Beruflich Dokumente
Kultur Dokumente
Instructions for
Form 1120-PC
U.S. Property and Casualty Insurance Company
Income Tax Return
Section references are to the Internal Revenue Code unless otherwise noted.
Paperwork Reduction Act Estimated Tax Rules lobbying expenses qualify under the de
minimis rule, they are deductible.
Notice The estimated tax penalty is waived for
● A portion of payments for membership
underpayments of estimated taxes for any
We ask for the information on this form to period before March 16, 1994, to the dues to a trade organization or a
carry out the Internal Revenue laws of the extent that the underpayment is noncharitable organization that engages in
United States. You are required to give us attributable to changes made by the Act. lobbying activities may not be deductible if
the information. We need it to ensure that the dues are allocable to nondeductible
you are complying with these laws and to There are new estimated tax rules for tax
lobbying expenditures by the organization.
allow us to figure and collect the right years beginning after December 31, 1993.
For more information, see section 162.
amount of tax. The new rules require a corporation to
base its estimated tax payments on 100% ● Charitable contributions paid or incurred
The time needed to complete and file (rather than 97%) of the tax shown on its after December 31, 1993, to an
this form will vary depending on individual return for the current year. The “safe organization that conducts lobbying
circumstances. The estimated average time harbor” rule that allows a corporation to activities are not deductible if (1) the
is: avoid the penalty by paying 100% of its lobbying activities relate to matters of
Recordkeeping 104 hr., 31 min. prior year tax still applies. The Act also direct financial interest to the donor’s trade
added two new sets of periods over which or business, and (2) the principal purpose
Learning about the a corporation may elect to annualize of the contribution was to avoid federal
law or the form 33 hr., 53 min. income. For details, see Form 1120-W, income tax by obtaining a deduction for
Preparing the form 55 hr., 41 min. Corporation Estimated Tax. activities that would have been
nondeductible under the lobbying expense
Copying, assembling, Depreciation and Amortization rules if conducted directly by the donor.
and sending the ● Goodwill and certain other intangible See section 170(f).
form to the IRS 5 hr., 22 min. property acquired after August 10, 1993, ● No deduction is allowed for amounts
If you have comments concerning the may now be amortized over a 15-year paid or incurred for club dues (including
accuracy of these time estimates or period. dues for airline and hotel clubs), after
suggestions for making this form more ● Certain computer software acquired after December 31, 1993. For details, see
simple, we would be happy to hear from August 10, 1993, may be depreciated section 274.
you. You can write to both the Internal using the straight line method over a No deduction is allowed for travel
Revenue Service, Attention: Reports 36-month period. expenses paid or incurred after December
Clearance Officer, PC:FP, Washington, DC 31, 1993, for a spouse, dependent, or
● The recovery period for figuring
20224; and the Office of Management other individual accompanying an officer or
depreciation for nonresidential real
and Budget, Paperwork Reduction Project employee of the corporation on business
property is 39 years for property placed in
(1545-1027), Washington, DC 20503. DO travel, unless that spouse, dependent, or
service after May 12, 1993.
NOT send the tax form to either of these other individual is an employee of the
offices. Instead, see Where To File on ● The maximum section 179 deduction for corporation and the travel is for a bona
page 2. most filers has been increased to $17,500 fided business purpose and would
for property placed in service in tax years otherwise be deductible. For details, see
beginning after December 31, 1992. section 274.
Changes To Note For details, see Form 4562, Depreciation ● Generally, no deduction is allowed for
and Amortization. any charitable contribution of $250 or more
The Revenue Reconciliation Act of 1993
(“the Act”) made changes to the tax law made after December 31, 1993, unless the
Other Tax Law Changes corporation has a contemporaneous
for corporations, including changes to the ● Lobbying expenses paid or incurred after
tax rates and the estimated tax rules. written acknowledgment from the donee
December 31, 1993, are no longer organization of the contribution (including a
Tax Rates and Related Changes deductible business expenses under good faith estimate of the value of any
section 162. Lobbying expenses include goods or services provided to the donor in
The Act increased the maximum corporate amounts paid or incurred in connection exchange for the donation). For details, see
tax rate to 35% for corporations with with influencing Federal or state legislation section 170.
taxable income over $10 million. (but not local legislation), or amounts paid
Corporations with taxable income over $15 ● The percentage for computing the 70%
or incurred in connection with any
million are subject to an additional tax of dividends-received deduction for dividends
communication with certain covered
3% of the excess over $15 million, or received on the preferred stock of a public
Federal executive branch officials in an
$100,000, whichever is smaller. The new utility (section 244) has increased from
attempt to influence the offical actions or
rates appear in the Tax Rate Schedule on 41.176 percent to 42 percent for tax years
positions of the officals. A de minimis rule
page 5. beginning after 1992.
applies if the total amount of certain
The Act also increased the personal in-house expenditures for lobbying does ● The percentage for computing the 80%
holding company tax rate (Schedule PH not exceed $2,000. If the corporation’s dividends-received deduction for dividends
(Form 1120)) to 39.6%. received on the preferred stock of a public
Page 12
Line 13, column (c).—Include the 4. Multiply line 3 by 80% section 481 over a period not to exceed 4
following: 5. Add lines 16, 19, 21, and 22 (without tax years beginning with the 1st tax year
1. Dividends (other than capital gain and regard to FSC dividends), column (c) beginning on or after September 30, 1990.
and the portion of the deduction on line
exempt-interest dividends) that are 17, column (c) that is attributable to
Lines 2b and 4b.—Include on lines 2b and
received from regulated investment dividends received from 20% 4b, 90% of unearned premiums for
companies and are not subject to the 70% -or-more-owned corporations insurance against default in the payment of
deduction. 6. Enter the smaller of line 4 or line 5. If principal or interest on securities described
2. Dividends from tax-exempt line 5 is greater than line 4, stop here; in section 165(g)(2)(C) (relating to worthless
organizations. enter the amount from line 6 on line securities) with maturities of more than 5
23, column (c) (without regard to FSC years.
3. Dividends (other than capital gain dividends). Do not complete the rest of
dividends) received from a real estate this worksheet Lines 2c and 4c.—The amount of the
investment trust that, for the tax year of discounted unearned premiums as of the
7. Enter the total amount of dividends
the trust in which the dividends are paid, received from 20%-or-more-owned
end of any tax year must be the present
qualifies under sections 856 through 860. corporations that are included on lines value of such premiums (as of such time
2, 3, 5, 7, and 8 (without regard to FSC and separately with respect to premiums
4. Dividends not eligible for a dividends), column (a) received in each calendar year) determined
dividends-received deduction because of by using: (1) the amount of the
8. Subtract line 7 from line 3
the holding period of the stock or an undiscounted unearned premiums at such
obligation to make corresponding 9. Multiply line 8 by 70%
time; (2) the applicable interest rate; and
payments with respect to similar stock. 10. Subtract line 5 from line 23, column (c)
(3) the applicable statutory premium
(without regard to FSC dividends)
Two situations in which the recognition pattern.
dividends-received deduction will not be 11. Enter the smaller of line 9 or line 10
Lines 2d and 4d.—Include on lines 2d and
allowed on any share of stock are: 12. Dividends-received deduction after
4d, 80% of the total of all unearned
limitation (section 246(b)). Add lines
● If the corporation held it 45 days or less 6 and 11. Enter the result on line 23, premiums not reported on lines 2a through
(see section 246(c)(1)(A)), or column (c) (without regard to FSC 2c, or 4a through 4c, respectively.
● To the extent the corporation is under an dividends) A reciprocal or interinsurer required
obligation to make related payments for under state law to reflect unearned
substantially similar or related property. premiums on its annual statement net of
5. Any other taxable dividend income not Schedule E—Premiums premium acquisition expenses, should
properly reported above, (including Earned increase its unearned premiums by the
distributions under section 936(h)(4)). amount of such acquisition expenses prior
Definitions to making the computation on lines 2d and
Line 17.—Dividends received on
4d. See section 832(b)(7)(E).
debt-financed stock acquired after July 18, “Undiscounted unearned premiums” means
1984, are not entitled to the full 70% or the unearned premiums shown in the Line 6.—Transitional adjustments apply to
80% dividends-received deduction. The annual statement filed for the year ending companies which become taxable under
70% or 80% deduction is reduced by a with or in the tax year. section 831(a). See section 832(b)(7)(D) for
percentage that is related to the amount of more information.
“Applicable interest rate” means the
debt incurred to acquire the stock. See
annual rate determined under section
section 246A. Also see section 245(a)
846(c)(2) for the calendar year the
before making this computation for an
premiums are received. Schedule F—Losses
additional limitation which applies to
dividends received from foreign “Applicable statutory premium Incurred
corporations. recognition pattern” means the statutory Line 1. Losses paid.—Enter the total
premium recognition pattern in effect for losses paid on insurance contracts during
Attach a schedule showing how the
the calendar year the premiums are the tax year less salvage and reinsurance
amount on line 17 was figured.
received, and is based on the statutory recovered during the tax year.
Line 23. Total. premium recognition pattern which applies
Lines 2a and 4a. Unpaid losses on life
to premiums received by the corporation in
insurance contracts.—Unpaid losses
Limitations on dividends-received such calendar year. For purposes of the
must be adjusted for recoveries of
deduction preceding sentence, premiums received
reinsurance. The amounts of expected
during any calendar year will be treated as
Generally, line 23, column (c) may not recoveries should be estimated based on
received in the middle of such year.
exceed the amount from the worksheet the facts in each case and the
below. However, in a year in which an NOL Line 1.—Enter gross premiums written on corporation’s experience with similar
occurs, this limitation does not apply even insurance contracts during the tax year, cases.
if the loss is created by the less return premiums and premiums paid
Lines 2b and 4b. Discounted unpaid
dividends-received deduction. See for reinsurance.
losses outstanding.—Enter all discounted
sections 172(d) and 246(b). Lines 2a and 4a.—Include on lines 2a and unpaid losses as defined in section 846.
4a:
Section 846 provides that the amount of
Worksheet for Schedule C, line 23 (Keep 1. All life insurance reserves, as defined discounted unpaid losses must be
for your records) in section 816(b) (but determined under computed separately by line of business
section 807); and (multiple peril lines must be treated as a
1. Enter the amount from Schedule A, line 2. All unearned premiums of a Blue single line of business) and by accident
37 or Schedule B, line 21, whichever Cross or Blue Shield organization to which year and must be equal to the present
applies, without: the NOL deduction section 833 applies. value of such losses determined by using:
(section 172); dividend-received
deduction (sections 243(a)(1), 244(a), Note: If due to the amendments made to 1. The amount of the undiscounted
245(a) or (b), and 247); any adjustment section 832(b)(4) applicable to tax years unpaid losses,
under section 1059; and any capital beginning on or after September 30, 1990, 2. The applicable interest rate, and
loss carryback to the tax year under a corporation is required to change its
section 1212(a)(1) 3. The applicable loss payment pattern.
method of computing reserves, this change
2. Enter the sum of the amounts from line is treated as a change in method of Special rules apply with respect to
22, column (c), (without regard to accounting, initiated by the corporation, unpaid losses related to disability
wholly owned foreign subsidiary and made with the consent of the insurance (other than credit disability
dividends) and line 24, column (c) insurance), noncancelable accident and
Secretary. The corporation must take into
3. Subtract line 2 from line 1 account the net adjustments required by health insurance, cancelable accident and
Page 13
health insurance, and to the international Note: There is a special application of the
and reinsurance lines of business. With “Fresh Start” provision in the case of an
regard to the special rules for discounting insurance company that: Schedule G—Other Capital
unpaid losses on accident and health 1. is exempt from tax for its first tax year Losses
insurance (other than disability income beginning after 1986 under section 501(a)
insurance), unpaid losses are assumed to Capital assets are considered sold or
that is described in any paragraph of exchanged to provide funds to meet
be paid in the middle of the year following section 501(c) or, under section 831(b), is
the accident year. abnormal insurance losses and to pay
taxed only on investment income, and dividends and make similar distributions to
As a general rule, the amount of 2. if the insurance company later policyholders to the extent that the gross
undiscounted unpaid losses means the becomes subject to tax under section receipts from their sale or exchange are
unpaid losses and unpaid loss adjustment 831(a), the rules relating to the Fresh Start not more than the amount by which the
expenses shown in the annual statement. under the discounting provisions are to be sum of dividends and similar distributions
However, see Regulations sections applied by treating the last tax year before paid to policyholders, losses paid, and
1.846-1(a)(1) referring to Regulations the year in which the insurance company expenses paid for the tax year is more
section 1.832-4(b). Under section becomes subject to tax under section than the total on line 9, Schedule G.
832(b)(5)(A), however, unpaid losses must 831(a) as the insurance company’s last tax
be adjusted to take into account estimated Total gross receipts from sales of capital
year beginning before 1987. See section assets (line 12, column (c)) must not be
recoveries due to salvage and reinsurance 1010(e) of the Act of 1988 and Notice
for those losses. If the amounts shown in more than line 10. If necessary, the
88-100. corporation may report part of the gross
the annual statement were determined on
a discounted basis and if the extent to Lines 6 and 7. Estimated salvage and receipts from a particular sale of a capital
which these losses were discounted can reinsurance recoverable.—An insurance asset on this schedule and the rest on
be determined on the basis of information company’s treatment of salvage in Schedule D (Form 1120). Otherwise, do not
disclosed on or with the annual statement, determining its paid and unpaid losses is a include on Schedule D (Form 1120) any
the amount of the undiscounted unpaid method of accounting for Federal income sales reported on this schedule.
losses must be recomputed to eliminate tax purposes. Generally, insurance
any reduction caused by such discounting. companies that did not previously treat
In no event can the amount of discounted salvage in accordance with section Schedule H—Special
unpaid losses determined under section 832(b)(5)(A) are required to change their
846 with respect to any line of business for method of accounting for the first tax year Deduction for Section 833
an accident year exceed the total amount beginning after December 31, 1989. A Organizations and Ending
change in the method of computing losses
of unpaid losses with respect to any line of
incurred, is treated as a change in a Adjusted Surplus
business for an accident year as reported
on the annual statement. Also see method of accounting, initiated by the Line 5. Beginning adjusted surplus.—
Regulations section 1.832-4(d) regarding insurance company, and made with the Enter the amount from Schedule H, Part II,
increasing unpaid losses shown on the consent of the Secretary. In applying line 12 of the 1992 Form 1120–PC.
annual statement by salvage recoverable. section 481 due to a change required by The adjusted surplus as of the beginning
Also see Rev. Proc. 92-77, 1992-2 C.B. section 832(b)(5)(A), only 13% of the net of any tax year is an amount equal to the
454. amount of adjustments (otherwise required adjusted surplus as of the beginning of the
by section 481 to be taken into account) preceding tax year: (1) increased by the
The applicable interest rate for each will be taken into account. In addition, the
calendar year and the applicable loss amount of any adjusted taxable income for
portion of net adjustments required to be the preceding tax year, or (2) decreased by
payment pattern for each accident year for taken into account, must be taken into
each line of business are determined by the amount of any adjusted net operating
account over a period not to exceed 4 tax loss for the preceding tax year.
the Secretary. The applicable interest rate years beginning with the insurance
for 1993 is 8.10%. See Rev. Rul. 92-104, company’s first tax year beginning after For purposes of the computation of the
1992-2, C.B. 212. The applicable loss December 31, 1989. If an insurance adjusted surplus, the terms “adjusted
payment patterns are published in Rev. company, subject to tax under section taxable income” and “adjusted net
Proc. 93-29, 1993-25 I.R.B. 18. Applicable 831, took salvage recoverable into account operating loss” mean the taxable income
interest rates and payment patterns for in determining losses incurred for its last or the net operating loss, respectively,
prior years are published in Rev. Proc. tax year beginning before January 1, 1990, determined with the following
92-47, 1992-1 C.B. 980; Rev. Rul. 91-42, (and reflected such treatment in its annual modifications: (1) without regard to the
1991-2 C.B. 332; Rev. Rul. 90-26, 1990-1 statement) 87% of the discounted amount deduction determined under section
C.B. 124; Rev. Rul. 89-66A, 1989-1 C.B. of estimated salvage recoverable as of the 833(b)(1); (2) without regard to any
220; and Rev. Rul. 88-63, 1988-2 C.B. close of such last tax year will be allowed carryover or carryback to that tax year;
130. as a deduction ratably over its first 4 tax and (3) by increasing gross income by an
However, under section 846(e), years beginning after December 31, 1989. amount equal to the net exempt income
corporations having sufficient historical Also see Rev. Procs. 91-48, 1991-2 C.B. for the tax year.
experience to determine a loss payment 760, 93-30, 1993-25, I.R.B. 26, and Line 6. Special deduction.—The
pattern may, under certain circumstances, Regulations section 1.832-4. deduction for any tax year is limited to
elect to use their own historical See section 11305(c)(4) of the “Revenue taxable income for such tax year
experience. If an election is made, the loss Reconciliation Act of 1990” (“Act of 1990”) determined without regard to such
payment patterns will be based on the for the special rule for overestimates and deduction.
most recent calendar year for which an section 11305(c)(5) of the “Act of 1990” for Note: Under section 833(b)(4), any
annual statement was filed before the the effect on earnings and profits. determination under section 833(b) must
beginning of the accident year. No election be made by only taking into account items
under section 846(e) will apply to any Line 9. Tax-exempt interest subject to
section 832(b)(5)(B).—Enter the amount of from the health-related business of the
international or reinsurance line of corporation.
business. If the corporation elects to use tax-exempt interest received or accrued
its own loss payment patterns, be sure to during the tax year on investments made Line 8a. Adjusted tax-exempt income.—
check the “Yes” column for question 10 in after August 7, 1986. For additional Reduce the total tax-exempt interest
Schedule I, Other Information. For more information regarding the determination of received or accrued during the tax year by
information regarding this election, see the acquisition date of an investment, see any amount (not otherwise deductible)
section 846(e), Regulations section the instructions for Schedule C. which would have been allowable as a
1.846-2, and Rev. Proc. 92-76, 1992-2 deduction for the tax year if such interest
C.B. 453. were not tax-exempt. Enter the result on
line 8a.
Page 14
Line 8b. Adjusted dividends-received 1. 80% of the total combined voting of Form 5472 with the Internal Revenue
deduction.—Reduce the total amount power of all classes of stock entitled to Service Center, Philadelphia, PA 19255.
allowed as a deduction under sections vote or at least 80% of the total value of If the corporation’s tax return is not filed
243, 244, and 245 by the amount of any all classes of stock of each corporation in when due, Form 5472 must nevertheless
decrease in deductions allowable for the the group (except the parent) must be be timely filed at the service center where
tax year because of section 832(b)(5)(B) owned by one or more of the other the tax return is due (with a copy to
when the decrease is caused by the corporations in the group. Philadelphia). When the tax return is filed,
deductions under sections 243, 244, and 2. The common parent must own at attach a copy of the previously filed Form
245. Enter the result on line 8b. least 80% of the total combined voting 5472.
power of all classes of stock entitled to Penalties for failure to file Form 5472. If
vote or at least 80% of the total value of a corporation does not file Form 5472 as
Schedule I—Other all classes of stock of at least one of the described above, a $10,000 penalty
Information other corporations in the group. Stock applies. The penalty also applies for failure
owned directly by other members of the to maintain records as required by
Be sure to answer all of the questions that group is not counted when computing the Regulations section 1.6038A-3.
apply to the corporation. voting power or value.
See section 1563(d)(1) for the definition Question 8
Question 4
of “stock” for purposes of determining Foreign financial accounts.—Check the
Check the “Yes” box for question 4 if stock ownership above. “Yes” box if either 1 or 2 below, applies to
either 1 or 2 below applies to the the corporation. Otherwise, check the “No”
corporation: Question 6
box:
1. The corporation is a subsidiary in an Check the “Yes” box if one foreign person 1. At any time during the 1993 calendar
affiliated group (defined below), but is not owned at least 25% of (a) the total voting year the corporation had an interest in or
filing a consolidated return for the tax year power of all classes of stock of the signature or other authority over a bank,
with that group. corporation entitled to vote, or (b) the total securities, or other financial account in a
2. The corporation is a subsidiary in a value of all classes of stock of the foreign country; and
parent-subsidiary controlled group (defined corporation.
● The combined value of the account(s)
below). The constructive ownership rules of was more than $10,000 at any time during
Any corporation that meets either of the section 318 apply in determining if a the calendar year; AND
requirements above should check the corporation is foreign-owned. See section
6038A(c)(5) and the related regulations. ● The account was NOT with a U.S.
“Yes” box. This applies even if the military banking facility operated by a U.S.
corporation is a subsidiary member of one Enter on line 6a the percentage owned financial institution.
group and the parent corporation of by the foreign person specified in question
another. 6. On line 6b, write the name of the 2. The corporation owns more than 50%
owner’s country. of the stock in any corporation that would
Note: If the corporation is an “excluded answer “Yes” to item 1 above.
member” of a controlled group (see section Note: If there is more than one
1563(b)(2)), it is still considered a member 25%-or-more foreign owner, complete lines Get Form TD F 90-22.1, Report of
of a controlled group for this purpose. 6a and 6b for the foreign person with the Foreign Bank and Financial Accounts, to
highest percentage of ownership. see if the corporation is considered to
Affiliated group.—The term “affiliated have an interest in or signature or other
group” means one or more chains of Foreign person.—The term “Foreign authority over a financial account in a
includible corporations (section 1504(a)) person” means: foreign country.
connected through stock ownership with a ● A foreign citizen or nonresident alien,
common parent corporation. The common If “Yes” is checked for this question, file
parent must be an includible corporation ● An individual who is a citizen of a U.S. Form TD F 90-22.1 by June 30, 1994, with
and the following requirements must be possession (but who is not a U.S. citizen the Department of the Treasury at the
met: or resident), address shown on the form. Form TD F
● A foreign partnership, 90-22.1 is not a tax return, so do not file it
1. The common parent must own directly with Form 1120-PC. You can get Form TD
stock that represents at least 80% of the ● A foreign corporation, F 90-22.1 from an IRS Distribution Center
total voting power and at least 80% of the ● Any foreign estate or trust within the or by calling our toll free number
total value of the stock of at least one of meaning of section 7701(a)(31) or 1-800-TAX-FORM (1-800-829-3676).
the other includible corporations.
● A foreign government (or one of its Also, if “Yes” is checked for this
2. Stock that represents at least 80% of agencies or instrumentalities) to the extent question, write the name of the foreign
the total voting power and at least 80% of that it is engaged in the conduct of a country or countries. Attach a separate
the total value of the stock of each of the commercial activity as described in section sheet if more space is needed.
other corporations (except for the common 892.
parent) must be owned directly by at least Question 13
one of the other includible corporations. Owner’s country.—For individuals, the
term “owners country” means the country Show any tax-exempt interest received or
For this purpose, the term “stock” of residence. For all others, it is the accrued. Include any exempt-interest
generally does not include any stock that country where incorporated, organized, dividends received as a shareholder in a
(a) is nonvoting, (b) is nonconvertible, (c) is created, or administered. mutual fund or other regulated investment
limited and preferred as to dividends and company.
does not participate significantly in Requirement to file Form 5472.—If the
corporate growth, and (d) has redemption corporation checked “Yes” to Question 6,
Question 14
and liquidation rights that do not exceed it may have to file Form 5472, Information
the issue price of the stock (except for a Return of a 25% Foreign-Owned U.S. Check the box on line 14 if the corporation
reasonable redemption or liquidation Corporation or a Foreign Corporation elects under section 172(b)(3) to forgo the
premium). Engaged in a U.S. Trade or Business. carryback period for an NOL. If you check
Generally, a 25% foreign-owned this box, do not attach the statement
Parent-subsidiary controlled group.— corporation that had a reportable described in Temporary Regulations
The term “parent-subsidiary controlled transaction with a foreign or domestic section 7.0(d).
group” means one or more chains of related party during the tax year must file
corporations connected through stock Form 5472. Form 5472 must be filed by Question 15
ownership (section 1563(a)(1)). Both of the the due date of the corporation’s income
following requirements must be met: Enter the amount of the net operating loss
tax return (including extensions). Attach (NOL) carryover to the tax year from prior
Form 5472 to the tax return and file a copy
Page 15
years, regardless of whether any of the Line 2d. Section 824(d)(1)(E).—Enter the
loss is used to offset income on this amount by which the total amount in the
return. The amount to enter is the total of account exceeds the greater of: Schedule M-1—
all NOLs generated in prior years but not (i) 10% of premiums earned on Reconciliation of Income
used to offset income (either as a insurance contracts during the tax year (as
carryback or carryover) to a tax year prior (Loss) per Books With
defined in section 832(b)(4)) minus
to 1993. Do not reduce the amount by any dividends to policyholders (as defined in Income per Return
NOL deduction reported on Schedule A, section 832(c)(11)), or Line 5c. Travel and entertainment.—
line 36b. Pub. 536 has a worksheet for
(ii) the total amount in the account at the Include on line 5c any of the following:
figuring a corporation’s NOL carryover.
close of the preceding tax year. ● 20% of meals and entertainment not
allowed under section 274(n).
Schedule J—Protection ● Expenses for the use of an
Schedule L—Balance Sheets entertainment facility.
Against Loss Account
Note: All insurance companies required to ● The part of business gifts over $25.
Section 1024 of P.L. 99-514 repealed file Form 1120-PC must complete
section 824 relating to the protection ● Expenses over $2,000 of an individual
Schedule L. allocable to conventions on cruise ships.
against loss account (PAL account).
Line 5. Tax-exempt securities.—Include ● Employee achievement awards over
However, PAL account balances are
on this line: $400.
includible in income as though section 824
were still in effect. 1. State and local government ● The cost of entertainment tickets over
obligations, the interest on which is face value (also subject to 20%
Line 2a. Section 824(d)(1)(B).—Enter the
excludable from gross income under disallowance under section 274(n)).
amount, if any, by which the sum of the
section 103(a), and
investment loss and the statutory ● The cost of skyboxes over the face value
underwriting loss for the tax year exceeds 2. Stock in a mutual fund or other of non-luxury box seat tickets.
the sum of the statutory underwriting regulated investment company that
distributed exempt-interest dividends ● The part of the cost of luxury water
income and the taxable investment income travel not allowed under section 274(m).
for the tax year. during the tax year of the corporation.
Line 18. Insurance liabilities.—Include on ● Expenses for travel as a form of
Line 2b. Section 824(d)(1)(C).—Enter (in education.
the order the losses occurred) amounts this line:
equal to the unused loss carryovers to the ● Undiscounted unpaid losses, ● Other travel and entertainment expenses
tax year. not allowed as a deduction.
● Loss adjustment expenses, and
Line 2c. Section 824(d)(1)(D).—Enter any Line 7a. Tax exempt-interest.—Include as
● Unearned premiums. interest on line 7a any exempt-interest
amount remaining in the account which
was added to the account for the fifth See section 846 for more information. dividends received as a shareholder in a
preceding tax year minus one-half of the mutual fund or other regulated investment
amount remaining in the account for such company.
tax year which was added by section
824(a)(1)(B).