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Line 3b, column (a). Section 103(a)

required for losses, expenses, or

line 31. Show the partnership’s name,

excludes interest on state or local bonds

establishment of reserves is returned or

address, and EIN on a separate

from gross income.

credited to the policyholder on

statement attached to this return. If the

cancellation or expiration of the policy,

amount entered is from more than one

This exclusion does not apply to any:

must include in income an amount equal

partnership, identify the amount from

1. Private activity bond which is not a

to 2% of the premiums earned on

each partnership.

qualified bond as defined by section 141;

•

insurance contracts during the tax year

Part or all of the proceeds received

2. Arbitrage bond as defined by

with respect to such policies after

from certain corporate-owned life

section 148; or

deduction of premium deposits returned

insurance contracts issued after August

3. Bonds not meeting the

or credited during the same tax year. See

17, 2006. Corporations that own one or

requirements of section 149 (regarding

section 832(b)(1)(D).

more employer-owned life insurance

the registration of tax-exempt bonds).

contracts issued after August 17, 2006,

Line 9. Income on account of special

must file Form 8925, Report of

income and deduction accounts.

Lines 3a and 3b, column (b).

Employer-Owned Life Insurance

Corporations which write the kinds of

Amortization of premium. Enter on

Contracts.

insurance below must maintain the

line 3a, column (b), the total amortization

•

Income from cancellation of debt

following special accounts. A corporation

of bond premium, including amortization

(COD) for the repurchase of a debt

which writes:

on tax-exempt bonds. Enter on line 3b,

instrument for less than its adjusted issue

column (b), the amortization of bond

1. Mortgage guaranty insurance must

price. If the corporation elected to defer

premium on tax-exempt bonds only.

maintain a mortgage guaranty account;

COD income from the reacquisition of an

2. Lease guaranty insurance must

Note. Insurance companies electing to

applicable debt instrument in 2009 or

maintain a lease guaranty account; and

amortize discount for tax purposes must

2010, see section 108(i) and Rev. Proc.

3. Insurance on obligations the

reduce the amortization of premium by

2009-37.

interest on which is excludable from gross

any amortization of discount.

•

The corporation’s share of the following

income under section 103 must maintain

Line 4. Gross rents. Enter gross rents,

from Form 8621, Information Return by a

an account with respect to insurance on

computed as indicated under the

Shareholder of a Passive Foreign

state and local obligations.

instructions for Gross income, on page 8.

Investment Company or Qualified

Deduct expenses, such as repairs,

Electing Fund.

Amounts required to be subtracted

interest, taxes, and depreciation, on the

from these accounts under sections

1. Ordinary earnings of a qualified

proper lines for deductions.

832(e)(5) and 832(e)(6) must be reported

electing fund (QEF) (from Part II, line 1c).

Line 6. Capital gain net income. Every

as income on line 9. See section 832(e)

2. Gain or loss from marking passive

sale or exchange of a capital asset must

for more information.

foreign investment company (PFIC) stock

be reported in detail on Schedule D (Form

to market (from Part III, line 5c or 7).

Line 10. Income from protection

1120), Capital Gains and Losses, even if

3. Gain or loss from sale or other

against loss account. Although section

there is no gain or loss.

disposition of Section 1296 stock (from

1024 of P.L. 99-514 repealed section 824

Part III, line 8c or 9b).

relating to the protection against loss

Generally, losses from sales or

4. Excess distributions from a section

(PAL) account, PAL account balances are

exchanges of capital assets are only

1291 fund treated as ordinary income

includible in income as though section

allowed to the extent of gains. However,

(from Part III, line 11b).

824 were still in effect. Attach a schedule

corporations taxed under section 831 may

showing the computation.

claim losses from capital assets sold or

See the Instructions for Form 8621.

exchanged to get funds to meet abnormal

Line 11. Mutual interinsurers or

Deductions

insurance losses and to pay dividends

reciprocal underwriters — decrease in

and similar distributions to policyholders.

subscriber accounts. Enter the

Limitations on Deductions

Do not include those types of losses here,

decrease for the tax year in savings

but instead, report them on Schedule G.

Section 263A uniform capitalization

credited to subscriber accounts of a

rules. The uniform capitalization rules of

mutual insurance company that is an

The net capital loss for these

section 263A require corporations to

interinsurer or reciprocal underwriter.

corporations is the amount by which

capitalize certain costs.

losses for the year from sales or

Line 12. Income from a special loss

exchanges of capital assets exceed the

discount account. Enter the amount

See Regulations sections 1.263A-1

gains from these sales or exchanges plus

from Form 8816, Part II, line 6.

through 1.263A-3.

the smaller of:

Line 13. Other Income. Enter any other

Transactions between related

1. Taxable income (computed without

taxable income not reported on lines 1

taxpayers. Generally, an accrual basis

gains or losses from sales or exchanges

through 12. List the type and amount of

taxpayer can only deduct business

of capital assets); or

income on an attached schedule. If the

expenses and interest owed to a related

2. Losses from the sale or exchange

corporation has only one item of other

party in the year the payment is included

of capital assets sold or exchanged to

income, describe it in parentheses on line

in the income of the related party. See

obtain funds to meet abnormal insurance

13. Examples of other income to report on

sections 163(e)(3), 163(j), and 267 for

losses and to provide for the payment of

line 13 include the following.

limitations on deductions for unpaid

•

dividends and similar distributions to

The amount included in income from

interest and expenses.

policyholders.

Form 6478, Alcohol and Cellulosic Biofuel

Corporations use Form 8926,

Fuels Credit.

Disqualified Corporate Interest Expense

Subject to the limitations in section

•

The amount included in income from

Disallowed Under Section 163(j) and

1212(a), a net capital loss can be carried

Form 8864, Biodiesel and Renewable

Related Information, to figure the amount

back 3 years and forward 5 years as a

Diesel Fuels Credit.

of any corporate interest expense

short-term capital loss.

•

Refunds of taxes deducted in prior

disallowed by section 163(j).

Line 8. Certain mutual fire or flood

years to the extent they reduced income

Section 291 limitations. Corporations

insurance company premiums. A

subject to tax imposed. See section 111

may be required to adjust certain

mutual fire or flood insurance company

and the related regulations. Do not offset

deductions. See section 291 to determine

whose principal business is the issuance

current year taxes against tax refunds.

•

the amount of the adjustment. Also, see

of policies (1) for which the premium

Ordinary income from trade or business

section 43.

deposits are the same (regardless of the

activities of a partnership (from Schedule

length of the term the policies are written

K-1 (Form 1065 or Form 1065-B)). Do not

Golden parachute payments. A portion

for) and (2) under which the unabsorbed

offset ordinary losses against ordinary

of the payments made by a corporation to

portion of such premium deposits not

income. Instead, include the losses on

key personnel that exceeds their usual

-9-

Instructions for Form 1120-PC (2011)

Instructions For Form 1120-Pc - U.s. Property And Casualty Insurance Company Income Tax Return Page 9

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