2021 Department of the Treasury

Internal Revenue Service

Instructions for Form 1120

U.S. Corporation Income Tax Return
Section references are to the Internal Revenue
Code unless otherwise noted.
Future Developments Under the general rule, any contribution in
aid of construction or any contribution by a
Contents Page For the latest information about government entity to the capital of a
developments related to Form 1120 and corporation is not eligible for exclusion
Future Developments . . . . . . . . . ... 1 its instructions, such as legislation from income under section 118. Under the
What’s New . . . . . . . . . . . . . . . ... 1 enacted after they were published, go to special rule, any amount of money or
Photographs of Missing Children . ... 1 [Link]/Form1120. property received after December 31,
The Taxpayer Advocate Service . . ... 1 2020, as a contribution in aid of
Direct Deposit of Refund . . . . . . . ... 2 What’s New construction or a contribution to the capital
How To Make a Contribution To of a regulated public utility which provides
Reduce Debt Held by the Credit for qualified sick and family water or sewerage disposal services is
Public . . . . . . . . . . . . . . . . ... 2 leave wages. The American Rescue eligible for exclusion from income under
How To Get Forms and Plan Act of 2021 (the ARP) provided section 118. Generally, corporations
Publications . . . . . . . . . . . . . . . 2 credits for qualified sick and family leave report amounts treated as contribution in
General Instructions . . . . . . . . . . . . . 2 wages similar to the credits that were aid of construction under this provision on
Purpose of Form . . . . . . . . . . . . . . . 2 previously enacted under the Families Schedule M-3 (Form 1120), Part III,
Who Must File . . . . . . . . . . . . . . . . 2 First Coronavirus Response Act (FFCRA) line 36. For additional information, see
When To File . . . . . . . . . . . . . . . . . 3 and amended and extended by the section 118.
Where To File . . . . . . . . . . . . . . . . . 4 COVID-related Tax Relief Act of 2020.
Who Must Sign . . . . . . . . . . . . . . . . 3 See the Instructions for Form 941 for more
information.
Photographs of
Paid Preparer Authorization . . . . . . . . 3 Missing Children
Assembling the Return . . . . . . . . . . . 4 COVID-19 related employee retention
The Internal Revenue Service is a proud
Tax Payments . . . . . . . . . . . . . . . . 4 credit. The employee retention credit,
partner with the National Center for
Estimated Tax Payments . . . . . . . . . 5 enacted by the Coronavirus Aid, Relief,
Missing & Exploited Children® (NCMEC).
Interest and Penalties . . . . . . . . . . . . 5 and Economic Security (CARES) Act, and
Photographs of missing children selected
Accounting Methods . . . . . . . . . . . . 5 amended by the ARP and other recent
by the Center may appear in instructions
legislation, is limited to qualified wages
Accounting Period . . . . . . . . . . . . . . 6 on pages that would otherwise be blank.
paid before October 1, 2021 (or, in the
Rounding Off to Whole Dollars . . . . . . 6 You can help bring these children home
case of wages paid by an eligible
Recordkeeping . . . . . . . . . . . . . . . . 6 by looking at the photographs and calling
employer which is a recovery startup
Other Forms and Statements That 1-800-THE-LOST (1-800-843-5678) if you
business, before January 1, 2022). See
May Be Required . . . . . . . . . . . 6 recognize a child.
the Instructions for Form 941 for more
Specific Instructions . . . . . . . . . . . . . 7 information.
Period Covered . . . . . . . . . . . . . . . 7 The Taxpayer Advocate
Paycheck Protection Program (PPP)
Name and Address . . . . . . . . . . . . . 7
loans. Corporations should report
Service
Identifying Information . . . . . . . . . . . 8 The Taxpayer Advocate Service (TAS) is
certain information related to a PPP loan.
Employer Identification Number an independent organization within the
(EIN) . . . . . . . . . . . . . . . . ... 8 The forgiveness of a PPP loan creates
tax-exempt income. Rev. Proc. 2021-48, IRS that helps taxpayers and protects
Total Assets . . . . . . . . . . . . . . . ... 9 taxpayer rights. TAS's job is to ensure that
2021-49 I.R.B. 835 available at
Initial Return, Final Return, Name every taxpayer is treated fairly and knows
Change, or Address Change . ... 9 [Link]/irb/2021-49_IRB#REV-
PROC-2021-48 permits corporations to and understands their rights under the
Income . . . . . . . . . . . . . . . . . . ... 9 Taxpayer Bill of Rights.
treat tax-exempt income resulting from the
Deductions . . . . . . . . . . . . . . . . . 10 forgiveness of a PPP loan as received or
Schedule C. Dividends, Inclusions, accrued (1) as, and to the extent that, As a taxpayer, the corporation has
and Special Deductions . . . . . . 17 rights that the IRS must abide by in its
eligible expenses are paid or incurred; (2)
Schedule J. Tax Computation and when the taxpayer applies for forgiveness dealings with the corporation. TAS can
Payment . . . . . . . . . . . . . . . . 19 help the corporation if:
of the PPP loan; or (3) when forgiveness
Schedule K. Other Information . . . . . 21 of the PPP loan is granted. For additional • A problem is causing financial difficulty
Schedule L. Balance Sheets per details about the timing of tax-exempt for the business;
Books . . . . . . . . . . . . . . . . . . 24
income related to PPP loans, see Rev. • The business is facing an immediate
Schedule M-1. Reconciliation of Proc. 2021-48. Also, see Paycheck threat of adverse action; or
Income (Loss) per Books With
Protection Program (PPP) loans and the • The corporation has tried repeatedly to
Income per Return . . . . . . . . . . 24 contact the IRS but no one has
instructions for Schedules M-1 and M-2,
Schedule M-2. Analysis of responded, or the IRS hasn't responded
Unappropriated Retained later.
by the date promised.
Earnings per Books . . . . . . . . . 25 Contributions in aid of construction for
Principal Business Activity Codes . . . 28 regulated water and sewerage dispos- TAS has offices in every state, the
Index . . . . . . . . . . . . . . . . . . . . . 31 al utility companies. For contributions District of Columbia, and Puerto Rico.
made after December 31, 2020, a special Local advocates' numbers are in their
rule applies to contributions to the capital local directories and at
of water and sewerage disposal utilities. [Link]. The

Jan 24, 2022 Cat. No. 11455T

corporation can also call TAS at forms and publications it may need on (FASIT). Special rules apply to a FASIT in
1-877-777-4778. [Link]/FormsPubs. Otherwise, the existence on October 22, 2004, to the
corporation can go to [Link]/ extent that regular interests issued by the
TAS also works to resolve large-scale OrderForms to place an order and have FASIT before October 22, 2004, continue
or systemic problems that affect many forms mailed to it. The IRS will process to remain outstanding in accordance with
taxpayers. If the corporation knows of one your order for forms and publications as their original terms.
of these broad issues, please report it to soon as possible.
TAS through the Systemic Advocacy If a corporation holds an ownership
Management System at [Link]/SAMS. interest in a FASIT to which these special

For more information, go to [Link]/

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

-2- Instructions for Form 1120

Special Returns for Private delivery services can't
Regulated investment deliver items to P.O. boxes. You
Certain Organizations company (section 851)
1120-RIC !
CAUTION must use the U.S. Postal Service

S corporation (section to mail any item to an IRS P.O. box

Instead of filing Form 1120, certain organizations, 1120-S address.
1361)
as shown below, file special returns.
If the organization is a: File Form Settlement fund
1120-SF Extension of Time To File
▼ ▼ (section 468B)
File Form 7004, Application for Automatic
Exempt organization
Extension of Time To File Certain
Business Income Tax, Information, and
with unrelated trade or 990-T Electronic Filing Other Returns, to request an extension of
business income
Corporations can generally electronically time to file. Generally, the corporation
Religious or apostolic file (e-file) Form 1120, related forms, must file Form 7004 by the regular due
organization exempt 1065 schedules, and attachments; Form 7004 date of the return. See the Instructions for
under section 501(d) (automatic extension of time to file); and Form 7004.
Forms 940, 941, and 944 (employment tax
Entity formed as a
limited liability company
returns). If there is a balance due, the Who Must Sign
corporation can authorize an electronic
under state law and The return must be signed and dated by:
1065 funds withdrawal while e-filing. Form 1099
treated as a partnership
and other information returns can also be
• The president, vice president, treasurer,
for federal income tax assistant treasurer, chief accounting
purposes electronically filed. The option to e-file
officer; or
does not, however, apply to certain
Subchapter T returns.
• Any other corporate officer (such as tax
cooperative association officer) authorized to sign.
(including a farmers'
1120-C Certain corporations with total assets of
cooperative) $10 million or more that file at least 250 If a return is filed on behalf of a
returns a year are required to e-file Form corporation by a receiver, trustee, or
Entity that elects to be 1120. See Regulations section assignee, the fiduciary must sign the
treated as a real estate 301.6011-5. However, these corporations return, instead of the corporate officer.
mortgage investment 1066 can request a waiver of the electronic filing Returns and forms signed by a receiver or
conduit (REMIC) under
requirements. See Notice 2010-13, trustee in bankruptcy on behalf of a
section 860D corporation must be accompanied by a
2010-4 I.R.B. 327.
copy of the order or instructions of the
Interest charge domestic For more information, visit [Link]/
international sales 1120-IC-DISC
court authorizing signing of the return or
Corporations. form.
corporation (section 992)

Foreign corporation When To File If an employee of the corporation

(other than life or Generally, a corporation must file its completes Form 1120, the paid preparer
property and casualty income tax return by the 15th day of the space should remain blank. Anyone who
1120-F
insurance company filing 4th month after the end of its tax year. A prepares Form 1120 but does not charge
Form 1120-L or Form
new corporation filing a short-period return the corporation should not complete that
1120-PC)
must generally file by the 15th day of the section. Generally, anyone who is paid to
4th month after the short period ends. A prepare the return must sign it and fill in
Foreign sales
1120-FSC corporation that has dissolved must the “Paid Preparer Use Only” area.
corporation (section 922)
generally file by the 15th day of the 4th The paid preparer must complete the
Condominium month after the date it dissolved. required preparer information and:
management, residential
real estate However, a corporation with a fiscal tax • Sign the return in the space provided
management, or year ending June 30 must file by the 15th for the preparer's signature, and
timeshare association 1120-H day of the 3rd month after the end of its • Give a copy of the return to the
that elects to be treated tax year. A corporation with a short tax taxpayer.
as a homeowners year ending anytime in June will be A paid preparer may sign original
association under treated as if the short year ended on June
section 528 TIP or amended returns by rubber
30, and must file by the 15th day of the 3rd stamp, mechanical device, or
Life insurance company
month after the end of its tax year. computer software program.
1120-L
(section 801) If the due date falls on a Saturday,
Sunday, or legal holiday, the corporation
Fund set up to pay for
can file on the next business day.
Paid Preparer
nuclear
1120-ND Authorization
decommissioning costs Private Delivery Services If the corporation wants to allow the IRS to
(section 468A)
Corporations can use certain private discuss its 2021 tax return with the paid
Property and casualty delivery services (PDS) designated by the preparer who signed it, check the “Yes”
insurance company 1120-PC IRS to meet the “timely mailing as timely box in the signature area of the return.
(section 831) filing” rule for tax returns. Go to [Link]/ This authorization applies only to the
PDS. individual whose signature appears in the
Political organization
(section 527)
1120-POL The PDS can tell you how to get written “Paid Preparer Use Only” section of the
proof of the mailing date. return. It does not apply to the firm, if any,
Real estate investment shown in that section.
trust (section 856)
1120-REIT For the IRS mailing address to use if
you’re using a PDS, go to [Link]/ If the “Yes” box is checked, the
PDSstreetAddresses. corporation is authorizing the IRS to call

Instructions for Form 1120 -3-

the paid preparer to answer any questions
that may arise during the processing of its Where To File
return. The corporation is also authorizing
the paid preparer to: File the corporation's return at the applicable IRS address listed below.
• Give the IRS any information that is
missing from the return; If the corporation's principal And the total assets at
• Call the IRS for information about the business, office, or agency the end of the tax year
processing of the return or the status of is located in: are: Use the following address:
any related refund or payment(s); and Connecticut, Delaware, District Less than $10 million Department of the Treasury
• Respond to certain IRS notices about of Columbia, Georgia, Illinois, and Schedule M-3 is not Internal Revenue Service Center
math errors, offsets, and return Indiana, Kentucky, Maine, filed Kansas City, MO 64999-0012
preparation. Maryland, Massachusetts,
$10 million or more, or Department of the Treasury
Michigan, New Hampshire,
The corporation is not authorizing the less than $10 million and Internal Revenue Service Center
New Jersey, New York, North
paid preparer to receive any refund check, Schedule M-3 is filed Ogden, UT 84201-0012
Carolina, Ohio, Pennsylvania,
bind the corporation to anything (including Rhode Island, South Carolina,
any additional tax liability), or otherwise Tennessee, Vermont, Virginia,
represent the corporation before the IRS. West Virginia, Wisconsin
The authorization will automatically end Alabama, Alaska, Arizona,
no later than the due date (excluding Arkansas, California,
extensions) for filing the corporation's Colorado, Florida, Hawaii,
2022 tax return. If the corporation wants to Idaho, Iowa, Kansas,
expand the paid preparer's authorization Louisiana, Minnesota, Department of the Treasury
or revoke the authorization before it ends, Mississippi, Missouri, Any amount Internal Revenue Service Center
see Pub. 947, Practice Before the IRS and Montana, Nebraska, Nevada, Ogden, UT 84201-0012
Power of Attorney. New Mexico, North Dakota,
Oklahoma, Oregon, South
Assembling the Return Dakota, Texas, Utah,
Washington, Wyoming
To ensure that the corporation's tax return
is correctly processed, attach all A foreign country or U.S. Internal Revenue Service Center
schedules and other forms after page 6 of possession Any amount P.O. Box 409101
Form 1120 in the following order. Ogden, UT 84409
1. Schedule N (Form 1120). A group of corporations with members located in more than one service center area will often
2. Schedule D (Form 1120). keep all the books and records at the principal office of the managing corporation. In this case,
the tax returns of the corporations may be filed with the service center for the area in which the
3. Form 4797. principal office of the managing corporation is located.
4. Form 8949.
5. Form 8996.
6. Form 8050. totals on the printed forms. Enter the (such as deposits of employment, excise,
corporation's name and EIN on each and corporate income tax). Generally,
7. Form 1125-A.
supporting statement or attachment. electronic funds transfers are made using
8. Form 4136. the Electronic Federal Tax Payment
9. Form 8978. Note. If the corporation had tax withheld System (EFTPS). However, if the
under Chapter 3 or 4 of the Internal corporation does not want to use EFTPS,
10. Form 965-B.
Revenue Code and received a Form it can arrange for its tax professional,
11. Form 8941. 1042-S, Form 8805, or Form 8288-A financial institution, payroll service, or
12. Form 3800. showing the amount of income tax other trusted third party to make deposits
13. Form 6252. withheld, attach such form(s) to the on its behalf. Also, it may arrange for its
corporation’s income tax return to claim a financial institution to submit a same-day
14. Form 8997. withholding credit. The corporation should payment (discussed below) on its behalf.
15. Additional schedules in report the tax withheld on Schedule J, Part EFTPS is a free service provided by the
alphabetical order. III, line 20d. See the instructions for Department of the Treasury. Services
16. Additional forms in numerical order. Schedule J, Part III, line 20d. provided by a tax professional, financial
institution, payroll service, or other third
17. Supporting statements and
attachments. Tax Payments party may have a fee.
Generally, the corporation must pay any To get more information about EFTPS
Complete every applicable entry space tax due in full no later than the due date for or to enroll in EFTPS, visit [Link] or
on Form 1120. Do not enter “See filing its tax return (not including call 1-800-555-4477 (TTY/TDD
Attached” or “Available Upon Request” extensions). See the instructions for 1-800-733-4829).
instead of completing the entry spaces. If line 35. If the due date falls on a Saturday,
more space is needed on the forms or Sunday, or legal holiday, the payment is Depositing on time. For any deposit
schedules, attach separate sheets using due on the next day that isn't a Saturday, made by EFTPS to be on time, the
the same size and format as the printed Sunday, or legal holiday. corporation must submit the deposit by 8
forms. p.m. Eastern time the day before the date
Electronic Deposit the deposit is due. If the corporation uses
If there are supporting statements and Requirement a third party to make deposits on its
attachments, arrange them in the same behalf, they may have different cutoff
order as the schedules or forms they Corporations must use electronic funds
transfer to make all federal tax deposits times.
support and attach them last. Show the

-4- Instructions for Form 1120

Same-day wire payment option. If the Interest and Penalties including the definition of responsible
corporation fails to submit a deposit persons.
transaction on EFTPS by 8 p.m. Eastern If the corporation receives a notice
time the day before the date a deposit is ! about penalties after it files its Note. The trust fund recovery penalty will
CAUTION return, send the IRS an not apply to any amount of trust fund taxes
due, it can still make its deposit on time by
using the Federal Tax Collection Service explanation and we will determine if the an employer holds back in anticipation of
(FTCS). To use the same-day wire corporation meets reasonable-cause the credit for qualified sick and family
payment method, the corporation will need criteria. Do not attach an explanation leave wages or the employee retention
to make arrangements with its financial when the corporation's return is filed. credit that they are entitled to. See Pub. 15
institution ahead of time regarding or Pub. 51 for more information.
Interest. Interest is charged on taxes
availability, deadlines, and costs. Other penalties. Other penalties can be
paid late even if an extension of time to file
Financial institutions may charge a fee for imposed for negligence, substantial
is granted. Interest is also charged on
payments made this way. To learn more understatement of tax, reportable
penalties imposed for failure to file,
about the information the corporation will transaction understatements, and fraud.
negligence, fraud, substantial valuation
need to provide to its financial institution to See sections 6662, 6662A, and 6663.
misstatements, substantial
make a same-day wire payment, go to
understatements of tax, and reportable
[Link]/SameDayWire.
transaction understatements from the due
date (including extensions) to the date of Accounting Methods
Estimated Tax Payments payment. The interest charge is figured at Figure taxable income using the method of
Generally, the following rules apply to the a rate determined under section 6621. accounting regularly used in keeping the
corporation's payments of estimated tax. corporation's books and records. In all
Late filing of return. A corporation that
• The corporation must make installment cases, the method used must clearly show
does not file its tax return by the due date,
payments of estimated tax if it expects its taxable income. Permissible methods
including extensions, may be penalized
total tax for the year (less applicable include cash, accrual, or any other method
5% of the unpaid tax for each month or
credits) to be $500 or more. authorized by the Internal Revenue Code.
part of a month the return is late, up to a
• The installments are due by the 15th maximum of 25% of the unpaid tax. The Generally, the following rules apply. For
day of the 4th, 6th, 9th, and 12th months minimum penalty for a return that is more more information, see Pub. 538,
of the tax year. If any date falls on a than 60 days late is the smaller of the tax Accounting Periods and Methods.
Saturday, Sunday, or legal holiday, the due or $435. The penalty will not be • A corporation, or a partnership that has
installment is due on the next regular imposed if the corporation can show that a corporation as a partner, cannot use the
business day. the failure to file on time was due to cash method of accounting unless it is a
• The corporation must use electronic reasonable cause. See Caution, earlier. small business taxpayer (defined later). A
funds transfer to make installment tax shelter (defined in section 448(d)(3))
payments of estimated tax. Late payment of tax. A corporation that
may never use the cash method. See
• Use Form 1120-W, Estimated Tax for does not pay the tax when due may
sections 448(a)(1) through (a)(3).
Corporations, as a worksheet to compute generally be penalized 1/2 of 1% of the
However, see Nonaccrual experience
estimated tax. See the Instructions for unpaid tax for each month or part of a
method for service providers in the
Form 1120-W. month the tax is not paid, up to a
instructions for line 1a.
• Penalties may apply if the corporation maximum of 25% of the unpaid tax. See
Caution, earlier. • Unless it is a small business taxpayer
does not make required estimated tax (defined below), a corporation must use
payment deposits. See Estimated tax Trust fund recovery penalty. This an accrual method for sales and
penalty below. penalty may apply if certain excise, purchases of inventory items. See the
• If the corporation overpaid estimated income, social security, and Medicare instructions for Form 1125-A.
tax, it may be able to get a quick refund by taxes that must be collected or withheld • A corporation engaged in farming must
filing Form 4466, Corporation Application are not collected or withheld, or these use an accrual method. For exceptions,
for Quick Refund of Overpayment of taxes are not paid. These taxes are see section 447 and Pub. 225.
Estimated Tax. See the instructions for generally reported on: • Special rules apply to long-term
Schedule J, Part III, line 15, later. • Form 720, Quarterly Federal Excise contracts. See section 460.
Estimated tax penalty. A corporation Tax Return; • Dealers in securities must use the
that does not make estimated tax • Form 941, Employer's QUARTERLY mark-to-market accounting method.
payments when due may be subject to an Federal Tax Return; Dealers in commodities and traders in
underpayment penalty for the period of • Form 943, Employer's Annual Federal securities and commodities can elect to
underpayment. Generally, a corporation is Tax Return for Agricultural Employees; use the mark-to-market accounting
subject to the penalty if its tax liability is • Form 944, Employer's ANNUAL method. See section 475.
$500 or more and it did not timely pay at Federal Tax Return; or
Small business taxpayer. For tax years
least the smaller of: • Form 945, Annual Return of Withheld beginning in 2021, a corporation qualifies
• Its tax liability for the current year, or Federal Income Tax.
as a small business taxpayer if (a) it has
• Its prior year's tax. The trust fund recovery penalty may be average annual gross receipts of $26
Use Form 2220, Underpayment of imposed on all persons who are million or less for the 3 prior tax years, and
Estimated Tax by Corporations, to see if determined by the IRS to have been (b) it is not a tax shelter (as defined in
the corporation owes a penalty and to responsible for collecting, accounting for, section 448(d)(3)).
figure the amount of the penalty. If Form or paying over these taxes, and who acted
A small business taxpayer can account
2220 is completed, enter the penalty on willfully in not doing so. The penalty is
for inventory by (a) treating the inventory
line 34. See the instructions for line 34. equal to the full amount of the unpaid trust
as non-incidental materials and supplies,
fund tax. See the Instructions for Form
or (b) conforming to its treatment of
720, Pub. 15 (Circular E), Employer's Tax
inventory in an applicable financial
Guide, or Pub. 51 (Circular A), Agricultural
statement (as defined in section 451(b)
Employer's Tax Guide, for details,
(3)). If it does not have an applicable

Instructions for Form 1120 -5-

financial statement, it can use the method 1120, line 10, as other income. If the net Other Forms and
of accounting used in its books and section 481(a) adjustment is negative,
records prepared according to its report the ratable portion on line 26 as a Statements That May Be
accounting procedures. See Change in deduction. Required
accounting method, below, if the taxpayer
Amended return. Use Form 1120-X,
wants to change its accounting method for Accounting Period Amended U.S. Corporation Income Tax
inventory to use one of the inventory A corporation must figure its taxable
methods available to small business Return, to correct a previously filed Form
income on the basis of a tax year. A tax 1120.
taxpayers. year is the annual accounting period a
Change in accounting method. corporation uses to keep its records and Reportable transaction disclosure
Generally, the corporation must get IRS report its income and expenses. statement. Disclose information for each
consent to change either an overall Generally, corporations can use a reportable transaction in which the
method of accounting or the accounting calendar year or a fiscal year. Personal corporation participated. Form 8886,
treatment of any material item for income service corporations, however, must use a Reportable Transaction Disclosure
tax purposes. To obtain consent, the calendar year unless they meet one of the Statement, must be filed for each tax year
corporation must generally file Form 3115, exceptions discussed later under Personal that the federal income tax liability of the
Application for Change in Accounting Service Corporation. corporation is affected by its participation
Method, during the tax year for which the in the transaction. The following are
Change of tax year. Generally, a reportable transactions.
change is requested. See the Instructions corporation, including a personal service
for Form 3115 and Pub. 538 for more 1. Any listed transaction, which is a
corporation, must get the consent of the
information and exceptions. See Rev. transaction that is the same as or
IRS before changing its tax year by filing
Proc. 2021-34, 2021-35 I.R.B. 337, substantially similar to one of the types of
Form 1128, Application To Adopt,
available at [Link]/irb/ transactions that the IRS has determined
Change, or Retain a Tax Year. However,
2021-35_IRB#REV-PROC-2021-34, for to be a tax avoidance transaction and
exceptions may apply. See the
additional procedures that may apply for identified by notice, regulation, or other
Instructions for Form 1128 and Pub. 538
obtaining automatic consent to change published guidance as a listed
for more information.
methods of accounting for revenue transaction.
recognition and certain other methods of
accounting that may affect the accounting
Rounding Off to 2. Any transaction offered under
conditions of confidentiality for which the
for revenue recognition. Also see Rev. Whole Dollars corporation (or a related party) paid an
Proc. 2022-09, 2022-02 I.R.B. 310 The corporation may enter decimal points advisor a fee of at least $250,000.
available at [Link]/irb/ and cents when completing its return. 3. Certain transactions for which the
2022-02_IRB#REV-PROC-2022-9 for However, the corporation should round off corporation (or a related party) has
additional procedures that may apply for cents to whole dollars on its return, forms, contractual protection against
obtaining automatic consent to change and schedules to make completing its disallowance of the tax benefits.
certain methods of accounting related to return easier. The corporation must either
small businesses. round off all amounts on its return to whole 4. Certain transactions resulting in a
dollars, or use cents for all amounts. To loss of at least $10 million in any single
Section 481(a) adjustment. If the year or $20 million in any combination of
round, drop amounts under 50 cents and
corporation's taxable income for the years.
increase amounts from 50 to 99 cents to
current tax year is figured under a method
the next dollar. For example, $8.40 rounds 5. Any transaction identified by the
of accounting different from the method
to $8 and $8.50 rounds to $9. IRS by notice, regulation, or other
used in the preceding tax year, the
published guidance as a “transaction of
corporation may have to make an If two or more amounts must be added interest.”
adjustment under section 481(a) to to figure the amount to enter on a line,
prevent amounts of income or expense include cents when adding the amounts For more information, see Regulations
from being duplicated or omitted. The and round off only the total. section 1.6011-4. Also, see the
section 481(a) adjustment period is Instructions for Form 8886.
generally 1 year for a net negative Recordkeeping Penalties. The corporation may have
adjustment and 4 years for a net positive Keep the corporation's records for as long
adjustment. For an eligible terminated S to pay a penalty if it is required to disclose
as they may be needed for the a reportable transaction under section
corporation, the section 481(a) adjustment administration of any provision of the
period is generally 6 years for a negative 6011 and fails to properly complete and
Internal Revenue Code. Usually, records file Form 8886. Penalties may also apply
or positive adjustment that is attributable that support an item of income, deduction,
to the S corporation's revocation of its under section 6707A if the corporation
or credit on the return must be kept for 3 fails to file Form 8886 with its corporate
election under section 1362(a) after years from the date the return is due or
December 21, 2017, and before return, fails to provide a copy of Form
filed, whichever is later. Keep records that 8886 to the Office of Tax Shelter Analysis
December 22, 2019. See section 481(d). verify the corporation's basis in property (OTSA), or files a form that fails to include
Exceptions to the general section for as long as they are needed to figure all the information required (or includes
481(a) adjustment period may apply. Also, the basis of the original or replacement incorrect information). Other penalties,
in some cases, a corporation can elect to property. such as an accuracy-related penalty under
modify the section 481(a) adjustment section 6662A, may also apply. See the
period. The corporation may have to The corporation should keep copies of
all filed returns. They help in preparing Instructions for Form 8886 for details on
complete the appropriate lines of Form these and other penalties.
3115 to make an election. See the future and amended returns and in the
Instructions for Form 3115 for more calculation of earnings and profits. Reportable transactions by material
information and exceptions. advisors. Material advisors to any
If the net section 481(a) adjustment is reportable transaction must disclose
positive, report the ratable portion on Form certain information about the reportable

-6- Instructions for Form 1120

transaction by filing Form 8918, Material accordance with Regulations section 4. Whether forgiveness of the PPP
Advisor Disclosure Statement, with the 1.362-4(d)(3). loan has been granted as of the date the
IRS. For details, see the Instructions for return is filed.
Annual information reporting by speci-
Form 8918.
fied domestic entities under section A corporation that reported tax-exempt
Transfers to a corporation controlled 6038D. Certain domestic corporations income from the forgiveness of a PPP loan
by the transferor. Every significant that are formed or availed of to hold on its 2020 return, the timing of which
transferor (as defined in Regulations specified foreign financial assets corresponds to one of the options
section 1.351-3(d)) that receives stock of (“specified domestic entities”) must file presented in Rev. Proc. 2021-48, need not
a corporation in exchange for property in a Form 8938. Form 8938 must be filed each file an amended return solely to attach the
nonrecognition event must include the year the value of the corporation's statement that is described in these
statement required by Regulations section specified foreign financial assets is more instructions.
1.351-3(a) on or with the transferor's tax than $50,000 on the last day of the tax If a corporation treats tax-exempt
return for the tax year of the exchange. year or more than $75,000 at any time income resulting from a PPP loan as
The transferee corporation must include during the tax year. For more information received or accrued prior to when
the statement required by Regulations on domestic corporations that are forgiveness of the PPP loan is granted and
section 1.351-3(b) on or with its return for specified domestic entities and the types the amount of forgiveness granted is less
the tax year of the exchange, unless all the of foreign financial assets that must be than the amount of tax-exempt income
required information is included in any reported, see the Instructions for Form that was previously treated as received or
statement(s) provided by a significant 8938, generally, and in particular, Who accrued, the corporation should make a
transferor that is attached to the same Must File, Specified Domestic Entity, prior period adjustment on Schedule M-2
return for the same section 351 exchange. Specified Foreign Financial Assets, for the tax year in which the corporation
If the transferor or transferee corporation Interests in Specified Foreign Financial receives notice that the PPP loan was not
is a controlled foreign corporation, each Assets, Assets Not Required To Be fully forgiven. See the instructions for
U.S. shareholder (within the meaning of Reported, and Exceptions to Reporting. Schedule M-2 for more details.
section 951(b)) must include the required In addition, a domestic corporation
statement on or with its return. required to file Form 8938 with its Form Other forms and statements. See Pub.
1120 for the taxable year should check 542, Corporations, for a list of other forms
Distributions under section 355. Every and statements a corporation may need to
corporation that makes a distribution of “Yes” to Schedule N (Form 1120),
Question 8, and also include that schedule file in addition to the forms and statements
stock or securities of a controlled discussed throughout these instructions.
corporation, as described in section 355 with its Form 1120.
(or so much of section 356 as it relates to
section 355), must include the statement
Form 8975. Certain U.S. persons that are
the ultimate parent entity of a U.S. Specific Instructions
required by Regulations section multinational enterprise group with annual
1.355-5(a) on or with its return for the year revenue for the preceding reporting period Period Covered
of the distribution. A significant distributee of $850 million or more are required to file File the 2021 return for calendar year 2021
(as defined in Regulations section Form 8975, Country-by-Country Report. and fiscal years that begin in 2021 and
1.355-5(c)) that receives stock or Form 8975 and Schedule A (Form 8975) end in 2022. For a fiscal or short tax year
securities of a controlled corporation must must be filed with the income tax return of return, fill in the tax year space at the top
include the statement required by the ultimate parent entity of a U.S. of the form.
Regulations section 1.355-5(b) on or with multinational enterprise group for the tax
its return for the year of receipt. If the year in or within which the reporting period The 2021 Form 1120 can also be used
distributing or distributee corporation is a covered by Form 8975 ends. For more if:
controlled foreign corporation, each U.S. information, see Form 8975, Schedule A • The corporation has a tax year of less
shareholder (within the meaning of section (Form 8975) and the Instructions for Form than 12 months that begins and ends in
951(b)) must include the statement on or 8975 and Schedule A (Form 8975). 2022, and
with its return. • The 2022 Form 1120 is not available at
Paycheck Protection Program (PPP) the time the corporation is required to file
Dual consolidated losses. If a domestic loans. Corporations that have tax-exempt its return.
corporation incurs a dual consolidated income resulting from the forgiveness of a The corporation must show its 2022 tax
loss (as defined in Regulations section PPP loan should attach a statement to its year on the 2021 Form 1120 and take into
1.1503(d)-1(b)(5)), the corporation (or return reporting each tax year for which account any tax law changes that are
consolidated group) may need to attach a the corporation is applying Rev. Proc. effective for tax years beginning after
domestic use agreement and/or an annual 2021-48, sections 3.01(1), (2) or (3). Any December 31, 2021.
certification, as provided in Regulations statement for 2021 should include the
section 1.1503(d)-6(d) and (g). following information, for each PPP loan: Name and Address
Election to reduce basis under section 1. The corporation's name, address, Enter the corporation's true name (as set
362(e)(2)(C). If property is transferred to and EIN; forth in the charter or other legal document
a corporation subject to section 362(e)(2), 2. A statement that the corporation is creating it), address, and EIN on the
the transferor and the acquiring applying or applied section 3.01(1), (2), or appropriate lines. Enter the address of the
corporation may elect, under section (3) of Rev. Proc. 2021-48, and for what tax corporation's principal office or place of
362(e)(2)(C), to reduce the transferor's year (2020 or 2021), as applicable; business. Include the suite, room, or other
basis in the stock received instead of unit number after the street address. If the
reducing the acquiring corporation's basis 3. The amount of tax-exempt income
from forgiveness of the PPP loan that the post office does not deliver mail to the
in the property transferred. Once made, street address and the corporation has a
the election is irrevocable. For more corporation is treating as received or
accrued and for which tax year (2020 or P.O. box, show the box number instead.
information, see section 362(e)(2) and
Regulations section 1.362-4. If an election 2021); and
Note. Do not use the address of the
is made, a statement must be filed in registered agent for the state in which the
corporation is incorporated. For example,

Instructions for Form 1120 -7-

if a business is incorporated in Delaware assets at the end of the tax year “SECTION 444 ELECTION
or Nevada and the corporation's principal (Schedule L, line 15(d)) are less than TERMINATED.”
office is located in Little Rock, Arkansas, $250,000. See Schedule K, Question 13.
the corporation should enter the Little Schedule M-3 (Form 1120)
Rock address. For more information on consolidated A corporation with total assets
returns, see the regulations under section (nonconsolidated or consolidated for all
If the corporation receives its mail in 1502. corporations included within a
care of a third party (such as an consolidated tax group) of $10 million or
accountant or an attorney), enter on the Life-Nonlife Consolidated more on the last day of the tax year must
street address line “C/O” followed by the Return file Schedule M-3 (Form 1120), Net
third party's name and street address or Income (Loss) Reconciliation for
P.O. box. If Item A, box 1a, is checked and the
corporation is the common parent of a Corporations With Total Assets of $10
If the corporation has a foreign consolidated group that includes a life Million or More, instead of Schedule M-1.
address, include the city or town, state or insurance company, also check box 1b. A corporation filing Form 1120 that is not
province, country, and foreign postal See Regulations section 1.1502-47(m) for required to file Schedule M-3 may
code. Do not abbreviate the country the requirements for filing a consolidated voluntarily file Schedule M-3 instead of
name. Follow the country's practice for tax return for a life-nonlife consolidated Schedule M-1.
entering the name of the state or province group.
Corporations that (a) are required to file
and postal code.
Personal Holding Company Schedule M-3 (Form 1120) and have less
than $50 million total assets at the end of
Item A. Identifying A personal holding company must check
the tax year, or (b) are not required to file
Item A, box 2, and attach Schedule PH
Information (Form 1120), U.S. Personal Holding
Schedule M-3 (Form 1120) and voluntarily
file Schedule M-3 (Form 1120), must
Consolidated Return Company (PHC) Tax. See the Instructions
either (i) complete Schedule M-3 (Form
for Schedule PH (Form 1120) for details.
Corporations filing a consolidated return 1120) entirely, or (ii) complete
must check Item A, box 1a, and attach Personal Service Corporation Schedule M-3 (Form 1120) through Part I,
Form 851, Affiliations Schedule, and other If the corporation is a personal service and complete Form 1120, Schedule M-1,
supporting statements to the return. Also, corporation, check Item A, box 3. A instead of completing Parts II and III of
for the first year a subsidiary corporation is personal service corporation is a Schedule M-3 (Form 1120). If the
being included in a consolidated return, corporation whose principal activity for the corporation chooses to complete
attach Form 1122, Authorization and testing period is the performance of Schedule M-1 instead of completing Parts
Consent of Subsidiary Corporation To Be personal services. The testing period for a II and III of Schedule M-3, the amount on
Included in a Consolidated Income Tax tax year is generally the prior tax year Schedule M-1, line 1, must equal the
Return, to the parent's consolidated unless the corporation has just been amount on Schedule M-3, Part I, line 11.
return. Attach a separate Form 1122 for formed. Personal services include any See the Instructions for Schedule M-3
each new subsidiary being included in the activity performed in the fields of (Form 1120) for more details. Also, see
consolidated return. accounting, actuarial science, the instructions for Schedule M-1, later.

File supporting statements for each architecture, consulting, engineering,

If you are filing Schedule M-3, check
corporation included in the consolidated health, law, and the performing arts. The
Item A, box 4, to indicate that
return. Do not use Form 1120 as a services must be substantially performed
Schedule M-3 is attached.
supporting statement. On the supporting by employee-owners.
statement, use columns to show the A personal service corporation must Item B. Employer
following, both before and after
adjustments.
use a calendar tax year unless: Identification Number
• It elects to use a 52-53-week tax year
1. Items of gross income and that ends with reference to the calendar (EIN)
deductions. year or tax year elected under section Enter the corporation's EIN. If the
444; corporation does not have an EIN, it must
2. A computation of taxable income.
• It can establish a business purpose for apply for one. An EIN can be applied for:
3. Balance sheets, as of the beginning a different tax year and obtains the • Online—Go to [Link]/EIN. The EIN is
and end of the tax year. approval of the IRS (see the Instructions issued immediately once the application
4. A reconciliation of income per for Form 1128 and Pub. 538); or information is validated.
books with income per return. • It elects under section 444 to have a tax • By faxing or mailing Form SS-4,
5. A reconciliation of retained year other than a calendar year. To make Application for Employer Identification
earnings. the election, use Form 8716, Election To Number.
Have a Tax Year Other Than a Required Corporations located in the United
Enter on Form 1120 the totals for each Tax Year.
! States or U.S. possessions can
item of income, gain, loss, expense, or
CAUTION use the online application. Foreign
deduction, net of eliminating entries for If a corporation makes the section 444
election, its deduction for certain amounts corporations should call 267-941-1099
intercompany transactions between
paid to employee-owners may be limited. (not a toll free number) for more
corporations within the consolidated
See Schedule H (Form 1120), Section information on obtaining an EIN. See the
group. Attach consolidated balance
280H Limitations for a Personal Service Instructions for Form SS-4.
sheets and a reconciliation of
consolidated retained earnings. Corporation (PSC), to figure the maximum
deduction. EIN applied for, but not received. If the
The corporation does not have to corporation has not received its EIN by the
TIP provide the information requested If a section 444 election is terminated time the return is due, enter “Applied For”
in (3), (4), and (5), above, if its and the termination results in a short tax and the date the corporation applied in the
total receipts (line 1a plus lines 4 through year, type or print at the top of the first space for the EIN. However, if the
10 on page 1 of the return) and its total page of Form 1120 for the short tax year corporation is filing its return electronically,

-8- Instructions for Form 1120

an EIN is required at the time the return is corporate tax rate. If the election is made, gross profits, (d) percentage of gross
filed. An exception applies to subsidiaries the corporation generally may not claim profits to gross sales, (e) amount
of corporations whose returns are filed any loss, deduction, or credit with respect collected, and (f) gross profit on the
with the parent's electronically filed to qualifying shipping activities. A amount collected.
consolidated Form 1120. These corporation making this election may also For sales of timeshares and residential
subsidiaries should enter “Applied For” in elect to defer gain on the disposition of a lots reported under the installment
the space for the EIN on their returns. The qualifying vessel. method, if the corporation elects to pay
subsidiaries' returns are identified under Use Form 8902, Alternative Tax on interest under section 453(I)(3), the
the parent corporation's EIN. Qualifying Shipping Activities, to figure the corporation's income tax is increased by
For more information, see the tax. Include the alternative tax on the interest payable under section 453(l)
Instructions for Form SS-4. Schedule J, Part I, line 9e. (3). Report this addition to the tax on
Schedule J, Part I, line 9f.
Line 1. Gross Receipts or Sales
Item D. Total Assets Nonaccrual experience method for
Line 1a. Gross receipts or sales. Enter service providers. Accrual method
Enter the corporation's total assets (as
on line 1a gross receipts or sales from all corporations are not required to accrue
determined by the accounting method
business operations, except for amounts certain amounts to be received from the
regularly used in keeping the corporation's
that must be reported on lines 4 through performance of services that, based on
books and records) at the end of the tax
10. their experience, will not be collected, if:
year. If there are no assets at the end of
the tax year, enter -0-. Special rules apply to certain income, • The services are in the fields of health,
as discussed below. law, engineering, architecture, accounting,
If the corporation is required to actuarial science, performing arts,
complete Schedule L, enter the total Advance payments. In general,
consulting; or
assets from Schedule L, line 15, column advance payments are reported in the
year of receipt. For exceptions to this
• The corporation meets the section
(d), on page 1, Item D. If filing a 448(c) gross receipts test for all prior
consolidated return, report total general rule for corporations that use the
years.
consolidated assets for all corporations accrual method of accounting, see the
joining in the return. following. This provision does not apply to any
• To report income from long-term amount if interest is required to be paid on
the amount or if there is any penalty for
Item E. Initial Return, Final contracts, see section 460.
failure to timely pay the amount. See
• For rules that allow a limited deferral of
Return, Name Change, or advance payments beyond the current tax Regulations section 1.448-3 for more
Address Change year, see section 451(c). Also, see information on the nonaccrual experience
Regulations sections 1.451-8(c), (d), and method, including information on safe
• If this is the corporation's first return, harbor methods.
check the “Initial return” box. (e). For applicability dates, see
• If this is the corporation's final return Regulations section 1.451-8(h). For information on a book safe harbor
and it will no longer exist, check the “Final • For information on adopting or method of accounting for corporations that
return” box. changing to a permissible method for use the nonaccrual experience method of
• If the corporation changed its name reporting advance payments for services accounting, see Rev. Proc. 2011-46,
since it last filed a return, check the “Name and certain goods by an accrual method 2011-42 I.R.B. 518 available at
change” box. Generally, a corporation corporation, see the Instructions for Form [Link]/irb/2011-42_IRB#RP-2011-46, as
must also have amended its articles of 3115. Also, see Rev. Proc. 2021-34. modified by Rev. Proc. 2016-29, 2016-21
incorporation and filed the amendment I.R.B. 880 available at [Link]/irb/
Installment sales. Generally, the
with the state in which it was incorporated. 2016-21_IRB#RP-2016-29. Also, see the
installment method cannot be used for
• If the corporation has changed its Instructions for Form 3115 for procedures
dealer dispositions of property. A “dealer
address since it last filed a return to obtain automatic consent to change to
disposition” is any disposition of: (a)
(including a change to an “in care of” this method or make certain changes
personal property by a person who
address), check the “Address change” within this method.
regularly sells or otherwise disposes of
box. personal property of the same type on the Corporations that qualify to use the
installment plan, or (b) real property held nonaccrual experience method should
Note. If a change in address or for sale to customers in the ordinary attach a statement showing total gross
responsible party occurs after the return is course of the taxpayer's trade or business. receipts, the amount not accrued because
filed, use Form 8822-B, Change of of the application of section 448(d)(5), and
Address or Responsible Party— The restrictions on using the
the net amount accrued. Enter the net
Business, to notify the IRS. See the installment method do not apply to the
amount on line 1a.
instructions for Form 8822-B for details. following.
• Dispositions of property used or Line 1b. Returns and allowances.
produced in the trade or business of Enter cash and credit refunds the
Income farming. corporation made to customers for
Except as otherwise provided in the • Certain dispositions of timeshares and returned merchandise, rebates, and other
Internal Revenue Code, gross income residential lots reported under the allowances made on gross receipts or
includes all income from whatever source installment method for which the sales.
derived. corporation elects to pay interest under
section 453(I)(3). Line 2. Cost of Goods Sold
Exception for income from qualifying Complete and attach Form 1125-A, Cost
Enter on line 1a (and carry to line 3),
shipping activities. Gross income does of Goods Sold, if applicable. Enter on
the gross profit on collections from these
not include income from qualifying Form 1120, line 2, the amount from Form
installment sales. Attach a statement
shipping activities if the corporation makes 1125-A, line 8. See Form 1125-A and its
showing the following information for the
an election under section 1354 to be taxed instructions.
current and the 3 preceding years: (a)
on its notional shipping income (as
gross sales, (b) cost of goods sold, (c)
defined in section 1353) at the highest

Instructions for Form 1120 -9-

Line 4. Dividends and substantially all the assets of a foreign included in gross income for the tax year
branch are transferred to a specified 10% that includes the last day of the calendar
Inclusions
owned foreign corporation (as defined in quarter in which the credit is allowed.
See the instructions for Schedule C, later. section 245A(b)) with respect to which the
Complete Schedule C and enter on line 4 corporation was a U.S. shareholder
the amount from Schedule C, line 23, immediately after the transfer. See section Deductions
column (a). 91.
• Any LIFO recapture amount under Limitations on Deductions
Line 5. Interest
section 1363(d). The corporation may Uniform capitalization rules. The
Enter taxable interest on U.S. obligations have to include a LIFO recapture amount uniform capitalization rules of section
and on loans, notes, mortgages, bonds, in income if it: 263A require corporations to capitalize
bank deposits, corporate bonds, tax
1. Used the LIFO inventory method certain costs to inventory or other
refunds, etc. Do not offset interest
for its last tax year before the first tax year property. Corporations subject to the
expense against interest income. Special
for which it elected to become an S section 263A uniform capitalization rules
rules apply to interest income from certain
corporation, or are required to capitalize:
below-market-rate loans. See section
7872 for details. 2. Transferred LIFO inventory assets 1. Direct costs of assets produced or
to an S corporation in a nonrecognition acquired for resale, and
Note. Report tax-exempt interest on transaction in which those assets were 2. Certain indirect costs (including
Schedule K, item 9. Also, if required, transferred basis property. taxes) that are properly allocable to
include the same amount on property produced or property acquired for
Schedule M-1, line 7, or Schedule M-3 The LIFO recapture amount is the
amount by which the C corporation's resale.
(Form 1120), Part II, line 13, if applicable.
inventory under the FIFO method exceeds The corporation cannot deduct the costs
Line 6. Gross Rents the inventory amount under the LIFO required to be capitalized under section
Enter the gross amount received for the method at the close of the corporation's 263A until it sells, uses, or otherwise
rental of property. Deduct expenses such last tax year as a C corporation (or for the disposes of the property (to which the
as repairs, interest, taxes, and year of the transfer, if (2) above applies). costs relate). The corporation recovers
depreciation on the proper lines for Also, see the instructions for Schedule J, these costs through depreciation,
deductions. A rental activity held by a Part I, line 11. amortization, or cost of goods sold.
closely held corporation or a personal • The ratable portion of any net positive
section 481(a) adjustment. See Section A small business taxpayer (defined
service corporation may be subject to the
481(a) adjustment, earlier. earlier) is not required to capitalize costs
passive activity loss rules. See Passive
• Part or all of the proceeds received under section 263A. A small business
activity limitations, later.
from certain corporate-owned life taxpayer that wants to discontinue
Line 10. Other Income insurance contracts issued after August capitalizing costs under section 263A
Enter any other taxable income not 17, 2006. Corporations that own one or must change its method of accounting.
reported on lines 1 through 9. List the type more employer-owned life insurance See section 263A(i) and Regulations
and amount of income on an attached contracts issued after this date must file section 1.263A-1(j). Also, see Change in
statement. If the corporation has only one Form 8925, Report of Employer-Owned accounting method, earlier.
item of other income, describe it in Life Insurance Contracts. See section
For more information on the uniform
parentheses on line 10. 101(j) for details.
capitalization rules, see Pub. 538. Also,
• Income from cancellation of debt (COD) see Regulations sections 1.263A-1
Examples of other income to report on from the repurchase of a debt instrument
through 1.263A-3. See section 263A(d),
line 10 include the following. for less than its adjusted issue price.
Regulations section 1.263A-4, and Pub.
• Recoveries of bad debts deducted in • The corporation's share of the following 225 for rules for property produced in a
prior years under the specific charge-off income from Form 8621, Information
farming business.
method. Return by a Shareholder of a Passive
• The amount included in income from Foreign Investment Company or Qualified Transactions between related taxpay-
Form 6478, Biofuel Producer Credit. Electing Fund. ers. Generally, an accrual basis taxpayer
• The amount included in income from 1. Ordinary earnings of a qualified can only deduct business expenses and
Form 8864, Biodiesel and Renewable electing fund. interest owed to a related party in the year
Diesel Fuels Credit. the payment is included in the income of
• Refunds of taxes deducted in prior 2. Gain or loss from marking passive the related party. See sections 163(e)(3)
years to the extent they reduced the foreign investment company (PFIC) stock and 267(a)(2) for limitations on deductions
amount of tax imposed. See section 111 to market. for unpaid interest and expenses.
and the related regulations. Do not offset 3. Gain or loss from sale or other
Limitations on business interest ex-
current year taxes against tax refunds. disposition of section 1296 stock.
pense. Business interest expense may
• Ordinary income from trade or business 4. Excess distributions from a section be limited. See section 163(j) and Form
activities of a partnership (from 1291 fund allocated to the current year 8990, Limitation on Business Interest
Schedule K-1 (Form 1065)). Do not offset and pre-PFIC years, if any. Expense Under Section 163(j). Also, see
ordinary losses against ordinary income.
See Form 8621 and the Instructions for Limitation on deduction in the instructions
Instead, include the losses on line 26.
Form 8621 for details. for line 18 and Schedule K, Question 23
Show the partnership's name, address,
• The amount of payroll tax credit taken and Question 24, later.
and EIN on a separate statement attached
to this return. If the amount entered is from by an employer on its employment tax Section 291 limitations. Corporations
more than one partnership, identify the returns (Forms 941, 943, and 944) for may be required to adjust deductions for
amount from each partnership. qualified paid sick and qualified paid depletion of iron ore and coal, intangible
• The transferred loss amount identified family leave under FFCRA and ARP (both drilling and exploration and development
as “Section 91 Transferred Loss Amount,” the nonrefundable and refundable costs, certain deductions for financial
which is required to be recognized when portions). These amounts must be institutions, and the amortizable basis of

-10- Instructions for Form 1120

pollution control facilities. See section 291 • Trade or business activities in which the • Credit for small employer health
to determine the amount of the corporation did not materially participate insurance premiums (Form 8941).
adjustment. for the tax year; and • Employer credit for paid family and
Election to deduct business start-up
• Rental activities, regardless of its medical leave (Form 8994).
participation. If the corporation has any of the credits
and organizational costs. A corporation
For exceptions, see Form 8810, Corporate listed above, figure the current year credit
can elect to deduct a limited amount of
Passive Activity Loss and Credit before figuring the deduction for expenses
start-up and organizational costs it paid or
Limitations. on which the credit is based. If the
incurred. Any remaining costs must
generally be amortized over a 180-month Corporations subject to the passive corporation capitalized any costs on which
period. See sections 195 and 248 and the activity limitations must complete Form it figured the credit, it may need to reduce
related regulations. 8810 to compute their allowable passive the amount capitalized by the credit
activity loss and credit. Before completing attributable to these costs.
Time for making an election. The Form 8810, see Temporary Regulations See the instructions for the form used
corporation generally elects to deduct section 1.163-8T, which provides rules for to figure the applicable credit for more
start-up or organizational costs by allocating interest expense among details.
claiming the deduction on its income tax activities. If a passive activity is also
return filed by the due date (including subject to the at-risk rules of section 465 Limitations on deductions related to
extensions) for the tax year in which the or the tax-exempt use loss rules of section property leased to tax-exempt entities.
active trade or business begins. However, 470, those rules apply before the passive If a corporation leases property to a
for start-up or organizational costs paid or loss rules. governmental or other tax-exempt entity,
incurred before September 9, 2008, the the corporation cannot claim deductions
For more information, see section 469,
corporation is required to attach a related to the property to the extent that
the related regulations, and Pub. 925,
statement to its return to elect to deduct they exceed the corporation's income from
Passive Activity and At-Risk Rules.
such costs. the lease payments. This disallowed
For more details, including special Closely held corporations. A tax-exempt use loss can be carried over to
rules for costs paid or incurred before corporation is a closely held corporation if: the next tax year and treated as a
September 9, 2008, see the Instructions • At any time during the last half of the tax deduction with respect to the property for
for Form 4562. Also, see Pub. 535, year more than 50% in value of its that tax year. See section 470(d) for
Business Expenses. outstanding stock is directly or indirectly exceptions.
owned by or for not more than five Limitation on tax benefits for remuner-
If the corporation timely filed its return
individuals, and ation under the Patient Protection and
for the year without making an election, it
can still make an election by filing an
• The corporation is not a personal Affordable Care Act. The $1 million
service corporation. compensation limit is reduced to $500,000
amended return within 6 months of the
due date of the return (excluding Certain organizations are treated as for remuneration for services provided by
extensions). Clearly indicate the election individuals for purposes of this test. See individuals for or on behalf of certain
on the amended return and write “Filed section 542(a)(2). For rules for health insurance providers. The $500,000
pursuant to section 301.9100-2” at the top determining stock ownership, see section limitation applies to remuneration that is
of the amended return. File the amended 544 (as modified by section 465(a)(3)). deductible in the tax year during which the
return at the same address the corporation Reducing certain expenses for which services were performed and
filed its original return. The election credits are allowable. If the corporation remuneration for services during the year
applies when figuring taxable income for claims certain credits, it may need to that is deductible in a future tax year
the current tax year and all subsequent reduce the otherwise allowable (called "deferred deduction
years. deductions for expenses used to figure the remuneration"). The $500,000 limitation is
The corporation can choose to forgo credit. This applies to credits such as the reduced by any amounts disallowed as
the elections above by affirmatively following. excess parachute payments. See section
electing to capitalize its start-up or • Work opportunity credit (Form 5884). 162(m)(6) and Regulations section
organizational costs on its income tax • Employee retention credit for employers 1.162-31 for definitions and other special
return filed by the due date (including affected by qualified disasters (Form rules. Also, see Notice 2011-2, 2011-2
extensions) for the tax year in which the 5884-A), if applicable. I.R.B. 260.
active trade or business begins. • Credit for increasing research activities Line 12. Compensation of
(Form 6765).
Note. The election to either amortize or • Orphan drug credit (Form 8820).
Officers
capitalize start-up costs is irrevocable and • Disabled access credit (Form 8826). Enter deductible officers' compensation
applies to all start-up costs that are related • Empowerment zone employment credit on line 12. Do not include compensation
to the trade or business. (Form 8844). deductible elsewhere on the return, such
Report the deductible amount of • Indian employment credit (Form 8845). as amounts included in cost of goods sold,
start-up and organizational costs and any • Credit for employer social security and elective contributions to a section 401(k)
amortization on line 26. For amortization Medicare taxes paid on certain employee cash or deferred arrangement, or amounts
that begins during the current tax year, tips (Form 8846). contributed under a salary reduction SEP
complete and attach Form 4562, • Credit for small employer pension plan agreement or a SIMPLE IRA plan.
Depreciation and Amortization. start-up costs (Form 8881). If the corporation's total receipts
• Credit for employer-provided childcare (line 1a, plus lines 4 through 10) are
Passive activity limitations. Limitations facilities and services (Form 8882).
on passive activity losses and credits $500,000 or more, complete Form
• Low sulfur diesel fuel production credit 1125-E, Compensation of Officers. Enter
under section 469 apply to personal (Form 8896).
service corporations (defined earlier) and on Form 1120, line 12, the amount from
• Mine rescue team training credit (Form Form 1125-E, line 4.
closely held corporations (defined later). 8923).
Generally, the two kinds of passive • Credit for employer differential wage
activities are: payments (Form 8932).

Instructions for Form 1120 -11-

Line 13. Salaries and Wages cannot claim a bad debt deduction unless • Taxes, including state or local sales
the amount was previously included in taxes, that are paid or incurred in
Enter the total salaries and wages paid for
income. connection with an acquisition or
the tax year. Do not include salaries and
disposition of property (these taxes must
wages deductible elsewhere on the return, Line 16. Rents be treated as a part of the cost of the
such as amounts included in officers' If the corporation rented or leased a acquired property or, in the case of a
compensation, cost of goods sold, vehicle, enter the total annual rent or lease disposition, as a reduction in the amount
elective contributions to a section 401(k) expense paid or incurred during the year. realized on the disposition).
cash or deferred arrangement, or amounts
contributed under a salary reduction SEP
Also, complete Part V of Form 4562. If the • Taxes assessed against local benefits
corporation leased a vehicle for a term of that increase the value of the property
agreement or a SIMPLE IRA plan. 30 days or more, the deduction for vehicle assessed (such as for paving, etc.).
If the corporation provided taxable lease expense may have to be reduced by • Taxes deducted elsewhere on the
fringe benefits to its employees, such as an amount includible in income called the return, such as those reflected in cost of
personal use of a car, do not deduct as inclusion amount. The corporation may goods sold.
wages the amount allocated for have an inclusion amount if:
See section 164(d) for information on
depreciation and other expenses claimed
apportionment of taxes on real property
on lines 20 and 26. And the vehicle's
FMV on the first between seller and purchaser.
If the corporation claims a credit day of the lease
Do not reduce the corporation's
! for any wages paid or incurred, it The lease term began: exceeded:
CAUTION may need to reduce any ! deduction for social security and
CAUTION Medicare taxes by the following
corresponding deduction for officers' Cars (excluding trucks
and vans) amounts claimed on its employment tax
compensation and salaries and wages.
returns: (1) the nonrefundable and
See Reducing certain expenses for which After 12/31/20 but before
refundable portions of the CARES Act and
credits are allowable, earlier. 1/1/22 . . . . . . . . . . $51,000
ARP employee retention credit, and (2)
After 12/31/17 but before the nonrefundable and refundable
Also, reduce the amounts 1/1/21 . . . . . . . . . . $50,000 portions of the FFCRA and ARP credits for
! deducted as compensation of
CAUTION officers and salaries and wages After 12/31/12 but before qualified sick and family leave wages.
1/1/18 . . . . . . . . . . $19,000 Instead, item (1) reduces the deductions
by the nonrefundable and refundable
for compensation of officers and salaries
portions of the CARES Act and ARP After 12/31/07 but before
and wages on lines 12 and 13, and item
employee retention credit claimed on the 1/1/13 . . . . . . . . . . $18,500
(2) must be reported as income on line 10.
corporation's employment tax return(s). Trucks and vans

Line 14. Repairs and After 12/31/20 but before Line 18. Interest
1/1/22 . . . . . . . . . . $51,000
Maintenance Note. Do not offset interest income
After 12/31/17 but before
Enter the cost of repairs and maintenance 1/1/21 . . . . . . . . . . $50,000 against interest expense.
not claimed elsewhere on the return, such The corporation must make an interest
as labor and supplies, that are not After 12/31/13 but before
1/1/18 . . . . . . . . . . $19,500
allocation if the proceeds of a loan were
payments to produce or improve tangible used for more than one purpose (for
or real property. See Regulations After 12/31/09 but before example, to purchase a portfolio
1.263(a)-1. For example, amounts are 1/1/14 . . . . . . . . . . $19,000 investment and to acquire an interest in a
paid for improvements if they are for After 12/31/08 but before passive activity). See Temporary
betterments to the property, restorations 1/1/10 . . . . . . . . . . $18,500 Regulations section 1.163-8T for the
of the property (such as the replacements interest allocation rules.
After 12/31/07 but before
of major components or substantial 1/1/09 . . . . . . . . . . $19,000
structural parts), or if they adapt the Mutual savings banks, building and
property to a new or different use. loan associations, and cooperative banks
Amounts paid to produce or improve can deduct the amounts paid or credited
property must be capitalized. See to the accounts of depositors as
Regulations sections 1.263(a)-2 and (a)-3. dividends, interest, or earnings. See
section 591.
The corporation can deduct repair and
See Pub. 463, Travel, Gift, and Car Do not deduct the following interest.
maintenance expenses only to the extent
Expenses, for instructions on figuring the • Interest on indebtedness incurred or
they relate to a trade or business activity.
inclusion amount. continued to purchase or carry obligations
See Regulations section 1.162-4. The
corporation may elect to capitalize certain if the interest is wholly exempt from
Note. The inclusion amount for lease
repair and maintenance costs consistent income tax. See section 265(b) for special
terms beginning in 2022 will be published
with its books and records. See rules and exceptions for financial
in the Internal Revenue Bulletin in early
Regulations section 1.263(a)-3(n) for institutions. Also, see section 265(b)(7) for
2022.
information on how to make the election. a de minimis exception for financial
Line 17. Taxes and Licenses institutions for certain tax-exempt bonds
Line 15. Bad Debts issued in 2009 and 2010.
Enter taxes paid or accrued during the tax
Enter the total debts that became year, but do not include the following. • For cash basis taxpayers, prepaid
worthless in whole or in part during the tax interest allocable to years following the
• Federal income taxes.
year. A small bank or thrift institution using current tax year. For example, a cash
• Foreign or U.S. possession income
the reserve method of section 585 should taxes if a foreign tax credit is claimed. basis calendar year taxpayer who in 2021
attach a statement showing how it figured prepaid interest allocable to any period
• Taxes not imposed on the corporation.
the current year's provision. A corporation after 2021 can deduct only the amount
that uses the cash method of accounting allocable to 2021.

-12- Instructions for Form 1120

 • Interest and carrying charges on apply to contributions to organizations property which was land conveyed under
straddles. Generally, these amounts must conducting lobbying activities. See section the Alaska Native Claims Settlement Act.
be capitalized. See section 263(g). 170(f)(9). The total amount of the contribution
• Interest on debt allocable to the claimed for the qualified conservation
production of designated property by a Corporations reporting taxable income
on the accrual method can elect to treat as property cannot exceed 100% of the
corporation for its own use or for sale. The excess of the corporation's taxable
corporation must capitalize this interest. paid during the tax year any contributions
paid by the due date for filing the income (as computed above substituting
Also, capitalize any interest on debt “100%” for “10%” ) over all other allowable
allocable to an asset used to produce the corporation’s tax return (not including
extensions), if the contributions were charitable contributions. Any excess
property. See section 263A(f) and qualified conservation contributions can
Regulations sections 1.263A-8 through authorized by the board of directors during
the tax year. Attach a declaration to the be carried over to the next 15 years,
1.263A-15 for definitions and more subject to the 100% limitation. See
information. return stating that the resolution
authorizing the contributions was adopted sections 170(b)(2)(B) and (C).
• Interest paid or incurred on any portion
of an underpayment of tax that is by the board of directors during the tax Temporary suspension of limitations
attributable to an understatement arising year. The declaration must include the on certain contributions. The CARES
from an undisclosed listed transaction or date the resolution was adopted. See Act allows a corporation to elect to deduct
an undisclosed reportable avoidance section 170(a)(2)(B). qualified cash contributions without regard
transaction (other than a listed Limitation on deduction. Generally, the to the 10% taxable income limit. For 2021,
transaction) entered into in tax years total amount claimed cannot be more than qualified contributions are charitable
beginning after October 22, 2004. 10% of taxable income (line 30) computed contributions that were made during
without regard to the following. calendar year 2021 to an organization
Special rules apply to: described in section 170(b)(1)(A) (other
• Forgone interest on certain • Any deduction for contributions.
• The special deductions on line 29b. than certain private foundations described
below-market-rate loans (see section in section 509(a)(3) or donor-advised
7872). • The limitation under section 249 on the
deduction for bond premium. funds described in section 4966(d)(2)).
• Original issue discount (OID) on certain The total amount of the contribution
high yield discount obligations. See • Any net operating loss (NOL) carryback
to the tax year under section 172. claimed cannot exceed 25% of the excess
section 163(e)(5) to determine the amount of the corporation's taxable income (as
of the deduction for OID that is deferred • Any capital loss carryback to the tax
year under section 1212(a)(1). computed above substituting “25%” for
and the amount that is disallowed on a “10%” ) over all other allowable charitable
high yield discount obligation. The rules • Deduction for income attributable to
domestic production activities of specified contributions. Contributions over the 25%
under section 163(e)(5) do not apply to limitation cannot be deducted for the tax
certain high yield discount obligations agricultural or horticultural cooperatives.
year, but can be carried over to the next 5
issued after August 31, 2008, and before Carryover. Charitable contributions over tax years.
January 1, 2011. See section 163(e)(5) the 10% limitation (or the 25% limitation, if
(F). Also, see Notice 2010-11, 2010-4 elected, see Temporary suspension of Temporary suspension of 10% limita-
I.R.B. 326. limitations on certain contributions, later) tion for certain disaster-related contri-
• Interest which is allocable to cannot be deducted for the tax year but butions. A corporation may elect to
unborrowed policy cash values of life can be carried over to the next 5 tax years. deduct qualified cash contributions
insurance, endowment, or annuity See the exception below for farmers and without regard to the 10% taxable income
contracts issued after June 8, 1997. See ranchers and certain Native Corporations. limit. For 2021, qualified contributions are
section 264(f). Attach a statement any charitable contributions that were
Special rules apply if the corporation made before February 26, 2021, to an
showing the computation of the deduction. has an NOL carryover to the tax year. In organization described in section 170(b)
Limitation on deduction. Under section figuring the charitable contributions (1)(A) (other than certain private
163(j), business interest expense is deduction for the current tax year, the 10% foundations described in section 509(a)(3)
generally limited to the sum of business limit is applied using the taxable income or donor-advised funds described in
interest income, 30% of the adjusted after taking into account any deduction for section 4966(d)(2)) for relief efforts in one
taxable income, and floor plan financing the NOL. or more qualified disaster areas. The
interest. The amount of any business To figure the amount of any remaining corporation must obtain contemporaneous
interest expense that is not allowed as a NOL carryover to later years, taxable written acknowledgment (within the
deduction for the tax year is carried income must be modified (see section meaning of section 170(f)(8)) from the
forward to the following year. If section 172(b)). To the extent that contributions qualified charitable organization that the
163(j) applies, use Form 8990 to figure the are used to reduce taxable income for this contribution was used or is to be used for
amount of business interest expense the purpose and increase an NOL carryover, a disaster relief efforts.
corporation can deduct for the current tax contributions carryover is not allowed. See
year and the amount that can be carried The total amount of the contribution
section 170(d)(2)(B). claimed for disaster relief efforts cannot
forward to the next year. See the
Instructions for Form 8990. Also see Suspension of 10% limitation for farm- exceed 100% of the excess of the
Schedule K, Question 23 and Question ers and ranchers and certain Native corporation's taxable income (as
24, later. Corporations. Certain corporations can computed above substituting "100%" for
deduct contributions of qualified "10%" ) over all other allowable charitable
Line 19. Charitable conservation property without regard to contributions. Any excess qualified
Contributions the general 10% limit. This applies to: contributions are carried over to the next 5
Enter contributions or gifts actually paid • A qualified farmer or rancher (as years.
defined in section 170(b)(1)(E)(v)) that Cash contributions. For contributions of
within the tax year to or for the use of
does not have publicly traded stock; and cash, check, or other monetary gifts
charitable and governmental
organizations described in section 170(c) • A Native Corporation (as defined in (regardless of the amount), the
section 170(b)(2)(C)(iii)) that contributes corporation must maintain a bank record,
and any unused contributions carried over
from prior years. Special rules and limits or a receipt, letter, or other written

Instructions for Form 1120 -13-

communication from the donee (other than by personal holding Form 5500, Annual Return/Report of
organization indicating the name of the companies and service organizations). Employee Benefit Plan.
organization, the date of the contribution, See section 170(e)(4).
and the amount of the contribution. Form 5500-SF, Short Form Annual
Increase in limits on contributions Return/Report of Small Employee Benefit
Contributions of $250 or more. A of food inventory. For any charitable Plan. File this form instead of Form 5500
corporation can deduct a contribution of contribution of food during 2021 to which generally if there were under 100
$250 or more only if it gets a written section 170(e)(3)(C) applies, a corporation participants at the beginning of the plan
acknowledgment from the donee can deduct qualified contributions of up to year.
organization that shows the amount of 25% of their aggregate net income from all
cash contributed, describes any property trades or businesses from which the Note. Form 5500 and Form 5500-SF
contributed (but not its value), and either contributions were made or up to 25% of must be filed electronically under the
gives a description and a good faith their taxable income. computerized ERISA Filing Acceptance
estimate of the value of any goods or System (EFAST2). For more information,
services provided in return for the For more information on charitable see the EFAST2 website at
contribution or states that no goods or contributions, including substantiation and [Link].
services were provided in return for the recordkeeping requirements, see section
contribution. The acknowledgment must 170 and the related regulations and Pub. Form 5500-EZ, Annual Return of
be obtained by the due date (including 526. For other special rules that apply to One-Participant (Owners/Partners and
extensions) of the corporation's return, or, corporations, see Pub. 542. Their Spouses) Retirement Plan or a
if earlier, the date the return is filed. Do not Foreign Plan. File this form for a plan that
attach the acknowledgment to the tax Line 20. Depreciation only covers the owner (or the owner and
return, but keep it with the corporation's Include on line 20 depreciation and the his or her spouse) or a foreign plan that is
records. cost of certain property that the required to file an annual return and does
corporation elected to expense under not file the annual return electronically on
Contributions of property other than section 179 from Form 4562. Include Form 5500-SF. See the Instructions for
cash. If a corporation (other than a amounts not claimed on Form 1125-A or Form 5500-EZ.
closely held or personal service elsewhere on the return. See Form 4562
corporation) contributes property other Line 24. Employee Benefit
and the Instructions for Form 4562.
than cash and claims over a $500 Programs
deduction for the property, it must attach a Line 21. Depletion Enter contributions to employee benefit
statement to the return describing the kind See sections 613 and 613A for programs not claimed elsewhere on the
of property contributed and the method percentage depletion rates applicable to return (for example, insurance or health
used to determine its FMV. Closely held natural deposits. Also, see section 291 for and welfare programs) that are not an
corporations and personal service the limitation on the depletion deduction incidental part of a pension, profit-sharing,
corporations must complete Form 8283, for iron ore and coal (including lignite). etc., plan included on line 23.
Noncash Charitable Contributions, and
attach it to their returns. All other Attach Form T (Timber), Forest Line 26. Other Deductions
corporations must generally complete and Activities Schedule, if a deduction for Attach a statement, listing by type and
attach Form 8283 to their returns for depletion of timber is taken. amount, all allowable deductions that are
contributions of property (other than not deductible elsewhere on Form 1120.
money) if the total claimed deduction for Foreign intangible drilling costs and Enter the total on line 26.
all property contributed was more than foreign exploration and development costs
$5,000. Special rules apply to the must either be added to the corporation's Examples of other deductions include
contribution of certain property. See the basis for cost depletion purposes or be the following. See Pub. 535 for details on
Instructions for Form 8283. deducted ratably over a 10-year period. other deductions that may apply to
See sections 263(i), 616, and 617 for corporations.
Qualified conservation • Amortization. See Part VI of Form 4562.
details.
contributions. Special rules apply to • Certain costs of a qualified film,
qualified conservation contributions, See Pub. 535 for more information on television, or live theatrical production
including contributions of certain depletion. commencing before January 1, 2026 (after
easements on buildings located in a December 31, 2015, and before January
registered historic district. See section Line 23. Pension, 1, 2026, for a live theatrical production).
170(h) and Pub. 526, Charitable Profit-Sharing, etc., Plans This deduction does not apply to any
Contributions. portion of the aggregate cost of the
Enter the deduction for contributions to
Other special rules. The corporation qualified pension, profit-sharing, or other production above $15 million. There is a
must reduce its deduction for contributions funded deferred compensation plans. higher allowance for production in certain
of certain capital gain property. See Employers who maintain such a plan must areas. See section 181 and the related
sections 170(e)(1) and 170(e)(5). generally file one of the forms listed below regulations.
unless exempt from filing under Note. Certain film, television, or live
A larger deduction is allowed for certain theatrical productions acquired and
contributions including: regulations or other applicable guidance,
even if the plan is not a qualified plan placed in service after September 27,
• Inventory and other property to certain 2017 (for which a deduction would have
organizations for use in the care of the ill, under the Internal Revenue Code. The
filing requirement applies even if the been allowable under section 181 without
needy, or infants (see section 170(e)(3)), regard to the dollar limitation), are
including qualified contributions of corporation does not claim a deduction for
the current tax year. There are penalties qualified property eligible for the special
“apparently wholesome food” (discussed depreciation allowance under section
below); and for failure to file these forms on time and
for overstating the pension plan deduction. 168(k). See the Instructions for Form
• Scientific equipment used for research 4562.
to institutions of higher learning or to See sections 6652(e) and 6662(f). Also,
certain scientific research organizations see the instructions for the applicable
form.

-14- Instructions for Form 1120

 • Certain business start-up and • Any amount that is allocable to a class QTFs are defined in section 132(f)(1) and
organizational costs (discussed earlier, of exempt income. See section 265(b) for include:
under Limitations on Deductions). exceptions. • Transportation in a commuter highway
• Reforestation costs. The corporation • Lobbying expenses. However, see vehicle between the employee's residence
can elect to deduct up to $10,000 of exceptions discussed later. and place of employment,
qualifying reforestation expenses for each • Amounts paid or incurred for any • Any transit pass, and
qualified timber property. The corporation settlement, payout, or attorney fees • Qualified parking.
can elect to amortize over 84 months any related to sexual harassment or sexual See section 274, Pub. 15-B and Pub.
amount not deducted. See Pub. 535. abuse, if such payments are subject to a 535 for details.
• Insurance premiums. nondisclosure agreement. See section
• Legal and professional fees. 162(q). Membership dues. The corporation
• Supplies used and consumed in the Travel, meals, and entertainment.
can deduct amounts paid or incurred for
business. membership dues in civic or public service
Subject to limitations and restrictions
• Travel, meals, and entertainment discussed below, a corporation can
organizations, professional organizations
expenses. Special rules apply (discussed (such as bar and medical associations),
deduct ordinary and necessary travel, business leagues, trade associations,
later).
meal, and non-entertainment expenses
• Utilities. paid or incurred in its trade or business.
chambers of commerce, boards of trade,
• Ordinary losses from trade or business Generally, entertainment expenses,
and real estate boards. However, no
activities of a partnership (from deduction is allowed if a principal purpose
membership dues, and facilities used in of the organization is to entertain or
Schedule K-1 (Form 1065)). Do not offset
connection with these activities cannot be provide entertainment facilities for
ordinary income against ordinary losses.
deducted. In addition, no deduction is members or their guests. In addition,
Instead, include the income on line 10.
generally allowed for qualified corporations cannot deduct membership
Show the partnership's name, address,
transportation fringe benefits. Special dues in any club organized for business,
and EIN on a separate statement attached
rules apply to deductions for gifts, luxury pleasure, recreation, or other social
to this return. If the amount is from more
water travel, and convention expenses. purpose. This includes country clubs, golf
than one partnership, identify the amount
See section 274, Pub. 463, and Pub. 535 and athletic clubs, airline and hotel clubs,
from each partnership.
for details.
• Any extraterritorial income exclusion and clubs operated to provide meals
(from Form 8873). Travel. The corporation cannot deduct under conditions favorable to business
• Any net negative section 481(a) travel expenses of any individual discussion.
adjustment, or in the case of an eligible accompanying a corporate officer or Entertainment facilities. Generally,
terminated S corporation, the ratable employee, including a spouse or the corporation cannot deduct an expense
portion of any negative section 481(a) dependent of the officer or employee, paid or incurred for a facility (such as a
adjustment. See Section 481(a) unless: yacht or hunting lodge) used for an activity
adjustment, earlier. • That individual is an employee of the usually considered entertainment,
• Any applicable deduction under section corporation, and amusement, or recreation.
179D for costs of energy efficient • His or her travel is for a bona fide
commercial building property. business purpose and would otherwise be Amounts treated as compensation.
• Dividends paid in cash on stock held by deductible by that individual. Generally, the corporation may be able to
an employee stock ownership plan. deduct otherwise nondeductible
However, a deduction may be taken for Meals. Generally, the corporation can entertainment, amusement, or recreation
these dividends only if, according to the deduct only 50% of the amount otherwise expenses if the amounts are treated as
plan, the dividends are: allowable for non-entertainment related compensation to the recipient and
meal expenses paid or incurred in its trade reported on Form W-2 for an employee or
1. Paid in cash directly to the plan or business. However, the corporation can
participants or beneficiaries; on Form 1099-NEC for an independent
deduct 100% of business meal expenses contractor.
2. Paid to the plan, which distributes if the meals are food and beverages
them in cash to the plan participants or provided by a restaurant. This applies only However, if the recipient is an officer,
their beneficiaries no later than 90 days to amounts paid or incurred after director, beneficial owner (directly or
after the end of the plan year in which the December 31, 2020, and before January indirectly), or other “specified individual”
dividends are paid; 1, 2023. (as defined in section 274(e)(2)(B) and
Regulations section 1.274-9(b)), special
3. At the election of such participants Meals not separately stated from rules apply. See section 274(e)(2) and
or their beneficiaries (a) payable as entertainment are generally not Regulations sections 1.274-9 and
provided under (1) or (2) above, or (b) deductible. In addition (subject to 1.274-10.
paid to the plan and reinvested in exceptions under section 274(k)(2)):
qualifying employer securities; or • Meals must not be lavish or Fines or similar penalties. Generally,
4. Used to make payments on a loan extravagant, and no deduction is allowed for fines or similar
described in section 404(a)(9). • An employee of the corporation must penalties paid or incurred to, or at the
be present at the meal. direction of, a government or
See section 404(k) for more details and governmental entity for violating any law,
See section 274(n)(3) for a special rule
the limitation on certain dividends. or for the investigation or inquiry into the
that applies to expenses for meals
consumed by individuals subject to the potential violation of a law, except:
Do not deduct expenses such as the
following. hours of service limits of the Department • Amounts that constitute restitution or
remediation of property,
• Amounts paid or incurred to, or at the of Transportation.
• Amounts paid to come into compliance
direction of, a government or
Qualified transportation fringes with the law,
governmental entity for the violation, or
investigation or inquiry into the potential
(QTFs). Generally, no deduction is • Amounts paid or incurred as the result
allowed under section 274(a)(4) for QTFs of orders or agreements in which no
violation, of a law. However, see Fines or
provided by employers to their employees. government or governmental entity is a
similar penalties, later.
party, and

Instructions for Form 1120 -15-

• Amounts paid or incurred for taxes due. or loss from the activity by combining the For more details on the NOL deduction,
No deduction is allowed unless the gain or loss on the sale or disposition with see section 172 and the Instructions for
amounts are specifically identified in the the profit or loss from the activity. If the Form 1139.
order or agreement and the corporation corporation has a net loss, it may be
limited because of the at-risk rules. Line 29b. Special Deductions
establishes that the amounts were paid for
that purpose. Also, any amount paid or Treat any loss from an activity not See the instructions for Schedule C.
incurred as reimbursement to the allowed for the tax year as a deduction Line 30. Taxable Income
government for the costs of any allocable to the activity in the next tax
investigation or litigation are not eligible for year. Minimum taxable income. The
the exceptions and are nondeductible. corporation's taxable income cannot be
See section 162(f). Line 29a. Net Operating Loss less than the largest of the following
Deduction amounts.
Lobbying expenses. Generally, • The inversion gain of the corporation for
lobbying expenses are not deductible. A corporation can use the NOL incurred in
one tax year to reduce its taxable income the tax year, if the corporation is an
These expenses include: expatriated entity or a partner in an
• Amounts paid or incurred in connection in another tax year. Enter on line 29a the
total NOL carryovers from other tax years, expatriated entity. See section 7874(a).
with influencing federal, state, or local • The sum of the corporation's excess
legislation; or but do not enter more than the
corporation's taxable income (after special inclusions from its residual interest in a
• Amounts paid or incurred in connection REMIC from Schedules Q (Form 1066),
with any communication with certain deductions). Attach a statement showing
the computation of the NOL deduction. line 2c, and the corporation's taxable
federal executive branch officials in an income determined solely with respect to
attempt to influence the official actions or Complete item 12 on Schedule K.
its ownership and high-yield interests in
positions of the officials. See Regulations The following special rules apply. FASITs. See sections 860E(a) and 860J
section 1.162-29 for the definition of • If an ownership change (described in (repealed).
“influencing legislation.” section 382(g)) occurs, the amount of the
Net operating loss (NOL). If line 30
Dues and other similar amounts paid to taxable income of a loss corporation that
(figured without regard to the items listed
certain tax-exempt organizations may not may be offset by the pre-change NOL
above under minimum taxable income) is
be deductible. If certain in-house lobbying carryovers may be limited. See section
zero or less, the corporation may have an
expenditures do not exceed $2,000, they 382 and the related regulations. A loss
NOL that can be carried back or forward
are deductible. corporation must include the information
as a deduction to other tax years.
statement as provided in Regulations
Line 28. Taxable Income Before section 1.382-11(a) with its income tax For losses incurred in tax years
NOL Deduction and Special return for each tax year that it is a loss beginning after December 31, 2020, only
Deductions corporation in which an ownership shift, farming losses and losses of an insurance
equity structure shift, or other transaction company (other than a life insurance
At-risk rules. Generally, special at-risk described in Temporary Regulations company) can be carried back. The
rules under section 465 apply to closely section 1.382-2T(a)(2)(i) occurs. If the carryback period for these losses is 2
held corporations (see Passive activity corporation makes the years. For NOLs that can be carried back,
limitations, earlier) engaged in any activity closing-of-the-books election, see the corporation can elect to waive the
as a trade or business or for the Regulations section 1.382-6(b). carryback period and instead carry the
production of income. These corporations NOL forward to future tax years.
The limitations under section 382 do
may have to adjust the amount on line 28. See the instructions for Schedule K,
not apply to certain ownership changes
(See below.) Item 11 for information on making the
after February 17, 2009, made pursuant to
The at-risk rules do not apply to: a restructuring plan under the Emergency election to waive the entire carryback
• Holding real property placed in service Economic Stabilization Act of 2008. See period for 2021. See the Instructions for
by the taxpayer before 1987; section 382(n). Form 1139 for other special rules and
• Equipment leasing under sections For guidance in applying section 382 to
elections.
465(c)(4), (5), and (6); or For tax years beginning in 2021, the
loss corporations whose instruments were
• Any qualifying business of a qualified acquired by Treasury under certain NOL deduction for the year cannot exceed
corporation under section 465(c)(7). the aggregate amount of NOLs arising in
programs under the Emergency Economic
However, the at-risk rules do apply to Stabilization Act of 2008, see Notice tax years beginning before January 1,
the holding of mineral property. 2010-2, 2010-2 I.R.B. 251. 2018, carried to such year plus the lesser
If the at-risk rules apply, adjust the • If a corporation acquires control of of:
amount on this line for any section 465(d) another corporation (or acquires its assets 1. The aggregate amount of NOLs
losses. These losses are limited to the in a reorganization), the amount of arising in tax years beginning after
amount for which the corporation is at risk pre-acquisition losses that may offset December 31, 2017, carried to such tax
for each separate activity at the close of recognized built-in gain may be limited year; or
the tax year. If the corporation is involved (see section 384). 2. 80% of the excess, if any, of
in one or more activities, any of which • If a corporation elects the alternative tax taxable income determined without any
incurs a loss for the year, report the losses on qualifying shipping activities under NOL deduction, section 199A deduction,
for each activity separately. Attach Form section 1354, no deduction is allowed for or section 250 deduction, over any NOL
6198, At-Risk Limitations, showing the an NOL attributable to the qualifying carryover to the tax year from tax years
amount at risk and gross income and shipping activities to the extent that the beginning before January 1, 2018.
deductions for the activities with the loss is carried forward from a tax year
losses. preceding the first tax year for which the An exception applies for NOLs of
If the corporation sells or otherwise alternative tax election was made. See insurance companies other than life
disposes of an asset or its interest (either section 1358(b)(2). insurance companies. The 80% taxable
total or partial) in an activity to which the income limit does not apply to these
at-risk rules apply, determine the net profit entities. See sections 172(b) and (f).

-16- Instructions for Form 1120

Merchant Marine capital construction Direct deposit of refund. If the • Dividends (except those received on
fund. To take a deduction for amounts corporation wants its refund directly certain debt-financed stock acquired after
contributed to a capital construction fund deposited into its checking or savings July 18, 1984) that are received from
(CCF), reduce the amount that would account at any U.S. bank or other financial 20%-or-more-owned domestic
otherwise be entered on line 30 by the institution instead of having a check sent corporations subject to income tax and
amount of the deduction. On the dotted to the corporation, complete Form 8050, that are subject to the 65% deduction
line next to the entry space, enter “CCF” Direct Deposit of Corporate Tax Refund, under section 243(c), and
and the amount of the deduction. For and attach it to the corporation's tax • Taxable distributions from an IC-DISC
more information, see section 7518. return. or former DISC that are considered
eligible for the 65% deduction.
Line 32.
Schedule C. Dividends, Line 3, Column (a)
Reserved for future use.
Enter the following.
Line 34. Estimated Tax Penalty Inclusions, and Special • Dividends received on certain
Generally, the corporation does not have Deductions debt-financed stock acquired after July 18,
to file Form 2220 because the IRS can For purposes of the 20% ownership test 1984, from domestic and foreign
figure the penalty amount, if any, and bill on lines 1 through 7, the percentage of corporations subject to income tax that
the corporation. However, even if the stock owned by the corporation is based would otherwise be subject to the
corporation does not owe the penalty, it on voting power and value of the stock. dividends-received deduction under
must complete and attach Form 2220 if: Preferred stock described in section section 243(a)(1), 243(c), or 245(a).
• The annualized income or adjusted 1504(a)(4) is not taken into account. Generally, debt-financed stock is stock
method is used, or that the corporation acquired by incurring
Consolidated returns. Corporations a debt (for example, it borrowed money to
• The corporation is a large corporation filing a consolidated return should see
(as defined in the Instructions for Form buy the stock).
Regulations sections 1.1502-13, • Dividends received from a RIC on
2220) computing its first required
1.1502-26, and 1.1502-27 before debt-financed stock. The amount of
installment based on the prior year's tax.
completing Schedule C. dividends eligible for the
If Form 2220 is attached, check the box Corporations filing a consolidated dividends-received deduction is limited by
on line 34, and enter any penalty on this return must not report as dividends on section 854(b). The corporation should
line. Schedule C any amounts received from receive a notice from the RIC specifying
Line 35. Amount Owed corporations within the consolidated the amount of dividends that qualify for the
group. Such dividends are eliminated in deduction.
If the corporation cannot pay the full consolidation rather than offset by the
amount of tax owed, it can apply for an dividends-received deduction. Line 3, Columns (b) and (c)
installment agreement online. The Dividends received on certain
corporation can apply for an installment Line 1, Column (a) debt-financed stock acquired after July 18,
agreement online if: Enter dividends (except those received on 1984, are not entitled to the full 50% or
• It cannot pay the full amount shown on certain debt-financed stock acquired after 65% dividends-received deduction under
line 35, July 18, 1984—see section 246A) that section 243 or 245(a). The 50% or 65%
• The total amount owed is $25,000 or are: deduction is reduced by a percentage that
less, and • Received from less-than-20%-owned is related to the amount of debt incurred to
• The corporation can pay the liability in domestic corporations subject to income acquire the stock. See section 246A. Also,
full in 24 months. tax, and see section 245(a) before making this
To apply using the Online Payment • Qualified for the 50% deduction under computation for an additional limitation
Agreement Application, go to [Link]/ section 243(a)(1). that applies to certain dividends received
OPA. from foreign corporations. Attach a
Also, include on line 1 the following.
Under an installment agreement, the statement to Form 1120 showing how the
corporation can pay what it owes in
• Taxable distributions from an IC-DISC amount on line 3, column (c), was figured.
or former DISC that are designated as
monthly installments. There are certain
conditions that must be met to enter into
eligible for the 50% deduction and certain Line 4, Column (a)
dividends of Federal Home Loan Banks. Enter dividends received on preferred
and maintain an installment agreement,
See section 246(a)(2). stock of a less-than-20%-owned public
such as paying the liability within 24
months and making all required deposits
• Dividends (except those received on utility that is subject to income tax and is
certain debt-financed stock acquired after allowed the 23.3% deduction provided in
and timely filing tax returns during the
July 18, 1984) from a regulated sections 244 and 247 (as affected by
length of the agreement.
investment company (RIC). The amount of P.L.113-295, Div. A, section 221(a)(41)
If the installment agreement is dividends eligible for the (A), Dec. 19, 2014, 128 Stat. 4043) for
accepted, the corporation will be charged dividends-received deduction under dividends paid.
a fee and it will be subject to penalties and section 243 is limited by section 854(b).
interest on the amount of tax not paid by The corporation should receive a notice Line 5, Column (a)
the due date of the return. from the RIC specifying the amount of Enter dividends received on preferred
dividends that qualify for the deduction. stock of a 20%-or-more-owned public
Line 37
Report so-called dividends or earnings utility that is subject to income tax and is
Enter the amount of any overpayment that allowed the 26.7% deduction provided in
should be refunded or applied to next received from mutual savings banks, etc.,
as interest. Do not treat them as sections 244 and 247 (as affected by
year's estimated tax. P.L.113-295, Div. A, section 221(a)(41)
dividends.
(A), Dec. 19, 2014, 128 Stat. 4043) for
Note. This election to apply some or all of
the overpayment amount to the
Line 2, Column (a) dividends paid.
corporation's 2022 estimated tax cannot Enter on line 2:
be changed at a later date.

Instructions for Form 1120 -17-

Line 6, Column (a) though a deduction is allowed for the Line 16a, Column (a)
entire amount of those dividends. To claim
Enter the U.S.-source portion of dividends Enter the foreign-source portion of any
the 100% deduction on line 10, column
that: subpart F inclusions attributable to the
(c), the company must file with its return a
• Are received from statement that it was a federal licensee
sale or exchange by a controlled foreign
less-than-20%-owned foreign corporation (CFC) of stock in another
under the Small Business Investment Act
corporations, and foreign corporation described in section
of 1958 at the time it received the
• Qualify for the 50% deduction under dividends.
964(e)(4). This should equal the U.S.
section 245(a). To qualify for the 50% shareholder's pro rata share of the amount
deduction, the corporation must own at Line 11, Columns (a) and (c) reported on Form(s) 5471, Schedule I,
least 10% of the stock of the foreign line 1a. (Do not include on line 16a any
Enter only dividends that qualify under
corporation by vote and value. portion of such subpart F inclusion that is
section 243(b) for the 100%
dividends-received deduction described in not eligible for the section 245A deduction
Also, include dividends received from a
section 243(a)(3). Corporations taking this pursuant to Regulation section
less-than-20%-owned FSC that:
1.245A-5(g)(2). Include such amounts on
• Are attributable to income treated as deduction are subject to the provisions of
line 16c.)
effectively connected with the conduct of a section 1561.
trade or business within the United States The 100% deduction does not apply to Line 16b, Column (a)
(excluding foreign trade income), and affiliated group members that are joining in Enter the total subpart F inclusions
• Qualify for the 50% deduction under the filing of a consolidated return. attributable to tiered hybrid dividends. This
section 245(c)(1)(B). should equal the sum of the amounts
Line 12, Column (a)
Line 7, Column (a) reported by the U.S. shareholder on
Enter dividends from FSCs that are Form(s) 5471, Schedule I, line 1b.
Enter the U.S.-source portion of dividends attributable to foreign trade income and
that: that are eligible for the 100% deduction Line 16c, Column (a)
• Are received from 20%-or-more-owned provided in section 245(c)(1)(A). Enter all other amounts included in income
foreign corporations, and under section 951. This should equal the
• Qualify for the 65% deduction under Line 13, Column (a) U.S. shareholder's pro rata share of the
sections 243 and 245(a). Enter the foreign-source portion of sum of the amounts reported on Form
Also, include dividends received from a dividends that: 5471, Schedule I, lines 1(c) through 1(h),
20%-or-more-owned FSC that: • Are received from specified 2, and 4.
10%-owned foreign corporations (as
• Are attributable to income treated as defined in section 245A(b)), including, for Line 17, Column (a)
effectively connected with the conduct of a example, gain from the sale of stock of a Enter amounts included in income under
trade or business within the United States foreign corporation that is treated as a section 951A. See Form 8992, Part II,
(excluding foreign trade income), and dividend under sections 1248(a) and (j); line 5, and the Instructions for Form 8992.
• Qualify for the 65% deduction under and Also, if applicable, attach Form(s) 5471.
section 245(c)(1)(B). • Qualify for the section 245A deduction.
Line 8, Column (a) Note. Consider the applicability of section
Line 14, Column (a) 951A with respect to CFCs owned by
Enter dividends received from wholly Enter the foreign dividends not reportable domestic partnerships in which the
owned foreign subsidiaries that are on line 3, 6, 7, 8, 11, 12, or 13 of column corporation has an interest.
eligible for the 100% deduction under (a).
section 245(b). Line 18, Column (a)
Include on line 14 the foreign-source
In general, the deduction under section Include gross-up for taxes deemed paid
portion of any dividend that does not
245(b) applies to dividends paid out of the under section 960.
qualify for the section 245A deduction (for
earnings and profits of a foreign example, hybrid dividends within the Line 19, Column (a)
corporation for a tax year during which: meaning of section 245A(e), ineligible
• All of its outstanding stock is directly or Enter taxable distributions from an
amounts of dividends within the meaning
indirectly owned by the domestic IC-DISC or former DISC that are
of Regulations section 1.245A-5(b),
corporation receiving the dividends, and designated as not eligible for a
dividends that fail to meet the holding
• All of its gross income from all sources dividends-received deduction.
period requirement under section 246(c)
is effectively connected with the conduct (5), etc.). No deduction is allowed under section
of a trade or business within the United
Also, include on line 14 the 243 for a dividend from an IC-DISC or
States.
corporation's share of distributions from a former DISC (as defined in section 992(a))
Line 9, Column (c) section 1291 fund from Form 8621, to the to the extent the dividend:
Generally, line 9, column (c), cannot extent that the amounts are taxed as • Is paid out of the corporation's
exceed the amount from the Worksheet dividends under section 301. See Form accumulated IC-DISC income or
for Schedule C, line 9. However, in a year 8621 and the Instructions for Form 8621. previously taxed income, or
in which an NOL occurs, this limitation Attach a statement identifying the • Is a deemed distribution under section
does not apply even if the loss is created 995(b)(1).
amount of each dividend reported on
by the dividends-received deduction. See line 14 and the provision pursuant to Line 20, Column (a)
sections 172(d) and 246(b). which a deduction is not allowed with Include the following.
respect to such dividend.
Line 10, Columns (a) and (c) 1. Dividends (other than capital gain
Small business investment companies Line 15, Column (a) distributions reported on Schedule D
operating under the Small Business Reserved for future use. (Form 1120) and exempt-interest
Investment Act of 1958 must enter dividends) that are received from RICs
dividends that are received from domestic Line 15, Column (c) and that are not subject to the 50%
corporations subject to income tax even Reserved for future use. deduction.

-18- Instructions for Form 1120

 Schedule J.
Worksheet for Schedule C, line 9 Keep for Your Records Tax Computation and
1. Refigure Form 1120, page 1, line 28, without any adjustment under Payment
section 1059 and without any capital loss carryback to the tax year under
section 1212(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Part I—Tax Computation
2. Complete lines 10, 11, 12, and 13, column (c), and enter the total Line 1
here . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.
3. Subtract line 2 from line 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . If the corporation is a member of a
3.
controlled group, check the box on line 1.
4. Multiply line 3 by 65% (0.65) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Complete and attach Schedule O (Form
5. Add lines 2, 5, 7, and 8, column (c), and the part of the deduction on 1120), Consent Plan and Apportionment
line 3, column (c), that is attributable to dividends from Schedule for a Controlled Group.
20%-or-more-owned corporations . . . . . . . . . . . . . . . . . . . . . . . . . 5. Component members of a controlled
6. Enter the smaller of line 4 or line 5. If line 5 is greater than line 4, stop group must use Schedule O to report the
here; enter the amount from line 6 on line 9, column (c), and do not apportionment of certain tax benefits
complete the rest of this worksheet . . . . . . . . . . . . . . . . . . . . . . . . 6. between the members of the group. See
7. Enter the total amount of dividends from 20%-or-more-owned Schedule O and the Instructions for
corporations that are included on lines 2, 3, 5, 7, and 8, column Schedule O for more information.
(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.
8. Subtract line 7 from line 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.
Line 2
9. Multiply line 8 by 50% (0.50) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.
Multiply taxable income (page 1, line 30)
10. Subtract line 5 from line 9, column (c) . . . . . . . . . . . . . . . . . . . . . . . 10. by 21%. Enter this amount on line 2.
11. Enter the smaller of line 9 or line 10 . . . . . . . . . . . . . . . . . . . . . . . . 11. Mutual savings bank conducting life
12. Dividends-received deduction after limitation (sec. 246(b)). Add insurance business. The tax under
lines 6 and 11. Enter the result here and on line 9, column (c) . . . . . . . 12. section 594 consists of the sum of (a) a
partial tax computed on Form 1120 on the
taxable income of the bank, determined
2. Dividends from tax-exempt related payments with respect to positions without regard to income or deductions
organizations. in substantially similar or related property. allocable to the life insurance department,
3. Dividends (other than capital gain 5. Any other taxable dividend income and (b) a partial tax on the taxable income
distributions) received from a REIT that, not properly reported elsewhere on computed on Form 1120-L of the life
for the tax year of the trust in which the Schedule C. insurance department. Enter the
dividends are paid, qualifies under combined tax on line 2. Attach Form
sections 856 through 860. If patronage dividends or per-unit retain 1120-L as a schedule (and identify it as
allocations are included on line 20, identify such), together with the annual statements
4. Dividends not eligible for a the total of these amounts in a statement and schedules required to be filed with
dividends-received deduction, which attached to Form 1120. Form 1120-L. See Regulations section
include the following.
Line 21, Column (c) 1.6012-2(c)(1)(ii).
a. Dividends received on any share of
stock held for less than 46 days during the Section 247 (as affected by P.L.113-295, Exception for insurance companies
91-day period beginning 45 days before Div. A, section 221(a)(41)(A), Dec. 19, filing their federal income tax returns
the ex-dividend date. When counting the 2014, 128 Stat. 4043) allows public electronically. If an insurance company
number of days the corporation held the utilities a deduction of 40% of the smaller files its income tax return electronically, it
stock, you cannot count certain days of (a) dividends paid on their preferred should not include the annual statements
during which the corporation's risk of loss stock during the tax year, or (b) taxable and schedules required to be filed with
was diminished. See section 246(c)(4) income computed without regard to this Form 1120-L. However, such statements
and Regulations section 1.246-5 for more deduction. In a year in which an NOL must be available at all times for
details. occurs, compute the deduction without inspection by the IRS and retained for so
regard to section 247(a)(1)(B). long as such statements may be material
b. Dividends received on any share of
in the administration of any Internal
preferred stock which are attributable to Line 22, Column (c) Revenue law.
periods totaling more than 366 days if
Enter the section 250 deduction claimed
such stock was held for less than 91 days Deferred tax under section 1291. If the
for foreign-derived intangible income
during the 181-day period that began 90 corporation was a shareholder in a PFIC
(FDII) and global intangible low-taxed
days before the ex-dividend date. When and received an excess distribution or
income (GILTI). This should equal the sum
counting the number of days the disposed of its investment in the PFIC
of the amounts on Form 8993, Part III,
corporation held the stock, you cannot during the year, it must include the
lines 28 and 29.
count certain days during which the increase in taxes due under section
corporation's risk of loss was diminished. 1291(c)(2) (from Form 8621) in the total
See section 246(c)(4) and Regulations for line 2. On the dotted line next to line 2,
section 1.246-5 for more details. Preferred enter “Section 1291” and the amount.
dividends attributable to periods totaling Do not include on line 2 any interest
less than 367 days are subject to the due under section 1291(c)(3). Instead,
46-day holding period rule discussed include the amount of interest owed on
above. Schedule J, Part I, line 9f.
c. Dividends on any share of stock to
the extent the corporation is under an
obligation (including a short sale) to make

Instructions for Form 1120 -19-

 For more information on reporting the Line 5d. Enter any allowable credit from Line 9c. Interest due under the
deferred tax and interest, see the Form 8827, Credit for Prior Year Minimum look-back method—completed
Instructions for Form 8621. Tax—Corporations. Complete and attach long-term contracts. If the corporation
Increase in tax attributable to partner's Form 8827. used the percentage-of-completion
audit liability under section 6226. If the method under section 460(b) for certain
Line 5e. Enter the allowable credits from
corporation is filing Form 8978 to report long-term contracts, figure any interest
Form 8912, Credit to Holders of Tax Credit
adjustments shown on Form 8986 they due or to be refunded using the look-back
Bonds, line 12.
received from partnerships that have been method, described in section 460(b)(2).
audited and have elected to push out Use Form 8697 to figure any interest due
imputed underpayments to their partners, Line 6 or to be refunded. See the Instructions for
include any increase in taxes due from Add lines 5a through 5e. Enter the total on Form 8697. Include any interest due on
Form 8978, line 14, in the total for Form line 6. line 9c.
1120, Schedule J, line 2. On the dotted Line 9d. Interest due under the
Decrease attributable to partner's au-
line next to line 2, enter "FROM FORM look-back method—income forecast
dit liability under section 6226. If the
8978" and the amount. Attach Form 8978. method. If the corporation used the
corporation is filing Form 8978 to report
If Form 8978, line 14, shows a decrease in income forecast method to depreciate
adjustments shown on Form 8986 they
tax, see the instructions for Schedule J, property, it must figure any interest due or
received from partnerships that have been
line 6. to be refunded using the look-back
audited and have elected to push out
Additional tax under section 197(f). A imputed underpayments to their partners, method, described in section 167(g)(2).
corporation that elects to recognize gain include any decrease in taxes due Use Form 8866 to figure any interest due
and pay tax on the sale of a section 197 (negative amount) from Form 8978, or to be refunded. See the Instructions for
intangible under the related person line 14, in the total for Form 1120, Form 8866. Include any interest due on
exception to the anti-churning rules should Schedule J, line 6. On the dotted line next line 9d.
include any additional tax due in the total to line 6, enter "FROM FORM 8978" and Line 9e. Alternative tax on qualifying
for line 2. On the dotted line next to line 2, the amount. Attach Form 8978. If Form shipping activities. Enter any alternative
enter “Section 197” and the amount. See 8978, line 14, shows an increase in tax, tax on qualifying shipping activities from
section 197(f)(9)(B)(ii). see the instructions for Schedule J, line 2. Form 8902.
Line 9f. Interest/tax due under section
Line 3 Line 8 453A(c) and/or section 453(l). Include
If the corporation had gross receipts of at A corporation is taxed as a personal any interest on deferred tax attributable to
least $500 million in any 1 of the 3 tax holding company under section 542 if: certain nondealer installment obligations
years preceding the current tax year, • At least 60% of its adjusted ordinary (section 453A(c)) and dealer installment
complete and attach Form 8991. Enter on gross income for the tax year is personal obligations (section 453(l)).
line 3 the base erosion minimum tax holding company income, and
Line 9g. Other. Include on line 9g
amount from Form 8991, Part IV, line 5e. • At any time during the last half of the tax additional taxes and interest such as the
See section 59A and the Instructions for year more than 50% in value of its
following. Attach a statement showing the
Form 8991. Also, see Schedule K, outstanding stock is directly or indirectly
computation of each item included in the
Question 22, later. owned by five or fewer individuals.
total for line 9g and identify the applicable
See Schedule PH (Form 1120) for Code section and the type of tax or
Line 5 interest.
definitions and details on how to figure the
Line 5a. To find out when a corporation tax. • Recapture of Indian employment credit.
Generally, if an employer terminates the
can take the credit for payment of income
employment of a qualified employee less
tax to a foreign country or U.S. Line 9 than 1 year after the date of initial
possession, see Form 1118, Foreign Tax
Include any of the following taxes and employment, any Indian employment
Credit—Corporations.
interest. credit allowed for a prior tax year because
Line 5b. Enter any qualified electric of wages paid or incurred to that employee
vehicle passive activity credits from prior Line 9a. Recapture of investment cred- must be recaptured. For details, see Form
years allowed for the current tax year from it. If the corporation disposed of 8845 and section 45A.
Form 8834, Qualified Electric Vehicle investment credit property or changed its • Recapture of new markets credit (see
Credit, line 7. Attach Form 8834. If use before the end of its useful life or Form 8874, New Markets Credit, and
applicable, include on line 5b any credits recovery period, or is required to Form 8874-B, Notice of Recapture Event
from Form 5735, American Samoa recapture a qualifying therapeutic for New Markets Credit).
Economic Development Credit. See the discovery project grant, enter the increase • Recapture of employer-provided
Instructions for Form 5735. Attach Form in tax from Form 4255, Recapture of childcare facilities and services credit (see
5735. Investment Credit. See the Instructions for Form 8882).
Form 4255. • Tax and interest on a nonqualified
Line 5c. Enter on line 5c the allowable
Line 9b. Recapture of low-income withdrawal from a capital construction
credit from Form 3800, Part II, line 38.
housing credit. If the corporation fund (section 7518(g)).
The corporation is required to file Form disposed of property (or there was a • Interest due on deferred gain (section
3800, General Business Credit, to claim reduction in the qualified basis of the 1260(b)).
any of the business credits. See the property) for which it took the low-income • Interest due under section 1291(c)(3).
Instructions for Form 3800 for exceptions. housing credit, and the corporation did not See Form 8621 and the Instructions for
For a list of allowable credits, see Form follow the procedures that would have Form 8621.
3800. Also, see the applicable credit form prevented recapture of the credit, it may
and its instructions. owe a tax. See Form 8611, Recapture of
Low-Income Housing Credit.

-20- Instructions for Form 1120

Line 11 election to credit its estimated tax Line 22
payments to its beneficiaries, include the
Include any deferred tax on the corporation's share of the payment in the Reserved for future use.
termination of a section 1294 election total for line 14. Enter “T” and the amount
applicable to shareholders in a qualified
electing fund in the amount entered on
on the dotted line next to the entry space. Schedule K.
line 11.
Line 15
Other Information
Complete all items that apply to the
Subtract the following amounts from If the corporation overpaid estimated tax, it corporation.
the total for line 11. may be able to get a quick refund by filing
• Deferred tax on the corporation's share Form 4466. The overpayment must be at Question 2
of undistributed earnings of a qualified least 10% of the corporation's expected See the list of Principal Business Activity
electing fund. See the Instructions for income tax liability and at least $500. File Codes later in the instructions. Using the
Form 8621. Form 4466 after the end of the list of codes and activities, determine from
• Deferred LIFO recapture tax (section corporation's tax year, and no later than which activity the corporation derives the
1363(d)). This tax is the part of the LIFO the due date for filing the corporation’s tax highest percentage of its total receipts.
recapture tax that will be deferred and return (not including extensions). Form Enter on lines 2a, 2b, and 2c the principal
paid with Form 1120-S in the future. To 4466 must be filed before the corporation business activity code number, the
figure the deferred tax, first figure the total files its tax return. See the instructions for corporation's business activity, and a
LIFO recapture tax. Follow the steps Form 4466. description of the principal product or
below to figure the total LIFO recapture tax service of the corporation.
and the deferred amount. Also, see
Line 10. Other Income, earlier.
Line 18 Question 3
If the corporation had federal income tax Check the “Yes” box for question 3 if:
Step 1. Figure the tax on the withheld from any payments it received • The corporation is a subsidiary in an
corporation's income including the LIFO because, for example, it failed to give the affiliated group (defined below), but is not
recapture amount. Complete Schedule J, payer its correct EIN or was otherwise filing a consolidated return for the tax year
Part I, lines 1 through 10. subjected to back-up withholding, include with that group; or
the amount withheld in the total for line 18. • The corporation is a subsidiary in a
Step 2. Using a separate worksheet, parent–subsidiary controlled group. For a
complete Schedule J again, but do not Line 20. Refundable Credits definition of a parent–subsidiary controlled
include the LIFO recapture amount in the group, see the Instructions for Schedule O
corporation's taxable income. Line 20a. Credit from Form 2439. Enter (Form 1120).
any credit from Form 2439, Notice to
Step 3. Compare the tax in Step 2 to Shareholder of Undistributed Long-Term Any corporation that meets either of the
the tax in Step 1. The difference between Capital Gains, for the corporation's share requirements above should check the
the two is the LIFO recapture tax. of the tax paid by a regulated investment “Yes” box. This applies even if the
company (RIC) or a real estate investment corporation is a subsidiary member of one
Step 4. Multiply the amount figured in trust (REIT) on undistributed long-term group and the parent corporation of
Step 3 by 75% (0.75). The result is the capital gains included in the corporation's another.
deferred LIFO recapture tax. income. Attach Form 2439.
Note. If the corporation is an “excluded
How to report. Attach a statement Line 20b. Credit for federal tax on member” of a controlled group (see
showing the computation of each item fuels. Enter the total income tax credit definition in the Instructions for
included in, or subtracted from, the total claimed on Form 4136, Credit for Federal Schedule O (Form 1120)), it is still
for line 11. On the dotted line next to Tax Paid on Fuels. Attach Form 4136. considered a member of a controlled
line 11, specify (a) the applicable Code group for this purpose.
Line 20c. Reserved for future use.
section, (b) the type of tax, and (c) enter
the amount of tax. For example, if the Line 20d. Other. Include on line 20d any Affiliated group. An affiliated group is
corporation is deferring a $100 LIFO other refundable credit the corporation is one or more chains of includible
recapture tax, subtract this amount from claiming, including the following. Attach a corporations (section 1504(a)) connected
the total on line 11, then enter “Section statement listing the type of credit and the through stock ownership with a common
1363—Deferred Tax—$100” on the dotted amount of the credit. parent corporation. The common parent
line next to line 11. • Credit for tax withheld under Chapter 3 must be an includible corporation and the
or 4 of the Internal Revenue Code that is following requirements must be met.
Part II—Reserved For Future shown on Form 1042-S, Form 8805, or 1. The common parent must own
Use Form 8288-A. Attach the applicable form. directly stock that represents at least 80%
Line 12 • Credit for tax on ozone-depleting of the total voting power and at least 80%
chemicals. See section 4682(g)(2). of the total value of the stock of at least
Reserved for future use. • Credit under section 960(c) (section one of the other includible corporations.
960(b) for pre-2018 taxable years of
Part III—Payments and foreign corporations). If an increase in the
2. Stock that represents at least 80%
Refundable Credits of the total voting power and at least 80%
limitation under section 960(c) (section
of the total value of the stock of each of
960(b) (pre-2018)) exceeds the total tax
the other corporations (except for the
Line 14 on Schedule J, Part I, line 11, for the tax
common parent) must be owned directly
year, the amount of the excess is deemed
Enter any estimated tax payments the by one or more of the other includible
an overpayment of tax for the tax year.
corporation made for the tax year. corporations.
See section 960(c) (section 960(b)
Beneficiaries of trusts. If the (pre-2018)) for more information regarding For this purpose, the term “stock”
corporation is the beneficiary of a trust, the circumstances under which such an generally does not include any stock that
and the trust makes a section 643(g) excess arises. (a) is nonvoting, (b) is nonconvertible,

Instructions for Form 1120 -21-

(c) is limited and preferred as to dividends interest of 50% or more in the profit, loss, directly or indirectly, 50% of the profit,
and does not participate significantly in or capital of the partnership. List each trust loss, or capital of Partnership C.
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% Question 7
the issue price of the stock (except for a or more, or owned, directly or indirectly, an Check the “Yes” box if one foreign person
reasonable redemption or liquidation interest of 50% or more in the trust owned at least 25% of the total voting
premium). See section 1504(a)(4). beneficial interest. Indicate the name, EIN power of all classes of stock of the
(if any), country of organization, and the corporation entitled to vote or at least 25%
Question 4. Constructive maximum percentage interest owned, of the total value of all classes of stock of
Ownership of the Corporation directly or indirectly, in the profit, loss, or the corporation.
For purposes of question 4, the capital of the partnership at the end of the
partnership tax year, or, for a trust, the The constructive ownership rules of
constructive ownership rules of section
percentage interest owned in the trust section 318 apply in determining if a
267(c) (excluding section 267(c)(3)) apply
beneficial interest. List a partnership or corporation is foreign owned. See section
to ownership of interests in corporate
trust owned through a disregarded entity 6038A(c)(5) and the related regulations.
stock and ownership of interests in the
profit, loss, or capital of a partnership. If rather than the disregarded entity.
Enter on line 7a the percentage owned
the corporation checked “Yes” to question Maximum percentage owned in part- by the foreign person specified in question
4a or 4b, complete and attach Schedule G nership profit, loss, or capital. For the 7. On line 7b, enter the name of the
(Form 1120), Information on Certain purposes of question 5b, the term owner’s country.
Persons Owning the Corporation's Voting “maximum percentage owned” means the
Stock. highest percentage of interest in a Note. If there is more than one
Question 5. Constructive partnership's profit, loss, or capital as of 25%-or-more foreign owner, complete
the end of the partnership's tax year, as question 7 for the foreign person with the
Ownership of Other Entities determined under the partnership highest percentage of ownership.
For purposes of determining the agreement, when taking into account the Foreign person. The term “foreign
corporation's constructive ownership of constructive ownership rules earlier. If the person” means:
other entities, the constructive ownership partnership agreement does not express
rules of section 267(c) (excluding section • An individual who is not a citizen or
the partner's share of profit, loss, and resident of the United States;
267(c)(3)) apply to ownership of interests capital as fixed percentages, use a
in partnerships and trusts as well as • An individual who is a citizen or resident
reasonable method in arriving at the of a U.S. possession who is not otherwise
corporate stock. Generally, if an entity (a percentage items for the purposes of a citizen or resident of the United States;
corporation, partnership, or trust) is completing question 5b. Such method
owned, directly or indirectly, by or for • Any partnership, association, company,
must be consistent with the partnership or corporation that is not created or
another entity (corporation, partnership, agreement. The method used to compute organized in the United States;
estate, or trust), the owned entity is a percentage share of profit, loss, and
considered to be owned proportionately • Any foreign estate or trust within the
capital must be applied consistently from meaning of section 7701(a)(31); or
by or for the owners (shareholders, year to year. Maintain records to support
partners, or beneficiaries) of the owning • A foreign government (or one of its
the determination of the share of profits, agencies or instrumentalities) to the extent
entity. losses, and share of capital. that it is engaged in the conduct of a
Example. Corporation A owns, commercial activity, as described in
Question 5a directly, a 50% interest in the profit, loss, section 892.
List each foreign or domestic corporation or capital of Partnership B. Corporation A However, the term "foreign person"
not included on Form 851, Affiliations also owns, directly, a 15% interest in the does not include any foreign person who
Schedule, in which the corporation, at the profit, loss, or capital of Partnership C and consents to the filing of a joint U.S. income
end of the tax year, owned directly 20% or owns, directly, 15% of the voting stock of tax return.
more, or owned, directly or indirectly, 50% Corporation D. Partnership B owns,
or more of the total voting power of all directly, a 70% interest in the profit, loss, Owner's country. For individuals, the
classes of stock entitled to vote. Indicate or capital of Partnership C and owns, term “owner's country” means the country
the name of the corporation, EIN (if any), directly, 70% of the voting stock of of residence. For all others, it is the
country of incorporation, and the Corporation D. Corporation A owns, country where incorporated, organized,
percentage interest owned, directly or indirectly, through Partnership B, a 35% created, or administered.
indirectly, in the total voting power. List the interest (50% of 70%) in the profit, loss, or Requirement to file Form 5472. If the
parent corporation of an affiliated group of capital of Partnership C and owns, corporation checked “Yes,” it may have to
corporations filing a consolidated tax indirectly, 35% of the voting stock of file Form 5472, Information Return of a
return rather than the subsidiary members Corporation D. Corporation A owns, 25% Foreign-Owned U.S. Corporation or
except for subsidiary members in which directly or indirectly, a 50% interest in the a Foreign Corporation Engaged in a U.S.
an interest is owned, directly or indirectly, profit, loss, or capital of Partnership C Trade or Business. Generally, a 25%
independent of the interest owned, directly (15% directly and 35% indirectly), and foreign-owned corporation that had a
or indirectly, in the parent corporation. List owns, directly or indirectly, 50% of the reportable transaction with a foreign or
a corporation owned through a voting stock of Corporation D (15% domestic related party during the tax year
disregarded entity rather than the directly and 35% indirectly). must file Form 5472. See the Instructions
disregarded entity. Corporation A reports in its answer to for Form 5472, for filing instructions and
question 5a that it owns, directly or penalties for failure to file.
Question 5b indirectly, 50% of the voting stock of
Corporation D. Corporation A reports in its Item 9
List each foreign or domestic partnership answer to question 5b that it owns, Show any tax-exempt interest received or
in which the corporation, at the end of the directly, an interest of 50% in the profit, accrued. Include any exempt-interest
tax year, owned directly an interest of 20% loss, or capital of Partnership B and owns, dividends received as a shareholder in a
or more, or owned, directly or indirectly, an mutual fund or other RIC. Also, if required,

-22- Instructions for Form 1120

include the same amount on Questions 15a and 15b generally disallows a deduction for the
Schedule M-1, line 7 (or Schedule M-3 amount to the extent that, under the
If the corporation made any payment in
(Form 1120), Part II, line 13, if applicable). foreign tax law, there is not a
2021 that would require the corporation to
corresponding income inclusion (including
Item 11 file any Form(s) 1099, check the “Yes” box
long-term deferral). However, the
Generally, if the corporation has an NOL for question 15a and answer question
deduction is not disallowed to the extent
for 2021, it can generally elect to waive the 15b. Otherwise, check the “No” box for
the amount is directly or indirectly included
entire carryback period for the NOL and question 15a and skip question 15b. See
in income in the United States, such as if
Am I Required to File a Form 1099 or
instead carry the NOL forward to future tax the amount is taken into account with
Other Information Return? on [Link].
years. To do so, check the box on line 11 respect to a U.S. shareholder under
and file the tax return by its due date, Question 19 section 951(a) or section 951A. For
including extensions. Do not attach the additional information, see Regulations
If the corporation made any payments in
statement described in Temporary sections 1.267A-2 through 1.267A-4. For
2021 that would require the corporation to
Regulations section 301.9100-12T. examples illustrating the application of
file any Forms 1042 and 1042-S, check
Generally, once made, the election is section 267A, see Regulations section
the “Yes” box. See the Instructions for
irrevocable. 1.267A-6.
Form 1042 and Instructions for Form
If the corporation timely filed its return 1042-S for information regarding who is Question 22
for the loss year without making the required to file Forms 1042 and 1042-S
If the corporation had gross receipts of at
election, it can make the election on an and what types of payments are subject to
least $500 million in any one of the 3
amended return filed within 6 months of reporting on Forms 1042 and 1042-S.
preceding tax years, complete and attach
the due date of the loss year return Question 21 Form 8991. For this purpose, the
(excluding extensions). Attach the election corporation's gross receipts include the
If the corporation paid or accrued
to the amended return and write "Filed gross receipts of all persons aggregated
(including through a partnership) any
pursuant to section 301.9100-2" on the with the corporation, as specified in
interest or royalty for which a deduction is
election statement. See the Instructions section 59A(e)(3). See the Instructions for
not allowed under section 267A, check
for Form 1139. Form 8991 to determine if the corporation
"Yes" for question 21 and enter the total
amount for which a deduction is not is subject to the base erosion minimum
Corporations filing a consolidated tax.
return that elect to waive the entire allowed.
carryback period for the group must also Payments to which section 267A ap- Question 23
attach the statement required by plies. Interest or royalty paid or accrued The limitation on business interest
Regulations section 1.1502-21(b)(3) or the by a domestic corporation (including, in expense applies to every taxpayer with a
election will not be valid. the case of a domestic corporation that is trade or business, unless the taxpayer
Item 12 a partner in a partnership, the domestic meets certain specified exceptions. This
corporation's allocable share of interest or limitation generally does not apply if the
Enter the amount of the NOL carryover to royalty paid or accrued by the partnership) corporation has average annual gross
the tax year from prior years, even if some is subject to section 267A. Section 267A receipts of $26 million or less for the 3
of the loss is used to offset income on this generally applies to interest or royalty paid prior tax years. A taxpayer may elect out
return. The amount to enter is the total of or accrued according to a hybrid of the limitation for certain businesses
all NOLs generated in prior years but not arrangement (such as, for example, a otherwise subject to the business interest
used to offset income (either as a payment according to a hybrid instrument, expense limitation. See Question 24. Also,
carryback or carryover) to a tax year prior or a payment to a reverse hybrid), see the Instructions for Form 8990.
to 2021. Do not reduce the amount by any provided that the payment or accrual is to
NOL deduction reported on line 29a. a related party (or according to a Certain real property trades or
Question 14 structured arrangement). In addition, businesses and farming businesses
under an imported mismatch rule, section qualify to make an election not to limit
A corporation that files Form 1120 must 267A generally applies to interest or business interest expense. This is an
file Schedule UTP (Form 1120), Uncertain royalties paid or accrued according to a irrevocable election. If you make this
Tax Position Statement, with its 2021 non-hybrid arrangement where the income election, you are required to use the
income tax return if: attributable to that payment or accrual is alternative depreciation system to
• For 2021, the corporation's total assets directly or indirectly offset by certain depreciate any nonresidential real
equal or exceed $10 million; deductions involving hybridity incurred by property, residential rental property, and
• The corporation or a related party a related party or according to a structured qualified improvement property for an
issued audited financial statements arrangement. However, section 267A electing real property trade or business,
reporting all or a portion of the does not apply if a de minimis exception is and any property with a recovery period of
corporation's operations for all or a portion satisfied. See Regulations section 10 years or more for an electing farming
of the corporation's tax year; and 1.267A-1(c). For purposes of section business. See section 168(g)(1)(F). Also,
• The corporation has one or more tax 267A, interest and royalties are defined you are not entitled to the special
positions that must be reported on broadly. For additional information about depreciation allowance for that property.
Schedule UTP. arrangements subject to section 267A, For a taxpayer with more than one
see Regulations sections 1.267A-2 and qualifying business, the election is made
Attach Schedule UTP to the
1.267A-4. Also, see the anti-avoidance with respect to each business.
corporation's income tax return. Do not file
rule under Regulations section
it separately. A taxpayer that files a Check “Yes” if the corporation has an
1.267A-5(b)(6).
protective Form 1120 must also file election in effect to exclude a real property
Schedule UTP if it satisfies the Extent to which deduction is disal- trade or business or a farming business
requirements set forth above. lowed. When section 267A applies to from section 163(j). For more information,
interest or royalties paid or accrued see section 163(j) and the Instructions for
For details, see the Instructions for pursuant to a hybrid arrangement, it Form 8990.
Schedule UTP.

Instructions for Form 1120 -23-

Question 24 1. On or after December 22, 2017, a Corporations with total receipts
foreign corporation directly or indirectly (page 1, line 1a plus lines 4 through 10)
Generally, a taxpayer with a trade or
acquired substantially all of the properties and total assets at the end of the tax year
business must file Form 8990 to claim a
held directly or indirectly by the less than $250,000 are not required to
deduction for business interest. In
corporation; and complete Schedules L, M-1, and M-2 if the
addition, Form 8990 must be filed by any
2. The ownership percentage with “Yes” box on Schedule K, question 13, is
taxpayer that owns an interest in a
respect to the acquisition was greater than checked.
partnership with current year, or prior year
carryover, excess business interest 50% (by vote or by value).
Corporations with total assets
expense allocated from the partnership. If “Yes” is checked, also enter in the non-consolidated (or consolidated for all
Exclusions from filing. A taxpayer is not space provided the ownership percentage corporations included within the
required to file Form 8990 if the taxpayer both by vote and by value. If there are consolidated tax group) of $10 million or
is a small business taxpayer (defined multiple acquisitions that must be more on the last day of the tax year must
below) and does not have excess reported, enter the ownership for the most file Schedule M-3 (Form 1120) instead of
business interest expense from a recent acquisition. Attach a statement Schedule M-1. However, see the
partnership. A taxpayer also is not reporting the ownership percentage by instructions for Schedule M-1 below. See
required to file Form 8990 if the taxpayer vote and by value for the other the separate Instructions for Schedule M-3
only has business interest expense from acquisitions. (Form 1120) for provisions that also affect
these excepted trades or businesses: Schedule L.
Section 7874 applies in certain cases
• An electing real property trade or If filing a consolidated return, report
business, in which a foreign corporation directly or
indirectly acquires substantially all of the total consolidated assets, liabilities, and
• An electing farming business, or shareholder's equity for all corporations
properties of a domestic corporation.
• Certain utility businesses. joining in the return. See Consolidated
Generally, it applies when three
Small business taxpayer. A small requirements are satisfied. Return, earlier.
business taxpayer is not subject to the 1. Pursuant to a plan or series of
business interest expense limitation and is Line 1
related transactions, a foreign corporation
not required to file Form 8990. A small Include certificates of deposit as cash on
must acquire directly or indirectly
business taxpayer is a taxpayer that (a) is this line.
substantially all of the properties held
not a tax shelter (as defined in section
448(d)(3)), and (b) meets the gross
directly or indirectly by a domestic Line 5
corporation.
receipts test of section 448(c), discussed Include on this line:
next. 2. After the acquisition, the ownership • State and local government obligations,
percentage (by vote or value) must be at the interest on which is excludable from
Gross receipts test. For 2021, a least 60%. gross income under section 103(a), and
taxpayer meets the gross receipts test if • Stock in a mutual fund or other RIC that
3. After the acquisition, the expanded
the taxpayer has average annual gross distributed exempt-interest dividends
affiliated group that includes the foreign
receipts of $26 million or less for the 3 during the tax year of the corporation.
acquiring corporation must not have
prior tax years. A taxpayer's average
substantial business activities in the
annual gross receipts for the 3 prior tax
foreign country in which the foreign
Line 26
years is determined by adding the gross Some examples of adjustments to report
acquiring corporation is created or
receipts for the 3 prior tax years and on this line include:
organized.
dividing the total by 3. Gross receipts • Unrealized gains and losses on
include the aggregate gross receipts from When section 7874 applies, the tax securities held “available for sale,”
all persons treated as a single employer, treatment of the acquisition depends on • Foreign currency translation
such as a controlled group of the ownership percentage. If the adjustments,
corporations, commonly controlled ownership percentage is at least 80%, • The excess of additional pension
partnerships, or proprietorships, and then the foreign acquiring corporation is liability over unrecognized prior service
affiliated service groups. See section treated as a domestic corporation for all cost,
448(c) and the Instructions for Form 8990 purposes of the Internal Revenue Code. • Guarantees of employee stock (ESOP)
for additional information. See section 7874(b). If the ownership debt, and
percentage is at least 60% but less than • Compensation related to employee
Question 25 80%, then the foreign acquiring stock award plans.
To be certified as a qualified opportunity corporation is respected as a foreign
fund, the corporation must file Form 1120 corporation, but the domestic corporation If the total adjustment to be entered on
and attach Form 8996, even if the and certain other persons are subject to line 26 is a negative amount, enter the
corporation had no income or expenses to special rules that reduce the tax benefits amount in parentheses.
report. If the corporation is attaching Form of the acquisition. See section 7874(a).
8996, check the “Yes” box for question 25.
On the line following the dollar sign, enter See the regulations under section 7874 Schedule M-1.
for rules regarding the computation of the
the amount from Form 8996, line 15.
ownership percentage. See sections
Reconciliation of Income
The penalty reported on this line from 59A(d)(4) and 965(l) for additional rules (Loss) per Books With
Form 8996, line 15, is not due with the
filing of this form. The IRS will separately
regarding the tax treatment of certain Income per Return
expatriated entities. In completing Schedule M-1, the following
send to you a notice setting forth the due
date for the penalty payment and where apply.
that payment should be sent. Schedule L. • Corporations with total receipts (page 1,
line 1a plus lines 4 through 10) and total
Question 26 Balance Sheets per Books assets at the end of the tax year less than
Check the “Yes” box if: The balance sheets should agree with the $250,000 are not required to complete
corporation's books and records. Schedules L, M-1, and M-2 if the “Yes”

-24- Instructions for Form 1120

box on Schedule K, question 13, is • Entertainment expenses not deductible it was included on line 25 in column (a) as
checked. under section 274(a). Income per Income Statement).
• Corporations with total assets • Meal expenses not deductible under
non-consolidated (or consolidated for all section 274(n).
corporations included within the • Qualified transportation fringes not Schedule M-2. Analysis of
consolidated tax group) of $10 million or deductible under 274(a)(4). Unappropriated Retained
more on the last day of the tax year must • Expenses for the use of an
file Schedule M-3 (Form 1120) instead of entertainment facility. Earnings per Books
Schedule M-1. • The part of business gifts over $25. If the corporation treats tax-exempt
• A corporation filing Form 1120 that is • Expenses of an individual over $2,000, income resulting from a PPP loan as
not required to file Schedule M-3 may allocable to conventions on cruise ships. received or accrued prior to when
voluntarily file Schedule M-3 instead of • Employee achievement awards of forgiveness of the PPP loan is granted and
Schedule M-1. See the Instructions for nontangible or tangible property over $400 the amount of forgiveness granted is less
Schedule M-3 (Form 1120) for more ($1,600 if part of a qualified plan). than the amount of tax-exempt income
information. • The cost of skyboxes. that was previously treated as received or
• Corporations that (a) are required to file • Nondeductible club dues. accrued, the corporation should include
Schedule M-3 (Form 1120) and have less • The part of luxury water travel expenses the difference as a decrease in
than $50 million total assets at the end of not deductible under section 274(m). tax-exempt income on Schedule M-2,
the tax year, or (b) are not required to file • Expenses for travel as a form of line 6, for the tax year in which the
Schedule M-3 (Form 1120) and voluntarily education. taxpayer receives notice that the PPP loan
file Schedule M-3 (Form 1120), must • Other nondeductible travel and was not fully forgiven. The corporation
either (i) complete Schedule M-3 (Form entertainment expenses. should attach a statement to
1120) entirely or (ii) complete Schedule M-2 including the following
Schedule M-3 (Form 1120) through Part I, For more information, see Pub. 535. information:
and complete Form 1120, Schedule M-1, 1. The corporation's name, address,
instead of completing Parts II and III of
Line 7
and EIN;
Schedule M-3 (Form 1120). If the Report any tax-exempt interest received
or accrued, including any exempt-interest 2. A statement that the corporation is
corporation chooses to complete making adjustments in accordance with
Schedule M-1 instead of completing Parts dividends received as a shareholder in a
mutual fund or other RIC. Also, report this section 3.03 of Rev. Proc. 2021-48; and
II and III of Schedule M-3, the amount on
Schedule M-1, line 1, must equal the same amount on Schedule K, item 9. 3. The tax year for which tax-exempt
amount on Schedule M-3, Part I, line 11. income was originally reported, the
See the Instructions for Schedule M-3 The corporation should include amount of tax-exempt income that was
(Form 1120) for more information. tax-exempt income from forgiven PPP originally reported for such tax year, and
loans on line 7 of Schedule M-1 (if it was the amount of tax-exempt income being
Line 5c included on line 1 of the Schedule M-1), or adjusted on Schedule M-2.
Include any of the following applicable on Part II, line 25 of Schedule M-3 (Form
expenses. 1120), column (c) as a negative number (if

Instructions for Form 1120 -25-

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
November 2021 for taxpayers filing 2021 Forms 1065, 1120, 1120-C, 1120-F, 1120-H, 1120-ND, 1120S, 1120-SF, 1120-FSC, 1120-L,
1120-PC, 1066, 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 don't 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.

Reported time and cost burdens are national averages and don't necessarily reflect a “typical” case. Most taxpayers experience
lower than average burden, with taxpayer burden varying considerably by taxpayer type. For instance, the estimated average time
burden for all business entities is 93 hours, with an average cost of $3,927 per return. This average includes all associated forms and
schedules, across all preparation methods and taxpayer activities.

The average burden for partnerships filing Forms 1065 and related attachments is about 85 hours and $3,900; the average burden
for corporations filing Form 1120 and associated forms is about 140 hours and $6,100; and the average burden for Forms 1066,
1120-REIT, 1120-RIC, 1120S, and all related attachments is 80 hours and $3,100. Within each of these estimates there is significant
variation in taxpayer activity. Tax preparation fees and other out-of-pocket costs vary extensively depending on the tax situation of the
taxpayer, the type of software or professional preparer used, and the geographic location. Third-party burden hours are not included in
these estimates.

Table 1 – Taxpayer Burden for Entities Taxed as Partnerships

Forms 1065, 1066, and all attachments

Primary Form Filed or Type of Total Number of Returns Average Time (hours) Average Cost ($) Average Monetized
Taxpayer (millions) Burden ($)
All Partnerships 4.8 85 3,900 7,900
Small 4.5 75 2,800 5,300
Large* 0.3 245 20,600 45,900
*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 doesn't 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 Total Number of Returns Average Time (hours) Average Cost ($) Average Monetized
Taxpayer (millions) Burden ($)
All Taxable Corporations 2.1 140 6,100 15,100
Small 2.0 90 3,100 6,400
Large* 0.1 895 49,700 142,600
*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 doesn't 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 Total Number of Returns Average Time (hours) Average Cost ($) Average Monetized
Taxpayer (millions) Burden ($)
All Pass-Through Corporations 5.4 80 3,100 6,400
Small 5.3 80 2,800 5,800
Large* 0.1 330 24,500 58,500
*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 doesn't meet the definition of a large business.

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 [Link]/FormComments. Or you can write to the

-26- Instructions for Form 1120

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.

Instructions for Form 1120 -27-

Principal Business Activity Codes largest percentage of its “total receipts.” Total receipts is
defined as the sum of gross receipts or sales (page 1,
2a, 2b, and 2c. On line 2a, enter the six-digit code
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
111900 Other Crop Farming (including Manufacturing
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 Primary Metal Manufacturing Parts & Supplies
112111 Beef Cattle Ranching & Farming
311500 Dairy Product Mfg 331110 Iron & Steel Mills & Ferroalloy 423200 Furniture & Home Furnishings
112112 Cattle Feedlots
311610 Animal Slaughtering and Mfg 423300 Lumber & Other Construction
112120 Dairy Cattle & Milk Production 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) 331500 Foundries
Forestry and Logging 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 332210 Cutlery & Handtool Mfg 423910 Sporting & Recreational Goods &
113310 Logging
312130 Wineries 332300 Architectural & Structural Metals Supplies
Fishing, Hunting, and Trapping
312140 Distilleries Mfg 423920 Toy & Hobby Goods & Supplies
114110 Fishing
312200 Tobacco Manufacturing 332400 Boiler, Tank, & Shipping 423930 Recyclable Materials
114210 Hunting & Trapping Container Mfg
Textile Mills and Textile Product Mills 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;
ginning, soil preparation, & Screw, Nut, & Bolt Mfg Merchant Wholesalers, Nondurable
315100 Apparel Knitting Mills Goods
planting, & cultivating) 332810 Coating, Engraving, Heat
315210 Cut & Sew Apparel Contractors Treating, & Allied Activities 424100 Paper & Paper Products
115210 Support Activities for Animal
Production 315220 Men's & Boys' Cut & Sew 332900 Other Fabricated Metal Product 424210 Drugs & Druggists' Sundries
Apparel Mfg Mfg
115310 Support Activities for Forestry 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
315990 Apparel Accessories & Other 424600 Chemical & Allied Products
211130 Natural Gas Extraction 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
213110 Support Activities for Mining 333900 Other General Purpose 424950 Paint, Varnish, & Supplies
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 &
322200 Converted Paper Product Mfg 334410 Semiconductor & Other Brokers
Construction Electronic Component Mfg
Printing and Related Support Activities Retail Trade
Construction of Buildings 323100 Printing & Related Support 334500 Navigational, Measuring,
Electromedical, & Control Motor Vehicle and Parts Dealers
236110 Residential Building Construction Activities
Instruments Mfg 441110 New Car Dealers
236200 Nonresidential Building Petroleum and Coal Products
Construction Manufacturing 334610 Manufacturing & Reproducing 441120 Used Car Dealers
Heavy and Civil Engineering Magnetic & Optical Media 441210 Recreational Vehicle Dealers
324110 Petroleum Refineries (including
Construction integrated) Electrical Equipment, Appliance, and 441222 Boat Dealers
237100 Utility System Construction Component Manufacturing 441228 Motorcycle, ATV, and All Other
324120 Asphalt Paving, Roofing, &
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
Exterior Contractors (including Filaments Mfg 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

-28-
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)
444190 Other Building Material Dealers 485110 Urban Transit Systems 541214 Payroll Services
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
445220 Fish & Seafood Markets Passenger Transportation 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 541400 Specialized Design Services
Health and Personal Care Stores 524140 Direct Life, Health, & Medical
488100 Support Activities for Air Insurance & Reinsurance (including interior, industrial,
446110 Pharmacies & Drug Stores Transportation graphic, & fashion design)
Carriers
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
448130 Children's & Infants' Clothing Funds 541600 Management, Scientific, &
492110 Couriers
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
448320 Luggage & Leather Goods Information “Offices of Bank Holding
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 Companies (Holding
511120 Periodical Publishers 541990 All Other Professional, Scientific,
451110 Sporting Goods Stores Companies), later. & Technical Services
511130 Book Publishers
451120 Hobby, Toy, & Game Stores Real Estate and Rental and
451130 Sewing, Needlework, & Piece
511140 Directory & Mailing List Management of Companies
Goods Stores
Publishers Leasing (Holding Companies)
511190 Other Publishers Real Estate
451140 Musical Instrument & Supplies 551111 Offices of Bank Holding
Stores 511210 Software Publishers 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
452300 General Merchandise Stores, equity REITs)
Broadcasting (except Internet) Remediation Services
incl. Warehouse Clubs and 531130 Lessors of Miniwarehouses &
Supercenters 515100 Radio & Television Broadcasting 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, 561420 Telephone Call Centers
531310 Real Estate Property Managers
453310 Used Merchandise Stores resellers, other 561430 Business Service Centers
telecommunications, & Internet 531320 Offices of Real Estate Appraisers
453910 Pet & Pet Supplies Stores (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
(including news syndicates, Appliances Rental services)
Nonstore Retailers
libraries, Internet publishing & 532281 Formal Wear & Costume Rental 561500 Travel Arrangement &
454110 Electronic Shopping & broadcasting)
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
454390 Other Direct Selling Rental 561720 Janitorial Services
522120 Savings Institutions
Establishments (including 532310 General Rental Centers 561730 Landscaping Services
door-to-door retailing, frozen 522130 Credit Unions
532400 Commercial & Industrial 561740 Carpet & Upholstery Cleaning
food plan providers, party plan 522190 Other Depository Credit Machinery & Equipment Rental &
merchandisers, & coffee-break Intermediation Services
Leasing 561790 Other Services to Buildings &
service providers) Nondepository Credit Intermediation Lessors of Nonfinancial Intangible Dwellings
Transportation and 522210 Credit Card Issuing 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 copyrighted works) show organizers)
522292 Real Estate Credit (including
481000 Air Transportation mortgage bankers & originators) Professional, Scientific, and Waste Management and Remediation
482110 Rail Transportation 522293 International Trade Financing Services
483000 Water Transportation Technical Services 562000 Waste Management &
522294 Secondary Market Financing
Truck Transportation Legal Services Remediation Services
522298 All Other Nondepository Credit
484110 General Freight Trucking, Local Intermediation 541110 Offices of Lawyers
541190 Other Legal Services

-29-
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
Assistance 622000 Hospitals 811430 Footwear & Leather Goods
Accommodation Repair
Offices of Physicians and Dentists Nursing and Residential Care Facilities 721110 Hotels (except Casino Hotels) & 811490 Other Personal & Household
621111 Offices of Physicians (except 623000 Nursing & Residential Care Motels Goods Repair & Maintenance
mental health specialists) Facilities 721120 Casino Hotels Personal and Laundry Services
621112 Offices of Physicians, Mental Social Assistance 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
Emergency & Other Relief 812113 Nail Salons
Offices of Other Health Practitioners 721210 RV (Recreational Vehicle) Parks
Services & Recreational Camps 812190 Other Personal Care Services
621310 Offices of Chiropractors (including diet & weight reducing
624310 Vocational Rehabilitation 721310 Rooming & Boarding Houses,
621320 Offices of Optometrists Services centers)
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
& Speech Therapists, & Recreation food service contractors &
caterers) 812310 Coin-Operated Laundries &
Audiologists Drycleaners
Performing Arts, Spectator Sports, and 722410 Drinking Places (Alcoholic
621391 Offices of Podiatrists Related Industries 812320 Drycleaning & Laundry Services
Beverages)
621399 Offices of All Other 711100 Performing Arts Companies (except Coin-Operated)
Miscellaneous Health 722511 Full-Service Restaurants
711210 Spectator Sports (including 812330 Linen & Uniform Supply
Practitioners 722513 Limited-Service Restaurants
sports clubs & racetracks) 812910 Pet Care (except Veterinary)
Outpatient Care Centers 722514 Cafeterias and Buffets Services
711300 Promoters of Performing Arts,
621410 Family Planning Centers Sports, & Similar Events 722515 Snack and Non-alcoholic 812920 Photofinishing
621420 Outpatient Mental Health & Beverage Bars
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

-30-
Index

Limited liability companies 2 Refundable credits 21

Lobbying expenses, Related party transactions 10
A E nondeductibility 16 Rents (expense) 12
Accounting methods 5 Electronic deposit requirement 4 Rents (income) 10
Accounting period (Tax Year) 6 Electronic filing 3 Repairs and maintenance 12
Address change 9 Employee benefit programs 14
Advance payments 9 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 11 corporations 2 Deduction for contributions 17 Salaries and wages 12
Assembling the return 4 Estimated tax: Tax on nonqualified Schedule:
At-risk rules 16 Penalty 5, 17 withdrawal 20 C 17
Estimated tax payments 5 Minimum tax: J 19
Extension of time to file 3 Prior year, credit for 20 K 21
Mutual savings banks conducting L 24
B life insurance business 19 M-1 24
Backup withholding 21 M-3 8, 24
Bad debts 12 F O 19
Balance sheets 24 Farming, corporations engaged
N Section 263A costs 10
Base erosion minimum tax 20, 23 in 2
Name change 9 Shareholders' equity
Beneficiaries of trusts 21 Final return 9
Net operating loss 16, 23 adjustments 24
Business start-up expenses 11 Financial asset securitization
Nonaccrual experience method 9 Signature 3
investment trust (FASIT) 2 Small business taxpayer 5, 24
Foreign person (defined) 22 Specific Instructions 7
C Foreign tax credit 20
Capital construction Forms and publications, how to O
fund (See Merchant Marine get 2 Other deductions 14
Future Developments 1 Other income 10 T
capital construction fund)
Other taxes 20 Taxes and licenses 12
Closely held corporations 11
Overpaid estimated tax 21 Tax-exempt securities 24
Compensation of officers 11 Tax issues, unresolved 1
Consolidated return 8, 23 G Total assets 9
Contributions, charitable 13 General business credit 20 Travel, meals, and
Contributions to reduce public General Instructions 2 P entertainment 15
debt 2 Gross receipts 9 Partnership income (loss) 15
Controlled group 19 Passive activity limitations 11
Cost of goods sold 9 Payments and refundable
Credits against tax 20 credits 21 U
I
Penalties 5, 17 Uniform capitalization rules 10
Installment sales 9
Interest due: Pension, profit-sharing, etc.
D Late payment of tax 5 plans 14
Deductions 10 Look-back method 20 Personal holding company 8 W
Depletion 14 Interest expense 12 Personal holding company tax 20 What’s New 1
Depository methods of tax Interest income: Personal service corporation 8 When to file 3
payment 4 Taxable 10 Preparer, tax return 3 Where to file 4
Depreciation 14 Tax-exempt 22, 25 Private delivery services 3 Who must file 2
Direct deposit of refund 2, 17 Who must sign 3
Disclosure statement 6 Worksheets:
Dividend income 10 R Schedule C 19
L
Dividends-received LIFO recapture: Recapture taxes 20
deduction 17–19 Tax on 21 Reconciliation of income 25
Dues, membership and other 15 Limitations on deductions 10, 13 Recordkeeping 6

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