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Line 1. Enter dividends (except those

not include any amount paid for new

regardless of the holding period

buildings or for permanent improvements

determined under section 1223.

received on debt-financed stock acquired

or betterments made to increase the

after July 18, 1984 – see section 246A)

A special rule applies in determining

value of any property or any amount

that are:

the acquisition date of dividends received

•

spent on foreclosed property before the

Received from less-than-20%-owned

from affiliates. This rule provides that the

property is held for rent.

domestic corporations subject to income

portion of any 100% dividend which is

tax, and

Line 11. Depreciation. Enter

related to prorated amounts be treated as

•

Qualified for the 70% deduction under

depreciation on assets only to the extent

received with respect to stock acquired on

section 243(a)(1).

that the assets are used to produce gross

the later of:

investment income reported on lines 1

Also, include on line 1 the following.

(a) the date the payor acquired the

•

through 7 of Schedule B. For more

Taxable distributions from an IC-DISC

stock or obligation to which the prorated

information, see the instructions for line

or former DISC that are designated as

amounts are attributable or

eligible for the 70% deduction and certain

22, Schedule A.

(b) the first day on which the payor and

dividends of Federal Home Loan Banks.

Line 12. Depletion. Enter any allowable

payee were members of the same

See section 246(a)(2).

depletion on royalty income reported on

affiliated group as defined in section

•

Dividends (except those received on

line 4, Schedule B. See the instructions

243(b).

debt-financed stock acquired after July

for line 23, Schedule A, for more

Also, if the taxpayer is a member of an

18, 1984) from a regulated investment

information.

affiliated group filing a consolidated

company (RIC). The amount of dividends

Line 13. Trade or business deductions.

return, its determination of dividends

eligible for the dividends-received

Enter the total deductions related to any

received is made as if the group were not

deduction under section 243 is limited by

trade or business income included in

filing a consolidated return.

section 854(b). The corporation should

gross investment income under section

receive a notice from the RIC specifying

Prorated amounts means tax-exempt

834(b)(2). Do not include deductions for

the amount of dividends that qualify for

interest and dividends for which a

any insurance business. Do not include

the deduction.

deduction is allowable under section 243,

losses from sales or exchanges of capital

244, or 245 (other than 100% dividends).

Report so-called dividends or earnings

assets or property used in the business,

100% dividend means any dividend if

received from mutual savings banks, etc.,

or from the compulsory or involuntary

the percentage used for purposes of

as interest. Do not treat them as

conversion of property used in the trade

determining the deduction allowable

dividends.

or business.

under section 243, 244, or 245(b) is

Line 14. Interest. See the instructions

Line 2. Enter on line 2:

100%. A special rule applies to certain

•

for lines 20a and 20b, Schedule A.

Dividends (except those received on

dividends received by a foreign

debt-financed stock acquired after July

Line 17. Investment expenses. Enter

corporation.

18, 1984) that are received from

expenses that are properly chargeable as

Lines 1 through 25

20%-or-more-owned domestic

investment expenses. If general

corporations subject to income tax and

expenses are allocated to investment

For purposes of the 20% ownership test

that are subject to the 80% deduction

expenses, the total deduction cannot be

on lines 1 through 7, the percentage of

under section 243(c), and

more than the amount on Schedule B,

stock owned by the corporation is based

•

Taxable distributions from an IC-DISC

Part II, line 39. Attach a statement

on voting power and value of the stock.

or former DISC that are considered

showing the kind and amount of general

Preferred stock described in section

eligible for the 80% deduction.

expenses. Minor items may be grouped

1504(a)(4) is not taken into account.

together.

Consolidated returns. Corporations

Line 3. Enter the following.

•

filing a consolidated return should see

See section 267 for the limitation on

Dividends received on debt-financed

Regulations sections 1.1502-13,

deductions for unpaid expenses and

stock acquired after July 18, 1984, from

1.1502-26, and 1.1502-27 before

interest in transactions between related

domestic and foreign corporations subject

completing Schedule C.

taxpayers.

to income tax that would otherwise be

subject to the dividends-received

Corporations filing a consolidated

deduction under section 243(a)(1),

return must not report as dividends on

Schedule B, Part

243(c), or 245(a). Generally,

Schedule C any amounts received from

debt-financed stock is stock that the

corporations within the tax consolidation

II—Invested Assets Book

corporation acquired by incurring a debt

group. Such dividends are eliminated in

Values

(for example, it borrowed money to buy

consolidation rather than offset by the

the stock).

dividends-received deduction.

Use Schedule B, Part II, to compute the

•

Dividends received from a RIC on

Lines 1 through 9, column (a). Enter in

limitation on investment expenses under

debt-financed stock. The amount of

column (a) of the appropriate line those

section 834(c)(2) when any general

dividends eligible for the

dividends that are subject to the

expenses are in part assigned to, or

dividends-received deduction is limited by

provisions of section 832(b)(5)(B).This will

included in, the investment expenses

section 854(b). The corporation should

include:

deducted on Schedule B, Part I, line 17.

receive a notice from the RIC specifying

1. All dividends (other than 100%

the amount of dividends that qualify for

dividends) received on stock acquired

the deduction.

Schedule C—Dividends

after August 7, 1986, and

Line 4. Enter dividends received on

2. 100% dividends received on stock

and Special Deductions

preferred stock of a less-than-20%-owned

acquired after August 7, 1986, to the

public utility that is subject to income tax

extent that such dividends are attributable

Definitions

and is allowed the deduction provided in

to prorated amounts (see definition

The acquisition date for investments

section 247 for dividends paid.

earlier).

acquired by direct purchase is the trade

Line 5. Enter dividends received on

date rather than the settlement date. For

In the case of an insurance company

preferred stock of a 20%-or-more-owned

investments not acquired by direct

that files a consolidated return, the

public utility that is subject to income tax

purchase (such as those acquired

determination with respect to any

and is allowed the deduction provided in

through transfers among affiliates,

dividend paid by a member to another

section 247 for dividends paid.

tax-free reorganizations, or the liquidation

member of the affiliated group is made as

of a subsidiary, etc.), the actual

if no consolidated return was filed. See

Line 6. Enter the U.S.-source portion of

acquisition date should be used

section 832(g).

dividends that:

-15-

Instructions for Form 1120-PC (2011)

Instructions For Form 1120-Pc - U.s. Property And Casualty Insurance Company Income Tax Return Page 15

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