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1040ez Instruction

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1040ez Instruction

1040ez instruction Index A Affiliated corporations, Aircraft used by affiliated corporations. 1040ez instruction Agri-biodiesel, defined, Agri-biodiesel. 1040ez instruction Air transportation taxes, Air Transportation Taxes 225-mile-zone rule, Taxable transportation. 1040ez instruction Alaska, Transportation between the continental U. 1040ez instruction S. 1040ez instruction and Alaska or Hawaii. 1040ez instruction , Transportation within Alaska or Hawaii. 1040ez instruction , Alaska and Hawaii. 1040ez instruction Baggage, Excess baggage. 1040ez instruction Bonus tickets, Bonus tickets. 1040ez instruction Credits or refunds, Credits or refunds. 1040ez instruction Exemptions, Exemptions. 1040ez instruction Export, Exportation. 1040ez instruction Fixed-wing aircraft, Fixed-wing aircraft uses. 1040ez instruction Hawaii, Transportation between the continental U. 1040ez instruction S. 1040ez instruction and Alaska or Hawaii. 1040ez instruction , Transportation within Alaska or Hawaii. 1040ez instruction , Alaska and Hawaii. 1040ez instruction Helicopters, Certain helicopter uses. 1040ez instruction , Transportation of Property by Air International air travel facilities, International Air Travel Facilities Military personnel, Military personnel on international trips. 1040ez instruction Package tours, Package tours. 1040ez instruction Persons by air, Transportation of Persons by Air Persons liable, Liability for tax. 1040ez instruction , Liability for tax. 1040ez instruction Property by air, Transportation of Property by Air Tax rates, Transportation of Persons by Air Taxable transportation, Taxable transportation. 1040ez instruction Travel agency, Liability for tax. 1040ez instruction Uninterrupted international, Uninterrupted international air transportation. 1040ez instruction Aircraft, Fixed-wing aircraft uses. 1040ez instruction Affiliated corporations, Aircraft used by affiliated corporations. 1040ez instruction Small planes, Small aircraft. 1040ez instruction Aircraft museum, In an aircraft or vehicle owned by an aircraft museum (No. 1040ez instruction 15). 1040ez instruction Alaska Air transportation taxes, Transportation between the continental U. 1040ez instruction S. 1040ez instruction and Alaska or Hawaii. 1040ez instruction Tax on diesel fuel or kerosene, Removal for sale or use in Alaska. 1040ez instruction Alcohol and tobacco taxes, Excise Taxes Not Covered Alternative fuel credit, Alternative fuel credit. 1040ez instruction Alternative fuel, defined, Other fuels. 1040ez instruction American Red Cross, International organizations and the American Red Cross. 1040ez instruction Answering service, Answering services. 1040ez instruction Appeal procedures, Examination and Appeal Procedures Approved refinery, defined, Approved terminal or refinery. 1040ez instruction Approved terminal, defined, Approved terminal or refinery. 1040ez instruction Arrow shafts, Arrow Shafts Assistance (see Tax help) Aviation gasoline, defined, Aviation gasoline. 1040ez instruction B Back-up tax, Back-up Tax Biodiesel, defined, Biodiesel. 1040ez instruction Blended taxable fuel, defined, Blended taxable fuel. 1040ez instruction Blender, defined, Blender. 1040ez instruction Blocked pump, Blocked pump. 1040ez instruction Blood collector organizations, qualified, Exclusive use by a qualified blood collector organization (No. 1040ez instruction 11). 1040ez instruction , Qualified blood collector organizations. 1040ez instruction Boats, In a boat engaged in commercial fishing (No. 1040ez instruction 4). 1040ez instruction Bonus tickets, Bonus tickets. 1040ez instruction Bows, Quivers, Broadheads, and Points, Bows, Quivers, Broadheads, and Points Bulk transfer, defined, Bulk transfer. 1040ez instruction Bulk transfer/terminal system, defined, Bulk transfer/terminal system. 1040ez instruction Buses, In certain intercity and local buses (No. 1040ez instruction 5). 1040ez instruction , In a qualified local bus (No. 1040ez instruction 6). 1040ez instruction , In a school bus (No. 1040ez instruction 7). 1040ez instruction Tire tax, Qualifying intercity or local bus. 1040ez instruction C Cellulosic biofuel, Cellulosic biofuel. 1040ez instruction Chemicals, ozone-depleting, Environmental Taxes Claims Claiming a credit, Claiming a Credit on Form 4136 Claiming a refund, Claiming A Refund Filing claims, Filing Claims Coal Blending, Blending. 1040ez instruction Exemptions, Exemption from tax. 1040ez instruction Producer, Coal Production, Coal production. 1040ez instruction Selling price, Determining tonnage or selling price. 1040ez instruction Tax rates, Tax rates. 1040ez instruction Coin-operated telephones, Coin-operated telephones. 1040ez instruction Comments, Comments and suggestions. 1040ez instruction Commercial aviation, In commercial aviation (other than foreign trade). 1040ez instruction Commercial fishing, In a boat engaged in commercial fishing (No. 1040ez instruction 4). 1040ez instruction Commercial waterway transportation, Commercial waterway transportation. 1040ez instruction Communications taxes Credits or refunds, Credits or Refunds Exemptions, Exemptions Figuring the tax, Figuring the tax. 1040ez instruction Local telephone service, Local telephone service. 1040ez instruction Local-only service, Local-only service. 1040ez instruction Private communication service, Private communication service. 1040ez instruction Teletypewriter exchange service, Teletypewriter exchange service. 1040ez instruction Credit card purchases Aviation gasoline, Credit card purchases. 1040ez instruction Gasoline, Credit card purchases. 1040ez instruction Kerosene for use in aviation, Credit card purchases. 1040ez instruction Undyed diesel fuel, Credit Card Purchases. 1040ez instruction Undyed kerosene, Credit Card Purchases. 1040ez instruction Credit or refund Gas guzzler tax, Credit or refund. 1040ez instruction Manufacturers taxes, Credits or Refunds Resale of tax-paid semitrailers, Tax on resale of tax-paid trailers and semitrailers. 1040ez instruction Retail tax, Credits or refunds. 1040ez instruction Tire tax, Credit or refund. 1040ez instruction Vaccines, Credit or refund. 1040ez instruction Credits, Claiming a Credit on Form 4136 D Deposits Net tax liability, Amount of Deposits Deposits, How to make, How To Make Deposits Diesel fuel Definitions, Diesel Fuel and Kerosene Exported, Diesel Fuel and Kerosene Diesel-water fuel emulsion, defined, Diesel-water fuel emulsion. 1040ez instruction Dyed diesel fuel, Dyed Diesel Fuel and Dyed Kerosene Dyed kerosene, Dyed Diesel Fuel and Dyed Kerosene E Electric outboard motors, Electric outboard boat motors. 1040ez instruction Enterer, defined, Enterer. 1040ez instruction Entry, defined, Entry. 1040ez instruction Environmental taxes Credit or refund, Credits or refunds. 1040ez instruction Exceptions, Exceptions. 1040ez instruction Ozone-depleting chemicals (ODCs), Environmental Taxes United States (defined), Environmental Taxes Examination procedures, Examination and Appeal Procedures Excluded liquid, Diesel Fuel and Kerosene Exempt articles, retail tax, Articles exempt from tax. 1040ez instruction Exempt communication services American Red Cross, International organizations and the American Red Cross. 1040ez instruction Answering service, Answering services. 1040ez instruction Coin-operated telephones, Coin-operated telephones. 1040ez instruction Installation charges, Installation charges. 1040ez instruction International organizations, International organizations and the American Red Cross. 1040ez instruction Mobile radio telephone service, Mobile radio telephone service. 1040ez instruction News services, News services. 1040ez instruction Nonprofit educational organizations, Nonprofit educational organizations. 1040ez instruction Nonprofit hospitals, Nonprofit hospitals. 1040ez instruction Private communication service, Private communication service. 1040ez instruction Qualified blood collector organizations, Qualified blood collector organizations. 1040ez instruction Radio broadcasts, News services. 1040ez instruction Security systems, Telephone-operated security systems. 1040ez instruction Exempt sales, heavy trucks, Sales exempt from tax. 1040ez instruction Exemptions Air transportation taxes, Exemptions. 1040ez instruction Bonus tickets, Bonus tickets. 1040ez instruction Coal, Exemption from tax. 1040ez instruction Communications taxes, Exemptions Federal government, Federal, state, and local government. 1040ez instruction Fixed-wing aircraft, Fixed-wing aircraft uses. 1040ez instruction For export, Exemptions Further manufacturing, Exemptions Helicopters, Certain helicopter uses. 1040ez instruction Indian handicrafts, Exemptions Indian tribal governments, Federal, state, and local government. 1040ez instruction Military personnel, Military personnel on international trips. 1040ez instruction Nonprofit educational organizations, Federal, state, and local government. 1040ez instruction , Exemptions Qualified blood collector organizations, Exemptions State and local governments, Federal, state, and local government. 1040ez instruction , Exemptions Taxable tires, Tires exempt from tax. 1040ez instruction Vessel supplies, Exemptions Export, Export (No. 1040ez instruction 3). 1040ez instruction Exported taxable fuel, Exported taxable fuel. 1040ez instruction F Farming, On a farm for farming purposes (No. 1040ez instruction 1). 1040ez instruction Federal government, Federal, state, and local government. 1040ez instruction Fishing, In a boat engaged in commercial fishing (No. 1040ez instruction 4). 1040ez instruction Fishing rods and fishing poles. 1040ez instruction , Fishing rods and fishing poles. 1040ez instruction Fishing tackle boxes, Fishing tackle boxes. 1040ez instruction Fixed-wing aircraft, Fixed-wing aircraft uses. 1040ez instruction Floor stocks tax Ozone-depleting chemicals, Floor Stocks Tax Floor stocks, ODCs, Environmental Taxes Foreign trade, In foreign trade (No. 1040ez instruction 9). 1040ez instruction Form 1363, Exportation. 1040ez instruction 4136, Claiming a Credit on Form 4136 6197, Gas Guzzler Tax, Form 6197. 1040ez instruction , Attachments to Form 720. 1040ez instruction 637, Reminders 6627, Environmental Taxes, Attachments to Form 720. 1040ez instruction 720, Claiming A Refund, Form 6197. 1040ez instruction , Filing Form 720 720X, Form 720X. 1040ez instruction 8849, Claiming A Refund 8864, Biodiesel Sold as But Not Used as Fuel Form 720 Attachments, Attachments to Form 720. 1040ez instruction Due dates, Due dates. 1040ez instruction Final return, Final return. 1040ez instruction Schedule A, Filing Form 720 Schedule C, Filing Form 720 Schedule T, Filing Form 720 Free tax services, How To Get Tax Help Fuels Alternative fuel, Other Fuels (Including Alternative Fuels) Diesel, Diesel Fuel and Kerosene Diesel-water fuel emulsion, Diesel-Water Fuel Emulsion For use in aviation, Kerosene for Use in Aviation Gasoline, Gasoline and Aviation Gasoline Kerosene, Diesel Fuel and Kerosene Other Fuels, Other Fuels (Including Alternative Fuels) Used on inland waterways, Fuels Used on Inland Waterways G Gambling, Taxable situations. 1040ez instruction Gas guzzler tax Automobiles, Automobiles. 1040ez instruction Credit or refund, Credit or refund. 1040ez instruction Limousines, Automobiles. 1040ez instruction Vehicles not subject to tax, Vehicles not subject to tax. 1040ez instruction Gasoline blendstocks, Gasoline Blendstocks Gasoline, defined, Gasoline. 1040ez instruction H Hawaii, air transportation taxes, Transportation between the continental U. 1040ez instruction S. 1040ez instruction and Alaska or Hawaii. 1040ez instruction Heavy Motor Vehicle User Fee, Excise Taxes Not Covered Heavy trucks First retail sale, defined, First retail sale defined. 1040ez instruction Further manufacture, Further manufacture. 1040ez instruction Installment sales, Installment sales. 1040ez instruction Parts or accessories, Parts or accessories. 1040ez instruction Presumptive retail sales price, Presumptive retail sales price. 1040ez instruction Related persons, Related person. 1040ez instruction Separate purchases, Separate purchase. 1040ez instruction Tax base, Determination of tax base. 1040ez instruction Tax rate, Retail Tax on Heavy Trucks, Trailers, and Tractors Helicopter, Certain helicopter uses. 1040ez instruction Help (see Tax help) Highway vehicle, Highway vehicle. 1040ez instruction , In a highway vehicle owned by the United States that is not used on a highway (No. 1040ez instruction 12). 1040ez instruction Highway vehicle (Diesel-powered), Diesel-powered highway vehicle. 1040ez instruction I Identifying number, Taxpayer identification number. 1040ez instruction Imported taxable products (ODCs), Imported Taxable Products Income, include in, Including the Credit or Refund in Income Indoor tanning services, Indoor Tanning Services Tax Information returns, liquid products, Information Returns Inland waterways, Fuels Used on Inland Waterways Intercity and local buses, In certain intercity and local buses (No. 1040ez instruction 5). 1040ez instruction Interest and penalties, Penalties and Interest International air travel facilities, International Air Travel Facilities K Kerosene Definitions, Diesel Fuel and Kerosene Exported, Diesel Fuel and Kerosene For use in aviation, Kerosene for Use in Aviation L Liquid products, information returns, Information Returns Local telephone service, Local telephone service. 1040ez instruction Local-only service, Local-only service. 1040ez instruction M Manufacturer, defined, Manufacturer. 1040ez instruction Manufacturers taxes Arrow shafts, Arrow Shafts Bows, Quivers, Broadheads, and Points, Bows, Quivers, Broadheads, and Points Coal, Coal Credits or refunds, Credits or Refunds Exemptions, Exemptions Gas guzzler tax, Gas Guzzler Tax Lease, Lease considered sale. 1040ez instruction Lease payments, Partial payments. 1040ez instruction Partial payments, Partial payments. 1040ez instruction Registration, Registration requirements. 1040ez instruction Related person, Related person. 1040ez instruction Requirements for exempt sales, Requirements for Exempt Sales Sale, Sale. 1040ez instruction Sport fishing equipment, Sport Fishing Equipment Taxable Tires, Taxable Tires Vaccines, Vaccines Medical device tax, Taxable medical devices. 1040ez instruction Military aircraft, In military aircraft (No. 1040ez instruction 16). 1040ez instruction Mobile radio telephone service, Mobile radio telephone service. 1040ez instruction N News services, News services. 1040ez instruction Nonprofit educational organization, Exclusive use by a nonprofit educational organization (No. 1040ez instruction 13). 1040ez instruction Nonprofit educational organization use and state use, Nonprofit educational organization and state use. 1040ez instruction Nonprofit educational organizations, Nonprofit educational organizations. 1040ez instruction , Federal, state, and local government. 1040ez instruction Nontaxable uses, definitions, Definitions of Nontaxable Uses Nontaxable uses, type of use table, Definitions of Nontaxable Uses O Obligations not in registered form, Obligations Not in Registered Form Off-highway use, Off-highway business use (No. 1040ez instruction 2). 1040ez instruction Oil spill liability, Environmental Taxes Other Fuels (Including Alternative Fuels), Other Fuels (Including Alternative Fuels) Other fuels, defined, Other fuels. 1040ez instruction Ozone-depleting chemicals Floor stocks tax, Floor Stocks Tax Imported taxable products, Imported Taxable Products P Patient-centered outcomes research fee, Patient-Centered Outcomes Research Fee Payment of taxes, Payment of Taxes Penalties Dyed diesel fuel, Penalty. 1040ez instruction Dyed kerosene, Penalty. 1040ez instruction Pipeline operator, defined, Pipeline operator. 1040ez instruction Position holder, defined, Position holder. 1040ez instruction Publications (see Tax help) Q Qualified local bus, In a qualified local bus (No. 1040ez instruction 6). 1040ez instruction R Rack, defined, Rack. 1040ez instruction Radio broadcasts, News services. 1040ez instruction Records, Refiner, defined, Refiner. 1040ez instruction Refinery, defined, Refinery. 1040ez instruction Refunds, Claiming A Refund Refunds of second tax, Refunds of Second Tax Registered ultimate vendor, Sales by Registered Ultimate Vendors, Registered ultimate vendor. 1040ez instruction Registrant, Taxable fuel registrant. 1040ez instruction Registrant, defined, Registrant. 1040ez instruction Registration, Registration Requirements Form 637, Reminders Registration-required obligations, Obligations Not in Registered Form Related persons Heavy trucks, Related person. 1040ez instruction Sport fishing equipment, Related person. 1040ez instruction Removal, defined, Removal. 1040ez instruction Retail tax Credits or refunds, Credits or refunds. 1040ez instruction Heavy trucks, Retail Tax on Heavy Trucks, Trailers, and Tractors Rulings Program, Rulings Program Rural airports, Rural airports. 1040ez instruction S Sale, defined, Sale. 1040ez instruction Sales by registered ultimate vendors, gasoline, Sales by registered ultimate vendors. 1040ez instruction Sales by registered ultimate vendors, kerosene for use in aviation, Sales by Registered Ultimate Vendors Sales price Bonus goods, Bonus goods. 1040ez instruction Cost of transportation, Manufacturers taxes based on sale price. 1040ez instruction Delivery costs, Manufacturers taxes based on sale price. 1040ez instruction Discounts, Manufacturers taxes based on sale price. 1040ez instruction Installation costs, Manufacturers taxes based on sale price. 1040ez instruction Insurance costs, Manufacturers taxes based on sale price. 1040ez instruction Local advertising charges, Manufacturers taxes based on sale price. 1040ez instruction Manufacturers excise tax, Manufacturers taxes based on sale price. 1040ez instruction Rebates, Manufacturers taxes based on sale price. 1040ez instruction Retail dealer preparation costs, Manufacturers taxes based on sale price. 1040ez instruction Warranty charges, Manufacturers taxes based on sale price. 1040ez instruction School bus, In a school bus (No. 1040ez instruction 7). 1040ez instruction Second generation biofuel, Second generation biofuel. 1040ez instruction Security systems, Telephone-operated security systems. 1040ez instruction Ship passenger tax, Ship Passenger Tax Special September rule, When to deposit, Special rule for deposits of taxes in September. 1040ez instruction Sport fishing equipment List of equipment, Sport Fishing Equipment Resales, Certain equipment resale. 1040ez instruction State and local governments, Federal, state, and local government. 1040ez instruction State or local governments, Exclusive use by a state, political subdivision of a state, or the District of Columbia (No. 1040ez instruction 14). 1040ez instruction State or nonprofit educational organization use, Sales by registered ultimate vendors. 1040ez instruction State use, Registered ultimate vendor (state use). 1040ez instruction , State use. 1040ez instruction State, defined, State. 1040ez instruction Suggestions, Comments and suggestions. 1040ez instruction T Tanning tax, Indoor Tanning Services Tax Tax help, How To Get Tax Help Tax rate, Electric outboard boat motors. 1040ez instruction Air transportation of persons, Transportation of Persons by Air Air transportation of property, Transportation of Property by Air Arrow shafts, Arrow Shafts Bows, Quivers, Broadheads, and Points, Bows, Quivers, Broadheads, and Points Coal, Tax rates. 1040ez instruction Electric outboard motor, Electric outboard boat motors. 1040ez instruction International air travel facilities, International Air Travel Facilities Obligations not in registered form, Obligations Not in Registered Form Policies issued by foreign persons, Foreign Insurance Taxes Ship passenger tax, Ship Passenger Tax Sport fishing equipment, Sport Fishing Equipment Trucks, Retail Tax on Heavy Trucks, Trailers, and Tractors Taxable fuel registrant, Taxable fuel registrant. 1040ez instruction Taxable Tires Manufacturers taxes, Taxable Tires Taxable tires Exemptions, Tires exempt from tax. 1040ez instruction Taxes, Payment of, Payment of Taxes Taxpayer identification number, Taxpayer identification number. 1040ez instruction Teletypewriter exchange service, Teletypewriter exchange service. 1040ez instruction Terminal operator, defined, Terminal operator. 1040ez instruction Terminal, defined, Terminal. 1040ez instruction Throughputter, defined, Throughputter. 1040ez instruction Tires Credit against heavy truck tax, Tire credit. 1040ez instruction Credit or refund of tax, Credit or refund. 1040ez instruction Train, Use in a train. 1040ez instruction Train (Diesel-powered), Diesel-powered train. 1040ez instruction Transmix, Diesel Fuel and Kerosene Travel agency, Liability for tax. 1040ez instruction TTY/TDD information, How To Get Tax Help Two-party exchanges, Two-party exchanges. 1040ez instruction , Two-party exchanges. 1040ez instruction U Ultimate purchaser, Ultimate purchaser. 1040ez instruction Uninterrupted international air transportation, Uninterrupted international air transportation. 1040ez instruction , Military personnel on international trips. 1040ez instruction Used other than as a fuel Diesel fuel and kerosene, For diesel fuel and kerosene (other than kerosene used in aviation) used other than as a fuel (No. 1040ez instruction 8). 1040ez instruction Uses, nontaxable Alternative fuels, Other Fuels (Including Alternative Fuels) Aviation gasoline, Gasoline and Aviation Gasoline Diesel fuel, Undyed Diesel Fuel and Undyed Kerosene (Other Than Kerosene Used in Aviation) Diesel-water fuel emulsion, Diesel-Water Fuel Emulsion Gasoline, Gasoline and Aviation Gasoline Kerosene, Undyed Diesel Fuel and Undyed Kerosene (Other Than Kerosene Used in Aviation) Kerosene for use in aviation, Ultimate purchasers. 1040ez instruction Liquefied petroleum gas (LPG), Other Fuels (Including Alternative Fuels) Other Fuels, Other Fuels (Including Alternative Fuels) V Vaccines Credit or refund, Credit or refund. 1040ez instruction Manufacturers tax, What's New, Vaccines Vehicles Gas guzzler, Gas Guzzler Tax Imported, Imported automobiles. 1040ez instruction Law enforcement, Vehicles not subject to tax. 1040ez instruction Vendors, registered ultimate, Sales by Registered Ultimate Vendors, Registered ultimate vendor. 1040ez instruction Vessel operator, defined, Vessel operator. 1040ez instruction W Wagering and occupational wagering fee, Excise Taxes Not Covered When to deposit, When To Make Deposits Prev  Up     Home   More Online Publications
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The 1040ez Instruction

1040ez instruction Publication 542 - Main Content Table of Contents Businesses Taxed as CorporationsPersonal services. 1040ez instruction Employee-owners. 1040ez instruction Other rules. 1040ez instruction Other rules. 1040ez instruction Property Exchanged for StockNonqualified preferred stock. 1040ez instruction Liabilities. 1040ez instruction Election to reduce basis. 1040ez instruction Capital Contributions Filing and Paying Income TaxesIncome Tax Return Penalties Estimated Tax U. 1040ez instruction S. 1040ez instruction Real Property Interest Accounting MethodsSection 481(a) adjustment. 1040ez instruction Accounting Periods Recordkeeping Income, Deductions, and Special ProvisionsCosts of Going Into Business Related Persons Income From Qualifying Shipping Activities Election to Expense Qualified Refinery Property Deduction to Comply With EPA Sulfur Regulations Energy-Efficient Commercial Building Property Deduction Corporate Preference Items Dividends-Received Deduction Extraordinary Dividends Below-Market Loans Charitable Contributions Capital Losses Net Operating Losses At-Risk Limits Passive Activity Limits Figuring TaxTax Rate Schedule Alternative Minimum Tax (AMT) Credits Recapture Taxes Accumulated Earnings Tax Distributions to ShareholdersMoney or Property Distributions Distributions of Stock or Stock Rights Constructive Distributions Reporting Dividends and Other Distributions How To Get Tax Help Businesses Taxed as Corporations The rules you must use to determine whether a business is taxed as a corporation changed for businesses formed after 1996. 1040ez instruction Business formed before 1997. 1040ez instruction   A business formed before 1997 and taxed as a corporation under the old rules will generally continue to be taxed as a corporation. 1040ez instruction Business formed after 1996. 1040ez instruction   The following businesses formed after 1996 are taxed as corporations. 1040ez instruction A business formed under a federal or state law that refers to it as a corporation, body corporate, or body politic. 1040ez instruction A business formed under a state law that refers to it as a joint-stock company or joint-stock association. 1040ez instruction An insurance company. 1040ez instruction Certain banks. 1040ez instruction A business wholly owned by a state or local government. 1040ez instruction A business specifically required to be taxed as a corporation by the Internal Revenue Code (for example, certain publicly traded partnerships). 1040ez instruction Certain foreign businesses. 1040ez instruction Any other business that elects to be taxed as a corporation. 1040ez instruction For example, a limited liability company (LLC) can elect to be treated as an association taxable as a corporation by filing Form 8832, Entity Classification Election. 1040ez instruction For more information about LLCs, see Publication 3402, Taxation of Limited Liability Companies. 1040ez instruction S corporations. 1040ez instruction   Some corporations may meet the qualifications for electing to be S corporations. 1040ez instruction For information on S corporations, see the instructions for Form 1120S, U. 1040ez instruction S. 1040ez instruction Income Tax Return for an S Corporation. 1040ez instruction Personal service corporations. 1040ez instruction   A corporation is a personal service corporation if it meets all of the following requirements. 1040ez instruction Its principal activity during the “testing period” is performing personal services (defined later). 1040ez instruction Generally, the testing period for any tax year is the prior tax year. 1040ez instruction If the corporation has just been formed, the testing period begins on the first day of its tax year and ends on the earlier of: The last day of its tax year, or The last day of the calendar year in which its tax year begins. 1040ez instruction Its employee-owners substantially perform the services in (1), above. 1040ez instruction This requirement is met if more than 20% of the corporation's compensation cost for its activities of performing personal services during the testing period is for personal services performed by employee-owners. 1040ez instruction Its employee-owners own more than 10% of the fair market value of its outstanding stock on the last day of the testing period. 1040ez instruction Personal services. 1040ez instruction   Personal services include any activity performed in the fields of accounting, actuarial science, architecture, consulting, engineering, health (including veterinary services), law, and the performing arts. 1040ez instruction Employee-owners. 1040ez instruction   A person is an employee-owner of a personal service corporation if both of the following apply. 1040ez instruction He or she is an employee of the corporation or performs personal services for, or on behalf of, the corporation (even if he or she is an independent contractor for other purposes) on any day of the testing period. 1040ez instruction He or she owns any stock in the corporation at any time during the testing period. 1040ez instruction Other rules. 1040ez instruction   For other rules that apply to personal service corporations see Accounting Periods, later. 1040ez instruction Closely held corporations. 1040ez instruction   A corporation is closely held if all of the following apply. 1040ez instruction It is not a personal service corporation. 1040ez instruction At any time during the last half of the tax year, more than 50% of the value of its outstanding stock is, directly or indirectly, owned by or for five or fewer individuals. 1040ez instruction “Individual” includes certain trusts and private foundations. 1040ez instruction Other rules. 1040ez instruction   For the at-risk rules that apply to closely held corporations, seeAt-Risk Limits, later. 1040ez instruction Property Exchanged for Stock If you transfer property (or money and property) to a corporation in exchange for stock in that corporation (other than nonqualified preferred stock, described later), and immediately afterward you are in control of the corporation, the exchange is usually not taxable. 1040ez instruction This rule applies both to individuals and to groups who transfer property to a corporation. 1040ez instruction It also applies whether the corporation is being formed or is already operating. 1040ez instruction It does not apply in the following situations. 1040ez instruction The corporation is an investment company. 1040ez instruction You transfer the property in a bankruptcy or similar proceeding in exchange for stock used to pay creditors. 1040ez instruction The stock is received in exchange for the corporation's debt (other than a security) or for interest on the corporation's debt (including a security) that accrued while you held the debt. 1040ez instruction Both the corporation and any person involved in a nontaxable exchange of property for stock must attach to their income tax returns a complete statement of all facts pertinent to the exchange. 1040ez instruction For more information, see section 1. 1040ez instruction 351-3 of the Regulations. 1040ez instruction Control of a corporation. 1040ez instruction   To be in control of a corporation, you or your group of transferors must own, immediately after the exchange, at least 80% of the total combined voting power of all classes of stock entitled to vote and at least 80% of the outstanding shares of each class of nonvoting stock. 1040ez instruction Example 1. 1040ez instruction You and Bill Jones buy property for $100,000. 1040ez instruction You both organize a corporation when the property has a fair market value of $300,000. 1040ez instruction You transfer the property to the corporation for all its authorized capital stock, which has a par value of $300,000. 1040ez instruction No gain is recognized by you, Bill, or the corporation. 1040ez instruction Example 2. 1040ez instruction You and Bill transfer the property with a basis of $100,000 to a corporation in exchange for stock with a fair market value of $300,000. 1040ez instruction This represents only 75% of each class of stock of the corporation. 1040ez instruction The other 25% was already issued to someone else. 1040ez instruction You and Bill recognize a taxable gain of $200,000 on the transaction. 1040ez instruction Services rendered. 1040ez instruction   The term property does not include services rendered or to be rendered to the issuing corporation. 1040ez instruction The value of stock received for services is income to the recipient. 1040ez instruction Example. 1040ez instruction You transfer property worth $35,000 and render services valued at $3,000 to a corporation in exchange for stock valued at $38,000. 1040ez instruction Right after the exchange, you own 85% of the outstanding stock. 1040ez instruction No gain is recognized on the exchange of property. 1040ez instruction However, you recognize ordinary income of $3,000 as payment for services you rendered to the corporation. 1040ez instruction Property of relatively small value. 1040ez instruction   The term property does not include property of a relatively small value when it is compared to the value of stock and securities already owned or to be received for services by the transferor if the main purpose of the transfer is to qualify for the nonrecognition of gain or loss by other transferors. 1040ez instruction   Property transferred will not be considered to be of relatively small value if its fair market value is at least 10% of the fair market value of the stock and securities already owned or to be received for services by the transferor. 1040ez instruction Stock received in disproportion to property transferred. 1040ez instruction   If a group of transferors exchange property for corporate stock, each transferor does not have to receive stock in proportion to his or her interest in the property transferred. 1040ez instruction If a disproportionate transfer takes place, it will be treated for tax purposes in accordance with its true nature. 1040ez instruction It may be treated as if the stock were first received in proportion and then some of it used to make gifts, pay compensation for services, or satisfy the transferor's obligations. 1040ez instruction Money or other property received. 1040ez instruction   If, in an otherwise nontaxable exchange of property for corporate stock, you also receive money or property other than stock, you may have to recognize gain. 1040ez instruction You must recognize gain only up to the amount of money plus the fair market value of the other property you receive. 1040ez instruction The rules for figuring the recognized gain in this situation generally follow those for a partially nontaxable exchange discussed in Publication 544 under Like-Kind Exchanges. 1040ez instruction If the property you give up includes depreciable property, the recognized gain may have to be reported as ordinary income from depreciation. 1040ez instruction See chapter 3 of Publication 544. 1040ez instruction No loss is recognized. 1040ez instruction Nonqualified preferred stock. 1040ez instruction   Nonqualified preferred stock is treated as property other than stock. 1040ez instruction Generally, it is preferred stock with any of the following features. 1040ez instruction The holder has the right to require the issuer or a related person to redeem or buy the stock. 1040ez instruction The issuer or a related person is required to redeem or buy the stock. 1040ez instruction The issuer or a related person has the right to redeem or buy the stock and, on the issue date, it is more likely than not that the right will be exercised. 1040ez instruction The dividend rate on the stock varies with reference to interest rates, commodity prices, or similar indices. 1040ez instruction For a detailed definition of nonqualified preferred stock, see section 351(g)(2) of the Internal Revenue Code. 1040ez instruction Liabilities. 1040ez instruction   If the corporation assumes your liabilities, the exchange generally is not treated as if you received money or other property. 1040ez instruction There are two exceptions to this treatment. 1040ez instruction If the liabilities the corporation assumes are more than your adjusted basis in the property you transfer, gain is recognized up to the difference. 1040ez instruction However, if the liabilities assumed give rise to a deduction when paid, such as a trade account payable or interest, no gain is recognized. 1040ez instruction If there is no good business reason for the corporation to assume your liabilities, or if your main purpose in the exchange is to avoid federal income tax, the assumption is treated as if you received money in the amount of the liabilities. 1040ez instruction For more information on the assumption of liabilities, see section 357(d) of the Internal Revenue Code. 1040ez instruction Example. 1040ez instruction You transfer property to a corporation for stock. 1040ez instruction Immediately after the transfer, you control the corporation. 1040ez instruction You also receive $10,000 in the exchange. 1040ez instruction Your adjusted basis in the transferred property is $20,000. 1040ez instruction The stock you receive has a fair market value (FMV) of $16,000. 1040ez instruction The corporation also assumes a $5,000 mortgage on the property for which you are personally liable. 1040ez instruction Gain is realized as follows. 1040ez instruction FMV of stock received $16,000 Cash received 10,000 Liability assumed by corporation 5,000 Total received $31,000 Minus: Adjusted basis of property transferred 20,000 Realized gain $11,000   The liability assumed is not treated as money or other property. 1040ez instruction The recognized gain is limited to $10,000, the cash received. 1040ez instruction Loss on exchange. 1040ez instruction   If you have a loss from an exchange and own, directly or indirectly, more than 50% of the corporation's stock, you cannot deduct the loss. 1040ez instruction For more information, see Nondeductible Loss under Sales and Exchanges Between Related Persons in chapter 2 of Publication 544. 1040ez instruction Basis of stock or other property received. 1040ez instruction   The basis of the stock you receive is generally the adjusted basis of the property you transfer. 1040ez instruction Increase this amount by any amount treated as a dividend, plus any gain recognized on the exchange. 1040ez instruction Decrease this amount by any cash you received, the fair market value of any other property you received, and any loss recognized on the exchange. 1040ez instruction Also decrease this amount by the amount of any liability the corporation or another party to the exchange assumed from you, unless payment of the liability gives rise to a deduction when paid. 1040ez instruction    Further decreases may be required when the corporation or another party to the exchange assumes from you a liability that gives rise to a deduction when paid, if the basis of the stock would otherwise be higher than its fair market value on the date of the exchange. 1040ez instruction This rule does not apply if the entity assuming the liability acquired either substantially all of the assets or the trade or business with which the liability is associated. 1040ez instruction The basis of any other property you receive is its fair market value on the date of the trade. 1040ez instruction Basis of property transferred. 1040ez instruction   A corporation that receives property from you in exchange for its stock generally has the same basis you had in the property, increased by any gain you recognized on the exchange. 1040ez instruction However, the increase for the gain recognized may be limited. 1040ez instruction For more information, see section 362 of the Internal Revenue Code. 1040ez instruction Election to reduce basis. 1040ez instruction   In a section 351 transaction, if the adjusted basis of the property transferred exceeds the property's fair market value, the transferor and transferee may make an irrevocable election to treat the basis of the stock received by the transferor as having a basis equal to the fair market value of the property transferred. 1040ez instruction The transferor and transferee make this election by attaching a statement to their tax returns filed by the due date (including extensions) for the tax year in which the transaction occurred. 1040ez instruction However, if the transferor makes the election by including the certification provided in Notice 2005-70, 2005-41, I. 1040ez instruction R. 1040ez instruction B. 1040ez instruction 694, on or with its tax return filed by the due date (including extensions), then no election need be made by the transferee. 1040ez instruction    For more information on making this election, see section 362(e)(2)(C) of the Internal Revenue Code, and Notice 2005-70. 1040ez instruction Capital Contributions This section explains the tax treatment of contributions from shareholders and nonshareholders. 1040ez instruction Paid-in capital. 1040ez instruction   Contributions to the capital of a corporation, whether or not by shareholders, are paid-in capital. 1040ez instruction These contributions are not taxable to the corporation. 1040ez instruction Basis. 1040ez instruction   The corporation's basis of property contributed to capital by a shareholder is the same as the basis the shareholder had in the property, increased by any gain the shareholder recognized on the exchange. 1040ez instruction However, the increase for the gain recognized may be limited. 1040ez instruction For more information, see Basis of property transferred, above, and section 362 of the Internal Revenue Code. 1040ez instruction   The basis of property contributed to capital by a person other than a shareholder is zero. 1040ez instruction   If a corporation receives a cash contribution from a person other than a shareholder, the corporation must reduce the basis of any property acquired with the contribution during the 12-month period beginning on the day it received the contribution by the amount of the contribution. 1040ez instruction If the amount contributed is more than the cost of the property acquired, then reduce, but not below zero, the basis of the other properties held by the corporation on the last day of the 12-month period in the following order. 1040ez instruction Depreciable property. 1040ez instruction Amortizable property. 1040ez instruction Property subject to cost depletion but not to percentage depletion. 1040ez instruction All other remaining properties. 1040ez instruction   Reduce the basis of property in each category to zero before going on to the next category. 1040ez instruction   There may be more than one piece of property in each category. 1040ez instruction Base the reduction of the basis of each property on the following ratio:   Basis of each piece of property   Bases of all properties (within that category) If the corporation wishes to make this adjustment in some other way, it must get IRS approval. 1040ez instruction The corporation files a request for approval with its income tax return for the tax year in which it receives the contribution. 1040ez instruction Filing and Paying Income Taxes The federal income tax is a pay-as-you-go tax. 1040ez instruction A corporation generally must make estimated tax payments as it earns or receives income during its tax year. 1040ez instruction After the end of the year, the corporation must file an income tax return. 1040ez instruction This section will help you determine when and how to pay and file corporate income taxes. 1040ez instruction For certain corporations affected by Presidentially declared disasters such as hurricanes, the due dates for filing returns, paying taxes, and performing other time-sensitive acts may be extended. 1040ez instruction The IRS may also forgive the interest and penalties on any underpaid tax for the length of any extension. 1040ez instruction For more information, visit www. 1040ez instruction irs. 1040ez instruction gov/newsroom/article/0,,id=108362. 1040ez instruction 00. 1040ez instruction Income Tax Return This section will help you determine when and how to report a corporation's income tax. 1040ez instruction Who must file. 1040ez instruction   Unless exempt under section 501 of the Internal Revenue Code, all domestic corporations in existence for any part of a tax year (including corporations in bankruptcy) must file an income tax return whether or not they have taxable income. 1040ez instruction Which form to file. 1040ez instruction   A corporation generally must file Form 1120, U. 1040ez instruction S. 1040ez instruction Corporation Income Tax Return, to report its income, gains, losses, deductions, credits, and to figure its income tax liability. 1040ez instruction Certain organizations and entities must file special returns. 1040ez instruction For more information, see Special Returns for Certain Organizations, in the Instructions for Form 1120. 1040ez instruction Electronic filing. 1040ez instruction   Corporations can generally electronically file (e-file) Form 1120 and certain related forms, schedules, and attachments. 1040ez instruction Certain corporations with total assets of $10 million or more, that file at least 250 returns a year must e-file Form 1120. 1040ez instruction However, in certain instances, these corporations can request a waiver. 1040ez instruction For more information regarding electronic filing, visit www. 1040ez instruction irs. 1040ez instruction gov/efile. 1040ez instruction When to file. 1040ez instruction   Generally, a corporation must file its income tax return by the 15th day of the 3rd month after the end of its tax year. 1040ez instruction A new corporation filing a short-period return must generally file by the 15th day of the 3rd month after the short period ends. 1040ez instruction A corporation that has dissolved must generally file by the 15th day of the 3rd month after the date it dissolved. 1040ez instruction Example 1. 1040ez instruction A corporation's tax year ends December 31. 1040ez instruction It must file its income tax return by March 15th. 1040ez instruction Example 2. 1040ez instruction A corporation's tax year ends June 30. 1040ez instruction It must file its income tax return by September 15th. 1040ez instruction   If the due date falls on a Saturday, Sunday, or legal holiday, the due date is extended to the next business day. 1040ez instruction Extension of time to file. 1040ez instruction   File Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information and Other Returns, to request an extension of time to file a corporation income tax return. 1040ez instruction The IRS will grant the extension if you complete the form properly, file it, and pay any tax due by the original due date for the return. 1040ez instruction   Form 7004 does not extend the time for paying the tax due on the return. 1040ez instruction Interest, and possibly penalties, will be charged on any part of the final tax due not shown as a balance due on Form 7004. 1040ez instruction The interest is figured from the original due date of the return to the date of payment. 1040ez instruction   For more information, see the instructions for Form 7004. 1040ez instruction How to pay your taxes. 1040ez instruction   A corporation must pay its tax due in full no later than the 15th day of the 3rd month after the end of its tax year. 1040ez instruction Electronic Federal Tax Payment System (EFTPS). 1040ez instruction   Corporations generally must use EFTPS to make deposits of all tax liabilities (including social security, Medicare, withheld income, excise, and corporate income taxes). 1040ez instruction For more information on EFTPS and enrollment, visit www. 1040ez instruction eftps. 1040ez instruction gov or call 1-800-555-4477. 1040ez instruction Also see Publication 966, The Secure Way to Pay Your Federal Taxes. 1040ez instruction Note. 1040ez instruction Forms 8109 and 8109-B, Federal Tax Deposit Coupon, can no longer be used to make federal tax deposits. 1040ez instruction Penalties Generally, if the corporation receives a notice about interest and penalties after it files its return, send the IRS an explanation and we will determine if the corporation meets reasonable-cause criteria. 1040ez instruction Do not attach an explanation when the corporation's return is filed. 1040ez instruction See the instructions for your income tax return. 1040ez instruction Late filing of return. 1040ez instruction    A corporation that does not file its tax return by the due date, including extensions, may be penalized 5% of the unpaid tax for each month or part of a month the return is late, up to a maximum of 25% of the unpaid tax. 1040ez instruction If the corporation is charged a penalty for late payment of tax (discussed next) for the same period of time, the penalty for late filing is reduced by the amount of the penalty for late payment. 1040ez instruction The minimum penalty for a return that is over 60 days late is the smaller of the tax due or $100. 1040ez instruction The penalty will not be imposed if the corporation can show the failure to file on time was due to a reasonable cause. 1040ez instruction Late payment of tax. 1040ez instruction    A corporation that does not pay the tax when due may be penalized ½ of 1% of the unpaid tax for each month or part of a month the tax is not paid, up to a maximum of 25% of the unpaid tax. 1040ez instruction The penalty will not be imposed if the corporation can show that the failure to pay on time was due to a reasonable cause. 1040ez instruction Trust fund recovery penalty. 1040ez instruction   If income, social security, and Medicare taxes that a corporation must withhold from employee wages are not withheld or are not deposited or paid to the United States Treasury, the trust fund recovery penalty may apply. 1040ez instruction The penalty is the full amount of the unpaid trust fund tax. 1040ez instruction This penalty may apply to you if these unpaid taxes cannot be immediately collected from the business. 1040ez instruction   The trust fund recovery penalty may be imposed on all persons who are determined by the IRS to be responsible for collecting, accounting for, and paying these taxes, and who acted willfully in not doing so. 1040ez instruction   A responsible person can be an officer or employee of a corporation, an accountant, or a volunteer director/trustee. 1040ez instruction A responsible person also may include one who signs checks for the corporation or otherwise has authority to cause the spending of business funds. 1040ez instruction   Willfully means voluntarily, consciously, and intentionally. 1040ez instruction A responsible person acts willfully if the person knows the required actions are not taking place. 1040ez instruction   For more information on withholding and paying these taxes, see Publication 15 (Circular E), Employer's Tax Guide, and Publication 51, (Circular A), Agricultural Employer's Tax Guide. 1040ez instruction Other penalties. 1040ez instruction   Other penalties can be imposed for negligence, substantial understatement of tax, reportable transaction understatements, and fraud. 1040ez instruction See sections 6662, 6662A, and 6663 of the Internal Revenue Code. 1040ez instruction Estimated Tax Generally, a corporation must make installment payments if it expects its estimated tax for the year to be $500 or more. 1040ez instruction If the corporation does not pay the installments when they are due, it could be subject to an underpayment penalty. 1040ez instruction This section will explain how to avoid this penalty. 1040ez instruction When to pay estimated tax. 1040ez instruction   Installment payments are due by the 15th day of the 4th, 6th, 9th, and 12th months of the corporation's tax year. 1040ez instruction Example 1. 1040ez instruction Your corporation's tax year ends December 31. 1040ez instruction Installment payments are due on April 15, June 15, September 15, and December 15. 1040ez instruction Example 2. 1040ez instruction Your corporation's tax year ends June 30. 1040ez instruction Installment payments are due on October 15, December 15, March 15, and June 15. 1040ez instruction   If any due date falls on a Saturday, Sunday, or legal holiday, the installment is due on the next business day. 1040ez instruction How to figure each required installment. 1040ez instruction   Use Form 1120-W, Estimated Tax for Corporations, as a worksheet to figure each required installment of estimated tax. 1040ez instruction You will generally use one of the following two methods to figure each required installment. 1040ez instruction You should use the method that yields the smallest installment payments. 1040ez instruction Note. 1040ez instruction In these discussions, “return” generally refers to the corporation's original return. 1040ez instruction However, an amended return is considered the original return if it is filed by the due date (including extensions) of the original return. 1040ez instruction Method 1. 1040ez instruction   Each required installment is 25% of the income tax the corporation will show on its return for the current year. 1040ez instruction Method 2. 1040ez instruction   Each required installment is 25% of the income tax shown on the corporation's return for the previous year. 1040ez instruction   To use Method 2: The corporation must have filed a return for the previous year, The return must have been for a full 12 months, and The return must have shown a positive tax liability (not zero). 1040ez instruction Also, if the corporation is a large corporation, it can use Method 2 to figure the first installment only. 1040ez instruction   See the Instructions for Form 1120-W, for the definition of a large corporation and other special rules for large corporations. 1040ez instruction Other methods. 1040ez instruction   If a corporation's income is expected to vary during the year because, for example, its business is seasonal, it may be able to lower the amount of one or more required installments by using one or both of the following methods. 1040ez instruction The annualized income installment method. 1040ez instruction The adjusted seasonal installment method. 1040ez instruction Use Schedule A of Form 1120-W to determine if using one or both of these methods will lower the amount of any required installments. 1040ez instruction Refiguring required installments. 1040ez instruction   If after the corporation figures and deposits its estimated tax it finds that its tax liability for the year will be more or less than originally estimated, it may have to refigure its required installments to see if an underpayment penalty may apply. 1040ez instruction An immediate catchup payment should be made to reduce any penalty resulting from the underpayment of any earlier installments. 1040ez instruction Underpayment penalty. 1040ez instruction   If the corporation does not pay a required installment of estimated tax by its due date, it may be subject to a penalty. 1040ez instruction The penalty is figured separately for each installment due date. 1040ez instruction The corporation may owe a penalty for an earlier due date, even if it paid enough tax later to make up the underpayment. 1040ez instruction This is true even if the corporation is due a refund when its return is filed. 1040ez instruction Form 2220. 1040ez instruction   Use Form 2220, Underpayment of Estimated Tax by Corporations, to determine if a corporation is subject to the penalty for underpayment of estimated tax and to figure the amount of the penalty. 1040ez instruction   If the corporation is charged a penalty, the amount of the penalty depends on the following three factors. 1040ez instruction The amount of the underpayment. 1040ez instruction The period during which the underpayment was due and unpaid. 1040ez instruction The interest rate for underpayments published quarterly by the IRS in the Internal Revenue Bulletin. 1040ez instruction   A corporation generally does not have to file Form 2220 with its income tax return because the IRS will figure any penalty and bill the corporation. 1040ez instruction However, even if the corporation does not owe a penalty, complete and attach the form to the corporation's tax return if any of the following apply. 1040ez instruction The annualized income installment method was used to figure any required installment. 1040ez instruction The adjusted seasonal installment method was used to figure any required installment. 1040ez instruction The corporation is a large corporation figuring its first required installment based on the prior year's tax. 1040ez instruction How to pay estimated tax. 1040ez instruction   A corporation is generally required to use EFTPS to pay its taxes. 1040ez instruction See Electronic Federal Tax Payment System (EFTPS), earlier. 1040ez instruction Also see the Instructions for Form 1120-W. 1040ez instruction Quick refund of overpayments. 1040ez instruction   A corporation that has overpaid its estimated tax for the tax year may be able to apply for a quick refund. 1040ez instruction Use Form 4466, Corporation Application for Quick Refund of Overpayment of Estimated Tax, to apply for a quick refund of an overpayment of estimated tax. 1040ez instruction A corporation can apply for a quick refund if the overpayment is: At least 10% of its expected tax liability, and At least $500. 1040ez instruction Use Form 4466 to figure the corporation's expected tax liability and the overpayment of estimated tax. 1040ez instruction File Form 4466 before the 16th day of the 3rd month after the end of the tax year, but before the corporation files its income tax return. 1040ez instruction Do not file Form 4466 before the end of the corporation's tax year. 1040ez instruction An extension of time to file the corporation's income tax return will not extend the time for filing Form 4466. 1040ez instruction The IRS will act on the form within 45 days from the date you file it. 1040ez instruction U. 1040ez instruction S. 1040ez instruction Real Property Interest If a domestic corporation acquires a U. 1040ez instruction S. 1040ez instruction real property interest from a foreign person or firm, the corporation may have to withhold tax on the amount it pays for the property. 1040ez instruction The amount paid includes cash, the fair market value of other property, and any assumed liability. 1040ez instruction If a domestic corporation distributes a U. 1040ez instruction S. 1040ez instruction real property interest to a foreign person or firm, it may have to withhold tax on the fair market value of the property. 1040ez instruction A corporation that fails to withhold may be liable for the tax, and any penalties and interest that apply. 1040ez instruction For more information, see section 1445 of the Internal Revenue Code; Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities; Form 8288, U. 1040ez instruction S. 1040ez instruction Withholding Tax Return for Dispositions by Foreign Persons of U. 1040ez instruction S. 1040ez instruction Real Property Interests; and Form 8288-A, Statement of Withholding on Dispositions by Foreign Persons of U. 1040ez instruction S. 1040ez instruction Real Property Interests. 1040ez instruction Accounting Methods An accounting method is a set of rules used to determine when and how income and expenses are reported. 1040ez instruction Taxable income should be determined using the method of accounting regularly used in keeping the corporation's books and records. 1040ez instruction In all cases, the method used must clearly show taxable income. 1040ez instruction Generally, permissible methods include: Cash, Accrual, or Any other method authorized by the Internal Revenue Code. 1040ez instruction Accrual method. 1040ez instruction   Generally, a corporation (other than a qualified personal service corporation) must use the accrual method of accounting if its average annual gross receipts exceed $5 million. 1040ez instruction A corporation engaged in farming operations also must use the accrual method. 1040ez instruction   If inventories are required, the accrual method generally must be used for sales and purchases of merchandise. 1040ez instruction However, qualifying taxpayers and eligible businesses of qualifying small business taxpayers are excepted from using the accrual method for eligible trades or businesses and may account for inventoriable items as materials and supplies that are not incidental. 1040ez instruction   Under the accrual method, an amount is includable in income when: All the events have occurred that fix the right to receive the income, which is the earliest of the date: The required performance takes place, Payment is due, or Payment is received; and The amount can be determined with reasonable accuracy. 1040ez instruction   Generally, an accrual basis taxpayer can deduct accrued expenses in the tax year when: All events that determine the liability have occurred, The amount of the liability can be figured with reasonable accuracy, and Economic performance takes place with respect to the expense. 1040ez instruction   There are exceptions to the economic performance rule for certain items, including recurring expenses. 1040ez instruction See section 461(h) of the Internal Revenue Code and the related regulations for the rules for determining when economic performance takes place. 1040ez instruction Nonaccrual experience method. 1040ez instruction   Accrual method corporations are not required to maintain accruals for certain amounts from the performance of services that, on the basis of their experience, will not be collected, if: The services are in the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts, or consulting; or The corporation's average annual gross receipts for the 3 prior tax years does not exceed $5 million. 1040ez instruction   This provision does not apply if interest is required to be paid on the amount or if there is any penalty for failure to pay the amount timely. 1040ez instruction Percentage of completion method. 1040ez instruction   Long-term contracts (except for certain real property construction contracts) must generally be accounted for using the percentage of completion method described in section 460 of the Internal Revenue Code. 1040ez instruction Mark-to-market accounting method. 1040ez instruction   Generally, dealers in securities must use the mark-to-market accounting method described in section 475 of the Internal Revenue Code. 1040ez instruction Under this method any security held by a dealer as inventory must be included in inventory at its FMV. 1040ez instruction Any security not held as inventory at the close of the tax year is treated as sold at its FMV on the last business day of the tax year. 1040ez instruction Any gain or loss must be taken into account in determining gross income. 1040ez instruction The gain or loss taken into account is treated as ordinary gain or loss. 1040ez instruction   Dealers in commodities and traders in securities and commodities can elect to use the mark-to-market accounting method. 1040ez instruction Change in accounting method. 1040ez instruction   A corporation can change its method of accounting used to report taxable income (for income as a whole or for the treatment of any material item). 1040ez instruction The corporation must file Form 3115, Application for Change in Accounting Method. 1040ez instruction For more information, see Form 3115 and Publication 538. 1040ez instruction Section 481(a) adjustment. 1040ez instruction   The corporation may have to make an adjustment under section 481(a) of the Internal Revenue Code to prevent amounts of income or expense from being duplicated or omitted. 1040ez instruction The section 481(a) adjustment period is generally 1 year for a net negative adjustment and 4 years for a net positive adjustment. 1040ez instruction However, a corporation can elect to use a 1-year adjustment period if the net section 481(a) adjustment for the change is less than $25,000. 1040ez instruction The corporation must complete the appropriate lines of Form 3115 to make the election. 1040ez instruction See the Instructions for Form 3115. 1040ez instruction Accounting Periods A corporation must figure its taxable income on the basis of a tax year. 1040ez instruction A tax year is the annual accounting period a corporation uses to keep its records and report its income and expenses. 1040ez instruction Generally, corporations can use either a calendar year or a fiscal year as its tax year. 1040ez instruction Unless special rules apply, a corporation generally adopts a tax year by filing its first federal income tax return using that tax year. 1040ez instruction For more information, see Publication 538. 1040ez instruction Personal service corporation. 1040ez instruction   A personal service corporation must use a calendar year as its tax year unless: It elects to use a 52–53 week tax year that ends with reference to the calendar year; It can establish a business purpose for a different tax year and obtains approval of the IRS. 1040ez instruction See Form 1128, Application To Adopt, Change, or Retain a Tax Year, and Publication 538; or It elects under section 444 of the Internal Revenue Code to have a tax year other than a calendar year. 1040ez instruction Use Form 8716, Election to Have a Tax Year Other Than a Required Tax Year, to make the election. 1040ez instruction   If a personal service corporation makes a section 444 election, its deduction for certain amounts paid to employee-owners may be limited. 1040ez instruction See Schedule H (Form 1120), Section 280H Limitations for a Personal Service Corporation (PSC), to figure the maximum deduction. 1040ez instruction Change of tax year. 1040ez instruction   Generally, a corporation must get the consent of the IRS before changing its tax year by filing Form 1128. 1040ez instruction However, under certain conditions, a corporation can change its tax year without getting the consent. 1040ez instruction For more information, see Form 1128 and Publication 538. 1040ez instruction Recordkeeping A corporation should keep its records for as long as they may be needed for the administration of any provision of the Internal Revenue Code. 1040ez instruction Usually records that support items of income, deductions, or credits on the return must be kept for 3 years from the date the return is due or filed, whichever is later. 1040ez instruction Keep records that verify the corporation's basis in property for as long as they are needed to figure the basis of the original or replacement property. 1040ez instruction The corporation should keep copies of all filed returns. 1040ez instruction They help in preparing future and amended returns and in the calculation of earnings and profits. 1040ez instruction Income, Deductions, and Special Provisions Rules on income and deductions that apply to individuals also apply, for the most part, to corporations. 1040ez instruction However, the following special provisions apply only to corporations. 1040ez instruction Costs of Going Into Business When you go into business, treat all costs you incur to get your business started as capital expenses. 1040ez instruction However, a corporation can elect to deduct a limited amount of start-up or organizational costs. 1040ez instruction Any costs not deducted can be amortized. 1040ez instruction Start-up costs are costs for creating an active trade or business or investigating the creation or acquisition of an active trade or business. 1040ez instruction Organizational costs are the direct costs of creating the corporation. 1040ez instruction For more information on deducting or amortizing start-up and organizational costs, see the instructions for your income tax return. 1040ez instruction Also see, Publication 535, chapter 7, Costs You Can Deduct or Capitalize, and chapter 8, Amortization. 1040ez instruction Related Persons A corporation that uses an accrual method of accounting cannot deduct business expenses and interest owed to a related person who uses the cash method of accounting until the corporation makes the payment and the corresponding amount is includible in the related person's gross income. 1040ez instruction Determine the relationship, for this rule, as of the end of the tax year for which the expense or interest would otherwise be deductible. 1040ez instruction If a deduction is denied, the rule will continue to apply even if the corporation's relationship with the person ends before the expense or interest is includible in the gross income of that person. 1040ez instruction These rules also deny the deduction of losses on the sale or exchange of property between related persons. 1040ez instruction Related persons. 1040ez instruction   For purposes of this rule, the following persons are related to a corporation. 1040ez instruction Another corporation, that is a member of the same controlled group (as defined in section 267(f) of the Internal Revenue Code). 1040ez instruction An individual who owns, directly or indirectly, more than 50% of the value of the outstanding stock of the corporation. 1040ez instruction A trust fiduciary, when the trust or the grantor of the trust owns, directly or indirectly, more than 50% in value of the outstanding stock of the corporation. 1040ez instruction An S corporation, if the same persons own more than 50% in value of the outstanding stock of each corporation. 1040ez instruction A partnership, if the same persons own more than 50% in value of the outstanding stock of the corporation and more than 50% of the capital or profits interest in the partnership. 1040ez instruction Any employee-owner, if the corporation is a personal service corporation (see Personal service corporation, earlier), regardless of the amount of stock owned by the employee-owner. 1040ez instruction Ownership of stock. 1040ez instruction   To determine whether an individual directly or indirectly owns any of the outstanding stock of a corporation, the following apply. 1040ez instruction Stock owned, directly or indirectly, by or for a corporation, partnership, estate, or trust, is treated as being owned proportionately by or for its shareholders, partners, or beneficiaries. 1040ez instruction An individual is treated as owning the stock owned, directly or indirectly, by or for the individual's family. 1040ez instruction Family includes only brothers and sisters (including half brothers and half sisters), a spouse, ancestors, and lineal descendants. 1040ez instruction Any individual owning (other than by applying (2), above) stock in a corporation, is treated as also owning the stock owned directly or indirectly by that individual's partner. 1040ez instruction To apply (1), (2), or (3), above, stock constructively owned by a person under (1) is treated as actually owned by that person. 1040ez instruction But stock constructively owned by an individual under (2) or (3) is not treated as actually owned by the individual for applying either (2) or (3) to make another person the constructive owner of that stock. 1040ez instruction Reallocation of income and deductions. 1040ez instruction   Where it is necessary to clearly show income or prevent tax evasion, the IRS can reallocate gross income, deductions, credits, or allowances between two or more organizations, trades, or businesses owned or controlled directly, or indirectly, by the same interests. 1040ez instruction Complete liquidations. 1040ez instruction   The disallowance of losses from the sale or exchange of property between related persons does not apply to liquidating distributions. 1040ez instruction More information. 1040ez instruction   For more information about the related person rules, see Publication 544. 1040ez instruction Income From Qualifying Shipping Activities A corporation may make an election to be taxed on its notional shipping income at the highest corporate tax rate. 1040ez instruction If a corporation makes this election it may exclude income from qualifying shipping activities from gross income. 1040ez instruction Also if the election is made, the corporation generally may not claim any loss, deduction, or credit with respect to qualifying shipping activities. 1040ez instruction A corporation making this election may also elect to defer gain on the disposition of a qualifying vessel. 1040ez instruction A corporation uses Form 8902, Alternative Tax on Qualifying Shipping Activities, to make the election and figure the alternative tax. 1040ez instruction For more information regarding the election, see Form 8902. 1040ez instruction Election to Expense Qualified Refinery Property A corporation can make an irrevocable election on its tax return filed by the due date (including extensions) to deduct 50% of the cost of qualified refinery property (defined in section 179C(c) of the Internal Revenue Code), placed in service before January 1, 2014. 1040ez instruction The deduction is allowed for the year in which the property is placed in service. 1040ez instruction A subchapter T cooperative can make an irrevocable election on its return by the due date (including extensions) to allocate this deduction to its owners based on their ownership interest. 1040ez instruction For more information, see section 179C of the Internal Revenue Code and the related Regulations. 1040ez instruction Deduction to Comply With EPA Sulfur Regulations A small business refiner can make an irrevocable election on its tax return filed by the due date (including extensions) to deduct up to 75% of qualified costs paid or incurred to comply with the Highway Diesel Fuel Sulfur Control Requirements of the Environmental Protection Agency (EPA). 1040ez instruction A subchapter T cooperative can make an irrevocable election on its return filed by the due date (including extensions) to allocate the deduction to its owners based on their ownership interest. 1040ez instruction For more information, see sections 45H and 179B of the Internal Revenue Code and the related Regulations. 1040ez instruction Energy-Efficient Commercial Building Property Deduction A corporation can claim a deduction for costs associated with energy-efficient commercial building property, placed in service before January 1, 2014. 1040ez instruction In order to qualify for the deduction: The costs must be associated with depreciable or amortizable property in a Standard 90. 1040ez instruction 1-2001 domestic building; The property must be either a part of the interior lighting system, the heating, cooling, ventilation and hot water system, or the building envelope (defined in section 179D(c)(1)(C) of the Internal Revenue Code); and The property must be installed as part of a plan to reduce the total annual energy and power costs of the building by 50% or more. 1040ez instruction The deduction is limited to $1. 1040ez instruction 80 per square foot of the building less the total amount of deductions taken for this property in prior tax years. 1040ez instruction Other rules and limitations apply. 1040ez instruction The corporation must reduce the basis of any property by any deduction taken. 1040ez instruction The deduction is subject to recapture if the corporation fails to fully implement an energy savings plan. 1040ez instruction For more information, see section 179D of the Internal Revenue Code. 1040ez instruction Also see Notice 2006-52, 2006-26 I. 1040ez instruction R. 1040ez instruction B. 1040ez instruction 1175, clarified and amplified by Notice 2008-40, 2008-14 I. 1040ez instruction R. 1040ez instruction B. 1040ez instruction 725, and any successor. 1040ez instruction Corporate Preference Items A corporation must make special adjustments to certain items before it takes them into account in determining its taxable income. 1040ez instruction These items are known as corporate preference items and they include the following. 1040ez instruction Gain on the disposition of section 1250 property. 1040ez instruction For more information, see section 1250 Property under Depreciation Recapture in chapter 3 of Publication 544. 1040ez instruction Percentage depletion for iron ore and coal (including lignite). 1040ez instruction For more information, see Mines and Geothermal Deposits under Mineral Property in chapter 9 of Publication 535. 1040ez instruction Amortization of pollution control facilities. 1040ez instruction For more information, see Pollution Control Facilities in chapter 8 of Publication 535 and section 291(a)(5) of the Internal Revenue Code. 1040ez instruction Mineral exploration and development costs. 1040ez instruction For more information, see Exploration Costs and Development Costs in chapter 7 of Publication 535. 1040ez instruction For more information on corporate preference items, see section 291 of the Internal Revenue Code. 1040ez instruction Dividends-Received Deduction A corporation can deduct a percentage of certain dividends received during its tax year. 1040ez instruction This section discusses the general rules that apply. 1040ez instruction The deduction is figured on Form 1120, Schedule C, or the applicable schedule of your income tax return. 1040ez instruction For more information, see the Instructions for Form 1120, or the instructions for your applicable income tax return. 1040ez instruction Dividends from domestic corporations. 1040ez instruction   A corporation can deduct, within certain limits, 70% of the dividends received if the corporation receiving the dividend owns less than 20% of the corporation distributing the dividend. 1040ez instruction If the corporation owns 20% or more of the distributing corporation's stock, it can, subject to certain limits, deduct 80% of the dividends received. 1040ez instruction Ownership. 1040ez instruction   Determine ownership, for these rules, by the amount of voting power and value of the paying corporation's stock (other than certain preferred stock) the receiving corporation owns. 1040ez instruction Small business investment companies. 1040ez instruction   Small business investment companies can deduct 100% of the dividends received from taxable domestic corporations. 1040ez instruction Dividends from regulated investment companies. 1040ez instruction   Regulated investment company dividends received are subject to certain limits. 1040ez instruction Capital gain dividends received from a regulated investment company do not qualify for the deduction. 1040ez instruction For more information, see section 854 of the Internal Revenue Code. 1040ez instruction No deduction allowed for certain dividends. 1040ez instruction   Corporations cannot take a deduction for dividends received from the following entities. 1040ez instruction A real estate investment trust (REIT). 1040ez instruction A corporation exempt from tax under section 501 or 521 of the Internal Revenue Code either for the tax year of the distribution or the preceding tax year. 1040ez instruction A corporation whose stock was held less than 46 days during the 91-day period beginning 45 days before the stock became ex-dividend with respect to the dividend. 1040ez instruction Ex-dividend means the holder has no rights to the dividend. 1040ez instruction A corporation whose preferred stock was held less than 91 days during the 181-day period beginning 90 days before the stock became ex-dividend with respect to the dividend if the dividends received are for a period or periods totaling more than 366 days. 1040ez instruction Any corporation, if your corporation is under an obligation (pursuant to a short sale or otherwise) to make related payments with respect to positions in substantially similar or related property. 1040ez instruction Dividends on deposits. 1040ez instruction   Dividends on deposits or withdrawable accounts in domestic building and loan associations, mutual savings banks, cooperative banks, and similar organizations are interest, not dividends. 1040ez instruction They do not qualify for this deduction. 1040ez instruction Limit on deduction for dividends. 1040ez instruction   The total deduction for dividends received or accrued is generally limited (in the following order) to: 80% of the difference between taxable income and the 100% deduction allowed for dividends received from affiliated corporations, or by a small business investment company, for dividends received or accrued from 20%-owned corporations, then 70% of the difference between taxable income and the 100% deduction allowed for dividends received from affiliated corporations, or by a small business investment company, for dividends received or accrued from less-than-20%-owned corporations (reducing taxable income by the total dividends received from 20%-owned corporations). 1040ez instruction Figuring the limit. 1040ez instruction   In figuring the limit, determine taxable income without the following items. 1040ez instruction The net operating loss deduction. 1040ez instruction The domestic production activities deduction. 1040ez instruction The deduction for dividends received. 1040ez instruction Any adjustment due to the nontaxable part of an extraordinary dividend (see Extraordinary Dividends, below). 1040ez instruction Any capital loss carryback to the tax year. 1040ez instruction Effect of net operating loss. 1040ez instruction   If a corporation has a net operating loss (NOL) for a tax year, the limit of 80% (or 70%) of taxable income does not apply. 1040ez instruction To determine whether a corporation has an NOL, figure the dividends-received deduction without the 80% (or 70%) of taxable income limit. 1040ez instruction Example 1. 1040ez instruction A corporation loses $25,000 from operations. 1040ez instruction It receives $100,000 in dividends from a 20%-owned corporation. 1040ez instruction Its taxable income is $75,000 ($100,000 – $25,000) before the deduction for dividends received. 1040ez instruction If it claims the full dividends-received deduction of $80,000 ($100,000 × 80%) and combines it with an operations loss of $25,000, it will have an NOL of ($5,000). 1040ez instruction Therefore, the 80% of taxable income limit does not apply. 1040ez instruction The corporation can deduct the full $80,000. 1040ez instruction Example 2. 1040ez instruction Assume the same facts as in Example 1, except that the corporation only loses $15,000 from operations. 1040ez instruction Its taxable income is $85,000 before the deduction for dividends received. 1040ez instruction After claiming the dividends-received deduction of $80,000 ($100,000 × 80%), its taxable income is $5,000. 1040ez instruction Because the corporation will not have an NOL after applying a full dividends-received deduction, its allowable dividends-received deduction is limited to 80% of its taxable income, or $68,000 ($85,000 × 80%). 1040ez instruction Extraordinary Dividends If a corporation receives an extraordinary dividend on stock held 2 years or less before the dividend announcement date, it generally must reduce its basis in the stock by the nontaxed part of the dividend. 1040ez instruction The nontaxed part is any dividends-received deduction allowable for the dividends. 1040ez instruction Extraordinary dividend. 1040ez instruction   An extraordinary dividend is any dividend on stock that equals or exceeds a certain percentage of the corporation's adjusted basis in the stock. 1040ez instruction The percentages are: 5% for stock preferred as to dividends, or 10% for other stock. 1040ez instruction Treat all dividends received that have ex-dividend dates within an 85-consecutive-day period as one dividend. 1040ez instruction Treat all dividends received that have ex-dividend dates within a 365-consecutive-day period as extraordinary dividends if the total of the dividends exceeds 20% of the corporation's adjusted basis in the stock. 1040ez instruction Disqualified preferred stock. 1040ez instruction   Any dividend on disqualified preferred stock is treated as an extraordinary dividend regardless of the period of time the corporation held the stock. 1040ez instruction   Disqualified preferred stock is any stock preferred as to dividends if any of the following apply. 1040ez instruction The stock when issued has a dividend rate that declines (or can reasonably be expected to decline) in the future. 1040ez instruction The issue price of the stock exceeds its liquidation rights or stated redemption price. 1040ez instruction The stock is otherwise structured to avoid the rules for extraordinary dividends and to enable corporate shareholders to reduce tax through a combination of dividends-received deductions and loss on the disposition of the stock. 1040ez instruction   These rules apply to stock issued after July 10, 1989, unless it was issued under a written binding contract in effect on that date, and thereafter, before the issuance of the stock. 1040ez instruction More information. 1040ez instruction   For more information on extraordinary dividends, see section 1059 of the Internal Revenue Code. 1040ez instruction Below-Market Loans If a corporation receives a below-market loan and uses the proceeds for its trade or business, it may be able to deduct the forgone interest. 1040ez instruction A below-market loan is a loan on which no interest is charged or on which interest is charged at a rate below the applicable federal rate. 1040ez instruction A below-market loan generally is treated as an arm's-length transaction in which the borrower is considered as having received both the following: A loan in exchange for a note that requires payment of interest at the applicable federal rate, and An additional payment in an amount equal to the forgone interest. 1040ez instruction Treat the additional payment as a gift, dividend, contribution to capital, payment of compensation, or other payment, depending on the substance of the transaction. 1040ez instruction Foregone interest. 1040ez instruction   For any period, forgone interest is equal to: The interest that would be payable for that period if interest accrued on the loan at the applicable federal rate and was payable annually on December 31, minus Any interest actually payable on the loan for the period. 1040ez instruction See Below-market loans, in chapter 4 of Publication 535 for more information. 1040ez instruction Charitable Contributions A corporation can claim a limited deduction for charitable contributions made in cash or other property. 1040ez instruction The contribution is deductible if made to, or for the use of, a qualified organization. 1040ez instruction For more information on qualified organizations, see Publication 526, Charitable Contributions. 1040ez instruction Also see, Exempt Organizations Select Check (EO Select Check) at www. 1040ez instruction irs. 1040ez instruction gov/charities, the on-line search tool for finding information on organizations eligible to receive tax-deductible contributions. 1040ez instruction Note. 1040ez instruction You cannot take a deduction if any of the net earnings of an organization receiving contributions benefit any private shareholder or individual. 1040ez instruction Cash method corporation. 1040ez instruction   A corporation using the cash method of accounting deducts contributions in the tax year paid. 1040ez instruction Accrual method corporation. 1040ez instruction   A corporation using an accrual method of accounting can choose to deduct unpaid contributions for the tax year the board of directors authorizes them if it pays them by the 15th day of the 3rd month after the close of that tax year. 1040ez instruction Make the choice by reporting the contribution on the corporation's return for the tax year. 1040ez instruction A declaration stating that the board of directors adopted the resolution during the tax year must accompany the return. 1040ez instruction The declaration must include the date the resolution was adopted. 1040ez instruction Limitations on deduction. 1040ez instruction   A corporation cannot deduct charitable contributions that exceed 10% of its taxable income for the tax year. 1040ez instruction Figure taxable income for this purpose without the following. 1040ez instruction The deduction for charitable contributions. 1040ez instruction The dividends-received deduction. 1040ez instruction The deduction allowed under section 249 of the Internal Revenue Code. 1040ez instruction The domestic production activities deduction. 1040ez instruction Any net operating loss carryback to the tax year. 1040ez instruction Any capital loss carryback to the tax year. 1040ez instruction Farmers and ranchers. 1040ez instruction    Corporations that are farmers and ranchers should see section 170(b)(2) of the Internal Revenue Code for special rules that may affect the deduction limit. 1040ez instruction Carryover of excess contributions. 1040ez instruction   You can carry over, within certain limits, to each of the subsequent 5 years any charitable contributions made during the current year that exceed the 10% limit. 1040ez instruction You lose any excess not used within that period. 1040ez instruction For example, if a corporation has a carryover of excess contributions paid in 2010 and it does not use all the excess on its return for 2011, it can carry any excess over to 2012, 2013, 2014, and 2015, if applicable. 1040ez instruction Any excess not used in 2015 is lost. 1040ez instruction Do not deduct a carryover of excess contributions in the carryover year until after you deduct contributions made in that year (subject to the 10% limit). 1040ez instruction You cannot deduct a carryover of excess contributions to the extent it increases a net operating loss carryover. 1040ez instruction Cash contributions. 1040ez instruction   A corporation must maintain a record of any contribution of cash, check, or other monetary contribution, regardless of the amount. 1040ez instruction The record can be a bank record, receipt, letter, or other written communication from the donee indicating the name of the organization, the date of the contribution, and the amount of the contribution. 1040ez instruction Keep the record of the contribution with the other corporate records. 1040ez instruction Do not attach the records to the corporation's return. 1040ez instruction For more information on cash contributions, see Publication 526. 1040ez instruction Gifts of $250 or more. 1040ez instruction   Generally, no deduction is allowed for any contribution of $250 or more unless the corporation gets a written acknowledgement from the donee organization. 1040ez instruction The acknowledgement should show the amount of cash contributed, a description of the property contributed, and either gives a description and a good faith estimate of the value of any goods or services provided in return for the contribution or states that no goods or services were provided in return for the contribution. 1040ez instruction The acknowledgement should be received by the due date (including extensions) of the return, or, if earlier, the date the return was filed. 1040ez instruction Keep the acknowledgement with other corporate records. 1040ez instruction Do not attach the acknowledgement to the return. 1040ez instruction Contributions of property other than cash. 1040ez instruction   If a corporation (other than a closely-held or a personal service corporation) claims a deduction of more than $500 for contributions of property other than cash, a schedule describing the property and the method used to determine its fair market value must be attached to the corporation's return. 1040ez instruction In addition the corporation should keep a record of: The approximate date and manner of acquisition of the donated property and The cost or other basis of the donated property held by the donor for less than 12 months prior to contribution. 1040ez instruction   Closely held and personal service corporations must complete and attach Form 8283, Noncash Charitable Contributions, to their returns if they claim a deduction of more than $500 for non-cash contributions. 1040ez instruction For all other corporations, if the deduction claimed for donated property exceeds $5,000, complete Form 8283 and attach it to the corporation's return. 1040ez instruction   A corporation must obtain a qualified appraisal for all deductions of property claimed in excess of $5,000. 1040ez instruction A qualified appraisal is not required for the donation of cash, publicly traded securities, inventory, and any qualified vehicles sold by a donee organization without any significant intervening use or material improvement. 1040ez instruction The appraisal should be maintained with other corporate records and only attached to the corporation's return when the deduction claimed exceeds $500,000; $20,000 for donated art work. 1040ez instruction   See Form 8283 for more information. 1040ez instruction Qualified conservation contributions. 1040ez instruction   If a corporation makes a qualified conservation contribution, the corporation must provide information regarding the legal interest being donated, the fair market value of the underlying property before and after the donation, and a description of the conservation purpose for which the property will be used. 1040ez instruction For more information, see section 170(h) of the Internal Revenue Code. 1040ez instruction Contributions of used vehicles. 1040ez instruction   A corporation is allowed a deduction for the contribution of used motor vehicles, boats, and airplanes. 1040ez instruction The deduction is limited, and other special rules apply. 1040ez instruction For more information, see Publication 526. 1040ez instruction Reduction for contributions of certain property. 1040ez instruction   For a charitable contribution of property, the corporation must reduce the contribution by the sum of: The ordinary income and short-term capital gain that would have resulted if the property were sold at its FMV and For certain contributions, the long-term capital gain that would have resulted if the property were sold at its FMV. 1040ez instruction   The reduction for the long-term capital gain applies to: Contributions of tangible personal property for use by an exempt organization for a purpose or function unrelated to the basis for its exemption; Contributions of any property to or for the use of certain private foundations except for stock for which market quotations are readily available; and Contributions of any patent, certain copyrights, trademark, trade name, trade secret, know-how, software (that is a section 197 intangible), or similar property, or applications or registrations of such property. 1040ez instruction Larger deduction. 1040ez instruction   A corporation (other than an S corporation) may be able to claim a deduction equal to the lesser of (a) the basis of the donated inventory or property plus one-half of the inventory or property's appreciation (gain if the donated inventory or property was sold at fair market value on the date of the donation), or (b) two times basis of the donated inventory or property. 1040ez instruction This deduction may be allowed for certain contributions of: Certain inventory and other property made to a donee organization and used solely for the care of the ill, the needy, and infants. 1040ez instruction Scientific property constructed by the corporation (other than an S corporation, personal holding company, or personal service corporation) and donated no later than 2 years after substantial completion of the construction. 1040ez instruction The property must be donated to a qualified organization and its original use must be by the donee for research, experimentation, or research training within the United States in the area of physical or biological science. 1040ez instruction Computer technology and equipment acquired or constructed and donated no later than 3 years after either acquisition or substantial completion of construction to an educational organization for educational purposes within the United States. 1040ez instruction Contributions to organizations conducting lobbying activities. 1040ez instruction   Contributions made to an organization that conducts lobbying activities are not deductible if: The lobbying activities relate to matters of direct financial interest to the donor's trade or business and The principal purpose of the contribution was to avoid federal income tax by obtaining a deduction for activities that would have been nondeductible under the lobbying expense rules if conducted directly by the donor. 1040ez instruction More information. 1040ez instruction   For more information on charitable contributions, including substantiation and recordkeeping requirements, see section 170 of the Internal Revenue Code, the related regulations, and Publication 526. 1040ez instruction Capital Losses A corporation can deduct capital losses only up to the amount of its capital gains. 1040ez instruction In other words, if a corporation has an excess capital loss, it cannot deduct the loss in the current tax year. 1040ez instruction Instead, it carries the loss to other tax years and deducts it from any net capital gains that occur in those years. 1040ez instruction A capital loss is carried to other years in the following order. 1040ez instruction 3 years prior to the loss year. 1040ez instruction 2 years prior to the loss year. 1040ez instruction 1 year prior to the loss year. 1040ez instruction Any loss remaining is carried forward for 5 years. 1040ez instruction When you carry a net capital loss to another tax year, treat it as a short-term loss. 1040ez instruction It does not retain its original identity as long term or short term. 1040ez instruction Example. 1040ez instruction A calendar year corporation has a net short-term capital gain of $3,000 and a net long-term capital loss of $9,000. 1040ez instruction The short-term gain offsets some of the long-term loss, leaving a net capital loss of $6,000. 1040ez instruction The corporation treats this $6,000 as a short-term loss when carried back or forward. 1040ez instruction The corporation carries the $6,000 short-term loss back 3 years. 1040ez instruction In year 1, the corporation had a net short-term capital gain of $8,000 and a net long-term capital gain of $5,000. 1040ez instruction It subtracts the $6,000 short-term loss first from the net short-term gain. 1040ez instruction This results in a net capital gain for year 1 of $7,000. 1040ez instruction This consists of a net short-term capital gain of $2,000 ($8,000 − $6,000) and a net long-term capital gain of $5,000. 1040ez instruction S corporation status. 1040ez instruction   A corporation may not carry a capital loss from, or to, a year for which it is an S corporation. 1040ez instruction Rules for carryover and carryback. 1040ez instruction   When carrying a capital loss from one year to another, the following rules apply. 1040ez instruction When figuring the current year's net capital loss, you cannot combine it with a capital loss carried from another year. 1040ez instruction In other words, you can carry capital losses only to years that would otherwise have a total net capital gain. 1040ez instruction If you carry capital losses from 2 or more years to the same year, deduct the loss from the earliest year first. 1040ez instruction You cannot use a capital loss carried from another year to produce or increase a net operating loss in the year to which you carry it back. 1040ez instruction Refunds. 1040ez instruction   When you carry back a capital loss to an earlier tax year, refigure your tax for that year. 1040ez instruction If your corrected tax is less than the tax you originally owed, use either Form 1139, Corporate Application for Tentative Refund, or Form 1120X, Amended U. 1040ez instruction S. 1040ez instruction Corporation Income Tax Return, to apply for a refund. 1040ez instruction Form 1139. 1040ez instruction    A corporation can get a refund faster by using Form 1139. 1040ez instruction It cannot file Form 1139 before filing the return for the corporation's capital loss year, but it must file Form 1139 no later than 1 year after the year it sustains the capital loss. 1040ez instruction Form 1120X. 1040ez instruction   If the corporation does not file Form 1139, it must file Form 1120X to apply for a refund. 1040ez instruction The corporation must file the Form 1120X within 3 years of the due date, includin