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            Department of the Treasury                        Contents
            Internal Revenue Service
                                                              Future Developments . . . . . . . . . . . . . . . . . . . . . . .          2
                                                              Photographs of Missing Children                . . . . . . . . . . . . . . 2
Publication 542
(Rev. January 2022)                                           Introduction   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Cat. No. 15072O
                                                              Businesses Taxed as Corporations . . . . . . . . . . . .                   2
                                                              Property Exchanged for Stock . . . . . . . . . . . . . . . .               3
Corporations                                                  Capital Contributions . . . . . . . . . . . . . . . . . . . . . . .        4
                                                              Filing and Paying Income Taxes                 . . . . . . . . . . . . . . 4
                                                              Income Tax Return . . . . . . . . . . . . . . . . . . . . . . .            5
                                                              Penalties      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
                                                              Estimated Tax          . . . . . . . . . . . . . . . . . . . . . . . . . . 6
                                                              U.S. Real Property Interest              . . . . . . . . . . . . . . . . . 7
                                                              Accounting Methods           . . . . . . . . . . . . . . . . . . . . . . . 7
                                                              Accounting Periods         . . . . . . . . . . . . . . . . . . . . . . . . 8
                                                              Recordkeeping . . . . . . . . . . . . . . . . . . . . . . . . . . . .      9
                                                              Income, Deductions, and Special Provisions . . . . .                       9
                                                              Costs of Going Into Business . . . . . . . . . . . . . . . .               9
                                                              Related Persons . . . . . . . . . . . . . . . . . . . . . . . . .          9
                                                              Corporate Preference Items                 . . . . . . . . . . . . . . .   10
                                                              Dividends-Received Deduction                   . . . . . . . . . . . . .   10
                                                              Extraordinary Dividends              . . . . . . . . . . . . . . . . . .   11
                                                              Below-Market Loans . . . . . . . . . . . . . . . . . . . . .               11
                                                              Charitable Contributions             . . . . . . . . . . . . . . . . . .   12
                                                              Capital Losses . . . . . . . . . . . . . . . . . . . . . . . . .           13
                                                              Net Operating Losses . . . . . . . . . . . . . . . . . . . .               14
                                                              At-Risk Limits . . . . . . . . . . . . . . . . . . . . . . . . . .         14
                                                              Passive Activity Limits . . . . . . . . . . . . . . . . . . . .            15
                                                              Figuring Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     15
                                                              Tax Rates        . . . . . . . . . . . . . . . . . . . . . . . . . . . .   15
                                                              Base Erosion Minimum Tax . . . . . . . . . . . . . . . .                   15
                                                              Credits      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
                                                              Recapture Taxes            . . . . . . . . . . . . . . . . . . . . . . .   15
                                                              Accumulated Earnings Tax               . . . . . . . . . . . . . . . . .   15
                                                              Distributions to Shareholders              . . . . . . . . . . . . . . .   16
                                                              Money or Property Distributions . . . . . . . . . . . . .                  16
                                                              Distributions of Stock or Stock Rights . . . . . . . . .                   16
                                                              Constructive Distributions             . . . . . . . . . . . . . . . . .   17
                                                              Reporting Dividends and Other Distributions . . . .                        17
Get forms and other information faster and easier at:         How To Get Tax Help          . . . . . . . . . . . . . . . . . . . . . .   19
• IRS.gov (English)         • IRS.gov/Korean (한국어) 
• IRS.gov/Spanish (Español) • IRS.gov/Russian (Pусский)       Other Useful Forms for Corporations                  . . . . . . . . . .   23
• IRS.gov/Chinese (中文)      • IRS.gov/Vietnamese (Tiếng Việt) 
                                                              Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  27

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Getting tax forms, instructions, and publications.
Go to IRS.gov/Forms to download current and prior-year
Future Developments
forms, instructions, and publications.
For the latest information about developments related to Ordering tax forms, instructions, and publications.
Pub. 542, such as legislation enacted after it was Go to IRS.gov/OrderForms to order current forms, instruc-
published, go to IRS.gov/Pub542. For changes that may tions, and publications; call 800-829-3676 to order
affect the current tax year, see the Instructions for Form prior-year forms and instructions. The IRS will process
1120 or the applicable instructions for the corporation’s your order for forms and publications as soon as possible.
tax return. Don’t resubmit requests you’ve already sent us. You can
get forms and publications faster online.

Additional forms. A list of other forms and statements
Photographs of Missing
that a corporation may need to file is included at the end
Children of this publication. Also, see the Instructions for Form
1120 or the applicable instructions for the corporation’s
The Internal Revenue Service is a proud partner with the tax return for additional forms and statements that may be
National Center for Missing & Exploited Children® required.
(NCMEC). Photographs of missing children selected by
the Center may appear in instructions on pages that would Useful Items
otherwise be blank. You can help bring these children You may want to see:
home by looking at the photographs and calling
800-THE-LOST (800-843-5678) if you recognize a child. Publication
510 510 Excise Taxes (Including Fuel Tax Credits and
Refunds)
Introduction
535 535 Business Expenses
This publication discusses the general tax laws that apply
538
to ordinary domestic corporations. It provides supplemen- 538 Accounting Periods and Methods
tal federal income tax information for corporations. It also 544 544 Sales and Other Dispositions of Assets
supplements the information provided in the Instructions
for Form 1120, U.S. Corporation Income Tax Return. 550 550 Investment Income and Expenses
However, the information given does not cover every sit- 925 925 Passive Activity and At-Risk Rules
uation and is not intended to replace the law or change its
meaning. 946 946 How To Depreciate Property

Comments and suggestions. We welcome your com-
ments about this publication and suggestions for future
editions. Businesses Taxed as
You can send us comments through IRS.gov/
Corporations
FormComments. Or, you can write to:
Internal Revenue Service The rules you must use to determine whether a business
Tax Forms and Publications is taxed as a corporation changed for businesses formed
1111 Constitution Ave. NW, IR-6526 after 1996.
Washington, DC 20224
Business formed before 1997. A business formed be-
fore 1997 and taxed as a corporation under the old rules
Although we can’t respond individually to each com- will generally continue to be taxed as a corporation.
ment received, we do appreciate your feedback and will
consider your comments and suggestions as we revise Business formed after 1996. The following businesses
our tax forms, instructions, and publications. Don’t send formed after 1996 are taxed as corporations.
tax questions, tax returns, or payments to the above ad-
dress. • A business formed under a federal or state law that re-
fers to it as a corporation, body corporate, or body po-
Getting answers to your tax questions. If you have litic.
a tax question not answered by this publication or the How
To Get Tax Help section at the end of this publication, go • A business formed under a state law that refers to it as
a joint-stock company or joint-stock association.
to the IRS Interactive Tax Assistant page at IRS.gov/
Help/ITA where you can find topics by using the search • An insurance company.
feature or viewing the categories listed. Certain banks.
•
• A business wholly owned by a state or local govern-
ment.

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• A business specifically required to be taxed as a cor- 2. He or she owns any stock in the corporation at any
poration by the Internal Revenue Code (for example, time during the testing period.
certain publicly traded partnerships).
Other rules. For other rules that apply to personal
• Certain foreign businesses. service corporations, see Accounting Periods, later.
• Any other business that elects to be taxed as a corpo-
Closely held corporations. A corporation is closely held
ration.
if all of the following apply.
1. It is not a personal service corporation.
Limited liability company (LLC). An LLC may be clas- 2. At any time during the last half of the tax year, more
sified for federal income tax purposes as either a partner- than 50% of the value of its outstanding stock is, di-
ship, a corporation, or an entity disregarded as an entity rectly or indirectly, owned by or for five or fewer indi-
separate from its owner by applying the rules in Treasury viduals. “Individual” includes certain trusts and private
Regulations section 301.7701-3. An LLC can elect to be foundations.
treated as an association taxable as a corporation by filing
Form 8832, Entity Classification Election. See the Instruc- For rules for determining stock ownership, see section
tions for Form 8832. For more information about LLCs, 544 of the Internal Revenue Code.
see Pub. 3402, Taxation of Limited Liability Companies. Other rules. For the at-risk rules that apply to closely
held corporations, see At-Risk Limits, later.
S corporations. Some corporations may meet the quali-
fications for electing to be S corporations. For information
on S corporations, see the Instructions for Form 1120S.
Property Exchanged for Stock
Personal service corporations. A corporation is a per-
sonal service corporation if it meets all of the following re- If you transfer property (or money and property) to a cor-
quirements. poration in exchange for stock in that corporation (other
1. Its principal activity during the “testing period” is per- than nonqualified preferred stock), and immediately after-
forming personal services (defined later). Generally, ward you are in control of the corporation, the exchange is
the testing period for any tax year is the prior tax year. usually not taxable. This rule applies both to individuals
If the corporation has just been formed, the testing and to groups who transfer property to a corporation. It
period begins on the first day of its tax year and ends also applies whether the corporation is being formed or is
on the earlier of: already operating. It does not apply in the following situa-
tions.
a. The last day of its tax year, or
• The corporation is an investment company.
b. The last day of the calendar year in which its tax • You transfer the property in a bankruptcy or similar
year begins. proceeding in exchange for stock used to pay cred-
2. Its employee-owners substantially perform the serv- itors.
ices in (1) above. This requirement is met if more than • The stock is received in exchange for the corpora-
20% of the corporation's compensation cost for its ac- tion's debt (other than a security) or for interest on the
tivities of performing personal services during the corporation's debt (including a security) that accrued
testing period is for personal services performed by while you held the debt.
employee-owners.
See Property Exchanged for Stock in chapter 2 of Pub.
3. Its employee-owners own more than 10% of the fair 544 for more information.
market value of its outstanding stock on the last day Both the corporation and any person involved in a
of the testing period. ! nontaxable exchange of property for stock must
Personal services. Personal services include any ac- CAUTION attach to their income tax returns for the year of
tivity performed in the fields of accounting, actuarial sci- the exchange, the complete statement of all facts perti-
ence, architecture, consulting, engineering, health (includ- nent to the exchange required by Treasury Regulations
ing veterinary services), law, and the performing arts. section 1.351-3.
Employee-owners. A person is an employee-owner
Control of a corporation. To be in control of a corpora-
of a personal service corporation if both of the following
tion, you or your group of transferors must own, immedi-
apply.
ately after the exchange, at least 80% of the total com-
1. He or she is an employee of the corporation or per- bined voting power of all classes of stock entitled to vote
forms personal services for, or on behalf of, the cor- and at least 80% of the outstanding shares of each class
poration (even if he or she is an independent contrac- of nonvoting stock.
tor for other purposes) on any day of the testing
period. Loss on exchange. 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. For more

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information, see Nondeductible Loss under Sales and Ex- • Any contribution by any governmental entity. How-
changes Between Related Persons in chapter 2 of Pub. ever, see the special rule below.
544. For contributions made after December 31, 2020, a
special rule applies to contributions to the capital of water
Basis of stock or other property received. The basis
and sewerage disposal utilities. Under the special rule,
of the stock you receive is generally the adjusted basis of
any amount of money or property received after Decem-
the property you transfer. Increase this amount by any
ber 31, 2020, as a contribution in aid of construction or a
amount treated as a dividend, plus any gain recognized
contribution to the capital of a regulated public utility which
on the exchange. Decrease this amount by any cash you
provides water or sewerage disposal services is eligible
received, the fair market value of any other property you
for exclusion from income under section 118 of the Inter-
received, and any loss recognized on the exchange. Also
nal Revenue Code.
decrease this amount by the amount of any liability the
corporation or another party to the exchange assumed Basis. The corporation's basis of property contributed to
from you, unless payment of the liability gives rise to a de- capital by a shareholder is the same as the basis the
duction when paid. shareholder had in the property, increased by any gain the
Further decreases may be required when the corpora- shareholder recognized on the exchange. However, the
tion or another party to the exchange assumes from you a increase for the gain recognized may be limited. For more
liability that gives rise to a deduction when paid, if the ba- information, see Basis of property transferred above and
sis of the stock would otherwise be higher than its fair section 362 of the Internal Revenue Code.
market value on the date of the exchange. This rule does The basis of property contributed to capital by a person
not apply if the entity assuming the liability acquired either other than a shareholder is zero.
substantially all of the assets or the trade or business with If a corporation receives a cash contribution from a per-
which the liability is associated. son other than a shareholder, the corporation must reduce
The basis of any other property you receive is its fair the basis of any property acquired with the contribution
market value on the date of the trade. during the 12-month period beginning on the day it re-
ceived the contribution by the amount of the contribution.
Basis of property transferred. A corporation that re- If the amount contributed is more than the cost of the
ceives property from you in exchange for its stock gener- property acquired, then reduce, but not below zero, the
ally has the same basis you had in the property, increased basis of the other properties held by the corporation on
by any gain you recognized on the exchange. However, the last day of the 12-month period in the following order.
the increase for the gain recognized may be limited. For
1. Depreciable property.
more information, see section 362 of the Internal Revenue
Code. 2. Amortizable property.
If property is transferred to a corporation subject to sec-
tion 362(e)(2), the transferor and the acquiring corporation 3. Property subject to cost depletion but not to percent-
may elect, under section 362(e)(2)(C), to reduce the age depletion.
transferor's basis in the stock received instead of reducing 4. All other remaining properties.
the acquiring corporation's basis in the property transfer-
red. Once made, the election is irrevocable. For more in- Reduce the basis of property in each category to zero
formation, see section 362(e)(2) and Treasury Regula- before going on to the next category.
tions section 1.362-4. If an election is made, a statement There may be more than one piece of property in each
must be filed in accordance with Regulations section category. Base the reduction of the basis of each property
1.362-4(d)(3). on the following ratio.

Basis of each piece of property
Capital Contributions Bases of all properties (within that category)

This section explains the tax treatment of contributions If the corporation wishes to make this adjustment in some
from shareholders and nonshareholders. other way, it must get IRS approval. The corporation files
a request for approval with its income tax return for the tax
Paid-in capital. Generally, contributions to the capital of year in which it receives the contribution.
a corporation, whether or not by shareholders, are paid-in
capital. These contributions are not taxable to the corpo-
ration. However, after December 22, 2017, the following
Filing and Paying Income
nonshareholder contributions to the capital of a corpora-
tion are not considered nontaxable paid-in capital. Taxes
• Any contribution in aid of construction or any other
contribution as a customer or potential customer. The federal income tax is a pay-as-you-go tax. A corpora-
tion must generally make estimated tax payments as it
• Any contribution by any civic group. earns or receives income during its tax year. After the end
of the year, the corporation must file an income tax return.

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This section will help you determine when and how to pay             charged on any part of the final tax due not shown as a 
and file corporate income taxes.                                     balance  due  on  Form  7004.  The  interest  is  figured  from 
                                                                     the original due date of the return to the date of payment.
    For certain corporations affected by federally de-
                                                                     For  more  information,  see  the  Instructions  for  Form 
TIP clared  disasters  such  as  hurricanes,  the  due 
                                                                     7004.
    dates for filing returns, paying taxes, and perform-
ing  other  time-sensitive  acts  may  be  extended.  The  IRS       How to pay your taxes.     A corporation must pay its tax 
may also forgive the interest and penalties on any under-            due in full no later than the due date for filing its tax return 
paid tax for the length of any extension. For more informa-          (not including extensions).
tion, visit IRS.gov/DisasterTaxRelief.
                                                                     Electronic Federal Tax Payment System (EFTPS).
                                                                     Corporations must generally use EFTPS to make deposits 
Income Tax Return                                                    of  all  tax  liabilities  (including  social  security,  Medicare, 
                                                                     withheld  income,  excise,  and  corporate  income  taxes). 
This section will help you determine when and how to re-             For  more  information  on  EFTPS  and  enrollment,  visit 
port a corporation's income tax.                                     www.eftps.gov.
Who must file.      Unless exempt under section 501 of the 
Internal Revenue Code, all domestic corporations in exis-            Penalties
tence for any part of a tax year (including corporations in                  Generally,  if  the  corporation  receives  a  notice 
bankruptcy) must file an income tax return whether or not            !       about interest and penalties after it files its return, 
they have taxable income.                                            CAUTION send  the  IRS  an  explanation  and  we  will  deter-
                                                                     mine  if  the  corporation  meets  reasonable-cause  criteria. 
Which form to file. A domestic entity electing to be clas-
                                                                     Do not attach an explanation when the corporation's re-
sified  as  an  association  taxable  as  a  corporation  must 
                                                                     turn is filed. See the instructions for your income tax re-
generally  file  Form  1120,  U.S.  Corporation  Income  Tax 
                                                                     turn.
Return,  to  report  its  income,  gains,  losses,  deductions, 
credits, and to figure its income tax liability. Certain organ-
izations and entities must, or may elect to, file special re-        Late filing of return. A corporation that does not file its 
turns. For more information, see Special Returns for Cer-            tax return by the due date, including extensions, may be 
tain Organizations in the Instructions for Form 1120.                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 
Electronic  filing. Corporations  can  generally  electroni-         unpaid tax. If the corporation is charged a penalty for late 
cally  file  (e-file)  Form  1120  and  certain  related  forms,     payment  of  tax  (discussed  next)  for  the  same  period  of 
schedules, and attachments. However, certain large cor-              time, the penalty for late filing is reduced by the amount of 
porations  must     e-file  Form  1120.  For  more  information,     the penalty for late payment. A minimum penalty applies 
see the Instructions for Form 1120.                                  for a return that is over 60 days late. The minimum penalty 
                                                                     amount may be adjusted for inflation. See the Instructions 
When  to  file.     Generally,  a  corporation  must  file  its  in- for Form 1120 (or the instructions for your applicable re-
come tax return by the 15th day of the 4th month after the           turn) for the minimum penalty amount for the current tax 
end of its tax year. A new corporation filing a short-period         year.  The  penalty  will  not  be  imposed  if  the  corporation 
return must generally file by the 15th day of the 4th month          can show the failure to file on time was due to a reasona-
after  the  short  period  ends.  A  corporation  that  has  dis-    ble cause.
solved must generally file by the 15th day of the 4th month 
after the date it dissolved.                                         Note.   If  the  corporation  is  charged  a  penalty  for  late 
However,  a  corporation  with  a  fiscal  tax  year  ending         payment  of  tax  (discussed  next)  for  the  same  period  of 
June 30 must file by the 15th day of the 3rd month after             time, the penalty for late filing is reduced by the amount of 
the end of its tax year. A corporation with a short tax year         the penalty for late payment.
ending anytime in June will be treated as if the short pe-
riod ended June 30 and must file by the 15th day of the              Late  payment  of  tax. A  corporation  that  does  not  pay 
3rd month after the end of its tax year.                             the tax when due may be penalized half of 1% of the un-
If the due date falls on a Saturday, Sunday, or legal hol-           paid tax for each month or part of a month the tax is not 
iday, the due date is extended to the next business day.             paid, up to a maximum of 25% of the unpaid tax. The pen-
                                                                     alty will not be imposed if the corporation can show that 
Extension of time to file.   File Form 7004, Application             the failure to pay on time was due to a reasonable cause.
for Automatic Extension of Time To File Certain Business 
Income  Tax,  Information,  and  Other  Returns,  to  request        Trust  fund  recovery  penalty. If  federal  income,  social 
an extension of time to file a corporation’s income tax re-          security, and Medicare taxes that a corporation must with-
turn.  The  IRS  will  grant  the  extension  if  the  corporation   hold from employee wages are not withheld or are not de-
completes the form properly, files it, and pays any tax due          posited or paid to the U.S. Treasury, the trust fund recov-
by the original due date for the return.                             ery penalty may apply. The penalty is the full amount of 
Form 7004 does not extend the time for paying the tax                the unpaid trust fund tax. This penalty may apply to you if 
due on the return. Interest, and possibly penalties, will be 

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these unpaid taxes cannot be immediately collected from Method 1. Each required installment is 25% of the in-
the business. come tax the corporation will show on its return for the
The trust fund recovery penalty may be imposed on all current year.
persons who are determined by the IRS to be responsible
Method 2. Each required installment is 25% of the in-
for collecting, accounting for, and paying these taxes, and
come tax shown on the corporation's return for the previ-
who acted willfully in not doing so.
ous year.
A responsible person can be an officer or employee of
To use Method 2:
a corporation, an accountant, or a volunteer director/
trustee. A responsible person may also include one who 1. The corporation must have filed a return for the previ-
signs checks for the corporation or otherwise has author- ous year,
ity to cause the spending of business funds.
2. The return must have been for a full 12 months, and
“Willfully” means voluntarily, consciously, and intention-
ally. A responsible person acts willfully if the person 3. The return must have shown a positive tax liability
knows the required actions are not taking place or reck- (not zero).
lessly disregards obvious and known risks to the govern-
ment’s right to receive trust fund taxes. Also, if the corporation is a large corporation, it can use
For more information on withholding and paying these Method 2 to figure the first installment only.
taxes, see Pub. 15 (Circular E), Employer's Tax Guide, See the Instructions for Form 1120-W, for the definition
and Pub. 51 (Circular A), Agricultural Employer's Tax of a “large corporation” and other special rules for large
Guide. corporations.
Other methods. If a corporation's income is expected
Other penalties. Other penalties can be imposed for to vary during the year because, for example, its business
negligence, substantial understatement of tax, reportable is seasonal, it may be able to lower the amount of one or
transaction understatements, and fraud. See sections more required installments by using one or both of the fol-
6662, 6662A, and 6663 of the Internal Revenue Code. lowing methods.
1. The annualized income installment method.
Estimated Tax
2. The adjusted seasonal installment method.
Generally, a corporation must make installment payments
if it expects its estimated tax for the year to be $500 or Use Schedule A of Form 1120-W to determine if using
more. If the corporation does not pay the installments one or both of these methods will lower the amount of any
when they are due, it could be subject to an underpay- required installments.
ment penalty. This section will explain how to avoid this Refiguring required installments. If after the corpo-
penalty. ration figures and deposits its estimated tax it finds that its
tax liability for the year will be more or less than originally
When to pay estimated tax. Installment payments are
estimated, it may have to refigure its required installments
due by the 15th day of the 4th, 6th, 9th, and 12th months
to see if an underpayment penalty may apply. An immedi-
of the corporation's tax year.
ate catch-up payment should be made to reduce any pen-
Example 1. Your corporation's tax year ends Decem- alty resulting from the underpayment of any earlier install-
ber 31. Installment payments are due on April 15, June ments.
15, September 15, and December 15.
Underpayment penalty. If the corporation does not pay
Example 2. Your corporation's tax year ends June 30. a required installment of estimated tax by its due date, it
Installment payments are due on October 15, December may be subject to a penalty. The penalty is figured sepa-
15, March 15, and June 15. rately for each installment due date. Therefore, the corpo-
If any due date falls on a Saturday, Sunday, or legal ration may owe a penalty for an earlier due date, even if it
holiday, the installment is due on the next business day. paid enough tax later to make up the underpayment. This
is true even if the corporation is due a refund when its re-
How to figure each required installment. Use Form turn is filed.
1120-W, Estimated Tax for Corporations, as a worksheet
Form 2220. Use Form 2220, Underpayment of Esti-
to figure each required installment of estimated tax. You
mated Tax by Corporations, to determine if a corporation
generally use one of the following two methods to figure
is subject to the penalty for underpayment of estimated
each required installment. You should use the method that
tax and to figure the amount of the penalty.
yields the smallest installment payments.
If the corporation is charged a penalty, the amount of
Note. In these discussions, “return” generally refers to the penalty depends on the following three factors.
the corporation's original return. However, an amended 1. The amount of the underpayment.
return is considered the original return if it is filed by the
due date (including extensions) of the original return. 2. The period during which the underpayment was due
and unpaid.

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3. The interest rate for underpayments published quar-
terly by the IRS in the Internal Revenue Bulletin.
Accounting Methods
A corporation generally does not have to file Form 2220
with its income tax return because the IRS will figure any An accounting method is a set of rules used to determine
penalty and bill the corporation. However, even if the cor- when and how income and expenses are reported. Taxa-
poration does not owe a penalty, complete and attach the ble income should be determined using the method of ac-
form to the corporation's tax return if any of the following counting regularly used in keeping the corporation's books
apply. and records. In all cases, the method used must clearly
show taxable income.
1. The annualized income installment method was used
to figure any required installment. Generally, permissible methods include:
2. The adjusted seasonal installment method was used • Cash,
to figure any required installment.
• Accrual, or
3. The corporation is a large corporation figuring its first
• Any other method authorized by the Internal Revenue
required installment based on the prior year's tax.
Code.
How to pay estimated tax. A corporation is generally re-
Accrual method. Generally, a corporation, other than a
quired to use EFTPS to pay its taxes. See Electronic Fed-
qualified personal service corporation (as defined in sec-
eral Tax Payment System (EFTPS), earlier. Also, see the
tion 448(d)(2)), must use an accrual method of accounting
Instructions for Form 1120-W.
if it is not a small business taxpayer (defined below). A
Quick refund of overpayments. A corporation that has corporation engaged in farming operations must also use
overpaid its estimated tax for the tax year may be able to an accrual method, unless it qualifies as a small business
apply for a quick refund. Use Form 4466, Corporation Ap- taxpayer.
plication for Quick Refund of Overpayment of Estimated Small business taxpayer. A “small business tax-
Tax, to apply for a quick refund of an overpayment of esti- payer” is a taxpayer that (a) has average annual gross re-
mated tax. A corporation can apply for a quick refund if ceipts of $26 million or less (adjusted for inflation) for the 3
the overpayment is: prior tax years, and (b) is not a tax shelter (as defined in
• At least 10% of its expected tax liability, and section 448(d)(3)).
• At least $500. If inventories are required, an accrual method must
Use Form 4466 to figure the corporation's expected tax li- generally be used for sales and purchases of merchan-
ability and the overpayment of estimated tax. dise. However, a small business taxpayer using a cash
method can adopt or change its accounting method to ac-
File Form 4466 after the end of the corporation’s tax count for inventories (a) in the same manner as materials
year, but before the corporation files its income tax return. and supplies that are nonincidental, or (b) to conform to its
Do not file Form 4466 before the end of the corporation's treatment of inventories in an applicable financial state-
tax year. An extension of time to file the corporation's in- ment (AFS) as defined in section 451(b)(3). If it does not
come tax return will not extend the time for filing Form have an AFS, it can use the method of accounting used in
4466. The IRS will act on the form within 45 days from the its books and records prepared according to its account-
date you file it. ing procedures.
Under an accrual method of accounting, you generally
U.S. Real Property Interest report income in the year it is earned and deduct or capi-
talize expenses in the year incurred. The purpose of an
If a domestic corporation acquires a U.S. real property in- accrual method of accounting is to match income and ex-
terest from a foreign person or firm, the corporation may penses in the correct year.
have to withhold tax on the amount it pays for the prop-
erty. The amount paid includes cash, the fair market value Income. Generally, you include an amount in gross in-
of other property, and any assumed liability. If a domestic come for the tax year in which the all events test is met.
corporation distributes a U.S. real property interest to a This test is met when all events have occurred which fix
foreign person or firm, it may have to withhold tax on the your right to receive the income and you can determine
fair market value of the property. A corporation that fails to the amount with reasonable accuracy. However, if you
withhold may be liable for the tax and any penalties and have an AFS, you include the amount in income no later
interest that apply. For more information, see section 1445 than when the item of income is reported in your AFS.
of the Internal Revenue Code; Pub. 515, Withholding of This is known as the AFS inclusion rule.
Tax on Nonresident Aliens and Foreign Entities; Form Under the AFS income inclusion rule, you report an
8288, U.S. Withholding Tax Return for Dispositions by amount in your gross income upon the earliest of the fol-
Foreign Persons of U.S. Real Property Interests; and lowing events:
Form 8288-A, Statement of Withholding on Dispositions • When you receive payment.
by Foreign Persons of U.S. Real Property Interests.
• When the income amount is due to you.

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• When you earn the income. Mark-to-market accounting method. Generally, deal-
ers in securities must use the mark-to-market accounting
• When title passes.
method described in section 475 of the Internal Revenue
• When included as revenue in your AFS, if you have an Code. Under this method, any security held by a dealer as
AFS. inventory must be included in inventory at its fair market
See Pub. 538 for additional information and special value. Any security not held as inventory at the close of
rules. the tax year is treated as sold at its fair market value on
the last business day of the tax year. Any gain or loss
Expenses. Generally, an accrual basis taxpayer can must be taken into account in determining gross income.
deduct accrued expenses in the tax year when: The gain or loss taken into account is treated as ordinary
1. All events that determine the liability have occurred, gain or loss.
Dealers in commodities and traders in securities and
2. The amount of the liability can be figured with reason- commodities can elect to use the mark-to-market account-
able accuracy, and ing method.
3. Economic performance takes place with respect to
Change in accounting method. A corporation can
the expense.
change its method of accounting used to report taxable in-
There are exceptions to the economic performance rule come (for income as a whole or for the treatment of any
for certain items, including recurring expenses. See sec- material item). The corporation must file Form 3115, Ap-
tion 461(h) of the Internal Revenue Code and the related plication for Change in Accounting Method. See the In-
regulations for the rules for determining when economic structions for Form 3115 and Pub. 538 for more informa-
performance takes place. tion and exceptions.
See Rev. Proc. 2021-34, 2021-35 I.R.B. 337 (or any
Nonaccrual experience method. Accrual method cor- successor) available at IRS.gov/irb/2021-35_IRB#REV-
porations are not required to maintain accruals for certain PROC-2021-34, for additional procedures that may apply
amounts from the performance of services that, based on for obtaining automatic consent to change methods of ac-
their experience, will not be collected, if: counting for revenue recognition and certain other meth-
• The services are in the fields of health, law, engineer- ods of accounting that may affect the accounting for reve-
ing, architecture, accounting, actuarial science, per- nue recognition. Also, see Rev. Proc. 2022-09, 2022-02
forming arts, or consulting; or I.R.B. 310 (or any successor) available at IRS.gov/irb/
2022-02_IRB#REV-PROC-2022-9, for additional proce-
• The corporation meets the section 448(c) gross re- dures that may apply for obtaining automatic consent to
ceipts test for all prior years. change certain methods of accounting related to small
This provision does not apply if interest is required to businesses.
be paid on the amount or if there is any penalty for failure
Section 481(a) adjustment. If the corporation's taxa-
to pay the amount timely. See Regulations section
ble income for the current tax year is figured under a
1.448-3 for more information on the nonaccrual experi-
method of accounting different from the method used in
ence method, including information on safe harbor meth-
the preceding tax year, the corporation may have to make
ods.
an adjustment under section 481(a) of the Internal Reve-
For information on a book safe harbor method of ac-
nue Code to prevent amounts of income or expense from
counting for corporations that use the nonaccrual experi-
being duplicated or omitted. The section 481(a) adjust-
ence method of accounting, see Rev. Proc. 2011-46,
ment period is generally 1 year for a net negative adjust-
2011-42 I.R.B. 518, available at IRS.gov/irb/
ment and 4 years for a net positive adjustment. However,
2011-42_IRB#RP-2011-46, as modified by Rev. Proc.
exceptions to the general section 481(a) adjustment pe-
2016-29, 2016-21 I.R.B. 880 (or any successor) available
riod may apply. Also, in some cases, a corporation can
at IRS.gov/irb/2016-21_IRB#RP-2016-29. Also, see the
elect to modify the section 481(a) adjustment period. The
Instructions for Form 3115 for procedures to obtain auto-
corporation may have to complete the appropriate lines of
matic consent to change to this method or make certain
Form 3115 to make an election. See the Instructions for
changes within this method.
Form 3115 for more information and exceptions.
Corporations that qualify to use the nonaccrual experi-
ence method should attach a statement showing total
gross receipts, the amount not accrued because of the
application of section 448(d)(5), and the net amount ac- Accounting Periods
crued.
A corporation must figure its taxable income on the basis
Percentage of completion method. Long-term con- of a tax year. A tax year is the annual accounting period a
tracts (except for certain real property construction con- corporation uses to keep its records and report its income
tracts) must generally be accounted for using the percent- and expenses. Generally, a corporation can use either a
age of completion method described in section 460 of the calendar year or a fiscal year as its tax year. Unless spe-
Internal Revenue Code. cial rules apply, a corporation generally adopts a tax year

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by filing its first federal income tax return using that tax Start-up costs are costs for creating an active trade or
year. For more information, see Pub. 538. business or investigating the creation or acquisition of an
active trade or business. Organizational costs are the di-
Personal service corporation. A personal service cor- rect costs of creating the corporation.
poration must use a calendar year as its tax year unless:
For more information on deducting or amortizing
• It elects to use a 52-53-week tax year that ends with start-up and organizational costs, see the instructions for
reference to the calendar year or tax year elected un- your income tax return. Also, see Pub. 535, chapter 7,
der section 444 of the Internal Revenue Code; Costs You Can Deduct or Capitalize, and chapter 8, Am-
• It can establish a business purpose for a different tax ortization.
year and obtains approval of the IRS (see the Instruc-
tions for Form 1128 and Pub. 538); or Related Persons

• It elects under section 444 to have a tax year other A corporation that uses an accrual method of accounting
than a calendar year. Use Form 8716, Election To cannot deduct business expenses and interest owed to a
Have a Tax Year Other Than a Required Tax Year, to related person who uses the cash method of accounting
make the election. until the corporation makes the payment and the corre-
If a personal service corporation makes a section 444 sponding amount is includible in the related person's
election, its deduction for certain amounts paid to em- gross income. Determine the relationship as of the end of
ployee-owners may be limited. See Schedule H (Form the tax year for which the expense or interest would other-
1120), Section 280H Limitations for a Personal Service wise be deductible. If a deduction is denied, the rule will
Corporation (PSC), to figure the maximum deduction. continue to apply even if the corporation's relationship
with the person ends before the expense or interest is in-
Change of tax year. Generally, a corporation must get cludible in the gross income of that person. These rules
the consent of the IRS before changing its tax year by fil- also deny the deduction of losses on the sale or exchange
ing Form 1128, Application To Adopt, Change, or Retain a of property between related persons.
Tax Year. However, under certain conditions, a corpora-
tion can change its tax year without getting the consent. Related persons. For purposes of this rule, the following
For more information, see Form 1128 and Pub. 538. persons are related to a corporation.
1. Another corporation that is a member of the same
controlled group (as defined in section 267(f) of the
Recordkeeping Internal Revenue Code).
2. An individual who owns, directly or indirectly, more
A corporation should keep its records for as long as they
than 50% of the value of the outstanding stock of the
may be needed for the administration of any provision of
corporation.
the Internal Revenue Code. Usually records that support
items of income, deductions, or credits on the return must 3. A trust fiduciary, if the trust or the grantor of the trust
be kept for 3 years from the date the return is due or filed, owns, directly or indirectly, more than 50% of the
whichever is later. Keep records that verify the corpora- value of the outstanding stock of the corporation.
tion's basis in property for as long as they are needed to
4. An S corporation, if the same persons own more than
figure the basis of the original or replacement property.
50% in value of the outstanding stock of each corpo-
The corporation should keep copies of all filed returns. ration.
They help in preparing future and amended returns and in
5. A partnership, if the same persons own more than
the calculation of earnings and profits.
50% in value of the outstanding stock of the corpora-
tion and more than 50% of the capital or profits inter-
est in the partnership.
Income, Deductions, and 6. Any employee-owner, if the corporation is a personal
Special Provisions service corporation (see Personal service corpora-
tion, earlier), regardless of the amount of stock owned
Rules on income and deductions that apply to individuals by the employee-owner.
also apply, for the most part, to corporations. However, Ownership of stock. To determine whether an indi-
the following special provisions apply only to corporations. vidual directly or indirectly owns any of the outstanding
stock of a corporation, the following apply.
Costs of Going Into Business 1. Stock owned, directly or indirectly, by or for a corpora-
tion, partnership, estate, or trust, is treated as being
When you go into business, treat all eligible costs you in-
owned proportionately by or for its shareholders, part-
cur to get your business started as capital expenses.
ners, or beneficiaries.
However, a corporation can elect to deduct a limited
amount of start-up or organizational costs. Any costs not 2. An individual is treated as owning the stock owned,
deducted can be amortized. directly or indirectly, by or for the individual's family.

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Family includes only brothers and sisters (including your income tax return. For more information, see the In-
half brothers and half sisters), a spouse, ancestors, structions for Form 1120, or the instructions for your appli-
and lineal descendants. cable income tax return.

3. Any individual owning (other than by applying (2) Dividends from foreign corporations. Generally,
above) stock in a corporation, is treated as also own- 100% of the foreign-source portion of dividends (and
ing the stock owned directly or indirectly by that indi- items treated as dividends) from 10%-owned foreign cor-
vidual's partner. porations may be deducted. The stock with respect to
4. To apply (1), (2), or (3) above, stock constructively which such dividends are received must meet a special
owned by a person under (1) is treated as actually 365-day holding period and does not include certain “hy-
owned by that person. But stock constructively owned brid” dividend payments. See Form 1120, Schedule C (or
by an individual under (2) or (3) is not treated as ac- the applicable schedule of your income tax return) for de-
tually owned by the individual for applying either (2) or tails regarding this deduction. Also see the Instructions for
(3) to make another person the constructive owner of Form 1120, or the instructions for your applicable income
that stock. tax return.

Reallocation of income and deductions. Where it is Note. This deduction is not subject to the limit on de-
necessary to clearly show income or prevent tax evasion, duction for dividends related to dividends from domestic
the IRS can reallocate gross income, deductions, credits, corporations, discussed below.
or allowances between two or more organizations, trades,
Dividends from domestic corporations. A corporation
or businesses owned or controlled directly, or indirectly,
can deduct, within certain limits, 50% of the dividends re-
by the same interests.
ceived if the corporation receiving the dividend owns less
Complete liquidations. The disallowance of losses from than 20% of the corporation distributing the dividend. If
the sale or exchange of property between related persons the corporation owns 20% or more of the distributing cor-
does not apply to liquidating distributions. poration's stock, it can, subject to certain limits, deduct
65% of the dividends received.
More information. For more information about the rela-
Ownership. For these rules, ownership is based on
ted person rules, see Pub. 544.
the amount of voting power and value of the paying corpo-
ration's stock (other than certain preferred stock) that the
Corporate Preference Items receiving corporation owns.

A corporation must make special adjustments to certain Small business investment companies. Small busi-
items before it takes them into account in determining its ness investment companies can deduct 100% of the divi-
taxable income. These items are known as “corporate dends received from taxable domestic corporations.
preference items” and they include the following.
Dividends from regulated investment companies.
• Gain on the disposition of section 1250 property. Regulated investment company dividends received are
For more information, see Section 1250 Property un- subject to certain limits. Capital gain dividends received
der Depreciation Recapture in chapter 3 of Pub. 544. from a regulated investment company do not qualify for
• Percentage depletion for iron ore and coal (in- the deduction. For more information, see section 854 of
cluding lignite). For more information, see Mines the Internal Revenue Code.
and Geothermal Deposits under Mineral Property in
No deduction allowed for certain dividends. Corpora-
chapter 9 of Pub. 535.
tions cannot take a deduction for dividends received from
• Amortization of pollution control facilities. For the following entities.
more information, see Pollution Control Facilities in
chapter 8 of Pub. 535 and section 291(a)(4) of the In- 1. A real estate investment trust (REIT).
ternal Revenue Code. 2. A corporation exempt from tax under section 501 or
• Mineral exploration and development costs. For 521 of the Internal Revenue Code either for the tax
more information, see Exploration Costs and Develop- year of the distribution or the preceding tax year.
ment Costs in chapter 7 of Pub. 535. 3. A corporation whose stock was held less than 46
For more information on corporate preference items, see days during the 91-day period beginning 45 days be-
section 291 of the Internal Revenue Code. fore the stock became ex-dividend with respect to the
dividend. “Ex-dividend” means the holder has no
rights to the dividend.
Dividends-Received Deduction
4. A corporation whose dividends were received on any
A corporation can deduct a percentage of certain divi- share of preferred stock that are attributable to peri-
dends received during its tax year. This section discusses ods totaling more than 366 days if such stock was
the general rules that apply. The deduction is figured on held for less than 91 days during the 181-day period
Form 1120, Schedule C, or the applicable schedule of that began 90 days before the ex-dividend date.

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5. Any corporation, if your corporation is under an obli- for dividends received. After claiming the dividends-re-
gation (pursuant to a short sale or otherwise) to make ceived deduction of $65,000 ($100,000 × 65%), its taxa-
related payments with respect to positions in substan- ble income is $5,000. Because the corporation will not
tially similar or related property. have an NOL after applying a full dividends-received de-
duction, its allowable dividends-received deduction is limi-
Dividends on deposits. Dividends on deposits or with- ted to 65% of its taxable income, or $45,500 ($70,000 ×
drawable accounts in domestic building and loan associa- 65%).
tions, mutual savings banks, cooperative banks, and simi-
lar organizations are interest, not dividends. They do not
qualify for this deduction. Extraordinary Dividends

Limit on deduction for dividends. The total deduction If a corporation receives an extraordinary dividend on
for dividends received or accrued is generally limited (in stock held 2 years or less before the dividend announce-
the following order) to: ment date, it must generally reduce its basis in the stock
by the nontaxed part of the dividend. The nontaxed part is
1. 65% of the difference between taxable income and any dividends-received deduction allowable for the divi-
the 100% deduction allowed for dividends received dends.
from affiliated corporations, or by a small business in-
vestment company, for dividends received or accrued Extraordinary dividend. An extraordinary dividend is
from 20%-owned corporations; then any dividend on stock that equals or exceeds a certain
percentage of the corporation's adjusted basis in the
2. 80% of the difference between taxable income and stock. The percentages are:
the 100% deduction allowed for dividends received
from affiliated corporations, or by a small business in- 1. 5% for stock preferred as to dividends, or
vestment company, for dividends received or accrued
2. 10% for other stock.
from less-than-20%-owned corporations (reducing
taxable income by the total dividends received from Treat all dividends received that have ex-dividend dates
20%-owned corporations). within an 85-consecutive-day period as one dividend.
Treat all dividends received that have ex-dividend dates
Figuring the limit. In figuring the limit, determine taxa-
within a 365-consecutive-day period as extraordinary divi-
ble income without the following items.
dends if the total of the dividends exceeds 20% of the cor-
1. The net operating loss deduction. poration's adjusted basis in the stock.

2. The deduction for income attributable to domestic Disqualified preferred stock. Any dividend on disquali-
production activities of specified agricultural or horti- fied preferred stock is treated as an extraordinary divi-
cultural cooperatives. dend regardless of the period of time the corporation held
3. The deduction for dividends received. the stock.
Disqualified preferred stock is any stock preferred as to
4. Any adjustment due to the nontaxable part of an ex- dividends if any of the following apply.
traordinary dividend (see Extraordinary Dividends
later). 1. The stock when issued has a dividend rate that de-
clines (or can reasonably be expected to decline) in
5. Any capital loss carryback to the tax year. the future.
Effect of net operating loss. If a corporation has a 2. The issue price of the stock exceeds its liquidation
net operating loss (NOL) for a tax year, the limit of 65% (or rights or stated redemption price.
50%) of taxable income does not apply. To determine
whether a corporation has an NOL, figure the divi- 3. The stock is otherwise structured to avoid the rules for
dends-received deduction without the 65% (or 50%) of extraordinary dividends and to enable corporate
taxable income limit. shareholders to reduce tax through a combination of
dividends-received deductions and loss on the dispo-
Example 1. A corporation loses $75,000 from opera- sition of the stock.
tions. It receives $100,000 in dividends from a
20%-owned corporation. Its taxable income is $25,000 More information. For more information on extraordi-
($100,000 – $75,000) before the deduction for dividends nary dividends, see section 1059 of the Internal Revenue
received. If it claims the full dividends-received deduction Code.
of $65,000 ($100,000 × 65%) and combines it with an op-
erations loss of $75,000, it will have an NOL of ($40,000). Below-Market Loans
Therefore, the 65% of taxable income limit does not apply.
The corporation can deduct the full $65,000. If a corporation receives a below-market loan and uses
the proceeds for its trade or business, it may be able to
Example 2. Assume the same facts as in Example 1, deduct the forgone interest.
except that the corporation only loses $30,000 from oper-
ations. Its taxable income is $70,000 before the deduction A below-market loan is a loan on which no interest is
charged or on which interest is charged at a rate below

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the applicable federal rate. A below-market loan is gener- 2. The dividends-received deduction.
ally treated as an arm's-length transaction in which the
3. The deduction allowed under section 249 of the Inter-
borrower is considered as having received both the fol-
nal Revenue Code for bond premium.
lowing.
• A loan in exchange for a note that requires payment of 4. Any deduction for income attributable to domestic
interest at the applicable federal rate. production activities of specified agricultural or horti-
cultural cooperatives.
• An additional payment in an amount equal to the for-
gone interest. 5. Any net operating loss carryback to the tax year.
Treat the additional payment as a gift, dividend, contribu- 6. Any capital loss carryback to the tax year.
tion to capital, payment of compensation, or other pay- Carryover of excess contributions. You can carry
ment, depending on the substance of the transaction. over, within certain limits, to each of the subsequent 5
Foregone interest. For any period, forgone interest is years any charitable contributions made during the current
equal to: year that exceed the 10% limit. You lose any excess not
used within that period. Do not deduct a carryover of ex-
1. The interest that would be payable for that period if in- cess contributions in the carryover year until after you de-
terest accrued on the loan at the applicable federal duct contributions made in that year (subject to the 10%
rate and was payable annually on December 31, mi- limit). You cannot deduct a carryover of excess contribu-
nus tions to the extent it increases a net operating loss carry-
over.
2. Any interest actually payable on the loan for the pe-
riod. Farmers, ranchers, or Native Corporations. Corpora-
See Below-market loans in chapter 4 of Pub. 535 for tions that are farmers, ranchers, or Native Corporations,
more information. see section 170(b)(2) of the Internal Revenue Code for
special rules that may affect the deduction limit.

Charitable Contributions Temporary suspension of limitation. For temporary
suspensions of the 10% taxable income limitations for
A corporation can claim a limited deduction for charitable
qualified contributions made in 2020 and 2021, see the In-
contributions made in cash or other property. The contri-
structions for Form 1120 or the instructions for your appli-
bution is deductible if made to, or for the use of, a qualified
cable tax return.
organization. For more information on qualified organiza-
tions, see Pub. 526, Charitable Contributions. Also, see Cash contributions. A corporation must maintain a re-
Tax Exempt Organization Search at IRS.gov/Charities, the cord of any contribution of cash, check, or other monetary
online search tool for finding information on organizations contribution, regardless of the amount. The record can be
eligible to receive tax-deductible contributions. a bank record, receipt, letter, or other written communica-
tion from the donee indicating the name of the organiza-
Note. You cannot take a deduction if any of the net
tion, the date of the contribution, and the amount of the
earnings of an organization receiving contributions benefit
contribution. Keep the record of the contribution with the
any private shareholder or individual.
other corporate records. Do not attach the records to the
Cash method corporation. A corporation using the corporation's return. For more information on cash contri-
cash method of accounting deducts contributions in the butions, see Pub. 526.
tax year paid. Gifts of $250 or more. Generally, no deduction is al-
lowed for any contribution of $250 or more unless the cor-
Accrual method corporation. A corporation using an
poration gets a written acknowledgement from the donee
accrual method of accounting can choose to deduct un-
organization. The acknowledgement should show the
paid contributions for the tax year the board of directors
amount of cash contributed, a description of the property
authorizes them if it pays them by the due date for filing
contributed (but not its value), and either gives a descrip-
the corporation’s tax return (not including extensions).
tion and a good faith estimate of the value of any goods or
Make the choice by reporting the contribution on the cor-
services provided in return for the contribution or states
poration's return for the tax year. Attach a declaration stat-
that no goods or services were provided in return for the
ing that the board of directors adopted the resolution dur-
contribution. The acknowledgement must be obtained by
ing the tax year. The declaration must include the date the
the due date (including extensions) of the return, or, if ear-
resolution was adopted.
lier, the date the return was filed. Keep the acknowledge-
Limitations on deduction. A corporation cannot deduct ment with other corporate records. Do not attach the ac-
charitable contributions that exceed 10% of its taxable in- knowledgement to the return.
come for the tax year. Figure taxable income for this pur-
Contributions of property other than cash. If a corpo-
pose without the following.
ration (other than a closely held or a personal service cor-
1. The deduction for charitable contributions. poration) claims a deduction of more than $500 for contri-
butions of property other than cash, a schedule describing

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the property and the method used to determine its fair • Contributions of any patent, certain copyrights, trade-
market value must be attached to the corporation's return. mark, trade name, trade secret, know-how, software
In addition, the corporation should keep a record of: (that is a section 197 intangible), or similar property, or
applications or registrations of such property.
• The approximate date and manner of acquisition of
the donated property, and Larger deduction. A corporation (other than an S cor-
• The cost or other basis of the donated property held poration) may be able to claim a deduction equal to the
by the donor for less than 12 months prior to contribu- lesser of (a) the basis of the donated inventory or property
tion. plus half of the inventory’s or property's appreciation (gain
if the donated inventory or property was sold at fair market
Closely held and personal service corporations must value on the date of the donation), or (b) two times basis
complete and attach Form 8283, Noncash Charitable of the donated inventory or property. This deduction may
Contributions, to their returns if they claim a deduction of be allowed for certain contributions of the following.
more than $500 for noncash contributions. For all other
corporations, if the deduction claimed for donated prop- • Certain inventory and other property made to a donee
erty exceeds $5,000, complete Form 8283 and attach it to organization and used solely for the care of the ill, the
the corporation's return. needy, and infants. Special rules apply to qualified
A corporation must obtain a qualified appraisal for all contributions of “apparently wholesome food” (see
deductions of property claimed in excess of $5,000. A section 170(e)(3)(C) of the Internal Revenue Code).
qualified appraisal is not required for the donation of cash, • Scientific property constructed by the corporation
publicly traded securities, inventory, and any qualified ve- (other than an S corporation, personal holding com-
hicles sold by a donee organization without any significant pany, or personal service corporation) and donated no
intervening use or material improvement. The appraisal later than 2 years after substantial completion of the
should be maintained with other corporate records and construction. The property must be donated to a quali-
only attached to the corporation's return when the deduc- fied organization and its original use must be by the
tion claimed exceeds $500,000 ($20,000 for donated art donee for research, experimentation, or research
work). training within the United States in the area of physical
See Form 8283 for more information. or biological science.
Qualified conservation contributions. If a corpora-
Contributions to organizations conducting lobbying
tion makes a qualified conservation contribution, the cor-
activities. Contributions made to an organization that
poration must provide information regarding the legal in-
conducts lobbying activities are not deductible if:
terest being donated, the fair market value of the
underlying property before and after the donation, and a • The lobbying activities relate to matters of direct finan-
description of the conservation purpose for which the cial interest to the donor's trade or business, and
property will be used. For more information, see section • The principal purpose of the contribution was to avoid
170(h) of the Internal Revenue Code. federal income tax by obtaining a deduction for activi-
Contributions of used vehicles. A corporation is al- ties that would have been nondeductible under the
lowed a deduction for the contribution of used motor vehi- lobbying expense rules if conducted directly by the
cles, boats, and airplanes. The deduction is limited, and donor.
other special rules apply. For more information, see Pub.
More information. For more information on charitable
526.
contributions, including substantiation and recordkeeping
Reduction for contributions of certain property. requirements, see section 170 of the Internal Revenue
For a charitable contribution of property, the corporation Code, the related regulations, and Pub. 526.
must reduce the contribution by the sum of:
• The ordinary income and short-term capital gain that Capital Losses
would have resulted if the property were sold at its fair
market value; and A corporation can deduct capital losses only up to the
amount of its capital gains. In other words, if a corporation
• For certain contributions, the long-term capital gain has an excess capital loss, it cannot deduct the loss in the
that would have resulted if the property were sold at its current tax year. Instead, it carries the loss to other tax
fair market value. years and deducts it from any net capital gains that occur
The reduction for the long-term capital gain applies to: in those years.
• Contributions of tangible personal property for use by A capital loss is carried to other years in the following
an exempt organization for a purpose or function unre- order.
lated to the basis for its exemption;
1. 3 years prior to the loss year.
• Contributions of any property to or for the use of cer-
tain private foundations except for stock for which 2. 2 years prior to the loss year.
market quotations are readily available; and 3. 1 year prior to the loss year.
4. Any loss remaining is carried forward for 5 years.

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When you carry a net capital loss to another tax year, treat two of more NOLs to the same year, see Pub. 536, Net
it as a short-term loss. It does not retain its original identity Operating Losses (NOLs) for Individuals, Estates, and
as long term or short term. Trusts.
Example. A calendar year corporation has a net A corporation's NOL generally differs from individual,
short-term capital gain of $3,000 and a net long-term capi- estate, and trust NOLs in the following ways.
tal loss of $9,000. The short-term gain offsets some of the 1. A corporation can take different deductions when fig-
long-term loss, leaving a net capital loss of $6,000. The uring an NOL.
corporation treats this $6,000 as a short-term loss when
carried back or forward. 2. A corporation must make different modifications to its
The corporation carries the $6,000 short-term loss back taxable income in the carryback or carryforward year
3 years. In year 1, the corporation had a net short-term when figuring how much of the NOL is used and how
capital gain of $8,000 and a net long-term capital gain of much is carried over to the next year.
$5,000. It subtracts the $6,000 short-term loss first from 3. A corporation uses different forms when claiming an
the net short-term gain. This results in a net capital gain NOL deduction.
for year 1 of $7,000. This consists of a net short-term capi-
tal gain of $2,000 ($8,000 − $6,000) and a net long-term 4. A corporation is not subject to section 461, which lim-
capital gain of $5,000. its the amount of losses from the trades or businesses
of noncorporate taxpayers.
S corporation status. A corporation may not carry a
capital loss from, or to, a year for which it is an S corpora- For more information, including how to figure the NOL
tion. deduction for the current tax year and any carryback or
carryforward, see the Instructions for Form 1139, and the
Rules for carryover and carryback. When carrying a instructions for the corporation's tax return.
capital loss from 1 year to another, the following rules ap-
ply. At-Risk Limits
• When figuring the current year's net capital loss, you
cannot combine it with a capital loss carried from an- The at-risk rules limit your losses from most activities to
other year. In other words, you can carry capital los- your amount at risk in the activity. The at-risk limits apply
ses only to years that would otherwise have a total net to certain closely held corporations (other than S corpora-
capital gain. tions).
• If you carry capital losses from 2 or more years to the The amount at risk generally equals:
same year, deduct the loss from the earliest year first. • The money and the adjusted basis of property contrib-
• You cannot use a capital loss carried from another uted by the taxpayer to the activity, and
year to produce or increase a net operating loss in the • The money borrowed for the activity.
year to which you carry it back.
Closely held corporation. For the at-risk rules, a corpo-
Refunds. When you carry back a capital loss to an earlier ration is a closely held corporation if, at any time during
tax year, refigure your tax for that year. If your corrected the last half of the tax year, more than 50% in value of its
tax is less than the tax you originally owed, use either outstanding stock is owned directly or indirectly by, or for,
Form 1139, Corporate Application for Tentative Refund, or five or fewer individuals.
Form 1120X, Amended U.S. Corporation Income Tax Re- To figure if more than 50% in value of the stock is
turn, to apply for a refund. owned by five or fewer individuals, apply the following
Form 1139. A corporation can get a refund faster by rules.
using Form 1139. It cannot file Form 1139 before filing the 1. Stock owned, directly or indirectly, by or for a corpora-
return for the corporation's capital loss year, but it must file tion, partnership, estate, or trust is considered owned
Form 1139 no later than 1 year after the year it sustains proportionately by its shareholders, partners, or bene-
the capital loss. ficiaries.
Form 1120X. If the corporation does not file Form 2. An individual is considered to own the stock owned,
1139, it must file Form 1120X to apply for a refund. The directly or indirectly, by or for his or her family. Family
corporation must file the Form 1120X within 3 years of the includes only brothers and sisters (including half
due date, including extensions, for filing the return for the brothers and half sisters), a spouse, ancestors, and
year in which it sustains the capital loss. lineal descendants.
3. If a person holds an option to buy stock, he or she is
Net Operating Losses
considered to be the owner of that stock.
A corporation generally figures and deducts a net operat- 4. When applying (1) or (2) above, stock considered
ing loss (NOL) the same way an individual, estate, or trust owned by a person under (1) or (3) above is treated
does. For more information on these general rules, includ- as actually owned by that person. Stock considered
ing the sequencing rule for when the corporation carries owned by an individual under (2) is not treated as

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owned by the individual for again applying (2) to con- • Any qualified electric vehicle passive activity credit
sider another the owner of that stock. from prior years allowed for the current year from
Form 8834. See Form 8810, Corporate Passive Activ-
5. Stock that may be considered owned by an individual
ity Loss and Credit Limitations, to see if a credit is al-
under either (2) or (3) above is considered owned by
lowed for the current year for personal service corpo-
the individual under (3).
rations and closely held corporations.
More information. For more information on the at-risk • General business credit.
limits, see Pub. 925, Passive Activity and At-Risk Rules. See Form 3800 for a list of allowable business
credits and other special rules. General business
Passive Activity Limits credits are treated as used on a first-in, first-out basis
by offsetting the earliest-earned credits first. There-
The passive activity rules generally limit your losses from fore, the order in which the credits are used in any tax
passive activities to your passive activity income. Gener- year is as follows.
ally, you are in a passive activity if you have a trade or 1. Carryforwards to that year, the earliest ones first.
business activity in which you do not materially participate
during the tax year, or you have a rental activity. 2. The general business credit earned in that year.
The passive activity rules apply to personal service cor- 3. The carryback to that year.
porations and closely held corporations other than S cor- Note. To carryback an unused credit, the corpora-
porations. tion must file an amended return (Form 1120X, or
other amended return) for the prior year, or an appli-
Corporations subject to the passive activity limitations
cation for tentative refund (Form 1139).
must complete Form 8810. For more information on the
passive activity limits, see the Instructions for Form 8810 • Credit for prior year minimum tax, if applicable (see
and Pub. 925. Form 8827).
• Bond credits (see Form 8912).
A corporation is also allowed certain refundable credits
Figuring Tax such as the credit for federal tax on fuels used for certain
nontaxable purposes (Form 4136). See the instructions
After you figure a corporation's taxable income, you figure for the corporation's income tax return for a list of other re-
its tax. This section discusses the tax rates, credits, and fundable credits that may be allowed for the current tax
recapture taxes. year.

Tax Rates Recapture Taxes

Corporations, including qualified personal service corpo- A corporation's tax liability is increased if it recaptures
rations, figure their tax by multiplying taxable income by credits it has taken in prior years. The following list in-
21% (0.21). If the corporation is a member of a controlled cludes some credits a corporation may need to recapture.
group, the corporation must also complete Schedule O
(Form 1120), Consent Plan and Apportionment Schedule • Investment credit (see the Instructions for Form 4255).
for a Controlled Group, to report the apportionment of cer- • Low-income housing credit (see the Instructions for
tain tax benefits between the members of the group. See Form 8611).
Schedule O (Form 1120) and the Instructions for Sched- New markets credit (see the Instructions for Form
•
ule O (Form 1120) for more information. 8874).
• Employer-provided childcare facilities and services
Base Erosion Minimum Tax
credit (see the Instructions for Form 8882).
If a corporation has gross receipts of at least $500 million • Indian employment credit (see the Instructions for
in any 1 of the 3 tax years preceding the current tax year, Form 8845).
a tax equal to the base erosion minimum tax amount for See the credits listed in the Instructions for Form 3800
the tax year may be imposed. This tax is reported using for additional credits that may be subject to recapture.
Form 8991. See the Instructions for Form 8991 for addi-
tional information.

Accumulated Earnings Tax
Credits
A corporation can accumulate its earnings for a possible
A corporation's tax liability is reduced by allowable credits.
expansion or other bona fide business reasons. However,
The following list includes some of the credits available to
if a corporation allows earnings to accumulate beyond the
corporations.
reasonable needs of the business, it may be subject to an
• Foreign tax credit (see Form 1118). accumulated earnings tax of 20%. If the accumulated

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earnings tax applies, interest applies to the tax from the • Certain distributions to 20% corporate shareholders
date the corporate return was originally due, without ex- (section 301(e)).
tensions.
To determine if the corporation is subject to this tax, Money or Property Distributions
first treat an accumulation of $250,000 or less generally
as within the reasonable needs of most businesses. Treat Most distributions are in money, but they may also be in
an accumulation of $150,000 or less as within the reason- stock or other property. For this purpose, “property” gen-
able needs of a business whose principal function is per- erally does not include stock in the corporation or rights to
forming services in the fields of accounting, actuarial sci- acquire this stock. However, see Distributions of Stock or
ence, architecture, consulting, engineering, health Stock Rights, later.
(including veterinary services), law, and the performing A corporation generally does not recognize a gain or
arts. loss on the distributions covered by the rules in this sec-
In determining if the corporation has accumulated earn- tion. However, see Gain from property distributions, later.

ings and profits beyond its reasonable needs, value the Amount distributed. The amount of a distribution is gen-
listed and readily marketable securities owned by the cor- erally the amount of any money paid to the shareholder
poration and purchased with its earnings and profits at net plus the fair market value (FMV) of any property transfer-
liquidation value, not at cost. red to the shareholder. However, this amount is reduced
Reasonable needs of the business include the follow- (but not below zero) by the following liabilities.
ing. • Any liability of the corporation the shareholder as-
• Specific, definite, and feasible plans for use of the sumes in connection with the distribution.
earnings accumulation in the business. • Any liability to which the property is subject immedi-
• The amount necessary to redeem the corporation's ately before, and immediately after, the distribution.
stock included in a deceased shareholder's gross es- The FMV of any property distributed to a shareholder be-
tate, if the amount does not exceed the reasonably comes the shareholder's basis in that property.
anticipated total estate and inheritance taxes and fu-
neral and administration expenses incurred by the Gain from property distributions. A corporation will
shareholder's estate. recognize a gain on the distribution of property to a share-
holder if the FMV of the property is more than its adjusted
The absence of a bona fide business reason for a cor-
basis. This is generally the same treatment the corpora-
poration's accumulated earnings may be indicated by
tion would receive if the property were sold. However, for
many different circumstances, such as a lack of regular
this purpose, the FMV of the property is the greater of the
distributions to its shareholders or withdrawals by the
following amounts.
shareholders classified as personal loans. However, ac-
tual moves to expand the business generally qualify as a • The actual FMV.
bona fide use of the accumulations. The amount of any liabilities the shareholder assumed
•
The fact that a corporation has an unreasonable accu- in connection with the distribution of the property.
mulation of earnings is sufficient to establish liability for If the property was depreciable or amortizable, the cor-
the accumulated earnings tax unless the corporation can poration may have to treat all or part of the gain as ordi-
show the earnings were not accumulated to allow its indi- nary income from depreciation recapture. For more infor-
vidual shareholders to avoid income tax. mation on depreciation recapture and the sale of business
property, see Pub. 544.

Distributions to Shareholders Distributions of Stock
or Stock Rights
This section discusses corporate distributions of money,
stock, or other property to a shareholder with respect to Distributions by a corporation of its own stock are com-
the shareholder's ownership of stock. However, this sec- monly known as “stock dividends.” Stock rights (also
tion does not discuss the special rules that apply to the known as “stock options”) are distributions by a corpora-
following distributions. See the applicable sections of the tion of rights to acquire its stock. Distributions of stock div-
Internal Revenue Code. idends and stock rights are generally tax free to share-
• Distributions in redemption of stock (section 302). holders. However, if any of the following apply to their
distribution, stock and stock rights are treated as property,
• Distributions in complete liquidation of the corporation as discussed under Money or Property Distributions, ear-
(sections 331 through 346). lier.
• Distributions in corporate organizations (section 351).
1. Any shareholder has the choice to receive cash or
Also, see Property Exchanged for Stock, earlier.
other property instead of stock or stock rights.
• Distributions in corporate reorganizations (sections
354 through 368).

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2. The distribution gives cash or other property to some shareholder. For a shareholder who is not a corporation, if
shareholders and an increase in the percentage inter- the FMV of the property on the date of the sale or ex-
est in the corporation's assets or earnings and profits change exceeds the price paid by the shareholder, the ex-
to other shareholders. cess is treated as a distribution to the shareholder.

3. The distribution is in convertible preferred stock and Unreasonable rents. If a corporation rents property from
has the same result as in (2). a shareholder and the rent is unreasonably more than the
4. The distribution gives preferred stock to some com- shareholder would charge to a stranger for use of the
mon stock shareholders and gives common stock to same property, the excessive part of the rent may be trea-
other common stock shareholders. ted as a distribution to the shareholder. For more informa-
tion, see Unreasonable rent in chapter 3 of Pub. 535.
5. The distribution is on preferred stock. (An increase in
the conversion ratio of convertible preferred stock Unreasonable salaries. If a corporation pays an em-
made solely to take into account a stock dividend, ployee who is also a shareholder a salary that is unrea-
stock split, or similar event that would otherwise result sonably high considering the services actually performed
in reducing the conversion right is not a distribution on by the shareholder-employee, the excessive part of the
preferred stock.) salary may be treated as a distribution to the share-
holder-employee.
The term “stock” includes rights to acquire stock and the
term “shareholder” includes a holder of rights or converti-
ble securities. Reporting Dividends and Other
Distributions
Constructive stock distributions. You must treat cer-
tain transactions that increase a shareholder's proportion- A corporate distribution to a shareholder is generally trea-
ate interest in the earnings and profits or assets of a cor- ted as a distribution of earnings and profits. Any part of a
poration as if they were distributions of stock or stock distribution from either current or accumulated earnings
rights. These constructive distributions are treated as and profits is reported to the shareholder as a dividend.
property if they have the same result as a distribution de- Any part of a distribution that is not from earnings and
scribed in (2), (3), (4), or (5) above. Constructive distribu- profits is applied against and reduces the adjusted basis
tions are described later. of the stock in the hands of the shareholder. To the extent
This treatment applies to a change in your stock's con- the balance is more than the adjusted basis of the stock,
version ratio or redemption price, a difference between the shareholder has a gain (usually a capital gain) from
your stock's redemption price and issue price, a redemp- the sale or exchange of property.
tion that is not treated as a sale or exchange of your stock,
and any other transaction having a similar effect on a For information on shareholder reporting of corporate
shareholder's interest in the corporation. distributions, see Pub. 550, Investment Income and Ex-
penses.
Expenses of issuing a stock dividend. You cannot de-
duct the expenses of issuing a stock dividend. These ex- Form 1099-DIV. File Form 1099-DIV, Dividends and Dis-
penses include printing, postage, cost of advice sheets, tributions, with the IRS for each shareholder to whom the
fees paid to transfer agents, and fees for listing on stock corporation has paid dividends and other distributions on
exchanges. The corporation must capitalize these costs. stock of $10 or more during a calendar year. A corporation
must generally send Forms 1099-DIV to the IRS with
Form 1096, Annual Summary and Transmittal of U.S. In-
Constructive Distributions
formation Returns, by February 28 (March 31 if filing elec-
tronically) of the year following the year of the distribution.
The following sections discuss transactions that may be
For more information, see the General Instructions for
treated as distributions.
Certain Information Returns (Forms 1096, 1097, 1098,
Below-market loans. If a corporation gives a share- 1099, 3921, 3922, 5498, and W-2G).
holder a loan on which no interest is charged or on which Generally, the corporation must furnish Forms
interest is charged at a rate below the applicable federal 1099-DIV to shareholders by January 31 of the year fol-
rate, the interest not charged may be treated as a distribu- lowing the close of the calendar year during which it made
tion to the shareholder. For more information, see Be- the distributions. However, the corporation may furnish
low-Market Loans, earlier. the Form 1099-DIV to shareholders after November 30 of
the year of the distributions if it has made its final distribu-
Corporation cancels shareholder's debt. If a corpora- tions for the year. The corporation may furnish the Form
tion cancels a shareholder's debt without repayment by 1099-DIV to shareholders anytime after April 30 of the
the shareholder, the amount canceled is treated as a dis- year of the distributions if it gives the Form 1099-DIV with
tribution to the shareholder. the final distributions for the calendar year.
If any regular due date falls on a Saturday, Sunday, or
Transfers of property to shareholders for less than legal holiday, file by the next business day. A business
FMV. A sale or exchange of property by a corporation to day is any day that is not a Saturday, Sunday, or legal hol-
a shareholder may be treated as a distribution to the iday.

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Backup withholding. Dividends may be subject to 1. Divide the current year earnings and profits by the to-
backup withholding. For more information on backup with- tal distributions made during the year.
holding, see the General Instructions for Certain Informa-
2. Multiply each distribution by the percentage figured in
tion Returns.
(1) to get the amount treated as a distribution of cur-
Form 5452. File Form 5452, Corporate Report of Nondi- rent year earnings and profits.
vidend Distributions, if nondividend distributions were 3. Start with the first distribution and treat the part of
made to shareholders. each distribution greater than the allocated current
A calendar tax year corporation must file Form 5452 year earnings and profits figured in (2) as a distribu-
with its income tax return for the tax year in which the non- tion of accumulated earnings and profits.
dividend distributions were made. A fiscal tax year corpo-
ration must file Form 5452 with its income tax return due 4. If accumulated earnings and profits are reduced to
for the first fiscal year ending after the calendar year in zero, the remaining part of each distribution is applied
which the nondividend distributions were made. against and reduces the adjusted basis of the stock in
the hands of the shareholders. To the extent that the
Current year earnings and profits. If a corporation's balance is more than the adjusted basis of the stock,
earnings and profits for the year (figured as of the close of it is treated as a gain from the sale or exchange of
the year without reduction for any distributions made dur- property.
ing the year) are more than the total amount of distribu-
tions made during the year, all distributions made during Example. You are the only shareholder of a corpora-
the year are treated as distributions of current year earn- tion that uses the calendar year as its tax year. In January,
ings and profits. If the total amount of distributions is more you use the worksheet in the Form 5452 instructions to
than the earnings and profits for the year, see Accumula- figure your corporation's current year earnings and profits
ted earnings and profits, later. for the previous year. At the beginning of the year, the cor-
poration's accumulated earnings and profits balance was
Example. You are the only shareholder of a corpora- $20,000. During the year, the corporation made four
tion that uses the calendar year as its tax year. In January, $4,000 distributions to you ($4,000 × 4 = $16,000). At the
you use the worksheet in the Form 5452 instructions to end of the year (before subtracting distributions made dur-
figure your corporation's current year earnings and profits ing the year), the corporation had $10,000 of current year
for the previous year. During the year, the corporation earnings and profits.
made four $1,000 distributions to you. At the end of the Since the corporation's current year earnings and prof-
year (before subtracting distributions made during the its ($10,000) were less than the distributions it made dur-
year), the corporation had $10,000 of current year earn- ing the year ($16,000), part of each distribution is treated
ings and profits. as a distribution of accumulated earnings and profits.
Since the corporation's current year earnings and prof- Treat the distributions as follows.
its ($10,000) were more than the amount of the distribu-
1. Divide the current year earnings and profits ($10,000)
tions it made during the year ($4,000), all of the distribu-
by the total amount of distributions made during the
tions are treated as distributions of current year earnings
year ($16,000). The result is 0.625.
and profits.
The corporation must issue a Form 1099-DIV to you to 2. Multiply each $4,000 distribution by the 0.625 figured
report the $4,000 distributed to you during the previous in (1) to get the amount ($2,500) of each distribution
year as dividends. The corporation must use Form 1096 treated as a distribution of current year earnings and
to report this information to the IRS. The corporation does profits.
not deduct these dividends on its income tax return.
3. The remaining $1,500 of each distribution is treated
Accumulated earnings and profits. If a corporation's as a distribution from accumulated earnings and prof-
current year earnings and profits (figured as of the close its. The corporation distributed $6,000 ($1,500 × 4) of
of the year without reduction for any distributions made accumulated earnings and profits.
during the year) are less than the total distributions made The remaining $14,000 ($20,000 − $6,000) of accumula-
during the year, part or all of each distribution is treated as ted earnings and profits is available for use in the follow-
a distribution of accumulated earnings and profits. Accu- ing year.
mulated earnings and profits are earnings and profits the The corporation must issue a Form 1099-DIV to you to
corporation accumulated before the current year. report the $16,000 distributed to you during the previous
If the total amount of distributions is less than current year as dividends. The corporation must use Form 1096
year earnings and profits, see Current year earnings and to report this information to the IRS. The corporation does
profits, above. not deduct these dividends on its income tax return.
Used with current year earnings and profits. If the Used without current year earnings and profits. If
corporation has current year earnings and profits, figure the corporation has no current year earnings and profits,
the use of accumulated and current earnings and profits figure the use of accumulated earnings and profits as fol-
as follows. lows.

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1. If the current year earnings and profits balance is neg- March 31 Distribution
ative, prorate the negative balance to the date of each
Accumulated earnings and profits. . . . . . . . . . . . . . $20,000
distribution made during the year. Prorated current year earnings and profits. . . . . . . . . ($2,500)
2. Figure the available accumulated earnings and profits Accumulated earnings and profits available. . . . . . . . $17,500
balance on the date of each distribution by subtract- Amount of distribution treated as a dividend. . . . . . . ($4,000)
ing the prorated amount of current year earnings and
June 30 Distribution
profits from the accumulated balance.
Accumulated earnings and profits. . . . . . . . . . . . . . $13,500
3. Treat each distribution as a distribution of these ad- Prorated current year earnings and profits. . . . . . . . . ($2,500)
justed accumulated earnings and profits. Accumulated earnings and profits available. . . . . . . . $11,000
Amount of distribution treated as a dividend. . . . . . . ($4,000)
4. If adjusted accumulated earnings and profits are re-
duced to zero, the remaining distributions are applied September 30 Distribution
against and reduce the adjusted basis of the stock in
Accumulated earnings and profits. . . . . . . . . . . . . . $7,000
the hands of the shareholders. To the extent that the Prorated current year earnings and profits. . . . . . . . . ($2,500)
balance is more than the adjusted basis of the stock, Accumulated earnings and profits available. . . . . . . . $4,500
it is treated as a gain from the sale or exchange of Amount of distribution treated as a dividend. . . . . . . ($4,000)
property.
December 31 Distribution
Example. You are the only shareholder of a corpora-
Accumulated earnings and profits. . . . . . . . . . . . . . $500
tion that uses the calendar year as its tax year. In January, Prorated current year earnings and profits. . . . . . . . . ($2,500)
you use the worksheet in the Form 5452 instructions to Accumulated earnings and profits available. . . . . . . . ($2,000)
figure your corporation's current year earnings and profits Amount of distribution treated as a dividend. . . . . . . $0
for the previous year. At the beginning of the year, the cor- Nondividend amount (reduction of stock basis or gain
poration's accumulated earnings and profits balance was from sale/exchange of property). . . . . . . . . . . . . . . $4,000
$20,000. During the year, the corporation made four Year-end accumulated earnings and profits. . . . . . . . ($2,000)
$4,000 distributions to you on March 31, June 30, Sep-
The corporation must issue a Form 1099-DIV to you to
tember 30, and December 31. At the end of the year (be-
report $12,000 of the $16,000 distributed to you during the
fore subtracting distributions made during the year), the
previous year as dividends. The corporation must use
corporation had a negative $10,000 current year earnings
Form 1096 to report this information to the IRS. The cor-
and profits balance.
poration does not deduct these dividends on its income
Since the corporation had no current year earnings and
tax return. However, the corporation must attach Form
profits, all of the distributions are treated as distributions of
5452 to this return to report the nondividend distribution.
accumulated earnings and profits. Treat the distributions
as follows. For more information about figuring earnings and
TIP profits, see the Worksheet for Figuring Current
1. Prorate the negative current year earnings and profits
Year Earnings and Profits in the Form 5452 in-
balance to the date of each distribution made during
structions.
the year. The negative $10,000 can be spread evenly
by prorating a negative $2,500 to each distribution.
2. The following table shows how to figure the available
accumulated earnings and profits balance on the date How To Get Tax Help
of each distribution.
If you have questions about a tax issue; need help prepar-
ing your tax return; or want to download free publications,
forms, or instructions, go to IRS.gov to find resources that
can help you right away.

Using online tools to help prepare your return. Go to
IRS.gov/Tools for the following.
• The Online EIN Application IRS.gov/EIN ( ) helps you
get an employer identification number (EIN) at no
cost.
• The Tax Calendar TAX.gov/calendar ( ) helps you track
important business tax dates and deadlines right from
your desktop.
• The FATCA FFI List Search and Download Tool
(IRS.gov/fatca-ffilist) makes it easier to find out if a
Foreign Financial Institution has registered with
FATCA.

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• The Electronic Federal Tax Payment System number (TIN) or other confidential information on social
(IRS.gov/EFTPS) is a free tax payment system that al- media sites. Always protect your identity when using any
lows you to pay your federal taxes online or by phone social networking site.
with EFTPS. The following IRS YouTube channels provide short, in-
formative videos on various tax-related topics in English,
Getting answers to your tax questions. On
Spanish, and ASL.
IRS.gov, you can get up-to-date information on
current events and changes in tax law. • Youtube.com/irsvideos.
• IRS.gov/Help: A variety of tools to help you get an- • Youtube.com/irsvideosmultilingua.
swers to some of the most common tax questions.
• Youtube.com/irsvideosASL.
• IRS.gov/ITA: The Interactive Tax Assistant, a tool that
will ask you questions and, based on your input, pro- Watching IRS videos. The IRS Video portal
vide answers on a number of tax law topics. (IRSVideos.gov) contains video and audio presentations
for individuals, small businesses, and tax professionals.
• IRS.gov/Forms: Find forms, instructions, and publica-
tions. You will find details on 2021 tax changes and Online tax information in other languages. You can
hundreds of interactive links to help you find answers find information on IRS.gov/MyLanguage if English isn’t
to your questions. your native language.
• You may also be able to access tax law information in
Free Over-the-Phone Interpreter (OPI) Service. The
your electronic filing software.
IRS is committed to serving our multilingual customers by
offering OPI services. The OPI service is a federally fun-
Need someone to prepare your tax return? There are ded program and is available at Taxpayer Assistance
various types of tax return preparers, including tax prepar- Centers (TACs), other IRS offices, and every VITA/TCE
ers, enrolled agents, certified public accountants (CPAs), return site. OPI service is accessible in more than 350 lan-
attorneys, and many others who don’t have professional guages.
credentials. If you choose to have someone prepare your
tax return, choose that preparer wisely. A paid tax pre- Accessibility Helpline available for taxpayers with
parer is: disabilities. Taxpayers who need information about ac-
cessibility services can call 833-690-0598. The Accessi-
• Primarily responsible for the overall substantive accu- bility Helpline can answer questions related to current and
racy of your return, future accessibility products and services available in al-
• Required to sign the return, and ternative media formats (for example, braille, large print,
audio, etc.).
• Required to include their preparer tax identification
number (PTIN). Getting tax forms and publications. Go to IRS.gov/
Although the tax preparer always signs the return, Forms to view, download, or print all of the forms, instruc-
you're ultimately responsible for providing all the informa- tions, and publications you may need. Or, you can go to
tion required for the preparer to accurately prepare your IRS.gov/OrderForms to place an order.
return. Anyone paid to prepare tax returns for others
should have a thorough understanding of tax matters. For Getting tax publications and instructions in eBook
more information on how to choose a tax preparer, go to format. You can also download and view popular tax
Tips for Choosing a Tax Preparer on IRS.gov. publications and instructions on mobile devices as
eBooks at IRS.gov/eBooks.
Coronavirus. Go to IRS.gov/Coronavirus for links to in-
formation on the impact of the coronavirus, as well as tax Note. IRS eBooks have been tested using Apple's
relief available for individuals and families, small and large iBooks for iPad. Our eBooks haven’t been tested on other
businesses, and tax-exempt organizations. dedicated eBook readers, and eBook functionality may
not operate as intended.
Employers can register to use Business Services On-
line. The Social Security Administration (SSA) offers on- Reporting and resolving your tax-related identity
line service at SSA.gov/employer for fast, free, and secure theft issues.
online W-2 filing options to CPAs, accountants, enrolled • Tax-related identity theft happens when someone
agents, and individuals who process Form W-2, Wage steals your personal information to commit tax fraud.
and Tax Statement, and Form W-2c, Corrected Wage and Your taxes can be affected if your TIN is used to file a
Tax Statement. fraudulent return or to claim a refund or credit.
IRS social media. Go to IRS.gov/SocialMedia to see the • The IRS doesn’t initiate contact with taxpayers by
various social media tools the IRS uses to share the latest email, text messages, telephone calls, or social media
information on tax changes, scam alerts, initiatives, prod- channels to request personal or financial information.
ucts, and services. At the IRS, privacy and security are This includes requests for personal identification num-
our highest priority. We use these tools to share public in- bers (PINs), passwords, or similar information for
formation with you. Don’t post your taxpayer identification credit cards, banks, or other financial accounts.

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• Go to IRS.gov/IdentityTheft, the IRS Identity Theft Contacting your local IRS office. Keep in mind, many
Central webpage, for information on identity theft and questions can be answered on IRS.gov without visiting an
data security protection for taxpayers, tax professio- IRS TAC. Go to IRS.gov/LetUsHelp for the topics people
nals, and businesses. If your TIN has been lost or sto- ask about most. If you still need help, IRS TACs provide
len or you suspect you’re a victim of tax-related iden- tax help when a tax issue can’t be handled online or by
tity theft, you can learn what steps you should take. phone. All TACs now provide service by appointment, so
you’ll know in advance that you can get the service you
Making a tax payment. Go to IRS.gov/Payments for in- need without long wait times. Before you visit, go to
formation on how to make a payment using any of the fol- IRS.gov/TACLocator to find the nearest TAC and to check
lowing options. hours, available services, and appointment options. Or,
• IRS Direct Pay: Pay your tax bill or estimated tax pay- on the IRS2Go app, under the Stay Connected tab,
ment directly from your checking or savings account choose the Contact Us option and click on “Local Offices.”
at no cost to you.
• Debit or Credit Card: Choose an approved payment The Taxpayer Advocate Service (TAS)
processor to pay online or by phone. Is Here To Help You
• Electronic Funds Withdrawal: Schedule a payment What Is TAS?
when filing your federal taxes using tax return prepara-
tion software or through a tax professional. TAS is an independent organization within the IRS that
helps taxpayers and protects taxpayer rights. Their job is
• Electronic Federal Tax Payment System: Best option
to ensure that every taxpayer is treated fairly and that you
for businesses. Enrollment is required.
know and understand your rights under the Taxpayer Bill
• Check or Money Order: Mail your payment to the ad- of Rights.
dress listed on the notice or instructions.
• Cash: You may be able to pay your taxes with cash at How Can You Learn About Your Taxpayer
a participating retail store. Rights?

• Same-Day Wire: You may be able to do same-day The Taxpayer Bill of Rights describes 10 basic rights that
wire from your financial institution. Contact your finan- all taxpayers have when dealing with the IRS. Go to
cial institution for availability, cost, and time frames. TaxpayerAdvocate.IRS.gov to help you understand what
these rights mean to you and how they apply. These are
Note. The IRS uses the latest encryption technology to
your rights. Know them. Use them.
ensure that the electronic payments you make online, by
phone, or from a mobile device using the IRS2Go app are
safe and secure. Paying electronically is quick, easy, and What Can TAS Do for You?
faster than mailing in a check or money order.
TAS can help you resolve problems that you can’t resolve
What if I can’t pay now? Go to IRS.gov/Payments for with the IRS. And their service is free. If you qualify for
more information about your options. their assistance, you will be assigned to one advocate
who will work with you throughout the process and will do
• Apply for an online payment agreement IRS.gov/ ( everything possible to resolve your issue. TAS can help
OPA) to meet your tax obligation in monthly install- you if:
ments if you can’t pay your taxes in full today. Once
you complete the online process, you will receive im- • Your problem is causing financial difficulty for you,
mediate notification of whether your agreement has your family, or your business;
been approved. • You face (or your business is facing) an immediate
• Use the Offer in Compromise Pre-Qualifier to see if threat of adverse action; or
you can settle your tax debt for less than the full • You’ve tried repeatedly to contact the IRS but no one
amount you owe. For more information on the Offer in has responded, or the IRS hasn’t responded by the
Compromise program, go to IRS.gov/OIC. date promised.
Understanding an IRS notice or letter you’ve re-
How Can You Reach TAS?
ceived. Go to IRS.gov/Notices to find additional informa-
tion about responding to an IRS notice or letter. TAS has offices in every state, the District of Columbia,
You can use Schedule LEP, Request for Change in and Puerto Rico. Your local advocate’s number is in your
Language Preference, to state a preference to receive no- local directory and at TaxpayerAdvocate.IRS.gov/
tices, letters, or other written communications from the Contact-Us. You can also call them at 877-777-4778.
IRS in an alternative language, when these are available.
Once your Schedule LEP is processed, the IRS will deter-
mine your translation needs and provide you translations
when available. If you have a disability requiring notices in
an accessible format, see Form 9000.

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How Else Does TAS Help Taxpayers? to resolve tax problems with the IRS, such as audits, ap-
peals, and tax collection disputes. In addition, LITCs can
TAS works to resolve large-scale problems that affect provide information about taxpayer rights and responsibili-
many taxpayers. If you know of one of these broad issues, ties in different languages for individuals who speak Eng-
report it to them at IRS.gov/SAMS. lish as a second language. Services are offered for free or
a small fee for eligible taxpayers. To find an LITC near
TAS for Tax Professionals you, go to TaxpayerAdvocate.IRS.gov/about-us/Low-
Income-Taxpayer-Clinics-LITC or see IRS Pub. 4134, Low
TAS can provide a variety of information for tax professio- Income Taxpayer Clinic List.
nals, including tax law updates and guidance, TAS pro-
grams, and ways to let TAS know about systemic prob-
lems you’ve seen in your practice.

Low Income Taxpayer Clinics (LITCs)

LITCs are independent from the IRS. LITCs represent in-
dividuals whose income is below a certain level and need

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Other Useful Forms for Corporations

Other Useful Forms
Form Use this form to—
W-2 and W-3—Wage and Tax Statement; and Report wages, tips, and other compensation, and withheld income, social
Transmittal of Wage and Tax Statements security, and Medicare taxes for employees.
W-2G—Certain Gambling Winnings Report gambling winnings from horse racing, dog racing, jai alai, lotteries,
keno, bingo, slot machines, sweepstakes, wagering pools, etc.
926—Return by a U.S. Transferor of Property to a Report certain transfers to foreign corporations under section 6038B.
Foreign Corporation
940—Employer's Annual Federal Unemployment Report and pay FUTA tax if the corporation either:
(FUTA) Tax Return
1. Paid wages of $1,500 or more in any calendar quarter during the
calendar year (or the preceding calendar year), or
2. Had one or more employees working for the corporation for at least
some part of a day in any 20 different weeks during the calendar year (or
the preceding calendar year).
941—Employer's QUARTERLY Federal Tax Return Report quarterly income tax withheld on wages and employer and employee
social security and Medicare taxes.
943—Employer's Annual Federal Tax Return for Report income tax withheld and employer and employee social security and
Agricultural Employees Medicare tax on farmworkers.
944—Employer's ANNUAL Federal Tax Return File annual Form 944 instead of filing quarterly Forms 941, if the IRS notified
you in writing.
945—Annual Return of Withheld Federal Income Report income tax withheld from nonpayroll payments, including pensions,
Tax annuities, individual retirement arrangements (IRAs), gambling winnings, and
backup withholding.
952—Consent To Extend the Time To Assess Tax Extend the period of assessment of all income taxes of the receiving
Under Section 332(b) corporation on the complete liquidation of a subsidiary under section 332.
965-B—Corporate and Real Estate Investment This form must be completed by a taxpayer for every tax year for which the
Trust (REIT) Report of Net 965 Tax Liability and taxpayer has any net 965 tax liability outstanding and not fully paid at any
Electing REIT Report of 965 Amounts point during the tax year. See the Instructions for Form 965-B.
966—Corporate Dissolution or Liquidation Report the adoption of a resolution or plan to dissolve the corporation or
liquidate any of its stock.
1042 and 1042-S—Annual Withholding Tax Return Report withheld tax on payments or distributions made to nonresident alien
for U.S. Source Income of Foreign Persons; and individuals, foreign partnerships, or foreign corporations to the extent these
Foreign Person's U.S. Source Income Subject to payments or distributions constitute gross income from sources within the
Withholding United States that is not effectively connected with a U.S. trade or business.
In addition, a publicly traded partnership is required to withhold on
distributions of effectively connected income to its foreign partners. See Pub.
515, Withholding of Tax on Nonresident Aliens and Foreign Entities.
1042-T—Annual Summary and Transmittal of Transmit paper Forms 1042-S to the IRS.
Forms 1042-S
1096—Annual Summary and Transmittal of U.S. Transmit paper Forms 1098, 1099, 5498, and W-2G to the IRS.
Information Returns

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Other Useful Forms
Form                                                 Use this form to—
1097-BTC, 1098, 1098-C, 1098-E, 1098-F,              Report the following: 
1098-T, 1099-A, B, C, CAP, G, H, DIV, INT, K,        • Tax credits to bond holders;
LTC, MISC, NEC, OID, PATR, Q, R, S, SA, 3921,        • Mortgage interest;
and 3922.                                            • Contributions of certain motor vehicles, boats, and airplanes;
                                                     • Student loan interest;
                                                     • Fines, penalties, and other amounts;
Important: Every corporation must file Forms         • Certain tuition payments;
1099-MISC (or 1099-NEC for nonemployee               • Acquisitions or abandonments of secured property;
compensation) if, in the course of its trade or      • Proceeds from broker and barter exchange transactions;
business, it makes payments of rents, services,      • Cancellation of debts;
commissions, or other fixed or determinable income   • Changes in corporate control and capital structure;
(see section 6041) totaling $600 or more to any one  • Certain government payments;
person during the calendar year.                     • Advance payments of health coverage insurance premiums;
                                                     • Dividends and distributions;
Also use these returns to report amounts received    • Interest payments;
as a nominee for another person. For more details,   • Merchant card and third-party network payments;
see the General Instructions for Certain Information • Payments of long-term care and accelerated death benefits;
Returns (1097, 1098, 1099, 3921, 3922, 5498, and     • Miscellaneous income payments to certain fishing boat crew members, 
W-2G).                                                 to providers of health and medical services, of rent or royalties, of 
                                                       nonemployee compensation, etc.;
                                                     • Original issue discount;
                                                     • Distributions received from cooperatives;
                                                     • Distributions from certain qualified education programs;
                                                     • Distributions from pensions, annuities, retirement or profit-sharing plans, 
                                                       IRAs, insurance contracts, etc.;
                                                     • Proceeds from real estate transactions;
                                                     • Distributions from an HSA, Archer MSA, or Medicare Advantage MSA;
                                                     • Exercise of incentive stock options; and
                                                     • Transfer of stock acquired through employee stock purchase plans.
1122—Authorization and Consent of Subsidiary         Include a subsidiary in a consolidated return. Attach this form to the parent's 
Corporation To Be Included in a Consolidated         consolidated return. Attach a separate Form 1122 for each subsidiary being 
Income Tax Return                                    included in the consolidated return.
1138—Extension of Time for Payment of Taxes by a  Request an extension of time for payment of tax for the immediately 
Corporation Expecting a Net Loss Carryback           preceding tax year if the corporation expects a net operating loss for the 
                                                     current year.
3520—Annual Return To Report Transactions With  Report ownership of and certain transactions with foreign trusts, including 
Foreign Trusts and Receipt of Certain Foreign Gifts  receipt of certain large gifts. See Schedule N (Form 1120), Question 5.
3520-A—Annual Information Return of Foreign          Report information about the foreign trust, its U.S. beneficiaries, and any U.S. 
Trust With a U.S. Owner                              person who is treated as an owner of any portion of the foreign trust.
5471—Information Return of U.S. Persons With         Satisfy the reporting requirements of sections 6038 and 6046, and the related 
Respect to Certain Foreign Corporations              regulations, as well as report amounts related to section 965. Form 5471 and 
                                                     the related schedules are used by certain U.S. persons who are officers, 
                                                     directors, or shareholders in certain foreign corporations. See the Instructions 
                                                     for Form 5471.
5498—IRA Contribution Information                    Report contributions (including rollover contributions) to any IRA, including a 
                                                     SEP, SIMPLE, or Roth IRA, and to report Roth IRA conversions, IRA 
                                                     recharacterizations, and the fair market value (FMV) of the account.
5498-ESA—Coverdell ESA Contribution Information Report contributions (including rollover contributions) to a Coverdell 
                                                     education savings account (ESA).
5498-SA—HSA, Archer MSA, or Medicare                 Report contributions and rollovers to an HSA or Archer MSA and the FMV of 
Advantage MSA Information                            an HSA, Archer MSA, or Medicare Advantage MSA. For more information, 
                                                     see the general and specific instructions for Forms 1098, 1099, 5498, and 
                                                     W-2G. 
5713—International Boycott Report                    Report operations in, or related to, a “boycotting” country, government, 
                                                     company, or national of a country and to figure the loss of certain tax benefits.

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Other Useful Forms
Form Use this form to—
8023—Elections Under Section 338 for Make elections under section 338 for a “target” corporation if the purchasing
Corporations Making Qualified Stock Purchases corporation has made a qualified stock purchase of the target corporation.
8027—Employer's Annual Information Return of Tip Report receipts from large food or beverage operations, tips reported by
Income and Allocated Tips employees, and allocated tips.
8275—Disclosure Statement Disclose items or positions, except those contrary to a regulation, that are not
otherwise adequately disclosed on a tax return. The disclosure is made to
avoid the parts of the accuracy-related penalty imposed for disregard of rules
or substantial understatement of tax. Also use Form 8275 for disclosures
relating to preparer penalties for understatements due to unrealistic positions
or disregard of rules.
8275-R—Regulation Disclosure Statement Disclose any item on a tax return for which a position has been taken that is
contrary to Treasury regulations.
8281—Information Return for Publicly Offered Report the issuance of public offerings of debt instruments (obligations).
Original Issue Discount Instruments
8300—Report of Cash Payments Over $10,000 Report the receipt, in the course of a trade or business, of more than $10,000
Received in a Trade or Business in cash or foreign currency in one transaction or a series of related
transactions.
8594—Asset Acquisition Statement Under Section Report a sale of assets that make up a trade or business if goodwill or going
1060 concern value attaches, or could attach, to such assets and if the buyer's
basis is determined only by the amount paid for the assets. Both the seller
and buyer must use this form.
8806—Information Return for Acquisition of Control Report an acquisition of control or a substantial change in the capital
or Substantial Change in Capital Structure structure of a domestic corporation.
8842—Election To Use Different Annualization Elect one of the annualization periods in section 6655(e)(2) for figuring
Periods for Corporate Estimated Tax estimated tax payments under the annualized income installment method.
8849—Claim for Refund of Excise Taxes Claim a refund of certain excise taxes.
8858—Information Return of U.S. Persons With Satisfy reporting requirements that apply if the corporation directly or
Respect to Foreign Disregarded Entities (FDEs) and indirectly owns a foreign disregarded entity or a foreign branch. A separate
Foreign Branches (FBs) Form 8858 is required for each foreign branch or foreign disregarded entity.
See the Instructions for Form 8858.

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Other Useful Forms
Form Use this form to—
8865—Return of U.S. Person With Respect to Report an interest in a foreign partnership. A domestic corporation may have
Certain Foreign Partnerships to file Form 8865 if it:
1. Controlled a foreign partnership (owned more than a 50% direct or
indirect interest in the partnership).
2. Owned at least a 10% direct or indirect interest in a foreign partnership
while U.S. persons controlled that partnership.
3. Had an acquisition, disposition, or change in proportional interest of a
foreign partnership that:
a. Increased its direct interest to at least 10% or reduced its direct
interest of at least 10% to less than 10%, or
b. Changed its direct interest by at least a 10% interest.
4. Contributed property to a foreign partnership in exchange for a
partnership interest if:
a. Immediately after the contribution, the corporation directly or
indirectly owned at least a 10% interest in the foreign partnership, or
b. The FMV of the property the corporation contributed to the
foreign partnership in exchange for a partnership interest exceeds
$100,000 when added to other contributions of property made to the
foreign partnership during the preceding 12-month period.
The domestic corporation may also have to file Form 8865 to report certain
dispositions by a foreign partnership of property it previously contributed to
that partnership if it was a partner at the time of the disposition. For more
details, including penalties for failing to file Form 8865, see the Instructions
for Form 8865.
8873—Extraterritorial Income Exclusion Figure the amount of extraterritorial income excluded from gross income for
the tax year (generally repealed for post-2004 income). See the Instructions
for Form 8873.
8876—Excise Tax on Structured Settlement Report and pay the 40% excise tax imposed under section 5891.
Factoring Transactions
8883—Asset Allocation Statement Under Section Report information about transactions involving the deemed sale of corporate
338 assets under section 338.
8886—Reportable Transaction Disclosure Disclose information for each reportable transaction in which the corporation
Statement participated. Attach Form 8886 to the corporation's income tax return for
each tax year in which it participated in a reportable transaction. The
corporation may have to pay a penalty if it is required to file Form 8886 and
does not do so. Other penalties may also apply. For more details, see the
Instructions for Form 8886.
8918—Material Advisor Disclosure Statement Disclose certain information about a reportable transaction to the IRS.
Material advisors who file Form 8918 will receive a reportable transaction
number from the IRS. This number must be provided to all taxpayers and
material advisors for whom the material advisor acts as a material advisor.
Other reporting requirements apply. See the Instructions for Form 8918.
8990—Limitation on Business Interest Expense Figure the amount of business interest expense the corporation can deduct
Under Section 163(j) and the amount to carry forward to the next year. See the Instructions for
Form 8990.
8991—Tax on Base Erosion Payments of Determine an applicable taxpayer's base erosion minimum tax amount for the
Taxpayers With Substantial Gross Receipts year. See the Instructions for Form 8991.
8992—U.S. Shareholder Calculation of Global Figure a U.S. shareholder's GILTI inclusion for years in which they are U.S.
Intangible Low-Taxed Income (GILTI) shareholders of controlled foreign corporations (CFCs). See the Instructions
for Form 8992.
8993—Section 250 Deduction for Foreign-Derived Figure the amount of the eligible deduction for FDII and GILTI under section
Intangible Income (FDII) and Global Intangible 250.
Low-Taxed Income (GILTI)

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                    To help us develop a more useful index, please let us know if you have ideas for index entries.
Index               See “Comments and Suggestions” in the “Introduction” for the ways you can reach us.
 
                                   Electronic filing 5
A                                  Estimated tax 6                   O
Accounting methods      7          Extraordinary dividends  11       Other useful forms 23
  Accrual method    7
  Change in accounting method:
  Section 481(a) adjustment   8    F                                 P
  Mark-to-market accounting        Figuring:                         Paid-in capital 4
  method    8                        Tax 15                          Passive activity limits           15
  Nonaccrual experience method   8 Foreign tax credit 15             Paying estimated tax    7
  Percentage of completion         Form:                             Penalties:
  method    8                        1096 17                          Estimated tax  6
Accounting periods   8               1099-DIV  17                     Late filing of return 5
Accumulated earnings tax   15        1118 15                          Late payment of tax   5
Assistance (See Tax help)            1120 5                           Other 6
At-risk limits 14                    1120-W  6                        Trust fund recovery   5
                                     1120X 14                        Personal service corporation                          3
                                     1139 14                         Preference items 10
B                                    2220 6                          Publications (See Tax help)
Backup withholding   18              3800 15
Base erosion minimum tax     15      4255 15
Below-market loans   11              5452 18                         R
                                     7004 5                          Recapture taxes:
                                     8611 15                          Childcare facilities and services 
C                                    8827 15                          credit   15
Capital contributions   4            8832 3                           Indian employment credit                           15
Capital losses   13                  8834 15                          Investment credit 15
Charitable contributions   12        8845 15                          Low-income housing credit                          15
Closely held corporation   3         8874 15                          New markets credit    15
  At-risk limits 14                  8882 15                          Qualified electric vehicle credit                     15
Corporate preference items    10     8912 15                         Recordkeeping   9
Corporations, businesses taxed                                       Related persons  9
  as 2                                                               Retained earnings  15
Credits:                           G
  Foreign tax  15                  Going into business 9
  General business credit  15                                        S
  Prior year minimum tax  15                                         Small business taxpayer             7
                                   I                                 Start-up costs  9
                                   Income tax returns 5
D
Distributions:                                                       T
  Money or property  16            L                                 Tax, figuring 15
  Other  17                        Loans, below-market   11          Tax help 19
  Reporting 17                                                       Tax rates 15
  Stock or stock rights 16         N
  To shareholders   16             Net operating losses  14
Dividends-received deduction    10 Nontaxable exchange of property 
                                     for stock 3
E
EFTPS, Electronic Federal Tax 
  Payment System     5

Publication 542 (January 2022)                                                                                           Page 27

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