Tax and Payments

Line 29b. Prior year(s) special estimated tax payments to be applied.   The amount entered on line 29b must agree with the amount(s) from Form 8816, Part III, line 11. See Form 8816 and section 847(2) for additional information.

Line 29c. Estimated tax payments.   Enter any estimated tax payments the corporation made for the tax year. Do not include any amount being applied on line 29d.

Line 29d. Special estimated tax payments.   If the deduction under section 847 is claimed on line 17, page 1, special estimated tax payments must be made in an amount equal to the tax benefit of the deduction. These payments must be made on or before the due date (without regard to extensions) of this tax return. See Form 8816 and section 847(2) for additional information.

Tax benefit rule.   Section 847(8) requires that if a corporation carries back net operating losses or capital losses that arise in years after a year in which a section 847 deduction was claimed, then the corporation must recompute the tax benefit attributable to the previously claimed section 847 deduction taking into account the loss carrybacks. Tax benefits also include those derived from filing a consolidated return with another insurance company (without regard to section 1503(c)).

Therefore, if the recomputation changes the amount of the section 847 tax benefit, then the taxpayer must provide a computation schedule and attach it to Form 8816.

Line 29f.   Enter the total of lines 29a through 29c less line 29e. Do not include line 29d in the total for line 29f.

Line 29h. Credit for tax paid on undistributed capital gains.   Enter the credit (from Form 2439, Notice to Shareholder of Undistributed Long-Term Capital Gains) for the corporation's share of the tax paid by a regulated investment company (RIC) or a real estate investment trust (REIT) on undistributed long-term capital gains included in the corporation's income. Attach Form 2439 to Form 1120-L.

Line 29i. Credit for federal tax paid on fuels.   Complete and attach Form 4136, Credit for Federal Tax Paid on Fuels, if the corporation qualifies to take this credit.

Line 29j. U.S. income tax paid or withheld at source.   Enter the amount of any U.S. income tax paid or withheld as reported on Form 1042-S.

Line 29k. Total payments.   Add the amounts on lines 29f through 29j and enter the total on line 29k.

Backup withholding.   If the corporation had income tax withheld from any payments it received because, for example, it failed to give the payer its correct EIN, include the amount withheld in the total for line 29k. This type of withholding is called Backup Withholding. Show the amount withheld in the blank space above line 29k and write Backup Withholding.

Line 30. Estimated tax penalty.   A corporation that does not make estimated tax payments when due may be subject to an underpayment penalty for the period of underpayment. Generally, a corporation is subject to the penalty if its tax liability is $500 or more and it did not timely pay the smaller of:

• Its tax liability for 2002 or
• Its prior year's tax.

See section 6655 for details and exceptions, including special rules for large corporations.

Use Form 2220, Underpayment of Estimated Tax by Corporations, to see if the corporation owes a penalty and to figure the amount of the penalty. Generally, the corporation does not have to file this form because the IRS can figure the amount of any penalty and bill the corporation for it. However, even if the corporation does not owe the penalty, complete and attach Form 2220 if:

• The annualized income or adjusted seasonal installment method is used.
• The corporation is a large corporation computing its first required installment based on the prior year's tax. (See the Instructions for Form 2220 for the definition of a large corporation.)

If Form 2220 is attached, check the box on line 30 and enter the amount of any penalty on that line.

Line 33. Direct deposit of tax refund of $1 million or more.   If the corporation wants its refund of $1 million or more directly deposited into its checking or savings account at any U.S. bank or other financial institution instead of having a check sent to the corporation, complete Form 8302 and attach it to the corporation's tax return.

Schedule A - Dividend Income and Dividends-Received Deduction

For purposes of the 20% ownership test on lines 1 through 7, the percentage of stock owned by the corporation is based on voting power and value of the stock. Preferred stock described in section 1504(a)(4) is not taken into account. Corporations filing a consolidated return should see Regulations sections 1.1502-13, 1.1502-26, and 1.1502-27 before completing Schedule A.

Line 1, column (a).   Enter dividends (except those received on debt-financed stock acquired after July 18, 1984 (see section 246A)) that:

• Were received from less-than-20%-owned domestic corporations subject to income tax and
• Qualify for the 70% deduction under section 243(a)(1).

  Also include on line 1:

• Taxable distributions from an IC-DISC or former DISC that are designated as eligible for the 70% deduction and certain dividends of Federal Home Loan Banks. See section 246(a)(2).
• Dividends (except those received on debt-financed stock acquired after July 18, 1984) from a regulated investment company (RIC). The amount of dividends eligible for the dividends-received deduction under section 243 is limited by section 854(b). The corporation should receive a notice from the RIC specifying the amount of dividends that qualify for the deduction.

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

Line 2, column (a).   Enter on line 2:

• Dividends (except those received on debt-financed stock acquired after July 18, 1984) that are received from 20%-or-more-owned domestic corporations subject to income tax and that are subject to the 80% deduction under section 243(c) and
• Taxable distributions from an IC-DISC or former DISC that are considered eligible for the 80% deduction.

Line 3, column (a).   Enter dividends that are:

• Received on debt-financed stock acquired after July 18, 1984, from domestic and foreign corporations subject to income tax that would otherwise be subject to the dividends-received deduction under section 243(a)(1), 243(c), or 245(a). Generally, debt-financed stock is stock that the corporation acquired by incurring a debt (e.g., it borrowed money to buy the stock).
• Received from a RIC on debt-financed stock. The amount of dividends eligible for the dividends-received deduction is limited by section 854(b). The corporation should receive a notice from the RIC specifying the amount of dividends that qualify for the deduction.

Line 3, columns (b) and (c).   Dividends received on debt-financed stock acquired after July 18, 1984, are not entitled to the full 70% or 80% dividends-received deduction. The 70% or 80% deduction is reduced by a percentage that is related to the amount of debt incurred to acquire the stock. See section 246A. Also, see section 245(a) before making this computation for an additional limitation that applies to dividends received from foreign corporations. Attach a schedule showing how the amount on line 3, column (c), was figured.

Line 4, column (a).   Enter dividends received on the preferred stock of a less-than-20%-owned public utility that is subject to income tax and is allowed the deduction provided in section 247 for dividends paid.

Line 5, column (a).   Enter dividends received on the preferred stock of a 20%-or-more-owned-public utility that is subject to income tax and is allowed the deduction provided in section 247 for dividends paid.

Line 6, column (a).   Enter the U.S.-source portion of dividends that:

• Were received from less-than-20%-owned foreign corporations and
• Qualify for the 70% deduction under section 245(a). To qualify for the 70% deduction, the corporation must own at least 10% of the stock of the foreign corporation by vote and value.

Also include dividends received from a less-than-20%-owned FSC that:

• Are attributable to income treated as effectively connected with the conduct of a trade or business within the United States (excluding foreign trade income) and
• Qualify for the 70% deduction provided in section 245(c)(1)(B).

Line 7, column (a).   Enter the U.S.-source portion of dividends received from 20%-or-more-owned foreign corporations that qualify for the 80% deduction under section 245(a). Also include dividends received from a 20%-or-more-owned FSC that:

• Are attributable to income treated as effectively connected with the conduct of a trade or business within the United States (excluding foreign trade income) and
• Qualify for the 80% deduction provided in section 245(c)(1)(B).

Line 8, column (a).   Enter dividends received from wholly owned foreign subsidiaries that are eligible for the 100% deduction under section 245(b).

In general, the deduction under section 245(b) applies to dividends paid out of the earnings and profits of a foreign corporation for a tax year during which:

• All of its outstanding stock is owned (directly or indirectly) by the domestic corporation receiving the dividends and
• All of its gross income from all sources is effectively connected with the conduct of a trade or business within the United States. Do not include dividends received from a life insurance company.

Line 9, column (a).   Enter only those dividends that qualify under section 243(b) for the 100% dividends-received deduction described in section 243(a)(3). Corporations taking this deduction are subject to the provision of section 1561. Do not include dividends received from a life insurance company.

The 100% deduction does not apply to affiliated group members that are joining in the filing of a consolidated return.

Line 10, column (c). Limitation on dividends-received deduction.   Generally, line 10 of column (c), may not exceed the amount from the worksheet below. However, in a year in which a loss from operations occurs, this limitation does not apply even if the loss is created by the dividends-received deduction. (See sections 246(b) and 810.)

Worksheet for Schedule A, line 10 (keep for your records)

1.	Add lines 8 and 25, page 1, less the total of lines 9 through 18, page 1, and without: the small life insurance company deduction, the operations loss deduction, the dividends-received deduction (sections 243(a)(1), 244(a), and 245), any adjustment under section 1059, and any capital loss carryback to the current tax year (section 1212(a)(1))
2.	Add lines 9 and 13, column (c)
3.	Subtract line 2 from line 1
4.	Multiply line 3 by 80%
5.	Add lines 2, 5, 7, and 8, column (c) and the portion of the deduction on line 3, column (c) that is attributable to dividends received from 20%-or-more-owned corporations
6.	Enter the smaller of line 4 or line 5. (If line 5 is greater than line 4, stop here and enter the amount from line 6 on line 10, column (c)). Do not complete the rest of worksheet
7.	Enter the total amount of dividends from 20% - or - more - owned corporations that are included on lines 2, 3, 5, 7, and 8 of column (a)
8.	Subtract line 7 from line 3
9.	Multiply line 8 by 70%
10.	Subtract line 5 above from line 10 of column (c)
11.	Enter the smaller of line 9 or line 10
12.	Dividends-received deduction after limitation (section 246(b)). Add lines 6 and 11. Enter the result here and on line 10, column (c)

Line 13, column (a).   Enter dividends that qualify for the 100% dividends-received deduction and that are not reported on line 8 or 9 because they were not distributed out of tax-exempt interest or out of dividends that do not qualify as 100% dividends, or because they were paid by a life insurance company.

Note.   Certain dividends received by a foreign corporation are not subject to proration. Attach a schedule showing computations.

Line 14, column (a).   Include the following:

1. Foreign dividends not reportable on lines 6, 7, 8, or 13. Include on line 14 the corporation's share of the ordinary earnings of a qualified electing fund from Form 8621, line 1c. Exclude distributions of amounts constructively taxed in the current year or in prior years under subpart F (sections 951 through 964).
2. Income constructively received from controlled foreign corporations under Subpart F. This amount should equal the total Subpart F income reported on Schedule I, Form 5471.
3. Gross-up of dividends for taxes deemed paid under sections 902 and 960.
4. Dividends (other than capital gain distributions reported on Schedule D (Form 1120) and exempt-interest dividends) that are received from RICs and that are not subject to the 70% deduction.
5. Dividends from tax-exempt organizations.
6. Dividends (other than capital gain dividends) received from a REIT that, for the tax year of the trust in which the dividends are paid, qualifies under sections 856 through 860.
7. Dividends not eligible for a dividends-received deduction because of the holding period of the stock or an obligation to make corresponding payments with respect to similar stock.

   Two situations in which the dividends-received deduction will not be allowed on any share of stock are:

   • If the corporation held it for less than 46 days during the 90-day period beginning 45 days before the stock became ex-dividend with respect to the dividend. (See section 246(c)(1)(A)) or
   • To the extent that the corporation is under an obligation to make related payments for substantially similar or related property.
8. Any other taxable dividend income not properly reported above (including distributions under section 936(h)(4)).

Schedule B - Gross Investment Income

Line 1. Interest.   Enter the total taxable interest received or accrued during the tax year, less any amortization of premium, plus any accrual of discount required by section 811(b). Generally, the appropriate amortization of premium and accrual of discount for the tax year on bonds, notes, debentures, or other evidence of indebtedness held by a life insurance company should be determined:

1. Under the method regularly employed by the company, if reasonable, and
2. In all other cases, under the regulations.

For bonds (as defined in section 171(d)) issued after September 27, 1985, the appropriate amount of amortization of premium must be determined using the yield to maturity method described in section 171(b)(3). Market discount is not required to be accrued under section 811(b). Attach a statement showing the method and computation used.

Note.   The 1996 Act repealed section 133, which provided for the 50% interest income exclusion with respect to ESOP loans. The Act also repealed section 812(g), which provided for the exclusion of interest income from ESOP loans for company/policyholder proration. The repeal of these exclusions is effective for ESOP loans made after August 20, 1996. See Act section 1602 for special rules for binding contract agreements in effect prior to June 10, 1996, and certain refinancings made after August 20, 1996.

Line 3. Gross rents.   Enter the gross rents received or accrued during the tax year. Related expenses, such as repairs, taxes, and depreciation should be reported as Other deductions on line 18, page 1.

Line 4. Gross royalties.   Enter the gross royalties received or accrued during the tax year. Report the depletion deduction on line 18, page 1.

Line 5. Leases, terminations, etc.   Enter the gross income received from entering into, altering, or terminating any lease, mortgage, or other instrument from which the corporation derives interest, rents, or royalties.

Line 6. Excess of net short-term capital gain over net long-term capital loss.   See the instructions for line 5, page 1, on page 7, for a definition of capital assets.

Line 7. Gross income from a trade or business other than insurance.   Enter the gross income from a trade or business (other than insurance carried on by the life insurance company or by a partnership of which the life insurance company is a partner). Include section 1245, section 1250, and other ordinary gains on assets used in a noninsurance business from Form 4797. Report expenses related to any trade or business other than insurance on line 18, page 1.

Line 10. The increase in policy cash value of section 264(f) policies as defined in section 805(a)(4)(F).   Generally, this applies to contracts issued after June 8, 1997, in tax years ending after that date. However, it also applies to contracts issued prior to June 9, 1997, that have been subject to a material increase in death benefits or other material change. See section 1084(d) of the Taxpayer Relief Act of 1997.

Line 12. 100% qualifying dividends.   Enter the total amount of dividends if the percentage used to determine the deduction allowable under sections 243, 244, and 245(b) is 100%. Do not include dividends to the extent they are funded with tax-exempt interest or dividends that would not qualify as 100% dividends in the hands of the corporation. See section 812(e).

Note.   Multi-tiered corporate arrangements cannot be used to change the character of the tax-exempt interest income and dividends received in an attempt to avoid exclusion.

Previous| First | Next

Instructions Index | 2002 Tax Help Archives | Tax Help Archives | Home