachments Primary Form Filed or Type of Number of Returns Average Time per Taxpayer Average Cost per Average Monetized Taxpayer (millions) (hours) Taxpayer Burden All Partnerships 4.5 290 $5,900 $17,800 Small 4.2 270 $4,400 $13,200 Other* 0.3 610 $29,000 $89,300 *“Other” is defined as one having end-of-year assets greater than $10 million. A large business is defined the same way for partnerships, taxable corporations, and pass-through corporations. A small business is any business that does not meet the definition of a large business.

Table 2 – Taxpayer Burden for Entities Taxed as Taxable Corporations

Forms 1120, 1120-C, 1120-F, 1120-H, 1120-ND, 1120-SF, 1120-FSC, 1120-L, 1120-PC, 1120-POL, and all attachments Primary Form Filed or Type of Number of Returns Average Time per Taxpayer Average Cost per Average Monetized Taxpayer (millions) (hours) Taxpayer Burden All Taxable Corporations 2.1 335 $7,700 $23,500 Small 2.0 280 $4,000 $13,500 Large* 0.1 1,255 $70,200 $194,800 *A “large” business is defined as one having end-of-year assets greater than $10 million. A “large” business is defined the same way for partnerships, taxable corporations, and pass-through corporations. A small business is any business that does not meet the definition of a large business.

Table 3 – Taxpayer Burden for Entities Taxed as Pass-Through Corporations

Forms 1120-REIT, 1120-RIC, 1120-S, and all attachments Primary Form Filed or Type of Number of Returns Average Time per Taxpayer Average Cost per Average Monetized Taxpayer (millions) (hours) Taxpayer Burden All Pass-Through Corporations 5.4 245 $3,500 $11,300 Small 5.3 240 $3,100 $10,200 Large* 0.1 610 $30,900 $91,500 *A “large” business is defined as one having end-of-year assets greater than $10 million. A “large” business is defined the same way for partnerships, taxable corporations, and pass-through corporations. A small business is any business that does not meet the definition of a large business.

Note. The data shown are the best estimates for 2020 business entity income tax returns. Reported time and cost burdens are national averages and do not reflect a “typical” case. Most taxpayers experience lower than average burden varying considerably by taxpayer type. The estimates are subject to change as new forms and data become available.

Comments. If you have comments concerning the accuracy of these time estimates or suggestions for making these forms simpler, we would be happy to hear from you. You can send us comments through IRS.gov/FormComments. Or you can write to the

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Internal Revenue Service, Tax Forms and Publications, 1111 Constitution Ave. NW, IR-6526, Washington, DC 20224. Do not send the tax form to this address. Instead, see Where To File, earlier, near the beginning of the instructions.

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Principal Business Activity Codes largest percentage of its “total receipts.” Total receipts is 2a, 2b, and 2c. On line 2a, enter the six-digit code defined as the sum of gross receipts or sales (page 1, selected from the list below. On line 2b, enter the This list of principal business activities and their line 1a) plus all other income (page 1, lines 4 through company's business activity. On line 2c, enter a brief associated codes is designed to classify an enterprise 10). If the company purchases raw materials and description of the principal product or service of the by the type of activity in which it is engaged to facilitate supplies them to a subcontractor to produce the finished company. the administration of the Internal Revenue Code. These product, but retains title to the product, the company is principal business activity codes are based on the North considered a manufacturer and must use one of the American Industry Classification System. manufacturing codes (311110–339900). Using the list of activities and codes below, Once the principal business activity is determined, determine from which activity the company derives the entries must be made on Form 1120, Schedule K, lines Agriculture, Forestry, Fishing, 238300 Building Finishing Contractors 325900 Other Chemical Product & 336990 Other Transportation Equipment (including drywall, insulation, Preparation Mfg Mfg and Hunting painting, wallcovering, flooring, Plastics and Rubber Products Furniture and Related Product Crop Production tile, & finish carpentry) Manufacturing Manufacturing 111100 Oilseed & Grain Farming 238900 Other Specialty Trade 326100 Plastics Product Mfg 337000 Furniture & Related Product Contractors (including site Manufacturing 111210 Vegetable & Melon Farming preparation) 326200 Rubber Product Mfg (including potatoes & yams) Nonmetallic Mineral Product Miscellaneous Manufacturing 111300 Fruit & Tree Nut Farming Manufacturing Manufacturing 339110 Medical Equipment & Supplies 111400 Greenhouse, Nursery, & Food Manufacturing 327100 Clay Product & Refractory Mfg Mfg Floriculture Production 311110 Animal Food Mfg 327210 Glass & Glass Product Mfg 339900 Other Miscellaneous Manufacturing 111900 Other Crop Farming (including 311200 Grain & Oilseed Milling 327300 Cement & Concrete Product Mfg tobacco, cotton, sugarcane, hay, Wholesale Trade peanut, sugar beet, & all other 311300 Sugar & Confectionery Product 327400 Lime & Gypsum Product Mfg crop farming) Mfg 327900 Other Nonmetallic Mineral Merchant Wholesalers, Durable Goods Animal Production 311400 Fruit & Vegetable Preserving & Product Mfg 423100 Motor Vehicle & Motor Vehicle Specialty Food Mfg 112111 Beef Cattle Ranching & Farming Primary Metal Manufacturing Parts & Supplies 311500 Dairy Product Mfg 112112 Cattle Feedlots 331110 Iron & Steel Mills & Ferroalloy 423200 Furniture & Home Furnishings 311610 Animal Slaughtering and Mfg 112120 Dairy Cattle & Milk Production 423300 Lumber & Other Construction Processing 331200 Steel Product Mfg from Materials 112210 Hog & Pig Farming 311710 Seafood Product Preparation & Purchased Steel 423400 Professional & Commercial 112300 Poultry & Egg Production Packaging 331310 Alumina & Aluminum Production Equipment & Supplies 112400 Sheep & Goat Farming 311800 Bakeries, Tortilla & Dry Pasta & Processing 423500 Metal & Mineral (except 112510 Aquaculture (including shellfish & Mfg 331400 Nonferrous Metal (except Petroleum) finfish farms & hatcheries) 311900 Other Food Mfg (including Aluminum) Production & 423600 Household Appliances and 112900 Other Animal Production coffee, tea, flavorings & Processing Electrical & Electronic Goods seasonings) Forestry and Logging 331500 Foundries 423700 Hardware, Plumbing, & Heating Beverage and Tobacco Product Fabricated Metal Product Equipment & Supplies 113110 Timber Tract Operations Manufacturing Manufacturing 423800 Machinery, Equipment, & 113210 Forest Nurseries & Gathering of 312110 Soft Drink & Ice Mfg Forest Products 332110 Forging & Stamping Supplies 312120 Breweries 113310 Logging 332210 Cutlery & Handtool Mfg 423910 Sporting & Recreational Goods & 312130 Wineries Supplies Fishing, Hunting, and Trapping 332300 Architectural & Structural Metals 312140 Distilleries Mfg 423920 Toy & Hobby Goods & Supplies 114110 Fishing 312200 Tobacco Manufacturing 332400 Boiler, Tank, & Shipping 423930 Recyclable Materials 114210 Hunting & Trapping Textile Mills and Textile Product Mills Container Mfg 423940 Jewelry, Watch, Precious Stone, Support Activities for Agriculture and 332510 Hardware Mfg & Precious Metals Forestry 313000 Textile Mills 314000 Textile Product Mills 332610 Spring & Wire Product Mfg 423990 Other Miscellaneous Durable 115110 Support Activities for Crop Goods Production (including cotton Apparel Manufacturing 332700 Machine Shops; Turned Product; & Screw, Nut, & Bolt Mfg Merchant Wholesalers, Nondurable ginning, soil preparation, 315100 Apparel Knitting Mills planting, & cultivating) 332810 Coating, Engraving, Heat Goods 315210 Cut & Sew Apparel Contractors 115210 Support Activities for Animal Treating, & Allied Activities 424100 Paper & Paper Products Production 315220 Men's & Boys' Cut & Sew 332900 Other Fabricated Metal Product 424210 Drugs & Druggists' Sundries Apparel Mfg 115310 Support Activities for Forestry Mfg 424300 Apparel, Piece Goods, & Notions 315240 Women's, Girls' and Infants' Cut Machinery Manufacturing Mining & Sew Apparel Mfg 424400 Grocery & Related Products 333100 Agriculture, Construction, & 424500 Farm Product Raw Materials 211120 Crude Petroleum Extraction 315280 Other Cut & Sew Apparel Mfg Mining Machinery Mfg 424600 Chemical & Allied Products 211130 Natural Gas Extraction 315990 Apparel Accessories & Other 333200 Industrial Machinery Mfg Apparel Mfg 424700 Petroleum & Petroleum Products 212110 Coal Mining 333310 Commercial & Service Industry Leather and Allied Product Machinery Mfg 424800 Beer, Wine, & Distilled Alcoholic 212200 Metal Ore Mining Manufacturing Beverages 212310 Stone Mining & Quarrying 333410 Ventilation, Heating, 316110 Leather & Hide Tanning & Air-Conditioning, & Commercial 424910 Farm Supplies 212320 Sand, Gravel, Clay, & Ceramic & Finishing Refrigeration Equipment Mfg 424920 Book, Periodical, & Newspapers Refractory Minerals Mining & 316210 Footwear Mfg (including rubber Quarrying 333510 Metalworking Machinery Mfg 424930 Flower, Nursery Stock, & Florists' & plastics) Supplies 212390 Other Nonmetallic Mineral 333610 Engine, Turbine & Power 316990 Other Leather & Allied Product Transmission Equipment Mfg 424940 Tobacco & Tobacco Products Mining & Quarrying Mfg 333900 Other General Purpose 424950 Paint, Varnish, & Supplies 213110 Support Activities for Mining Wood Product Manufacturing Machinery Mfg 424990 Other Miscellaneous Nondurable Utilities 321110 Sawmills & Wood Preservation Computer and Electronic Product Goods 221100 Electric Power Generation, 321210 Veneer, Plywood, & Engineered Manufacturing Wholesale Electronic Markets and Transmission & Distribution Wood Product Mfg 334110 Computer & Peripheral Agents and Brokers 221210 Natural Gas Distribution 321900 Other Wood Product Mfg Equipment Mfg 425110 Business to Business Electronic 221300 Water, Sewage & Other Systems Paper Manufacturing 334200 Communications Equipment Mfg Markets 221500 Combination Gas & Electric 322100 Pulp, Paper, & Paperboard Mills 334310 Audio & Video Equipment Mfg 425120 Wholesale Trade Agents & Brokers Construction 322200 Converted Paper Product Mfg 334410 Semiconductor & Other Printing and Related Support Activities Electronic Component Mfg Retail Trade Construction of Buildings 323100 Printing & Related Support 334500 Navigational, Measuring, Motor Vehicle and Parts Dealers 236110 Residential Building Construction Activities Electromedical, & Control Instruments Mfg 441110 New Car Dealers 236200 Nonresidential Building Petroleum and Coal Products Construction Manufacturing 334610 Manufacturing & Reproducing 441120 Used Car Dealers Magnetic & Optical Media Heavy and Civil Engineering 324110 Petroleum Refineries (including 441210 Recreational Vehicle Dealers Construction integrated) Electrical Equipment, Appliance, and 441222 Boat Dealers Component Manufacturing 237100 Utility System Construction 324120 Asphalt Paving, Roofing, & 441228 Motorcycle, ATV, and All Other 237210 Land Subdivision Saturated Materials Mfg 335100 Electric Lighting Equipment Mfg Motor Vehicle Dealers 237310 Highway, Street, & Bridge 324190 Other Petroleum & Coal 335200 Major Household Appliance Mfg 441300 Automotive Parts, Accessories, Construction Products Mfg 335310 Electrical Equipment Mfg & Tire Stores 237990 Other Heavy & Civil Engineering Chemical Manufacturing 335900 Other Electrical Equipment & Furniture and Home Furnishings Stores Construction 325100 Basic Chemical Mfg Component Mfg 442110 Furniture Stores Specialty Trade Contractors 325200 Resin, Synthetic Rubber, & Transportation Equipment 442210 Floor Covering Stores 238100 Foundation, Structure, & Building Artificial & Synthetic Fibers & Manufacturing 442291 Window Treatment Stores Filaments Mfg Exterior Contractors (including 336100 Motor Vehicle Mfg 442299 All Other Home Furnishings framing carpentry, masonry, 325300 Pesticide, Fertilizer, & Other 336210 Motor Vehicle Body & Trailer Mfg Stores glass, roofing, & siding) Agricultural Chemical Mfg 336300 Motor Vehicle Parts Mfg Electronics and Appliance Stores 238210 Electrical Contractors 325410 Pharmaceutical & Medicine Mfg 336410 Aerospace Product & Parts Mfg 443141 Household Appliance Stores 238220 Plumbing, Heating, & 325500 Paint, Coating, & Adhesive Mfg Air-Conditioning Contractors 336510 Railroad Rolling Stock Mfg 443142 Electronics Stores (including 325600 Soap, Cleaning Compound, & 336610 Ship & Boat Building Audio, Video, Computer, and 238290 Other Building Equipment Toilet Preparation Mfg Camera Stores) Contractors

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

Principal Business Activity Codes (Continued)

Building Material and Garden 484120 General Freight Trucking, Activities Related to Credit Accounting, Tax Preparation, Equipment and Supplies Dealers Long-distance Intermediation Bookkeeping, and Payroll Services 444110 Home Centers 484200 Specialized Freight Trucking 522300 Activities Related to Credit 541211 Offices of Certified Public 444120 Paint & Wallpaper Stores Transit and Ground Passenger Intermediation (including loan Accountants Transportation brokers, check clearing, & 541213 Tax Preparation Services 444130 Hardware Stores money transmitting) 485110 Urban Transit Systems 541214 Payroll Services 444190 Other Building Material Dealers Securities, Commodity Contracts, and 444200 Lawn & Garden Equipment & 485210 Interurban & Rural Bus Other Financial Investments and 541219 Other Accounting Services Supplies Stores Transportation Related Activities Architectural, Engineering, and Related Food and Beverage Stores 485310 Taxi and Ridesharing Services 523110 Investment Banking & Securities Services 445110 Supermarkets and Other 485320 Limousine Service Dealing 541310 Architectural Services Grocery (except Convenience) 485410 School & Employee Bus 523120 Securities Brokerage 541320 Landscape Architecture Services Stores Transportation 523130 Commodity Contracts Dealing 541330 Engineering Services 445120 Convenience Stores 485510 Charter Bus Industry 523140 Commodity Contracts Brokerage 541340 Drafting Services 445210 Meat Markets 485990 Other Transit & Ground 523210 Securities & Commodity 541350 Building Inspection Services Passenger Transportation 445220 Fish & Seafood Markets Exchanges 541360 Geophysical Surveying & 445230 Fruit & Vegetable Markets Pipeline Transportation 523900 Other Financial Investment Mapping Services 445291 Baked Goods Stores 486000 Pipeline Transportation Activities (including portfolio 541370 Surveying & Mapping (except Scenic & Sightseeing Transportation management & investment Geophysical) Services 445292 Confectionery & Nut Stores advice) 445299 All Other Specialty Food Stores 487000 Scenic & Sightseeing 541380 Testing Laboratories Transportation Insurance Carriers and Related 445310 Beer, Wine, & Liquor Stores Activities Specialized Design Services Support Activities for Transportation Health and Personal Care Stores 524140 Direct Life, Health, & Medical 541400 Specialized Design Services 488100 Support Activities for Air (including interior, industrial, 446110 Pharmacies & Drug Stores Insurance & Reinsurance Transportation Carriers graphic, & fashion design) 446120 Cosmetics, Beauty Supplies, & 488210 Support Activities for Rail Computer Systems Design and Related Perfume Stores 524150 Direct Insurance & Reinsurance Transportation (except Life, Health, & Medical) Services 446130 Optical Goods Stores 488300 Support Activities for Water Carriers 541511 Custom Computer Programming 446190 Other Health & Personal Care Transportation 524210 Insurance Agencies & Services Stores 488410 Motor Vehicle Towing Brokerages 541512 Computer Systems Design Gasoline Stations 488490 Other Support Activities for Road 524290 Other Insurance Related Services 447100 Gasoline Stations (including Transportation Activities (including third-party 541513 Computer Facilities Management convenience stores with gas) 488510 Freight Transportation administration of insurance and Services Clothing and Clothing Accessories Arrangement pension funds) 541519 Other Computer Related Stores 488990 Other Support Activities for Funds, Trusts, and Other Financial Services 448110 Men's Clothing Stores Transportation Vehicles Other Professional, Scientific, and 448120 Women's Clothing Stores Couriers and Messengers 525100 Insurance & Employee Benefit Technical Services Funds 448130 Children's & Infants' Clothing 492110 Couriers 541600 Management, Scientific, & Stores 525910 Open-End Investment Funds Technical Consulting Services 492210 Local Messengers & Local (Form 1120-RIC) 448140 Family Clothing Stores Delivery 541700 Scientific Research & 525920 Trusts, Estates, & Agency Development Services 448150 Clothing Accessories Stores Warehousing and Storage Accounts 541800 Advertising & Related Services 448190 Other Clothing Stores 493100 Warehousing & Storage (except 525990 Other Financial Vehicles lessors of miniwarehouses & 541910 Marketing Research & Public 448210 Shoe Stores (including mortgage REITs & Opinion Polling self-storage units) closed-end investment funds) 448310 Jewelry Stores 541920 Photographic Services Information “Offices of Bank Holding 448320 Luggage & Leather Goods 541930 Translation & Interpretation Stores Companies” and “Offices of Publishing Industries (except Internet) Other Holding Companies” are Services Sporting Goods, Hobby, Book, and 511110 Newspaper Publishers located under Management of 541940 Veterinary Services Music Stores 511120 Periodical Publishers Companies (Holding 541990 All Other Professional, Scientific, 451110 Sporting Goods Stores Companies), later. 511130 Book Publishers & Technical Services 451120 Hobby, Toy, & Game Stores 511140 Directory & Mailing List Real Estate and Rental and Management of Companies 451130 Sewing, Needlework, & Piece Publishers Goods Stores Leasing (Holding Companies) 511190 Other Publishers 451140 Musical Instrument & Supplies Real Estate 511210 Software Publishers 551111 Offices of Bank Holding Stores 531110 Lessors of Residential Buildings Companies 451211 Book Stores Motion Picture and Sound Recording & Dwellings (including equity Industries REITs) 551112 Offices of Other Holding 451212 News Dealers & Newsstands Companies 512100 Motion Picture & Video Industries 531120 Lessors of Nonresidential General Merchandise Stores (except video rental) Buildings (except Administrative and Support and 452200 Department Stores 512200 Sound Recording Industries Miniwarehouses) (including Waste Management and equity REITs) 452300 General Merchandise Stores, Broadcasting (except Internet) incl. Warehouse Clubs and 531130 Lessors of Miniwarehouses & Remediation Services 515100 Radio & Television Broadcasting Supercenters Self-Storage Units (including Administrative and Support Services Miscellaneous Store Retailers 515210 Cable & Other Subscription equity REITs) Programming 561110 Office Administrative Services 453110 Florists 531190 Lessors of Other Real Estate 561210 Facilities Support Services Telecommunications Property (including equity REITs) 453210 Office Supplies & Stationery 561300 Employment Services Stores 517000 Telecommunications (including 531210 Offices of Real Estate Agents & paging, cellular, satellite, cable & Brokers 561410 Document Preparation Services 453220 Gift, Novelty, & Souvenir Stores other program distribution, 531310 Real Estate Property Managers 561420 Telephone Call Centers 453310 Used Merchandise Stores resellers, other 531320 Offices of Real Estate Appraisers 561430 Business Service Centers 453910 Pet & Pet Supplies Stores telecommunications, & Internet (including private mail centers & service providers) 531390 Other Activities Related to Real copy shops) 453920 Art Dealers Estate Data Processing Services 561440 Collection Agencies 453930 Manufactured (Mobile) Home Rental and Leasing Services Dealers 518210 Data Processing, Hosting, & 561450 Credit Bureaus Related Services 532100 Automotive Equipment Rental & 453990 All Other Miscellaneous Store Leasing 561490 Other Business Support Services Retailers (including tobacco, Other Information Services (including repossession services, candle, & trophy shops) 519100 Other Information Services 532210 Consumer Electronics & court reporting, & stenotype Appliances Rental Nonstore Retailers (including news syndicates, services) libraries, Internet publishing & 532281 Formal Wear & Costume Rental 454110 Electronic Shopping & broadcasting) 561500 Travel Arrangement & Mail-Order Houses 532282 Video Tape & Disc Rental Reservation Services 454210 Vending Machine Operators Finance and Insurance 532283 Home Health Equipment Rental 561600 Investigation & Security Services 454310 Fuel Dealers (including Heating Depository Credit Intermediation 532284 Recreational Goods Rental 561710 Exterminating & Pest Control Oil and Liquefied Petroleum) 522110 Commercial Banking 532289 All Other Consumer Goods Services Rental 454390 Other Direct Selling 522120 Savings Institutions 561720 Janitorial Services Establishments (including 532310 General Rental Centers 522130 Credit Unions 561730 Landscaping Services door-to-door retailing, frozen 532400 Commercial & Industrial 522190 Other Depository Credit 561740 Carpet & Upholstery Cleaning food plan providers, party plan Machinery & Equipment Rental & Services merchandisers, & coffee-break Intermediation Leasing service providers) Nondepository Credit Intermediation 561790 Other Services to Buildings & Lessors of Nonfinancial Intangible Dwellings 522210 Credit Card Issuing Transportation and Assets (except copyrighted works) 561900 Other Support Services Warehousing 522220 Sales Financing 533110 Lessors of Nonfinancial (including packaging & labeling 522291 Consumer Lending Intangible Assets (except services, & convention & trade Air, Rail, and Water Transportation 522292 Real Estate Credit (including copyrighted works) show organizers) 481000 Air Transportation mortgage bankers & originators) Professional, Scientific, and Waste Management and Remediation 482110 Rail Transportation Services 522293 International Trade Financing Technical Services 483000 Water Transportation 522294 Secondary Market Financing 562000 Waste Management & Legal Services Remediation Services Truck Transportation 522298 All Other Nondepository Credit 484110 General Freight Trucking, Local Intermediation 541110 Offices of Lawyers 541190 Other Legal Services

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

Principal Business Activity Codes (Continued)

Other Ambulatory Health Care Services courses, skiing facilities, Automotive & Electronic) Repair Educational Services marinas, fitness centers, & & Maintenance 621900 Other Ambulatory Health Care bowling centers) 611000 Educational Services (including Services (including ambulance 811410 Home & Garden Equipment & schools, colleges, & universities) services & blood & organ banks) Accommodation and Food Appliance Repair & Maintenance Health Care and Social Hospitals Services 811420 Reupholstery & Furniture Repair 622000 Hospitals 811430 Footwear & Leather Goods Assistance Accommodation Repair Nursing and Residential Care Facilities Offices of Physicians and Dentists 721110 Hotels (except Casino Hotels) & 811490 Other Personal & Household 621111 Offices of Physicians (except 623000 Nursing & Residential Care Motels Goods Repair & Maintenance Facilities mental health specialists) 721120 Casino Hotels Personal and Laundry Services Social Assistance 621112 Offices of Physicians, Mental 721191 Bed & Breakfast Inns 812111 Barber Shops Health Specialists 624100 Individual & Family Services 721199 All Other Traveler 812112 Beauty Salons 621210 Offices of Dentists 624200 Community Food & Housing, & Accommodation 812113 Nail Salons Offices of Other Health Practitioners Emergency & Other Relief 721210 RV (Recreational Vehicle) Parks Services 812190 Other Personal Care Services 621310 Offices of Chiropractors & Recreational Camps 624310 Vocational Rehabilitation (including diet & weight reducing 621320 Offices of Optometrists 721310 Rooming & Boarding Houses, centers) Services Dormitories, & Workers’ Camps 621330 Offices of Mental Health 624410 Child Day Care Services 812210 Funeral Homes & Funeral Practitioners (except Physicians) Food Services and Drinking Places Services 621340 Offices of Physical, Occupational Arts, Entertainment, and 722300 Special Food Services (including 812220 Cemeteries & Crematories food service contractors & & Speech Therapists, & Recreation 812310 Coin-Operated Laundries & Audiologists caterers) Performing Arts, Spectator Sports, and Drycleaners 621391 Offices of Podiatrists 722410 Drinking Places (Alcoholic Related Industries Beverages) 812320 Drycleaning & Laundry Services 621399 Offices of All Other (except Coin-Operated) 711100 Performing Arts Companies 722511 Full-Service Restaurants Miscellaneous Health 812330 Linen & Uniform Supply Practitioners 711210 Spectator Sports (including 722513 Limited-Service Restaurants sports clubs & racetracks) 812910 Pet Care (except Veterinary) Outpatient Care Centers 722514 Cafeterias and Buffets 711300 Promoters of Performing Arts, Services 621410 Family Planning Centers Sports, & Similar Events 722515 Snack and Non-alcoholic 812920 Photofinishing Beverage Bars 621420 Outpatient Mental Health & 711410 Agents & Managers for Artists, 812930 Parking Lots & Garages Substance Abuse Centers Athletes, Entertainers, & Other Other Services 812990 All Other Personal Services 621491 HMO Medical Centers Public Figures Repair and Maintenance Religious, Grantmaking, Civic, 621492 Kidney Dialysis Centers 711510 Independent Artists, Writers, & Professional, and Similar Organizations Performers 811110 Automotive Mechanical & 621493 Freestanding Ambulatory Electrical Repair & Maintenance 813000 Religious, Grantmaking, Civic, Surgical & Emergency Centers Museums, Historical Sites, and Similar Professional, & Similar Institutions 811120 Automotive Body, Paint, Interior, 621498 All Other Outpatient Care & Glass Repair Organizations (including Centers 712100 Museums, Historical Sites, & condominium and homeowners Similar Institutions 811190 Other Automotive Repair & associations) Medical and Diagnostic Laboratories Maintenance (including oil 621510 Medical & Diagnostic Amusement, Gambling, and Recreation change & lubrication shops & car Laboratories Industries washes) Home Health Care Services 713100 Amusement Parks & Arcades 811210 Electronic & Precision 621610 Home Health Care Services 713200 Gambling Industries Equipment Repair & 713900 Other Amusement & Recreation Maintenance Industries (including golf 811310 Commercial & Industrial Machinery & Equipment (except

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

Index

Limited liability companies 2 Refundable credits 20 A E Lobbying expenses, Related party transactions 10 Accounting methods 5 Electronic deposit requirement 4 nondeductibility 15 Rents (expense) 11 Accounting period (Tax Year) 6 Electronic filing 3 Rents (income) 9 Address change 8 Employee benefit programs 14 Repairs and maintenance 11 Advance payments 8 Employer identification number M Affiliated group 21 (EIN) 8 Merchant Marine capital Amended return 6 Entities electing to be taxed as construction fund: S Amortization 10 corporations 2 Deduction for contributions 16 Salaries and wages 11 Assembling the return 4 Estimated tax: Tax on nonqualified Schedule: At-risk rules 15 Penalty 5, 16 withdrawal 20 C 16 Estimated tax payments 4 Minimum tax: J 19 Extension of time to file 3 Prior year, credit for 19 K 21 B Mutual savings banks conducting L 24 Backup withholding 20 life insurance business 19 M-1 24 Bad debts 11 F M-3 8, 24 Balance sheets 24 Farming, corporations engaged O 19 Base erosion minimum tax 19, 23 in 2 N Section 263A costs 10 Beneficiaries of trusts 20 Final return 8 Name change 8 Section 965 payments 20 Business start-up expenses 10 Financial asset securitization Net operating loss 15, 22 Shareholders' equity Nonaccrual experience method 9 adjustments 24 investment trust (FASIT) 2 Signature 3 Foreign person (defined) 22 Small business taxpayer 5, 23 C Foreign tax credit 19 Specific Instructions 7 Capital construction Forms and publications, how to O fund (See Merchant Marine get 2 Other deductions 14 capital construction fund) Future Developments 1 Other income 9 Closely held corporations 10 Other taxes 20 T Overpaid estimated tax 20 Taxes and licenses 12 Compensation of officers 11 Tax-exempt securities 24 Consolidated return 7, 22 G Tax issues, unresolved 1 Contributions, charitable 12 General business credit 19 Total assets 8 Contributions to reduce public General Instructions 2 P Travel, meals, and debt 2 Gross receipts 8 Partnership income (loss) 14 entertainment 14 Controlled group 19 Passive activity limitations 10 Cost of goods sold 9 Payments and refundable Credits against tax 19 I credits 20 Installment sales 9 Penalties 5, 16 U Interest due: Pension, profit-sharing, etc. Uniform capitalization rules 10 D Late payment of tax 5 plans 14 Deductions 10 Look-back method 20 Personal holding company 7 Depletion 13 Interest expense 12 Personal holding company tax 19 W Depository methods of tax Interest income: Personal service corporation 7 What’s New 1 payment 4 Taxable 9 Preparer, tax return 3 When to file 3 Depreciation 13 Tax-exempt 22, 24 Private delivery services 3 Where to file 4 Direct deposit of refund 2, 16 Who must file 2 Disclosure statement 6 Who must sign 3 Dividend income 9 L R Worksheets: Dividends-received LIFO recapture: Recapture taxes 20 Schedule C 18 deduction 16–19 Tax on 20 Reconciliation of income 24 Dues, membership and other 14 Limitations on deductions 10, 12 Recordkeeping 6

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