Line 6d, Form 1120 (Line 2a, Form 1120-A)

Enter on line 6d (line 2a of Form 1120-A) the corporation's total general business credit.

If the corporation is filing Form 8844, Empowerment Zone and Renewal Community Employment Credit, or Form 8884, New York Liberty Zone Business Employee Credit, check the Form(s) box, write the form number in the space provided, and include the allowable credit on line 6d (line 2a of Form 1120-A).

If the corporation is required to file Form 3800, General Business Credit, check the Form 3800 box and include the allowable credit on line 6d (line 2a of Form 1120-A).

If the corporation is not required to file Form 3800, check the Form(s) box, write the form number in the space provided, and include on line 6d (line 2a of Form 1120-A) the allowable credit from the applicable form listed below.

• Investment Credit (Form 3468).
• Work Opportunity Credit (Form 5884).
• Credit for Alcohol Used as Fuel (Form 6478).
• Credit for Increasing Research Activities (Form 6765).
• Low-Income Housing Credit (Form 8586).
• Orphan Drug Credit (Form 8820).
• Disabled Access Credit (Form 8826).
• Enhanced Oil Recovery Credit (Form 8830).
• Renewable Electricity Production Credit (Form 8835).
• Indian Employment Credit (Form 8845).
• Credit for Employer Social Security and Medicare Taxes Paid on Certain Employee Tips (Form 8846).
• Credit for Contributions to Selected Community Development Corporations (Form 8847).
• Welfare-to-Work Credit (Form 8861).
• New Markets Credit (Form 8874).
• Credit for Small Employer Pension Plan Startup Costs (Form 8881).
• Credit for Employer-Provided Child Care Facilities and Services (Form 8882).

Line 6e, Form 1120 (Line 2b, Form 1120-A)

To figure the minimum tax credit and any carryforward of that credit, use Form 8827, Credit for Prior Year Minimum Tax - Corporations. Also see Form 8827 if any of the corporation's 2001 nonconventional source fuel credit or qualified electric vehicle credit was disallowed solely because of the tentative minimum tax limitation. See section 53(d).

Line 6f (Form 1120 Only)

Enter the amount of any credit from Form 8860, Qualified Zone Academy Bond Credit.

Line 9 (Form 1120 Only)

A corporation is taxed as a personal holding company under section 542 if:

• At least 60% of its adjusted ordinary gross income for the tax year is personal holding company income and
• At any time during the last half of the tax year more than 50% in value of its outstanding stock is owned, directly or indirectly, by five or fewer individuals.

See Schedule PH (Form 1120) for definitions and details on how to figure the tax.

Line 10, Form 1120 (Line 5, Form 1120-A)

Include any of the following taxes and interest in the total on line 10 (line 5, Part I, Form 1120-A). Check the appropriate box(es) for the form, if any, used to compute the total.

Recapture of investment credit.   If the corporation disposed of investment credit property or changed its use before the end of its useful life or recovery period, it may owe a tax. See Form 4255, Recapture of Investment Credit, for details.

Recapture of low-income housing credit.   If the corporation disposed of property (or there was a reduction in the qualified basis of the property) for which it took the low-income housing credit, it may owe a tax. See Form 8611, Recapture of Low-Income Housing Credit.

Interest due under the look-back methods.   If the corporation used the look-back method for certain long-term contracts, see Form 8697 for information on figuring the interest the corporation may have to include. The corporation may also have to include interest due under the look-back method for property depreciated under the income forecast method. See Form 8866.

Other.   Additional taxes and interest amounts may be included in the total entered on line 10 (line 5, Part I, Form 1120-A). Check the box for Other if the corporation includes any of the taxes and interest discussed below. See How to report on page 19 for details on reporting these amounts on an attached schedule.

• Recapture of qualified electric vehicle (QEV) credit. The corporation must recapture part of the QEV credit it claimed in a prior year if, within 3 years of the date the vehicle was placed in service, it ceases to qualify for the credit. See Regulations section 1.30-1 for details on how to figure the recapture.
• Recapture of Indian employment credit. Generally, if an employer terminates the employment of a qualified employee less than 1 year after the date of initial employment, any Indian employment credit allowed for a prior tax year because of wages paid or incurred to that employee must be recaptured. For details, see Form 8845 and section 45A.
• Recapture of new markets credit (see Form 8874).
• Tax and interest on a nonqualified withdrawal from a capital construction fund (section 7518).
• Interest on deferred tax attributable to
  • installment sales of certain timeshares and residential lots (section 453(l)(3)) and
  • certain nondealer installment obligations (section 453A(c)).
• Interest due on deferred gain (section 1260(b)).

How to report.   If the corporation checked the Other box, attach a schedule showing the computation of each item included in the total for line 10 (line 5, Part I, Form 1120-A) and identify the applicable Code section and the type of tax or interest.

Line 11 ( Form 1120 Only)

Include any deferred tax on the termination of a section 1294 election applicable to shareholders in a qualified electing fund in the amount entered on line 11. See Form 8621, Part V, and How to report, below.

Subtract the following amounts from the total for line 11.

• Deferred tax on the corporation's share of undistributed earnings of a qualified electing fund (see Form 8621, Part II).
• Deferred LIFO recapture tax (section 1363(d)). This tax is the part of the LIFO recapture tax that will be deferred and paid with Form 1120S in the future. To figure the deferred tax, first figure the total LIFO recapture tax. Follow the steps below to figure the total LIFO recapture tax and the deferred amount. Also see the instructions regarding LIFO recapture amount under Line 10, Other Income, on page 9.

Step 1. Figure the tax on the corporation's income including the LIFO recapture amount. (Complete Schedule J through line 10, but do not enter a total on line 11 yet.)

Step 2. Using a separate worksheet, complete Schedule J again, but do not include the LIFO recapture amount in the corporation's taxable income.

Step 3. Compare the tax in Step 2 to the tax in Step 1. (The difference between the two is the LIFO recapture tax.)

Step 4. Multiply the amount figured in Step 3 by 75%. (The result is the deferred LIFO recapture tax.)

How to report.   Attach a schedule showing the computation of each item included in, or subtracted from, the total for line 11. On the dotted line next to line 11, specify

• the applicable Code section,
• the type of tax, and
• enter the amount of tax.

For example, if the corporation is deferring $100 LIFO recapture tax, subtract this amount from the total on line 11, then enter Section 1363-Deferred Tax-$100 on the dotted line next to line 11.

Schedule K, Form 1120 (Part II, Form 1120-A)

The following instructions apply to Form 1120, page 3, Schedule K, or Form 1120-A, page 2, Part II. Be sure to complete all the items that apply to the corporation.

Question 4 (Form 1120 Only)

Check the Yes box for question 4 if:

• The corporation is a subsidiary in an affiliated group (defined below), but is not filing a consolidated return for the tax year with that group or
• The corporation is a subsidiary in a parent-subsidiary controlled group (defined below).

Any corporation that meets either of the requirements above should check the Yes box. This applies even if the corporation is a subsidiary member of one group and the parent corporation of another.

Note:   If the corporation is an excluded member of a controlled group (see section 1563(b)(2)), it is still considered a member of a controlled group for this purpose.

Affiliated group.   The term affiliated group means one or more chains of includible corporations (section 1504(a)) connected through stock ownership with a common parent corporation. The common parent must be an includible corporation and the following requirements must be met:

1. The common parent must own directly stock that represents at least 80% of the total voting power and at least 80% of the total value of the stock of at least one of the other includible corporations and
2. Stock that represents at least 80% of the total voting power and at least 80% of the total value of the stock of each of the other corporations (except for the common parent) must be owned directly by one or more of the other includible corporations.

For this purpose, the term stock generally does not include any stock that

• is nonvoting,
• is nonconvertible,
• is limited and preferred as to dividends and does not participate significantly in corporate growth, and
• has redemption and liquidation rights that do not exceed the issue price of the stock (except for a reasonable redemption or liquidation premium). See section 1504(a)(4).

Parent-subsidiary controlled group.   The term parent-subsidiary controlled group means one or more chains of corporations connected through stock ownership (section 1563(a)(1)). Both of the following requirements must be met:

1. At least 80% of the total combined voting power of all classes of voting stock, or at least 80% of the total value of all classes of stock of each corporation in the group (except the parent) must be owned by one or more of the other corporations in the group and
2. The common parent must own at least 80% of the total combined voting power of all classes of stock entitled to vote or at least 80% of the total value of all classes of stock of one or more of the other corporations in the group. Stock owned directly by other members of the group is not counted when computing the voting power or value.

See section 1563(d)(1) for the definition of stock for purposes of determining stock ownership above.

Question 6 (Form 1120-A Only)

Foreign financial accounts.   Check the Yes box for question 6 if either 1 or 2 below applies to the corporation. Otherwise, check the No box:

1. At any time during the 2002 calendar year, the corporation had an interest in or signature or other authority over a bank, securities, or other financial account in a foreign country (see Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts); and
   • The combined value of the accounts was more than $10,000 at any time during the calendar year and
   • The account was not with a U.S. military banking facility operated by a U.S. financial institution.
2. The corporation owns more than 50% of the stock in any corporation that would answer Yes to item 1 above.

If the Yes box is checked for the question:

• Enter the name of the foreign country or countries. Attach a separate sheet if more space is needed.
• File Form TD F 90-22.1 by June 30, 2003, with the Department of the Treasury at the address shown on the form. Because Form TD F 90-22.1 is not a tax form, do not file it with Form 1120-A. You can order Form TD F 90-22.1 by calling 1-800-TAX-FORM (1-800-829-3676) or you can download it from the IRS web site at www.irs.gov.

Question 7 (Form 1120 Only)

Check the Yes box if one foreign person owned at least 25% of

• the total voting power of all classes of stock of the corporation entitled to vote or
• the total value of all classes of stock of the corporation.

The constructive ownership rules of section 318 apply in determining if a corporation is foreign owned. See section 6038A(c)(5) and the related regulations.

Enter on line 7a the percentage owned by the foreign person specified in question 7. On line 7b, write the name of the owner's country.

Note:   If there is more than one 25%-or-more foreign owner, complete lines 7a and 7b for the foreign person with the highest percentage of ownership.

Foreign person.   The term foreign person means:

• A foreign citizen or nonresident alien.
• An individual who is a citizen of a U.S. possession (but who is not a U.S. citizen or resident).
• A foreign partnership.
• A foreign corporation.
• Any foreign estate or trust within the meaning of section 7701(a)(31).
• A foreign government (or one of its agencies or instrumentalities) to the extent that it is engaged in the conduct of a commercial activity as described in section 892.

Owner's country.   For individuals, the term owner's country means the country of residence. For all others, it is the country where incorporated, organized, created, or administered.

Requirement to file Form 5472.   If the corporation checked Yes, it may have to file Form 5472. Generally, a 25% foreign-owned corporation that had a reportable transaction with a foreign or domestic related party during the tax year must file Form 5472.

See Form 5472 for filing instructions and penalties for failure to file.

Item 9, Form 1120 (Item 3, Form 1120-A)

Show any tax-exempt interest received or accrued. Include any exempt-interest dividends received as a shareholder in a mutual fund or other RIC.

Item 11 (Form 1120 Only)

If the corporation has an NOL for its 2002 tax year, it may elect under section 172(b)(3) to waive the entire carryback period for the NOL and instead carry the NOL forward to future tax years. To do so, check the box on line 11 and file the tax return by its due date, including extensions (do not attach the statement described in Temporary Regulations section 301.9100-12T). Once made, the election is irrevocable. See Pub. 542, section 172, and Form 1139 for more details.

Corporations filing a consolidated return must also attach the statement required by Regulations section 1.1502-21(b)(3)(i) or (ii).

Item 12 (Form 1120 Only)

Enter the amount of the NOL carryover to the tax year from prior years, even if some of the loss is used to offset income on this return. The amount to enter is the total of all NOLs generated in prior years but not used to offset income (either as a carryback or carryover) to a tax year prior to 2002. Do not reduce the amount by any NOL deduction reported on line 29a.

Schedule L, Form 1120 (Part III, Form 1120-A)

The balance sheet should agree with the corporation's books and records. Include certificates of deposit as cash on line 1, Schedule L.

Line 5

Include on this line:

1. State and local government obligations, the interest on which is excludable from gross income under section 103(a) and
2. Stock in a mutual fund or other RIC that distributed exempt-interest dividends during the tax year of the corporation.

Line 26, Form 1120 (Line 21, Form 1120-A)

Some examples of adjustments to report on this line include:

• Unrealized gains and losses on securities held available for sale.
• Foreign currency translation adjustments.
• The excess of additional pension liability over unrecognized prior service cost.
• Guarantees of employee stock (ESOP) debt.
• Compensation related to employee stock award plans.

If the total adjustment to be entered on line 26 (line 21, Form 1120-A) is a negative amount, enter the amount in parentheses.

Schedule M-1, Form 1120 (Part IV, Form 1120-A)

Line 5c, Form 1120 (Line 5, Form 1120-A)

Include any of the following:

• Meal and entertainment expenses not deductible under section 274(n).
• Expenses for the use of an entertainment facility.
• The part of business gifts over $25.
• Expenses of an individual over $2,000, which are allocable to conventions on cruise ships.
• Employee achievement awards over $400.
• The cost of entertainment tickets over face value (also subject to 50% limit under section 274(n)).
• The cost of skyboxes over the face value of nonluxury box seat tickets.
• The part of luxury water travel expenses not deductible under section 274(m).
• Expenses for travel as a form of education.
• Other nondeductible travel and entertainment expenses.

For more information, see Pub. 542.

Line 7, Form 1120 (Line 6, Form 1120-A)

Include as interest on line 7 (line 6, Form 1120-A), any exempt-interest dividends received as a shareholder in a mutual fund or other RIC.

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.

The time needed to complete and file the following forms will vary depending on individual circumstances. The estimated average times are:

Form	Recordkeeping	Learning about the law or the form	Preparing the form	Copying, assembling, and sending the form to the IRS
1120	71 hr., 18 min.	43 hr., 29 min.	75 hr., 24 min.	8 hr., 18 min.
1120-A	43 hr., 45 min.	24 hr., 34 min.	49 hr., 3 min.	5 hr., 5 min.
Sch. D (1120)	7 hr., 10 min.	4 hr., 6 min.	6 hr., 16 min.	32 min.
Sch. H (1120)	5 hr., 58 min.	35 min.	43 min.	- - - - -
Sch. N (1120)	3 hr., 35 min.	1 hr., 7 min.	3 hr., 6 min.	32 min.
Sch. PH (1120)	15 hr., 18 min.	6 hr., 12 min.	8 hr., 35 min.	32 min.

If you have comments concerning the accuracy of these time estimates or suggestions for making this form and related schedules simpler, we would be happy to hear from you. You can write to the Tax Forms Committee, Western Area Distribution Center, Rancho Cordova, CA 95743-0001. Do not send the tax form to this address. Instead, see Where To File on page 3.

Codes for Principal Business Activity

Page 2 of Principal Business Activity Codes

Page 3 of Principal Business Activity Codes

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