1.13.9  Statistical Editing of Insurance Company Returns

1.13.9.1  (04-04-1998)
Introduction

  1. General—This manual provides instructions for use in editing the Form 1120–L, filed by life insurance companies, Form 1120–PC, filed by property and casualty insurance companies, and consolidated returns filing under Section 1504(c) and 594 of the Internal Revenue Code.

  2. Ogden Service Center—All Forms 1120–L, 1120–PC, and consolidated with Form 1120L and/or Form 1120–PC are to be shipped to and edited in Ogden Service Center. See IRM 1.13.3, Document Management Handbook, for detailed shipping and controlling information.

  3. Pre-loaded Data—As with the Form 1120, certain fields are pre-loaded from the Return Transaction File (RTF). However, fewer items from the RTF are available for the 1120–L and 1120–PC. For example, income statement items are not pre-loaded. We indicate available RTF items on the 1120–L and 1120–PC screens with asterisks (*). Verify all RTF items according to instructions in this manual and Section 8.2.5 of IRM 1.13.8, Editing Pre-loaded Data.


1.13.9.2  (04-04-1998)
Specific instructions for Form 1120–L

  1. Incorrect Return Filing—all taxable life insurance companies are required to file a Form 1120–L. It is possible that a corporation that should have filed an 1120–L, instead filed a Form 1120, or 1120–PC. In addition, a property and casualty insurance company may mistakenly file an 1120–L instead of the correct Form 1120–PC. In general, assume the corporation filed correctly, use the following instructions to determine the correct return type:

    1. Should this 1120–L really be an 1120–PC?—If an 1120–L is filed with Item 2(c), page 8, Burial or other insurance company box checked and there is a note attached to the return stating that it is taxable under IR Code Section 831, then edit it as an 1120–PC. If the company filing on Form 1120–L or 1120 is incorporated in Texas, Arkansas or Louisiana and is described as a "Burial Company or Association" or "Mutual Aid Association," then edit it as a Form 1120–PC. If the company filing on Form 1120–L or Form 1120 is listed in Best's Insurance Reports, Property-Casualty as issuing cancelable policies or is in the list of mutual companies by States, then edit as a Form 1120–PC.

    2. How do I handle return-type changes of this sort?—The return must be edited using the correct return-type screens even if they filed the wrong form. In other words, you may have to force the data to fit into the correct return-type screens. The correct return-type must be entered, both on the 1120 Form Selection Menu screen and the Return ID Screen. (See Section 8.3.2 and Section 8.3.3 of IRM 1.13.8 for entering return type). When the screens for the correct return-type appear, use editing instructions for both the correct and incorrect return-types to aid in fitting the record into the appropriate screens. Consult the lead editor or call the National Office for specific problems on a record of this sort.

  2. Editing Sources—There are several sources you may need to use to correctly edit a Form 1120–L. They include the return itself, return attachments, the corporation's Annual Statement and Best's Insurance Reports, Life-Health.

    1. Before using reference books, compare the balance sheet and accounting period to make sure the degree of consolidation is the same. The following are examples of the types of problems that may be resolved using the reference books: obtaining balance sheet data for a corporation when the information is not attached to the return; verifying distributions to stockholders when questionable; and verifying net income per books when questionable.

    2. Some life insurance company income tax returns include separate or segregated accounts. For these returns, amounts shown for the separate accounts must be added to the amounts shown for the regular account prior to entering the data, if not already done. For the annual statement the calcscreens may be used to combine the accounts. See Section 8.5.2 of IRM 1.13.8 for instructions.

    3. In these instructions, when line references for the tax year are identical to the previous year, only one reference will be given.

    4. Generally, edit information from sources according to the following priority: the form itself, followed by the Annual Statement, followed by form attachments. Exceptions are noted in the specific instructions. Only edit information from Best's when specifically directed.

  3. Inactive or other reject records—Use the instructions in Section 8.4 of IRM 1.13.8 to determine whether an 1120–L should be assigned a reject code.

  4. When finding an amount for stored total assets, use in this order (1) A.S. page 2 line 25 column 4, (2) Schedule L, Part II line 2 (3) Best's Insurance Reports

  5. 1504(c) Returns—Use the exhibits for Form 1120–L to edit the 1120–L portion of 1504(c) returns. Detailed instructions for the editing and merge processes are in the 1504(c) exhibits.


1.13.9.3  (04-04-1998)
Specific instructions for Form 1120–PC

  1. Incorrect Return Filing—Since 1987, all taxable non-life insurance companies have been required to file on Form 1120–PC. It is possible that a corporation that should have filed an 1120–PC instead filed on an 1120 or 1120–L. In general, assume the corporation filed correctly, but when there is a question, use the following instructions to determine the correct return type. (Note: Do not convert an 1120–PC filer to an 1120–L filer, even if the corporation name suggests life or health insurance.)

    1. Should this 1120 or 1120–L really be an 1120–PC?—If an 1120–L is filed and Page 8, Schedule M, Line 2(c), Burial or other insurance company box checked and there is a note attached stating that it is taxable under IR Code Section 831, then edit it as an 1120–PC. If the company filing on Form 1120–L or 1120 is incorporated in Texas, Arkansas or Louisiana and is described as a "Burial Company or Association" or "Mutual Aid Association," then edit it as a Form 1120–PC. If an 1120 is filed and the attached schedule to Other Income indicates unique Property/Casualty items (e.g., premiums), edit it as an 1120–PC. Similarly, if the Other Deduction attached schedule indicates unique PC items (e.g., losses, loss adjustment expenses), edit as an 1120–PC.

    2. How do I handle return-type changes of this sort?—The return must be edited using the correct Return-Type screens even if they filed the wrong form. In other words, you may have to force the data to fit into the correct Return-Type screens. The correct Return-Type must be entered on the Return ID Screen. (See Section 8.3.2 and Section 8.3.3 of IRM 1.13.8 for entering Return-Type). When the screens for the correct Return-Type appear, use editing instructions for both the correct and incorrect Return-Types to aid in fitting the record into the appropriate screens. Consult the lead editor or call the National Office for specific problems on a record of this sort.

  2. Editing Sources—There are several sources you may need to use to correctly edit a Form 1120–PC. They include the tax return, return attachments, the corporation's Annual Statement, and Best's Insurance Reports, Property-Casualty. Generally, edit information from sources according to the following priority: the form itself, followed by form attachments, followed by the Annual Statement. Exceptions are noted in the specific instructions. Only edit information from Best's when specifically directed.

  3. Inactive or Reject Returns—Generally, inactive or reject conditions for Forms 1120–PC are the same as those for other 1120 types and are described in Section 8.4 of IRM 1.13.8. For any situations unique to Property/Casualty insurance companies not described in Section 8.4 of IRM 1.13.8, call the National Office.

  4. 1504(c) Returns—Use the exhibits for Form 1120–PC to edit the 1120–PC portion of 1504(c) returns. Detailed instructions for the editing and merge processes are in the 1504(c) exhibits.


1.13.9.4  (04-04-1998)
Specific instruction for 1504(c) returns

  1. Section 1504(c) of the Internal Revenue Code allows for the filing of a consolidated return by corporations with both insurance and non-insurance operations. This may include all or some combination of life insurance, property/casualty insurance, and non-insurance business activity.

  2. In terms of statistical processing, our users need not only the consolidated totals but also the separate detail by business activity. Therefore, three separate subgroups may require editing: a life insurance subgroup (using Form 1120–L screens), a property/casualty subgroup (using Form 1120–PC screens), and a non-insurance subgroup (using Form 1120 screens).

  3. Generally, accept taxpayer reporting regarding the composition of their non-insurance, non-life, and life subgroups. Meaning, when a 1504(c) filer clearly identifies each member of a particular subgroup (non-insurance, property/casualty, or life), you need not research each member to determine the validity of its grouping. However, if the taxpayer does not clearly identify the members of the subgroups, you should continue to employ Best's Insurance Reports, Property/Casualty and Best's Insurance Reports, Life/Health to determine the proper grouping of the subsidiary data.

  4. Each subgroup record is edited and tested separately just as if it were not part of a consolidated return (with some exceptions). Therefore, use the specific editing instructions for Forms 1120, 1120–PC, or 1120–L.

  5. The 1996 statistical processing for 1504(c) returns is not significantly changed from that used in prior on-line processing years. Like the prior year programs:

    1. The separate subgroups are only edited through to taxable income. No income tax, tax credits, or tax payments, etc. are allocated to the subgroups. Instead, we use a series of consolidated screens to edit the consolidated taxable income, tax and tax credits, etc.

    2. The forms which provide the detail for these various tax, tax credit, and tax payment items (Form 1118, 3468, 3800, 4626, 5884, 6478, 6765, 8586, 8609, 8820, 8826, 8827, 8830, 8835, 8844, 8845, 8846, and 8847) are edited in association with the specially-created consolidated screens. Use IRM 1.13.8 editing instructions to edit these forms.

    3. Elimination/Adjustment screens are provided to address taxpayer reported eliminations and adjustments. Rather than arbitrarily assign income statement or balance sheet eliminations to a particular subgroup, edit them into the appropriate elimination fields from where they are applied to the entire consolidated record.

    4. The consolidated Form 8816 is edited within the consolidated schedules set of screens but if it comes entirely from either the PC subgroup or L subgroup, the system provides a mechanism so the editor can choose to copy the subgroup Form 8816 Part I & II data onto the consolidated set of screens.

    5. Editing for the Form 8824, Like-Kind Exchangesis done at the subgroup level. The Form 8824 data captured at the subgroup level are copied to the consolidated record during the merge process. NOTE: in the 1504(c) context, if the subgroup reporting the Form 8824 has an EIN different from the consolidated EIN, enter the subgroup's EIN in the first Form 8824 field ( "Identification number as shown on return" ).

    6. 1504(c) returns are subject to a unique "Quality Review System" . Returns selected for review will be the fifty (50) largest from the prior year (based on asset size). In addition, a random 5% sample of the remaining 1504(c) returns will be selected for review.

  6. Section 1504(c) returns are merged on-line after completion of editing. Corrections to any particular subgroup requires releasing the subgroup record, inputting the desired correction, completing the return, and re-firing the 1504(c) merge process. No service center error resolution is performed on the merged record, but editors may view the merged result through browse mode. As part of the merge process, the merged records are subjected to National Office testing.

  7. There are two new features for the 1996 1504(c) program:

    1. The photocopying requirement for companies with 10 billion dollars or more in assets has been eliminated. A list of approximately 25 returns that still need to be photocopied for OTA analyst will be pre-loaded into the system. If a return is on this list, the editor will be informed at Return Completion via a screen message.

    2. Editors are encouraged to utilize the prior year quality review comments if they are available. If a 1504(c) was quality reviewed in the prior year, a message will inform the editor when they begin the return that the prior year quality comments are available.

1.13.9.4.1  (04-04-1998)
SOI Corporation Processing Main Menu

  1. As described in IRM 1.13.8, Statistical Editing for Corporation Income Tax Returns, there are ten options listed on the main menu.

    1. To begin the editing process for a 1504(c) return, select `6' (the Added Record option)

1.13.9.4.2  (04-04-1998)
Added Record Menu

  1. There are four options listed on the Added Record menu.

    1. Option 1, 594—Select this option to create and/or edit 594 subgroup records.

    2. Option 2, 1504C—Select this option to create and/or edit 1504(c) subgroup records.

    3. Option 3, SHORT EDIT—This option provides National Office analysts the means to add non-selected BEA super-critical corporation survey data to the file.

    4. Option 4, EXTRACT RECORD—This option provides National Office analysts the means to add replacement records for super-critical returns missing from the file.

  2. From this menu, select `2' to create, begin the initial edit, or continue editing a 1504(c) return.

1.13.9.4.3  (04-04-1998)
SOI Corporations 1504(c) Return Screen

  1. After selecting `Option 2' from the Added Record Menu, the SOI CORPORATIONS 1504(c) RETURN screen displays prompting for the Service Center, Cycle, Page and Line (SCPL) of the record you wish to edit. Enter the SCPL from the Sample Selection Sheet.

    1. If the keyed SCPL does not produce a matched database record, verify that the SCPL is entered correctly. Otherwise, refer the record to the lead editor.

    2. If the keyed SCPL matches database record with an edit status of `C' or `D', the system message "THIS RECORD HAS BEEN MERGED. RELEASE SUBGROUP TO RE-EDIT" will display and entry will not be allowed (until a subgroup is released).

    3. If the keyed SCPL matches database record currently in quality review, the system message "QUALITY REVIEW HAS NOT BEEN COMPLETED ON THIS RETURN" will display and entry will not be allowed (until quality review is completed).

    4. If the keyed SCPL matches a database record not completely edited or currently in quality review, the system responds by displaying the return type and return name for the parent corporation record.

  2. Enter the Return Type Code according to the following instructions. The Return Type Code should be assigned based on the consolidated form type used by the taxpayer. Assign the Return Type Code as follows: Form 1120 = 14, Form 1120–PC = 10, Form 1120–L = 09. After entering a valid Return Type for the parent record, the 1120, 1120–PC, and 1120–L subgroup records are initially set to `not created'. Also, based on the parent Return Type entered, the EIN for corresponding subgroup is pre-loaded.

  3. The subgroup records are created based on the editor's entries on Screen 1504.EDIT. If the 1504(c) return is filed in a manner such that you are unable to separately edit the subgroup detail, only enter a EIN for the subgroup that matches the parent Return Type.

    1. The cursor prompts the editor to enter the 1120 subgroup EIN. If an 1120 subgroup is available to edit, accept the pre-loaded EIN if the parent return in an 1120, or enter the EIN of the 1120 with largest total assets, otherwise enter [RETURN].

    2. The cursor prompts the editor to enter the 1120–PC subgroup EIN. If an 1120–PC subgroup is available to edit, accept the pre-loaded EIN if the parent return is an 1120–PC, or enter the EIN of the 1120–PC with largest total assets, otherwise enter [RETURN].

    3. The cursor prompts the editor to enter the 1120–L subgroup EIN. If an 1120–L subgroup is available to edit, accept the pre-loaded EIN if the parent return is an 1120–L, or enter the EIN of the 1120–L with largest total assets, otherwise enter [RETURN].

    4. The Consolidated schedules subgroup EIN is displayed and is that of the parent (previously entered). Initially the status is `Unedited'.

  4. After entering either an EIN or [RETURN] for the 1120–L subgroup, a pop-up message displays "Are all subgroup entries correct?" . The cursor is initially positioned on (NO) but can be positioned on (YES) by pressing [RETURN]. After positioning the cursor on the appropriate response, press [DO]. Pressing [DO] on the (NO) response returns the cursor to the EIN field for the 1120 subgroup. Pressing the [DO] key on the (YES) response creates the subgroup records, updates the edit status of the subgroups to `unedited', and returns the cursor to the first of the created subgroup records. Special Note: After creation of the subgroup records, if it is discovered that the EIN for any of the subgroups has been mis-keyed, the editor may access that subgroup's EIN field by positioning the cursor on the specific subgroup and pressing [INSERT HERE]. Correct the EIN entry and press [RETURN].

  5. The cursor may be positioned on any of the created 1120, 1120–PC, or 1120–L subgroup records by using [RETURN] or [F12]. After positioning the cursor, proceed to edit either the 1120, 1120–PC, or 1120–L subgroup by pressing [DO]. To return to the ADDED RECORD MENU screen, press [PF4].

  6. Pressing [DO] to edit a particular 1504(c) subgroup displays the CORPORATION RETURN IDENTIFICATION SCREEN. The selected numeric SCPL displays. To continue, press [RETURN] on the SCPL.

  7. The cursor is positioned on FORM REVISION YEAR and displays revision year 96. If Revision Year 96 is correct, press [RETURN]. Otherwise, change Revision Year to 95 and press [RETURN].

  8. Enter Total Assets for the 1504(c) subgroup you are about to enter. This is a double entry field.

  9. The reject coding option is disabled for subgroup records of a 1504(c) return, so the system does not accept a `Y' entry. Enter `C' and [RETURN] to continue to the FORM/SCHEDULE SELECTION SCREEN for the 1504(c) subgroup.

1.13.9.4.4  (04-04-1998)
Form/Schedule

  1. A form/schedule selection screen unique to each subgroup return type displays. Carefully examine the subgroup record and mark with an `X' any return, so the system does not accept a `Y' entry. Enter `C' and [RETURN] to continue to the FORM/SCHEDULE SELECTION SCREEN for the 1504(c) subgroup.

1.13.9.4.5  (04-04-1998)
Form/Schedule Selection Screen

  1. A form/schedule selection screen unique to each subgroup return type displays. Carefully examine the subgroup record and mark with an `X' any form or schedule listed for which there is data to edit. Sometimes the corporation only provides information for a particular form on an attachment and does not file the form itself. Therefore, you must search attachments as well.

  2. Certain screens display for the appropriate subgroup records and are not included as options on the form/schedule selection screen. These include the entity information, other information, income/deductions, and balance sheet screens. In the 1504(c) context, the Form 8594 may only be selected on the subgroup record whose Return Type equals that of the consolidated record. Thus, the form selection screen for one subgroup will allow selection of the Form 8594 screens but for the other subgroup(s), selection of the Form 8594 will not be available. Accordingly, all reported Form 8594 information (regardless of subgroup) should be included when editing on the one sub. However, like editing the Form 8824, if the subgroup reporting the Form 8594 has a Corporation Name and EIN different from the consolidated Corporation Name and EIN, enter the subgroup's Corporation Name and EIN in the first two Form 8594 fields.

  3. Special instructions: As previously described, the editor does not edit income tax, tax credits, or tax payments/credits on a subgroup basis. Therefore, Schedule J (tax data) screens and taxes/payments screens are not selected or available for 1504(c) subgroup screens. Likewise, forms 1118, 3468, 3800, 4626, 5884, 6478, 6765, 8586, 8609, 8820, 8826, 8827, 8830, 8835, 8844, 8845, 8846, and 8847 are edited in conjunction with the consolidated screens. Therefore, these screens cannot be selected on the subgroup record's form/schedule selection screen.

  4. Edit the 1120, 1120–PC, and 1120–L subgroup screens using the appropriate instructions from IRM 1.13.8, and this manual. Also, edit the consolidated Forms 1118, 3468, 3800, 4626, 5884, 6478, 6765, 8586, 8609, 8820, 8826, 8827, 8830, 8835, 8844, 8845, 8846, and 8847 according to the specific form instructions in IRM 1.13.8. Edit the consolidated Form 8816 data using the Form 8816 instructions included in Exhibit 1.13.9–3 that follow. For the specially-created elimination/adjustment screens and the consolidated taxable income computation screens, use the editing instructions that follow in Exhibits 1.13.9–34 and 1.13.9–35.

  5. For further instructions regarding the form/schedule selection screens, see Section 8.3.4 of IRM 1.13.8.

1.13.9.4.6  (04-04-1998)
Workscreens

  1. The system contains several on-line editor aids to simplify some of the more cumbersome and time-consuming editing processes. These include workscreens for industry coding, consolidating non-consolidated income statements and balance sheets, and allocating amounts out of catch-all fields on the income statement and balance sheet. Some of the enhancements are the lookup screens, on-line calculator, calcscreens, on-line comments field, fast forward/backward key, on-line help screens, and return information screen. These editing enhancements are also available in the editing process for 1504(c) records.

    1. See Section 8.5.1 of IRM 1.13.8 for instructions regarding Industry Code Workscreens.

    2. See Section 8.5.2 of IRM 1.13.8 for instructions regarding Calcscreens.

    3. See Section 8.5.3 of IRM 1.13.8 for instructions regarding Allocation Screens.

    4. See Section 8.5.4 of IRM 1.13.8 for instructions regarding On-Line Comments.

    5. See Section 8.5.6 of IRM 1.13.8 for instructions regarding the Fast Forward Key.

    6. See Section 8.5.7 of IRM 1.13.8 for instructions regarding the Fast Backward Key.

    7. See Section 8.5.8 of IRM 1.13.8 for instructions regarding On-Line Help.

    8. See Section 8.5.9 of IRM 1.13.8 for instructions regarding Return Information.

    9. See Section 8.5.10 of IRM 1.13.8 for instructions regarding the Prior Year Lookup/BMF function.

1.13.9.4.7  (04-04-1998)
Rejecting Records

  1. If after your initial inspection of a 1504(c) return you determine that the return needs to be rejected, follow the instructions in Section 8.4 of IRM 1.13.8 REJECTING RECORDS. Special Note: Do not select the ADDED RECORD option from the main menu as in normal 1504(c) processing. Rather, select Option 1—Edit Mode and follow the instructions in Section 8.4 of IRM 1.13.8.

  2. If you have already entered the ADDED RECORD option and begun 1504(c) processing, and then determine the return needs to be rejected, do the following:

    1. Notify your lead editor who will "drop" the SCPL from the system, returning the record to an Unedited status code (`U').

    2. After this procedure, you will be notified to access the SCPL and reject the return using the instructions in Section 8.4 of IRM 1.13.8.


1.13.9.5  (04-04-1998)
Specific instructions for Section 594 returns

  1. Taxpayers meeting the requirements of Section 594 of the Internal Revenue Code are subject to an alternative tax consisting of:

    1. A partial tax on the taxable income of the banking entities (computed on Form 1120) determined without regard to income or deductions allocable to the life insurance department, and

    2. a partial tax on the taxable income of the life insurance department (computed on Form 1120–L).

  2. Consequently, the taxpayer completes a separate Form 1120 for their banking activity and a separate Form 1120–L for their Life Insurance Department. The Form 1120–L is attached to the parent 1120 as a supporting schedule. After separately determining the taxable income and tax for the two subgroups, the taxpayer consolidates the tax on the parent's (Form 1120) Schedule J. This Life Department tax amount is typically a write-in amount reported on either Line 7 or 8 of the parent's Schedule J.

  3. Our users need to see not only the consolidated totals but also the separate subgroup detail. Therefore, it is necessary to edit a Section 594 return as two separate records: a non-insurance subgroup (using Form 1120 screens) and a life insurance subgroup (using Form 1120–L screens).

  4. For the 1996 Section 594 edit process, the two subgroup records merge on-line after completion. Quality review via the browse mode should still be conducted on the subgroup records. Corrections to either subgroup record requires releasing the subgroup return, inputting the desired correction, completing the return, and re-firing the 594 merge process. As part of the merge process, the merged records are subjected to limited National Office testing. Service Center personnel may view the merged record via the browse mode, however, no error resolution is performed on the merged record.

  5. For the 1996 SOI Corporation Program, the data abstraction or statistical processing for Section 594 returns remains essentially unchanged. New forms or schedules added to either the Form 1120 editing program or the Form 1120–L editing program will be reflected in the 594 editing process. Use the editing instructions in IRM 1.13.8 to edit the 1120 subgroup and this manual to edit the 1120–L subgroup.

  6. As in prior years, the only real "special instruction" regarding the editing of Section 594 returns involves the Schedule J tax data.

    1. When editing the 1120 subgroup, subtract out any amount of income tax, tax credits, or alternative minimum tax identified as coming from the life insurance department. Be sure that the 1120 subgroup's total tax and tax due/overpayment are adjusted
      accordingly.

    2. When editing the 1120–L subgroup, include the life insurance tax data identified from the parent's Schedule J. Be sure to include this amount in total tax and tax due.

  7. To assist in consolidating separate subsidiary information, the regular calcscreens for income statement, balance sheet (Annual Statement for Form 1120–L), Form 4562, Form 4797, M1 and M2 are available. In addition, calcscreens for Schedule(s) E, F and L are available on the Form 1120–L. For more information regarding calcscreens see IRM 1.13.8, Section 8.5.2.

1.13.9.5.1  (04-04-1998)
SOI Corporation Processing Main Menu

  1. As described in IRM 1.13.8, Statistical Editing for Corporation Income Tax Returns, there are ten options listed on the main menu.

  2. To begin the editing process for a Section 594 return, select Option 6, ADDED RECORD.

1.13.9.5.2  (04-04-1998)
Added Record Menu

  1. Here are four options listed on the Added Record menu.

    1. Option l, 594 RETURN—The editor selects this option to create and/or edit 594 subgroup records.

    2. Option 2, 1504(c) RETURN—The editor selects this option to create and/or edit 1504(c) subgroup records.

    3. Option 3, SHORT EDIT—This option is for National Office analysts providing a means to add non-selected BEA super-critical corporation's survey data to the file.

    4. Option 4, EXTRACT RECORD—This option is for National Office analysts providing a means to add replacement records for super-critical returns missing from the file.

  2. From this menu, select `1' to create, begin the initial edit, or continue editing a Section 594 return.

1.13.9.5.3  (04-04-1998)
SOI Corporations 594 Return Screen

  1. After selecting `Option 1' from the Added Record Menu, the SOI CORPORATIONS 594 RETURN screen displays prompting you for the Service Center, Cycle, Page and Line (SCPL) of the record you wish to edit. Enter the SCPL from the Sample Selection Sheet.

    1. If the keyed SCPL does not produce a matched database record, verify that the SCPL was entered correctly. Otherwise, refer the record to the lead editor.

    2. If the keyed SCPL matches a database record the system responds by displaying the EIN and RETURN NAME for the parent corporation record and its edit status.

  2. The cursor prompts you to enter the Life Insurance Department's Employer Identification Number (EIN). If there is an attached Form 1120–L for the Life Insurance Department available to edit, enter the EIN. If the 594 return is filed in such a manner so that you are unable to separately edit the components, enter [RETURN] at the Life Insurance Dept. EIN prompt.

  3. After entering either the EIN or [RETURN] for the Life Insurance Dept., the pop-up message, "Are all subgroup entries correct?" displays. The cursor is initially positioned on `NO' but can be positioned on `YES' by pressing [RETURN]. After positioning the cursor on the appropriate response, press [DO]. Pressing [DO] on the `NO' response returns the cursor to the EIN field for the Life Insurance Dept. Pressing the [DO] key on the (YES) response creates the subgroup records and updates the edit status of the subgroups to `unedited'. Special Note: After creation of the subgroup records if it is discovered that the EIN for the Life subgroup has been mis-keyed, the editor may access the Life Department EIN field by positioning the cursor on the Life Insurance Dept. subgroup and pressing [INSERT HERE]. Correct the EIN entry and press [RETURN].

  4. The cursor will be positioned on the Parent record. You may position the cursor on either the Parent or Life Insurance Dept. subgroup by using [RETURN] or [F12]. After positioning the cursor, proceed to edit either the 1120 or 1120–L subgroup by pressing [DO]. To return to the ADDED RECORD MENU screen, press [PF4].

  5. After pressing [DO] to edit a particular 594 subgroup, the CORPORATION RETURN IDENTIFICATION SCREEN will be displayed. The selected numeric SCPL is displayed. Press [RETURN] for the service center, cycle, page, and line entries to continue.

  6. The cursor is positioned on FORM REVISION YEAR. The system displays 96. If Revision Year 96 is correct, press [RETURN]. Otherwise, change Revision Year to 95 and press [RETURN].

  7. Enter Total Assets for the 594 subgroup you are about to enter. This is a double entry field. This Total Assets entry is stored and remains unchanged regardless of subsequent balance sheet automatic tests.

  8. The reject coding option has been disabled for components of a 594 return, so the system will not accept a `Y' entry. Enter `C' and [RETURN] to continue to the FORM/SCHEDULE SELECTION SCREEN for the 594 subgroup you are editing.

1.13.9.5.4  (04-04-1998)
Form/Schedule Selection Screen

  1. A Form/Schedule Selection Screen displays for each subgroup return type. Carefully examine the subgroup record, then mark with an `X' any form or schedule listed for which there is data to edit. Sometimes the corporation will only provide information for a particular form on an attachment and will not file the form itself. Therefore, you must search attachments as well.

  2. Certain screens will display for the appropriate subgroup records and are not included as options on the Form/Schedule Selection Screen. These include the entity information, other information, income/deduction, taxes/payments, and balance sheet screens.

  3. The editing procedure for 594 returns with regard to the Forms 1118, 3468, 3800, 4626, 5884, 6478, 6765, 8586, 8609, 8820, 8826, 8827, 8830, 8835, 8844, 8845, 8846, and 8847 is unlike that for 1504(c) returns. For 1504(c) returns, these forms are edited on separate consolidated screens and are not associated with any specific subgroup (whether 1120, 1120–PC, or 1120–L). For 594 returns, these forms are filed on an individual subgroup basis, so they must be edited with their related subgroup.

  4. For 1996, the editing of Form(s) 8594 can only occur during the editing of the 1120 subgroup. The "How Many Original Form(s) 8594 Attached?" question is disabled for the 1120–L sub, thus no Form 8594 may be created or edited for the Life Department. Contact the National Office if the Life Department has Form(s) 8594 attached.

  5. Edit the 1120 and 1120–L subgroup screens using the appropriate instructions from IRM 1.13.8 and IRM 1.13.9. Edit any attached Schedule D or Forms 1118, 3468, 3800, 4562, 4626, 4797, 5884, 6478, 6765, 8586, 8594, 8609, 8820, 8826, 8827, 8830, 8835, 8844, 8845, 8846, and 8847 also according to the specific form instructions in IRM 1.13.8.

  6. For further instructions regarding the Form/Schedule Selection Screens, see IRM 1.13.8, Section 8.3.3.

1.13.9.5.5  (04-04-1998)
Workscreens

  1. The system contains several on-line editor aids to simplify some of the more cumbersome and time-consuming editing processes. These include workscreens for industry coding, consolidating non-consolidated income statements and balance sheets, and allocating amounts out of catch-all fields on the income statement and balance sheet. Some of the enhancements are the lookup screens, on-line calculator, on-line comments field, fast forward/backward key, on-line help screens, and return information screen. These editing enhancements are also available in the editing process for Section 594 records. See Section 9.4.5 for a list of these editing enhancements.

1.13.9.5.6  (04-04-1998)
Rejecting Records

  1. If you determine after your initial inspection of a Section 594 return you need to reject the return, follow the instructions in IRM 1.13.8, Section 8.4 REJECTING RECORDS. Special Note: Do not select the ADDED RECORD option from the main menu as in normal 594 processing. Rather, select Option 1—Edit Mode and follow the instructions in IRM 1.13.8, Section 8.4.

  2. If you already entered the ADDED RECORD option and began 594 processing, then determine you need to reject the return, do the following:

    1. Notify your lead editor who will "drop" the SCPL from the system, returning the record to an Unedited status code (`U').

    2. After this procedure, you will be notified to access the SCPL and reject the return using the instructions in IRM 1.13.8, Section 8.4.

1.13.9.5.7  (04-04-1998)
Entity Information Screen

  1. Special Note: For 1996, edit the Corporation Name separately on both the 1120 subgroup and the 1120–L subgroup, but onlyif the EIN's are different. The system assigns the Corporation Name entered for the 1120 subgroup to the merged record.

  2. For specific instructions on the editing of Entity Information items and resolution of the associated tests see the relevant exhibit, depending on form type.

Exhibit 1.13.9-1  (04/04/98)
Entity Information

Exhibit 1.13.9–1 provides specific instructions for the editing of the Entity Information items and resolution of the associated tests.
             
Data Item   Line Reference
             
Corporation Name   Page 1
             
Editing Instructions:
  (1) This is a must enter field.
  (2) When available from the Prior Year File, this item will be pre-loaded on the screen but may be changed by the editor. See Section 8.2.5 of IRM 1.13.8 for general instructions regarding RTF data.
  (3) For general instructions regarding the editing of Corporation name see Exhibit 1.13.8–21 of IRM 1.13.8
             
Employer Identification Number (EIN)   Page 1, Line B
             
Editing Instructions:
  (1) This is a display field only except on the reject screen.
  (2) Verify that the nine digit number on the screen matches the number on the return.
  (3) If the EINs do not match notify the lead editor. National Office should be consulted before changes are made.
             
Accounting Period Indicator   Page 1, Line D
             
Editing Instructions:
  (1) When available from the RTF, this item will be pre-loaded on the screen. See Section 8.2.5 of IRM 1.13.8 for general instructions regarding RTF data.
  (2) For general instructions regarding the editing of Accounting period indicator see the core manual.
             
Month Accounting Period Ends   Page 1
             
Editing Instructions:
  (1) When available from the RTF, this item will be pre-loaded on the screen. See Section 8.2.5 of IRM 1.13.8 for general instructions regarding RTF data.
  (2) For general instructions regarding the editing of month accounting period ends see the core manual.
             
Year Accounting Period Ends   Page 1
             
Editing Instructions:
  (1) When available from the RTF, this item will be pre-loaded on the screen. See Section 8.2.5 of IRM 1.13.8 for general instructions regarding RTF data.
  (2) For general instructions regarding the editing of month accounting period ends see the CORE manual.
Data Item   Line Reference
             
Year Accounting Period Ends—cont.
             
  (3) If the return has an invalid accounting period, and the taxpayer indicates the return is merging or final, the following message appears, "Merging or final record with invalid accounting period. Please reject!" Use Reject Code #3.
             
Test Description
             
V004 This is a giant record with an accounting period ending before 7/96.
             
Correction Procedure:
  (1) Because this record is a giant, please consult with National Office before rejecting it.
  (2) If National Office agrees, the Test Release [F17] Key may be used.
  (3) Quite often, a Return with an invalid accounting period will arrive in the same workgroup as a Return with a valid accounting period. After identifying the EIN is the same, reject the older Return (Reject Code #3) and edit the current Return. This can be done without calling National Office.
             
E008 This is a non-giant record with an accounting period ending before 7/96.
             
Correction Procedure:
  (1) Non-giant returns with invalid accounting periods should be rejected.
  (2) Reject this return using Reject Code #3.
             
V005 Possible invalid accounting period.
             
Correction Procedure:
  (1) This test will fail when the Year Accounting Period Ends is 95 and the Month Accounting Period Ends is greater than 6 (for a full-year return) or greater than 36 (for a part-year return).
  (2) Check the return to determine the correct Month Accounting Period Ends and code according to the instructions above.
  (3) If this test cannot be corrected, the Test Release [F17] Key can be used.
             
V1500 Possible invalid accounting period
             
Correction Procedure:
  (1) Life Insurance Companies are required to file calendar year end returns. Please check the end accounting month. It is expected to be 12 or 42.
             
Month Accounting Period Begins   Page 1
             
Editing Instructions:
  (1) This item is edited for part-year returns only. Part-year returns have Month Accounting Period Ends of 31 through 42. Once the cursor lands on this field a value must be entered.
Data Item   Line Reference
             
Month Accounting Period Begins—cont.
             
  (2) The beginning accounting period should be shown on Page 1 of the return, directly beneath the title. It will not be on the label attached to the return.
  (3) Enter the code indicating the month in which the corporation's accounting period begins. Use the same number as the number of the month in the year (1 through 12). For example, for an accounting period beginning in July—enter "7" ; beginning in December—enter "12" , etc.
  (4) If the Date Incorporated was used to determine that the return is a part-year return, use the month incorporated to edit the Month Accounting Period Begins.
             
Year Accounting Period Begins Page 1
             
Editing Instructions:
  (1) This item is edited for part-year returns only. Part-year returns have Month Accounting Period Ends of 31 through 42. Once the cursor lands on this field a value must be entered.
  (2) The beginning accounting period should be shown on Page 1 of the return, directly beneath the title. It will not be on the label attached to the return.
  (3) Enter the last two digits of the year in which the accounting period begins.
             
Test Description
             
E020 Possible invalid accounting period.
             
Correction Procedure:
  (1) This test will fail when the beginning and ending accounting period years are more than one year apart. Check the return to determine the correct beginning and ending accounting period years according to the instructions above.
  (2) If this test cannot be corrected, contact the National Office.
  (3) If the Return has an invalid accounting period, and the taxpayer indicated the Return is merging or final, the following message appears, "Merging or final Record with invalid accounting period, Please Reject!" Use Reject Code #3.
 
             
Date Incorporated Page 1, Line C
             
Editing Instructions:
  (1) Enter the four digit year of the incorporation date.
  (2) If the Date Incorporated cannot be determined, enter 9999.
  (3) If the corporation only gives a two digit date of incorporation (i.e. '88), assume that the year is 1988 and edit as `1988'.
  (4) If more than one date of incorporation is given for the consolidated return, edit the earliest date given.
  (5) If different dates are given for the parent and subs, edit the date of the parent.
  (6) If the date is previous to 1800, enter 1800.
Data Item   Line Reference
             
Date Incorporated—cont.
             
  (7) If you are unable to find a date of incorporation on the return, Check the attached annual statements or Best's Insurance Reports.
  (8) IF date incorporated is not reported, or you are unsure, the Prior year lookup may be used.
             
Section 953 Code Page 1
             
Editing Instructions:
  (1) Valid entries for this field are: [RETURN], `C', and `D'.
  (2) If the taxpayer checks box 1 of line `D' (indicating a 953(c)(3)(C) election), enter `C'.
  (3) If the taxpayer checks box 2 if line D (indicating a 953(d) election), enter `D' into this field.
  (4) Otherwise, press [RETURN] to leave this field blank.
  Note: the presence of a 953 election is strong evidence that the taxpayer is a foreign corporation, and the Consolidator Return Indicator should be edited as `F' (look for supporting evidence).
             
Prior Year EIN
             
Editing Instructions:
  (1) This field must be positive.
  (2) If a corporation indicates in its return that its EIN has changed and provides the prior year EIN, enter this number.
  (3) Otherwise, leave this field blank.
             
Consolidated Return Indicator Page 1, Line A(1)
             
Editing Instructions:
  (1) Allowable entries for this field are `C', `F', or `N'
  (2) Enter `C' if the return is consolidated (e.g., if it combines tax information for a parent and one or more subsidiaries). To determine if it is consolidated:
    (a) Check box `C' in the upper left hand corner of page 1. If it is checked, enter `C' in this field.
    (b) Check for either Form 851 (Affiliated Schedule) or 1122 (Authorization and consent of subsidiary corporation to be included in a Consolidated Income Tax Return). If either are present and filled out, enter a `C' in this field.
  (3) Enter `F' if the return is filed by a foreign insurance company. To determine if it is a foreign insurance company, check for the presence of any of the following:
    (a) If a Form 1120–F is attached or used as a cover sheet.
    (b) If there is an amount present on page 1, line 9 or in an attachment for tax on non- connected income.
    (c) If there is an amount on Schedule K, line 7 or in an attachment indicating U.S. income tax paid or withheld at source.
    (d) If the address on page 1 indicates a foreign country.
    (e) If the corporation name includes LTD and the Employer Identification Number (EIN) begins with `98'.
Data Item   Line Reference
             
Consolidated Return Indicator—cont.
             
  (3) (f) If "LTD" is in the corporation name.
    (g) The EIN begins with `98' and the Annual Statement indicates that the statutory home office is a foreign country (i.e. the address on the Annual Statement is from Turks, Caicos Islands. . . . . .
    (h) If page 1, Box D(1) or Box D(2) is checked indicating a Section 953 election.
  (4) If `F' is entered, a pop-up box will display, prompting you for the country of incorporation. Enter the appropriate country code from the Country Code List. The Country Code Lookup may be accessed from the pop-up display by pressing [F13].
    (a) Use the foreign country suggested by the corporation address. See the Annual Statement statutory home office address (if available) or look for an attached Section 953 election statement that might indicate the country of incorporation.
    (b) If no country of incorporation can be identified, enter `OC'
  (5) Enter `N' if the return is nonconsolidated. (e.g., there is no indication that it is a consolidated return) and the return is not for a foreign insurance company.
  (6) If Section 953 code is present and Consolidated Return Indicator does not equal `F' a message will appear prompting you to correct the Consolidated Return Indicator.
             
Non-life Insurance Company Inclusion Code Page 1, Line A(2)
             
Editing Instructions:
  (1) Enter Y under the following conditions:
    (a) Page 1, Box A(2) is checked, or
    (b) There are amounts on page 5, Schedule I
    (c) Otherwise, enter Return.

Exhibit 1.13.9-2  (04/04/98)
Additional Information

Exhibit 1.13.9–2 provides specific instructions for the editing of the Additional Information items and resolution of the associated tests.
             
Data Item   Line Reference
             
Accounting Method Code   Page 8, Line 1
             
Editing Instructions:
  (1) This item is a one character alpha code indicating the type of accounting method as shown below:
    (a) Enter "A" if the taxpayer checked the box indicating accrual.
    (b) Enter "O" if the taxpayer checked the box labeled `other' and cash is not indicated.
    (c) Enter [RETURN] if the taxpayer did not check any of the above listed boxes or checked two or more boxes.
             
Type of Company Code   Page 8, Line 2
             
Editing Instructions:
  (1) Enter `S' if 2a(1), the "stock box" is checked.
  (2) Enter `M' if 2a(2), the "mutual box" is checked, or if no box is checked but the word "Mutual" is in the company name.
  (3) Enter `F' if 2b is checked, indicating that the company is a fraternal or assessment organization.
  (4) Enter `B' if 2c is checked, indicating that the company is an assessment organization or a burial or other insurance company,
  (5) If the instructions above do not resolve this condition, obtain Best's Life-Health Insurance Reports and try to determine the Type of company Code by use of the characteristics below. The code should be S or M for most legal reserve life companies. These companies appear in Section I or in the list of legal reserve life insurance companies by states in the back of Best's.
  (6) In general, the code should be S, stock, if—
    (a) The History or Management Operation Section indicates that the company is primarily stock.
    (b) There is a mention of stock sold without mention of current mutualization.
    (c) The company is mainly on a nonparticipating plan. This is usually mentioned in the "Life Business in Force" section in Best's.
    (d) An amount of "Capital" is in the "Assets and Liabilities" section, under "Liabilities" in Best's.
    (e) Enter S if there is an amount in Capital Stock or if there is an amount in stockholder distributions.
  (7) If the Company is a Stock company, and the Schedule J is not selected, the system will automatically select the Schedule J. If the Company is a Mutual, and the Schedule C is not selected, the system will automatically select the Schedule C.
  (8) In general, the code should be M, Mutual, if—
    (a) The word "Mutual" appears in the name of the company.
    (b) The "History" or "Management Operation" Sections in Best's indicates that the company is primarily mutual.
    (c) The company was originally a stock company and has currently completed mutualization.
Data Item   Line Reference
             
Type of Company Code—cont.
             
  (8) (d) The company is mainly on a participating plan. This is usually mentioned in the "Life Business in Force" section in Best's.
    (e) No amount of "Capital" is in the "Assets and Liabilities" section in Best's.
    (f) Taxpayer completed Schedule C.
    (g) Enter M for a Life Insurance Department of a Mutual Savings Bank.
  (9) The code should be made F, other, if—
    (a) The name of the company appears in Best's under "Statistics of Fraternal and Assessment Associations in the U.S. Arranged by States" .
    (b) Enter F if "fraternal" or "assessment association" is in the name.
  (10) If you are still unable to determine this code, contact the National Office.
             
PBA Code    
             
SOI Industry Code:    
             
The Industry code is automatically set depending upon the Type of company code assigned previously. If the Type of company code is `S', the Industry code is `6352'. If the type of company code is `M', `F', or `B' then the industry code is `6353.'
             
Test Description
             
L010 The SOI Industry Code is different from the Prior Year File Industry Code.
             
Correction Procedure:
  (1) This test compares prior year industry code to current year industry code.
  (2) This test will read out for companies with total assets greater than or equal to 500,000,000.
  (3) Check the return to verify the taxpayer's entry and the edited item for SOI Indy code.
  (4) Check the edited SOI Industry Code against the INDUSTRY CODE WORKSCREEN by pressing [F18] and follow instructions in Section 8.5.1 of IRM 1.13.8 and IRM 1.13.7, Industry Coding, to determine the corporation's principal business activity and select the best industry code.
  (5) If after researching, the industry code is still different from that in the Prior Year File, it's particularly important that you document the reasons for the change in the Industry Code Comment Field. In this case, use the Test Release Key to accept.
  (6) If the industry code needs to be changed. You must change the type of company code to correct.
 
Data Item   Line Reference
             
Percentage of Life Reserves   Page 8, Line 3
             
Editing Instructions:
  (1) Enter the life insurance reserves as a percentage of total reserves from page 8 Line 3. It may be necessary to refer to an attached schedule to obtain the percentage.
  (2) If Page 8, Line 3, is blank and there is no attached schedule for this question, make the percentage equal to 100.
  (3) Percentage of Life Reserves will be in the range of 50%–100%.
  (4) Enter the percentage rounded to the nearest whole percent: (e.g.) If 100%, 91%, 86.55%, and 50.49% are entered in Line 3, enter 100, 91, 87, and 50, respectively.
  (5) If zero or N/A enter as 100. If less than 50, edit as reported.
  (6) If a number greater than 100 is reported. A message will appear, "Percentage of Life reserves cannot be greater than 100." This must be corrected to continue.
  (7) If the return is consolidated, use the amount reported in the parent return.
             
Parent Ein Line 8, Line 6i
             
Editing Instructions:
  (1) When available from the RTF, this item will be pre-loaded on the screen. See Section 8.2.5 of IRM 1.13.8 for general instructions regarding RTF data.
  (2) Do not edit this line if the name and ein match the name and ein on page 1.
  (3) Do not edit this field if Revenue Processing has inserted 129999999 on this line.
             
Parent Name Page 8, Line 6ii
             
Editing Instructions:
  (1) If a name is available for the EIN previously entered, the name will be displayed in this field. If the displayed name differs (in a substantive way) from the name on the return, edit the name on the return.
  (2) If no name is displayed on the screen for line 6ii, edit the name on line 6ii following the instructions given for editing Corporation Name on page 1.
  (3) Do not edit this field if only a person's name and social security number are provided.
             
Test Description
             
V006 There is no corresponding parent name for the parent EIN.
             
Correction Procedure:
  (1) If a parent EIN is provided by the taxpayer, a corresponding parent name should be provided. If parent name is provided, edit as described above.
  (2) If no parent name is provided, this test may be test released.
Data Item   Line Reference
             
Parent Name—cont.
             
Test Description
             
V007 There is no corresponding parent EIN for the parent name.
             
Correction Procedure:
  (1) If a parent name is provided by the taxpayer, a corresponding parent EIN should be provided. If parent EIN is provided, edit as described above.
  (2) If no parent EIN is provided, this test may be test released.
 
             
Owner Code Page 8, Line 7
             
Editing Instructions:
  (1) Allowable entries for this field are "Y" and [RETURN].
  (2) If the answer to this question is "Y" , the taxpayer should have indicated the percentage owned.
  (3) The percentages for any owners appearing to be related should be totaled.
  (4) If there is any indication (i.e. an attached schedule) that the ownership is made up of several entities, none of which exceeds or equals 50% individually, edit as [RETURN]. The only exception is if the owners appear to be related. Then they should be treated as one entity. Please be aware, however, that some companies may attach a schedule indicating that their subs are 100% owned by the parent company. This type of schedule should not be used to edit the owner code which relates to the parent company.
             
Owner Percentage   Page 8, Line 7(b)
             
Editing instructions:
  (1) If the answer to question 7 is "Yes" , the taxpayer should have indicated the percentage of ownership on Line 7A. Enter the indicated percentage.
  (2) If the answer to question 7a is "Y" , but the taxpayer does not provide a percentage, enter 999 in this field.
  (3) If the figure in this field exceeds or equals 50%, but the taxpayer has not answered `Y' to question 6, change the response to question 6 to a `Y'.
  (4) Enter rounded whole percentages (i.e., 72.6 percent should be entered as "73" ).
  (5) This field must be positive.
  (6) If there are more than one percentage given for the consolidated return, edit the largest figure. If there is no consolidated figure given, edit the figure listed for the parent corporation.
  (7) If the taxpayer distinguishes between direct and indirect ownership, the total amount should be edited. Note, however, that certain amounts may be listed as the directly owned stock of one part of an entity and the indirectly owned stock of another. These amounts should not be double counted. If the total exceeds 100%, edit as 100%.
Data Item   Line Reference
             
Owner Percentage—cont.
             
  (8) If an attached schedule breaks the percentage owned into common and preferred stock, refer to the balance sheet to determine the amount of each type of stock. Then multiply the percentages by the amounts on the balance sheet. Divide that figure by the total amount of stock to determine the overall percentage. See example on the following page.
  (9) If you do not enter an owner code (above), but do enter an owner percent, a message will appear, "If no owner code exists, there should not be an owner percent." This must be corrected to continue.

Common/Preferred Stock Example
         
Attached schedule shows the following: Balance Sheet shows the following:
         
  Entity A 10% preferred stock Preferred Stock $1,000.00  
    60% common stock Common Stock $1,000,000.00   
      Total $1,001,000.00  
  Entity B 90% preferred stock    
    10% common stock    
         
Calculate:    
         
  Entity A: .1 x 1000   =     100 Entity B: .9 x 1000    =     900
    .6 x 1000000 =   600000         .1 x 1000000 =   100000
            $600100    $100900
         
  600100/1001000 = 59.9% 100900/1001000 = 10.1%
         
Enter rounded whole percentages (i.e., 72.6 percent should be entered as "073" ).

             
Foreign Owner Code   Page 8, Line 8
             
Editing Instructions:
  (1) Allowable Entries for this field are "Y" and [RETURN].
  (2) If the answer to question 8 is "Yes" , the taxpayer should have indicated the country of the owner and the percentage. If this information is not included by the taxpayer, edit the undeterminable percentage as "999" and/or country code as "OC" .
  (3) If there is any indication (i.e. an attached schedule) that the ownership is made up of several persons, none of which exceeds or equals 25% individually, edit as [RETURN].
  (4) If the 5472 is specifically referenced here by the taxpayer, refer to Section II of that form. If line 1a contains the name of a shareholder, edit this field as `Y'. The 5472 does not contain information on the foreign owner percent so if the figure is not on the 1120, edit as `999'. If the foreign country code is not indicated on the 1120, it may be edited from line 1d of the 5472.
Data Item   Line Reference
             
Foreign Owner Code—cont.
             
  (5) NOTE: In contrast to the owner code question, the foreign owner code specifies "foreign person" so the rules regarding family groups do not apply.
             
Test Description
             
L020 Company was foreign owned in prior year but not in current year.
             
Correction Procedure:
  (1) The text compares current and prior year foreign ownership codes.
  (2) Check the taxpayer's entries to verify the current-year foreign ownership codes.
  (3) Check the prior-year record used and the code on the display screen.
  (4) If this test cannot be corrected, the Test release [F17] key may be used.
             
L022 Company was not foreign owned in prior year but is in current year.
             
Correction Procedure:
  (1) This test compares current and prior year foreign ownership codes.
  (2) Check the taxpayer's entries to verify the current-year foreign ownership code.
  (3) Check the prior year record used and the code on the display screen.
  (4) If this test can not be corrected, the Test Release [F17] Key can be used.
             
Foreign Owner Percentage   Page 8, Line 8(a)
             
Editing Instructions:
  (1) If the answer to the Foreign Owner Code question is `Y', the taxpayer should have indicated the percentage that the foreign entity owns. If the taxpayer has answered the Foreign Owner Code question as `Y' and this field is undeterminable, edit as "999" .
  (2) If the answer to the Foreign Owner Question is `N' and the taxpayer has filled in a percent for this field, change the answer for Foreign Owner Question to `Y' and edit the percent given for this field.
  (3) This field must be positive.
  (4) Enter rounded whole percentages (i.e., 72.6 percent should be entered as "073" ).
  (5) If there are more than one percentage given for the consolidated return, edit the largest figure. If there is no percentage listed for the consolidated corporation, edit the percentage given for the parent.
  (6) If the taxpayer distinguishes between direct and indirect ownership, the total amount should be edited. If the total exceeds 100%, edit as 100%.
  (7) If an attached schedule breaks the percentage owned into common and preferred stock, refer to the balance sheet to determine the amount of each type of stock. Then, multiply the percentages by the amounts on the balance sheet. Divide that figure by the total amount of stock to determine the overall percentage. See example under Owner Percentage.
Data Item   Line Reference
             
Foreign Owner Percentage—cont.
             
  (8) If you do not enter foreign owner code (above) but do enter a foreign owner percent. A message will appear, "A foreign owner percent should not exist without a foreign owner code." This must be corrected to continue.
  (9) If the taxpayer enters 99% edit as 100.
             
Foreign Country Code   Page 8, Line 8(b)
             
Editing Instructions:
  (1) If the answer to question 8 is "Yes" , the taxpayer should have indicated the countries of the owners. Enter the appropriate alphabetic code according to the following instructions:
    (a) There is a query table available to look up the code associated with the country listed. Press the [F13] Key to access the query table. See Section 8.2.4:(5) of IRM 1.13.8 for instructions to select the country code.
    (b) If more than one country is listed, select the country which is listed first.
  (2) If the answer to the Foreign Owner Code question is `Y' and the taxpayer does not provide the country of ownership, enter "OC" in this field.
  (3) If the answer to the Foreign Owner Code question is not `Y', but the taxpayer has listed a country response, edit the Foreign Owner Question as `Y' and edit the code for the country listed.
  (4) Note: Please be aware of the distinction between the Netherlands Antilles (`NA') which are a group of islands in the Caribbean and the Netherlands in Europe, also known as Holland (`NL').
  (5) If there is an inconsistency between the Foreign owner code and the Foreign owner percent, a system message appears. Editing cannot continue until the error is corrected according to instructions (2) and (3) above.
             
Test Description
             
L025 Current and prior year foreign country codes don't match.
             
Correction Procedure:
  (1) This test compares current and prior year foreign country codes.
  (2) Check the taxpayer's entries, including any attached schedules, to verify the current-year foreign country code.
  (3) Check the prior year record used and the code on the display screen.
  (4) If this test can not be corrected, the Test Release [F17] Key can be used.
 
             
Data Item   Line Reference
             
Number of Forms 5472 Attached   Page 8, Line 8c
             
Test Description
             
L014 Form 5472 existed last year, but are not reported here.
             
Correction Procedure:
  (1) If 5472's existed for this record in the prior year they are expected to exist this year.
  (2) After verifying that no 5472's exist, the test release [F17] may be use.
  (3) If you do find that FORM 5472's do exist, but this line was left blank by the taxpayer, insert the correct number of 5472's attached to the Return.
             
CFC Shareholder Code   Page 8, line 9
             
Editing Instructions:
  (1) When available from the RTF, this item will be pre-loaded on the screen. See Section 8.2.5 of IRM 1.13.8 for general instructions regarding RTF data.
  (2) Allowable entries are `Y' and [RETURN].
             
Number of Form 5471 Attached   Page 8, Line 9
             
Editing Instructions:
  (1) This field must be positive.
  (2) If there is no taxpayer entry, press [ENTER].
  (3) If you have entered a number on this line, but did not code as a CFC Shareholder above, a `Y' will be inserted on that line automatically.
             
Test Description
             
V008 Corporation is a shareholder of a CFC and no 5471's are attached.
             
Correction Procedure:
  (1) If a corporation has indicated that it is a shareholder of a Controlled Foreign Corporation, it should have indicated the number of 5471's that are attached.
  (2) If the taxpayer has not filled in the number of 5471's attached, the test may be released.
             
L013 Form 5471 existed last year, but are not reported here.
             
Correction Procedure:
  (1) If 5471's existed for this record in the prior year they are expected to exist this year.
  (2) After verifying that no 5471's exist, the test release [F17] may be use.
  (3) If you do find that FORM 5471's do exist, but this line was left blank by the taxpayer, insert the correct number of 5471's attached to the Return.
 
Data Item   Line Reference
             
Foreign Account Code   Page 8, Line 10
             
Editing Instructions:
  (1) Allowable entries are `Y' and Return
  (2) Edit as taxpayer reported
             
Unique Payout Pattern   Page 8, Line 12
             
Editing Instructions:
  (1) If Line 12 is checked as yes, enter "Y" .
  (2) Otherwise, enter [RETURN].
             
Election to Forego NOLD Carryback   Page 8, Line 15
             
Editing Instructions:
  (1) Allowable entries for this field are `Y' or [RETURN].
             
NOLD Carryover from Prior Years   Page 8, Line 16
             
Editing Instructions:
  (1) This field is double entry
             
Control Group Code   Page 6, Schedule K, Line 1
Schedule H (Sec. 1)
Schedule L, Line 5
             
Editing Instructions:
  (1) If the return type is 09 this field will display a `Y'.
  (2) Enter `Y' if the corporation answers "Yes" to the question on, Schedule K, Line 1.
  (3) Enter `Y' if an apportionment schedule is attached which shows the allocations of the tax bracket amounts among its members. The line may also refer to IR Code Section 1561 or 1563.
  (4) Enter `Y', if line 6 on Other Information is edited.
  (5) Enter Y if Schedule L, Part I Line 5 is reported.
  (6) Enter Y if the Schedule H, Part I is filled out by the taxpayer.
  (7) Enter Y if intercompany dividends are present on Schedule A.
  (8) If this field is edited as `Y', follow the specific instructions for controlled groups where provided throughout the manual.

Exhibit 1.13.9-3  (04/04/98)
Form 8816—Special Loss Discount Account and Special Estimated Tax Payments for Insurance Companies

(1) Exhibit 1.13.9–3 provides instructions for editing items from Form 8816, Special Loss Discount Account and Special Estimated Tax Payments for Insurance Companies.
             
(2) Returns using this form may include information for any of the preceding twenty years, but the form only includes five columns for data. Consequently, the company may file a spread sheet to report this information, or may file more than one Form 8816.
             
(3) The instructions in Exhibit 1.13.9–3 will not contain any specific column numbers for any items from Lines 1 through 11. For any of these items, enter for the year specified by the taxpayer. The instructions for individual items within Special Loss Discount Account ( "SLDA" ) and Special Estimated Tax Payments ( "SETP" ) will be shown under the 1996 reference only.
             
(4) The Form 8816 edit system will operate much like the Form 8594 and calcscreens. Form 8816 items 1 through 11 will separately display for each Accident Year column. Thus, your original Accident Year entry is very important since it determines the total number of Accident Year columns subsequently displayed.
             
Data Item Line Reference
             
Accident Year   Part I, column heading
             
Editing Instructions:
  (1) Enter the accident year corresponding with the first column of Form 8816 data provided by the taxpayer. For example, if the taxpayer provides 8816 data for the year 1987 through 1996, enter `87' in the Accident Year field.
  (2) Your entry here will determine how many subsequent Form 8816 "columns" the system will display for edit.
  (3) Based on your entry, the system will prompt you for Form 8816 Part I and Part II data for the accident year entered and continue to displays columns to 1996.
  (4) The Accident Years should generally not begin before 1970. If you find a beginning Accident Year before 1970, notify the National Office via the Communications Log.
             
Test Description
             
E1700A Please check this accident year.
             
Correction Procedure:
  (1) This test checks for a possible mis-key in this field. Generally, most corporations filing a Form 8816 will not report Accident Year information before 1970.
  (2) Verify the taxpayer's reported Accident Year and your entry.
  (3) If you find a beginning Accident Year before 1970, notify the National Office via the Communications Log.
  (4) If this test cannot be corrected, the Test Release [F17] Key may be used.
Data Item   Line Reference
             
SLDA Balance Beginning Year   Part I, Line 1
             
SLDA Undiscounted Unpaid Losses   Part I, Line 2
             
SLDA Discounted Unpaid Losses   Part I, Line 3
             
Special Loss Discount Limitation   Part I, Line 4
             
Test Description
             
E1705A Components do add to total.
             
Correction Procedure:
  (1) This test checks to see that the Special Loss Discount Limitation equals Undiscounted Unpaid Losses (line 2) minus Discounted Unpaid Losses (line 3).
  (2) Verify the taxpayer's entries and edited amounts for these fields.
  (3) If this test cannot be corrected, the Test Release [F17] Key may be used.
 
             
SLDA Additions Section 847(4)   Part I, Line 5
             
SLDA Subtractions Section 847(5)   Part I, Line 6
             
SLDA Balance—End Of Year   Part I, Line 7
             
Test Description
             
E1710A End of year balance should equal Line 1 plus Line 5 less Line 6.
             
Correction Procedure:
  (1) This test checks to see that the End of Year balance equals the sum of Lines 1 through 5 minus Line 6.
  (2) Verify the taxpayer's entries and edited amounts for these fields.
  (3) If this test cannot be corrected, the Test Release [F17] Key may be used.
 
             
SETP Balance Beginning Year   Part II, Line 8
             
SETP Payments Made for Year   Part II, Line 9
             
SETP Payments Applied for Year   Part II, Line 10
             
Data Item   Line Reference
             
SETP Balance End of Year   Part II, Line 11
             
Test Description
             
E1725A Components do not add to total.
             
Correction Procedure:
  (1) This test checks to see that the SETP End of Year balance equals the sum of Lines 8 and 9 minus Line 10.
  (2) Verify the taxpayer's entries and edited amounts for these fields.
  (3) If this test cannot be corrected, the Test Release [F17] Key may be used.
 
             
Taxable Income Without Additional Deduction Part III, Line 12(a)
             
Taxable Income With Additional Deduction Part III, Line 12(b)
             
Amount of Additional Deduction   Part III, Line 13(a)
             
Adjusted Taxable Income Without Additional Deduction Part III, Line 14(a)
             
Test Description
             
E1730B Components do not add to total.
             
Correction Procedure:
  (1) This test checks to see that the Adjusted Taxable Income (without the additional deduction) equals the sum of Lines 12 and 13.
  (2) Verify the taxpayer's entries and edited amounts for these fields.
  (3) If this test cannot be corrected, the Test Release [F17] Key may be used.
 
             
Adjusted Taxable Income With Additional Deduction Part III, Line 14(b)
             
Test Description
             
E1735B Components do not add to total.
             
Correction Procedure:
  (1) This test checks to see that the Adjusted Taxable Income (with the additional deduction) equals Line 12.
  (2) Verify the taxpayer's entries and edited amounts for these fields.
  (3) If this test cannot be corrected, the Test Release [F17] Key may be used.
Data Item   Line Reference
             
Total Tax Without Additional Deduction   Part III, Line 15(a)
             
Total Tax With Additional Deduction   Part III, Line 15(b)
             
Tax Credits Without Additional Deduction Part III, Line 16(a)
             
Tax Credits With Additional Deduction Part III, Line 16(b)
             
Other Taxes Without Additional Deduction Part III, Line 17(a)
             
Other Taxes With Additional Deduction Part III, Line 17(b)
             
Net Tax Without Additional Deduction Part III, Line 18(a)
             
Test Description
             
E1740B Components do not add to total.
             
Correction Procedure:
  (1) This test checks to see that the Net Tax (without the additional deduction) equals the sum of Line 15(a) less Line 16(a), plus Line 17(a).
  (2) Verify the taxpayer's entries and edited amounts for these fields.
  (3) If this test cannot be corrected, the Test Release [F17] Key may be used.
 
             
Net Tax With Additional Deduction   Part III, Line 18(b)
             
Test Description
             
E1745B Components do not add to total.
             
Correction Procedure:
  (1) This test checks to see that the Net Tax (without the additional deduction) equals the sum of Line 15(b) less Line 16(b), plus Line 17(b).
  (2) Verify the taxpayer's entries and edited amounts for these fields.
  (3) If this test cannot be corrected, the Test Release [F17] Key may be used.
 
             
Data Item   Line Reference
             
Tentative Tax Benefit   Part III, Line 19
             
Test Description
             
E1750B Components do not add to total.
             
Correction Procedure:
  (1) This test checks to see that the Tentative Tax Benefit equals Net Tax (without Additional Deduction) Line 18(a) less Net Tax (with Additional Deduction) Line 18(b).
  (2) Verify the taxpayer's entries and edited amounts for these fields.
  (3) If this test cannot be corrected, the Test Release [F17] Key may be used.
 
             
Additional Tax Benefits from Additional Deduction Part III, Line 20
             
Tax Benefit from Additional Deduction   Part III, Line 21
             
Test Description
             
E1755B Components do not add to total.
             
Correction Procedure:
  (1) This test checks to see that the Tax Benefit from Section 847 Deduction equals Tentative Tax Benefit (Line 19) plus Additional Tax Benefits (Line 20).
  (2) Verify the taxpayer's entries and edited amounts for these fields.
  (3) If this test cannot be corrected, the Test Release [F17] Key may be used.

Exhibit 1.13.9-4  (04/04/98)
1120–L Separate Accounts Information

Exhibit 1.13.9–4 provides specific instructions for the editing of the Separate Accounts items and resolution of the associated tests.
             
Separate, Segregated, or Variable Accounts Information
             
Edit the following lines from the separate accounts (segregated accounts, variable accounts) when filed with the 1120–L. If the company has multiple separate accounts, sum them and enter them together. The desired reference is an 1120–L return filed ONLY for the separate accounts. If the separate accounts are not filed on a separate return, the secondary references should be used (as outlined below). If separate account assets exist, but the taxpayer reports no liabilities, use Best's to gather liabilities.
             
Data Item Line Reference
             
Net Capital Gain   Page 1, Line 6
             
Editing Instructions:
  (1) Edit from the Separate Accounts return.
  (2) Secondary Reference—Separate account Annual statement page 4 Line 2.
             
Interest Gross Taxable Dividends   Page 1, Line 16(a)
             
Editing Instructions:
  (1) Edit only from the Separate Accounts return.
             
Gross Investment Income Line 10   Page 2, Schedule B
             
Editing Instructions:
  (1) Edit from the Separate Accounts return.
             
Policy Interest   Page 3, Schedule F, Line 10f
             
Editing Instructions:
  (1) Edit from the Separate Accounts return.
             
Deductible Dividends on Employee Pension Funds Page 3, Schedule F, Line 20
             
Editing Instructions:
  (1) Edit only from the Separate Accounts return.
             
Total Assets Beginning   Page 7, Schedule L, Line 2(a)
             
Editing Instructions:
  (1) Edit from the Separate Accounts return.
  (2) 1st alternate reference—Separate Account Annual Statement Page 2 line 15.
  (3) 2nd alternate reference—Annual statement page 2 line 24.
  (4) 3rd alternate reference—Prior year Bests Balance Sheet section Total Assets.
             
Data Item   Line Reference
             
Total Assets Beginning—cont.
             
Test Description
             
L030 Beginning of year Separate Account assets differ significantly from prior year ending Separate Account assets.
             
Correction Procedure:
  (1) This number should be verified with all available references (Schedule L, Annual Statement, Bests).
  (2) If this cannot be corrected, the test release key may be used.
 
             
Total Assets Ending   Page 7, Schedule L, Line 2(b)
             
Editing Instructions:
  (1) Edit from the Separate Accounts return.
  (2) 1st alternate reference—Separate Account Annual Statement Page 2 Line 15.
  (3) 2nd alternate reference—Annual statement page 2 line 24.
  (4) 3rd alternate reference— Best Balance sheet section (separate account bus).
             
Total Insurance Liabilities Beginning   Page 7, Schedule L, Line 17(a)
             
Editing Instructions:
  (1) Edit from the Separate Accounts return.
  (2) Secondary Reference—Separate Account Annual Statement Page 3 line 20.
  (3) Secondary Reference—Annual statement page 3 line 27.
  (4) Secondary Reference—Prior year Bests Balance Sheet Section—Total Liabilities.
             
Total Insurance Liabilities Ending   Page 7, Schedule K, Line 17(b)
             
Editing Instructions:
  (1) Edit from the Separate Accounts return.
  (2) Secondary Reference—Separate Account Annual Statement Page 3 line 20.
  (3) Secondary Reference—Annual statement page 3 line 27.
  (4) Bests Balance Sheet section (separate account Bus.)
             
Test Description
             
V1521 There are Separate Accounts assets and no income amounts. Please check your entries.
             
Correction Procedure:
  (1) Check the return to verify entries.
  (2) If this test cannot be corrected, the Test release (F17) key may be used.
Data Item   Line Reference
             
Total Insurance Liabilities Ending—cont.
             
Test Description
             
V1522 If there are Separate Accounts assets they probably exist at both the beginning and end of the year. Please check your entries.
             
Correction Procedure:
  (1) Check the return to verify entries.
  (2) If the company does not provide separate account asset or liability amounts for the beginning of the year, check the previous year Best's and get them from there. Compare this amount to the current year Best's to ensure you pick up the proper amount.
  (3) If this test cannot be corrected, the Test release (F17) key may be used.
             
L031 Separate Accounts Liabilities differ significantly from prior year ending Separate Account liabilities.
             
Correction Procedure:
  (1) This number should be verified with all available references (Schedule L, Annual Statement, Bests).
  (2) If this cannot be corrected, the test release key may be used.
             
V1523 If there are Separate Accounts liabilities they probably exist at both the beginning and end of the year. Please check your entries.
             
Correction Procedure:
  (1) Check the return to verify entries.
  (2) If the company does not provide separate account asset or liability amounts for the beginning of the year, check the previous year Best's and get them from there. Compare this amount to the current year Best's to ensure you pick up the proper amount.
  (3) If this test cannot be corrected, the Test release (F17) key may be used.

Exhibit 1.13.9-5  (04/04/98)
Schedule L, Total Assets and Total Insurance Liabilities

(1) Exhibit 1.13.9–5 provides specific instructions for the editing of Schedule L, Total Assets and Total Insurance Liabilities items and resolution of the associated tests.
             
(2) Most returns which do not have amounts reported on the Schedule L reference lines will have attached forms or schedules containing the same information. These attachments should be used to edit total assets and total insurance liabilities.
             
(3) If the taxpayer indicates on any of the Schedule L Part I. Lines "greater than 500 million" , enter as 500 million, Only If the data cannot be found in Bests.
             
(4) If the Taxpayer indicates "less than 500 million" (>500,000,000), and the data cannot be found in Bests, call the National Office.
             
Data Item   Line Reference
             
Real Property—Beginning of Year   Page 7, Schedule L, Part I, Line 1(a)
  —Alternate reference—Prior Best's
balance sheet—Real Estate
             
Real Property—End of Year   Page 7, Schedule L, Part I, Line 1(b)
  —Alternate reference— Best's
balance sheet—Real Estate
             
Stocks—Beginning of Year   Page 7, Schedule L, Part I, Line 2(a)
  —Alternate reference—prior year Best's
balance sheet—total preferred stock + total
common stock
             
Stocks—End of Year Page 7, Schedule L, Part I, Line 2(b)
  —Alternate reference— Best's
balance sheet-total preferred stock + total
common stock
             
Proportionate Share of Partnership Trust
Assets Beginning of Year
Page 7, Schedule L, Part I, Line 3(a)
             
Proportionate Share of Partnership Trust
Assets End of Year
Page 7, Schedule L, Part I, Line 3(b)
             
Other Schedule K Assets, Beginning of Year Page 7, Schedule L, Part I, Line 4(a)
  —Alternate reference—Prior year Best's
balance sheet, Admitted Assets—(Real
Estate + total preferred stock + total common stock)
Data Item   Line Reference
             
Other Schedule K Assets—End of Year   Page 7, Schedule L, Part I, Line 4(b)
  —Alternate reference— Best's balance sheet,
Admitted Assets—(Real Estate + total preferred
stock + total common stock)
             
Total Assets of Controlled Groups
Beginning of Year
Page 7, Schedule L, Part I, Line 5(a)
             
Total Assets of Controlled Groups,
End of Year
  Page 7, Schedule L, Part I, Line 5(b)
             
Schedule L,
Total Assets Beginning of Year
  Page 7, Schedule L, Part I, Line 6(a)
  —Alternate reference—Prior year Best's
Balance Sheet—Admitted Assets
             
Test Description
             
E1500 Schedule L Assets, Beginning of Year, do not add up to total.
             
Correction Procedure:
  (1) Check the return to verify entries for the amounts in Schedule L.
  (2) If the return was edited correctly, enter the computed amount.
  (3) If this test cannot be corrected, the Test release (F17) key may be used.
 
             
Schedule L, Total Assets—End of Year   Page 7, Schedule L, Part I, Line 6(b)
  —Alternate reference— Best's
Balance Sheet—Admitted Assets
             
Test Description
             
E1510 Schedule L Assets, End of Year, do not add up to total.
             
Correction Procedure:
  (1) Check the return to verify entries for the amounts in Schedule L.
  (2) If the return was edited correctly, enter the computed amount.
  (3) If this test cannot be corrected, the Test release (F17) key may be used.
             
Subtotals for Assets, Beginning of Year   Page 7, Schedule L, Part II, Line 1(a)
             
Editing Instructions:
  (1) Alternate reference—Annual statement page 2 line 23.
  (2) Alternate reference—Prior year Bests balance sheet—other Assets.
Data Item   Line Reference
             
Subtotals for Assets, End of Year   Page 7, Schedule L, Part II, Line 1(b)
             
Editing Instructions:
  (1) Alternate reference—Annual statement page 2 line 23.
  (2) Alternate reference— Bests balance sheet—other Assets.
             
Total Assets, Beginning of Year   Page 7, Schedule L, Part II, Line 2(a)
             
Editing Instructions:
  (1) Alternate reference—Annual statement page 2 line 25.
  (2) If using prior years Bests, Check for Separate account liabilities. (To be edited below) If separate accounts exist, line 2 will be the difference of the subtotal for Assets (above) and the separate accounts. If there are no separate accounts, line 2 will equal Line 1.
             
Total Assets, End of Year   Page 7, Schedule L, Part II, Line 2(b)
             
Editing Instructions:
  (1) Alternate reference—Annual statement page 2 line 25.
  (2) If using Bests, Check for Separate account liabilities. (To be edited below) If separate accounts exist, line 2 will be the difference of the subtotal for Assets (above) and the separate accounts. If there are no separate accounts, line 2 will equal Line 1.
             
Total Insurance Liabilities
Beginning of Year
  Page 7 Schedule L, Part II, Line 17(a)
             
Editing Instructions:
  (1) This is a double entry field.
             
Total Insurance Liabilities End of Year   Page 7 Schedule L, Part II, Line 17(b)
             
Editing Instructions:
  (1) This is a double entry field.

Exhibit 1.13.9-6  (04/04/98)
Schedule H, Small Life Insurance Company Deduction

(1) Exhibit 1.13.9–6 provides specific instructions for the editing of the Schedule H, Small Life Insurance Company Deduction items and resolution of the associated tests.
             
(2) Most returns which do not have amounts reported on the Schedule H reference lines will have attached forms or schedules containing the same information. These attachments should be used to edit the small life insurance company deduction.
             
Data Item   Line Reference
             
Gain (Loss) from Operations   Page 5, Schedule H, Line 8
             
Editing Instructions:
  (1) This item should be equal to the amount on page 1, Line 21.
             
Noninsurance Income   Page 5, Schedule H, Line 9a
             
Noninsurance Deductions   Page 5, Schedule H, Line 9b
             
Schedule H, Line 3b Adjustments   Page 5, Schedule H, Line 10(b)
             
Tentative LICTI   Page 5, Schedule H, Line 10c
             
Test Description
             
E1520 Component Tentative LICTI items do not add to total.
             
Correction Procedure:
  (1) Check the return to verify entries for the amounts in Schedule H.
  (2) If the taxpayer leaves Schedule H blank, and there are no supporting schedules, this test may be released.
  (3) If this test cannot be corrected, the Test release (F17) key may be used.
             
Controlled Group Tentative LICTI   Page 5, Schedule H, Line 11
             
Combined Tentative LICTI   Page 5, Schedule H, Line 12
             
Test Description
             
E1525 Component Combined Tentative LICTI items do not add to total.
             
Correction Procedure:
  (1) Check the return to verify entries for the amounts in Schedule H.
  (2) If allowable Small Company Deduction is zero, make Combined Tentative LICTI equal to the computed amount.
  (3) If this test cannot be corrected, the Test release (F17) key may be used.
 
Data Item   Line Reference
             
Small Life Insurance Company Deduction Page 5, Schedule H, Line 17
             
Editing Instructions:
  (1) Be careful editing this amount, it is forwarded to page 1. If the amount is incorrect at that point, you will have to come back to this point to change this amount.

Exhibit 1.13.9-7  (04/04/98)
Schedule G, Policy Acquisition Expenses

(1) Exhibit 1.13.9-7 provides specific instructions for the editing of the Schedule G, Policy Acquisition expenses items and resolution of the associated tests.
             
(2) Most returns which do not have amounts reported on the Schedule G reference lines will have attached forms or schedules containing the same information. These attachments should be used to edit the small life insurance company deduction.
             
(3) If data is only entered in the last lines call National office for instructions on how to take the premium amounts from the annual statement.
             
Data Item   Line Reference
             
Annuity
Gross premiums and other consideration
Page 4, Schedule G, Line 1a
             
Group Life Insurance
Gross premiums and other consideration
Page 4, Schedule G, Line 1b
             
Other Gross premiums
and other consideration
Page 4, Schedule G, Line 1c
             
Annuity Return premiums
and other consideration
Page 4, Schedule G, Line 2a
             
Group Life Insurance
Return premiums and other consideration
Page 4, Schedule G, Line 2b
             
Other Return premiums and
other consideration
Schedule G, Line 2c
             
Annuity Net premiums
times premium percentage
Page 4, Schedule G, Line 5a
             
Test Description
             
E1526 Resulting percentage of premiums does not equal expected amount.
             
Correction Procedure:
  (1) Check the return to verify entries for lines 1 and 2.
  (2) If this test cannot be corrected, the Test release (F17) key may be used.
 
             
Data Item   Line Reference
             
Group Life Insurance
Net premiums times premium percentage
Page 4, Schedule G, Line 5b
             
Test Description
             
E1527 Resulting percentage of premiums does not equal expected amount.
             
Correction Procedure:
  (1) Check the return to verify entries for lines 1 and 2.
  (2) If this test cannot be corrected, the Test release (F17) key may be used.
 
             
Other Net premiums
times premium percentage
  Page 4, Schedule G, Line 5c
             
Test Description
             
E1528 Resulting percentage of premiums does not equal expected amount.
             
Correction Procedure:
  (1) Check the return to verify entries for lines 1 and 2.
  (2) If this test cannot be corrected, the Test release (F17) key may be used.
             
Add line 5 columns (a), (b), and (c)   Page 4, Schedule G, Line 6
             
Test Description
             
E1531 Line 6 is out of balance.
             
Correction Procedure:
  (1) Verify taxpayer entries and edited amounts for line 5
  (2) Line 6 computes from line 5 amounts. If this sum is less than zero, line 6 should be zero.
  (3) Check the amounts in lines 1, 2, 5, and 6. If the edited amount equals the taxpayer amounts, the test may be Test Released.
 
             
Data Item   Line Reference
             
Unused balance of negative capitalization Page 4, Schedule G, Line 7
             
Add lines 6 and 7
premium percentage and unused negative
capitalization from previous years
Page 4, Schedule G, Line 8
             
Test Description
             
E1529 Line 8 does not equal the expected amount.
             
Correction Procedure:
  (1) Line 8 should equal the greater of zero or the sum of lines 6 and 7.
  (2) Check the amounts in lines 6, 7, and 8. If the edited amount equals the taxpayer amounts, the test may be Test Released.
             
General Deductions   Page 4, Schedule G, Line 9
             
Enter the lesser of line 8 or 9   Page 4, Schedule G, Line 10
             
Test Description
             
E1532 Line 10 is out of balance.
             
Correction Procedure:
  (1) Line 10 should equal the lesser of lines 8 or 9.
  (2) Check the amounts in lines 8, 9, 10. If the edited amount equals the taxpayer amounts, the test may be Test Released.
  (3) If the company is a relatively small life insurance company they may enter zero in line 9. If this is the case, line 10 will probably equal line 8.
 
             
Deductible General Deductions   Page 4, Schedule G, Line 11
             
Editing Instructions:
  (1) Generally, deductible general deductions should equal the amount on page 1 described as other deductions, enter it as the taxpayer reports it.
             
Test Description
             
E1533 Line 11 is out of balance.
             
Correction Procedure:
  (1) Line 11 should equal the line 9 less lines 10.
  (2) Check the amounts in lines 9, 10, and 11. If the edited amount equals the taxpayer amounts, the test may be Test Released.
Data Item   Line Reference
             
If the amount on line 6 is negative,
enter it as a positive amount
  Page 4, Schedule G, Line 12
             
Unamortized Specified PAE
from prior years
deductible in the current year
  Page 4, Schedule G, Line 13
             
Deductible negative capitalization amount Page 4, Schedule G, Line 14
             
Test Description
             
E1534 Line 14 does not equal expected amount.
             
Correction Procedure:
  (1) Line 14 should equal the lesser of lines 12 or 13.
  (2) Check the amounts in lines 12, 13, and 14. If the edited amount equals the taxpayer amounts, the test may be Test Released.
 
             
Tentative 60 month specified PAE   Page 4, Schedule G, Line 15a
             
Phase-out amount   Page 4, Schedule G, Line 16
             
Current year 60-month specified PAE   Page 4, Schedule G, Line 17a
             
Test Description
             
E1530 Line 17a does not equal expected amount.
             
Correction Procedure:
  (1) Line 17a should equal line 15a minus line 16. Please check these amounts carefully.
  (2) If the edited amount equals the taxpayer amounts, the test may be Test Released.
 
             
Enter 10% of line 17a   Page 4, Schedule G, Line 17b
             
Test Description
             
E1536 Line 17b does not equal expected amount.
             
Correction Procedure:
  (1) Line 17b should equal 10% of line 17a. Please check amounts in 17a and line 17b.
Data Item   Line Reference
             
Enter 10% of line 17a—cont.
             
Test Description
             
E1536—cont.
             
  (2) Check the computation for line 20. If line 20 does not compute correctly, check if the computed amount for line 17b will make line 20 computation work.
  (3) If the edited amount equals the taxpayer amounts, the test may be Test Released.
             
Enter 5% of line 18a   Page 4, Schedule G, Line 18b
             
Test Description
             
E1537 Line 18b does not equal expected amount.
             
Correction Procedure:
  (1) Line 18b should equal 5% of line 18a. Please check amounts in line 18a and line 18b.
  (2) Check the computation for line 20. If line 20 does not compute correctly, check if the computed amount for line 18b will make line 20 computation work.
  (3) If the edited amount equals the taxpayer amounts, the test may be Test Released.
 
             
Enter the applicable amount
of amort from spec. PAE
  Page 4, Schedule G, Line 19
             
Deductible Policy acquisition
expenses
  Page 4, Schedule G, Line 20
             
Test Description
             
E1538 Line 20 is out of balance.
             
Correction Procedure:
  (1) Line 20 is the sum of lines 14, 17b, 18b, and 19.
  (2) Verify taxpayer entries and edited amounts for these lines.
  (3) Check the amounts in these lines.
  (4) Be careful when editing this amount it is forwarded to the Page 1, deduction amounts.

Exhibit 1.13.9-8  (04/04/98)
Schedule C, Differential Earnings Amount

(1) Exhibit 1.13.9–8 provides specific instructions for the editing of the Schedule C, Differential Earnings Amount items and resolution of the associated tests.
             
(2) Most returns which do not have amounts reported on the Schedule C reference lines have attached forms or schedules containing the same information. Use these attachments to edit the Differential Earnings Amount.
             
(3) If the only amount given by the taxpayer is the final differential earnings amount, work back to line 9. The taxpayer should show the differential earnings rate that they used. Divide the line 13 amount by the differential earnings amount. Enter the result in line 12. Enter nothing in line 11. Enter the same amount in line 10 as was entered in line 12. Enter 2 × line 10 in line 9.
             
(4) Stock life insurance companies should not fill out this Schedule. If you are editing a stock company with this schedule completed, verify that it is in fact a "Stock" company and if it is a "Stock" company organized in some way with a subsidiary that is a mutual insurance company.
             
Data Item Line Reference
             
Annual Statement Surplus and Capital
Beginning of Year
Page 2, Schedule C, Line 1(a)
             
Annual Statement Surplus and Capital,
End of Year
Page 2, Schedule C, Line 1(b)
             
Nonadmitted Financial Assets,
Beginning of Year
Page 2, Schedule C, Line 2(a)
             
Nonadmitted Financial Assets,
End of Year
Page 2, Schedule C, Line 2(b)
             
Excess of Statutory Reserves
Over Tax Reserves Beginning of Year
Page 2, Schedule C, Line 3(a)
             
Excess of Statutory Reserves
Over Tax Reserves End of Year
Page 2, Schedule C, Line 3(b)
             
Deficiency Reserves, Beginning of Year Page 2, Schedule C, Line 4(a)
             
Deficiency Reserves, End of Year Page 2, Schedule C, Line 4(b)
             
Asset Valuation Reserve, Beginning of Year Page 2, Schedule C, Line 5a(a)
             
Asset Valuation Reserve End of Year Page 2, Schedule C, Line 5a(b)
             
Interest Maintenance Reserve, Beginning of Year Page 2, Schedule C, Line 5b(a)
             
Interest Maintenance Reserve, End of Year Page 2, Schedule C, Line 5b(b)
Data Item   Line Reference
             
Other Voluntary Reserves, Beginning of Year Page 2, Schedule C, Line 6(a)
             
Other Voluntary Reserves End of Year Page 2, Schedule C, Line 6(b)
             
50% of Amount of Provision for Policyholder
Dividends Payable Beginning of Year
Page 2, Schedule C, Line 7(a)
             
50% of Amount of Provision for Policyholder
Dividends Payable, End of Year
Page 2, Schedule C, Line 7(b)
             
Adjustment for Equity
Western Hemisphere Companies,
Beginning of Year
Page 2, Schedule C, Line 8b(a)
             
Adjustment for Equity
Western Hemisphere Companies,
End of Year
Page 2, Schedule C, Line 8b(b)
             
Total Reserves, Line 8c, Beginning of Year Page 2, Schedule C, Line 8c(a)
             
Test Description
             
E1540 Components of Total Reserves, Beginning of Year, do not add to total.
             
Correction Procedure:
  (1) Check the return to verify entries for the amounts in Schedule C.
  (2) See if you can correct this test by substituting the computed amount.
  (3) If this test cannot be corrected, the Test release (F17) key may be used.
 
             
Total Reserves End of Year Page 2, Schedule C, Line 8c(b)
             
Test Description
             
E1545 Components of Total Reserves End of Year, do not add to total.
             
Correction Procedure:
  (1) Check the return to verify entries for the amounts in Schedule C.
  (2) See if you can correct this test by substituting the computed amount.
Data Item   Line Reference
             
Total of Line 8c, Columns (a) and (b) Page 2, Schedule C, Line 9
             
Test Description
             
E1548 Line 9 does not equal expected amount.
             
Correction Procedure:
  (1) Check the return to verify entries for the amounts in lines 8c(a), 8c(b) and line 9.
  (2) See if you can correct this test by substituting the computed amount.
  (3) If this test cannot be corrected, the Test Release Key [F17] may be used.
 
             
Tentative Average Equity Base, Page 2, Schedule C, Line 10(b)
             
Test Description
             
E1550 Tentative Average Equity Base is out of balance.
             
Correction Procedure:
  (1) Check the return to verify entries for the amounts in Schedule C.
  (2) This amount is expected to be .5 × line 9. There is a tolerance of 10.
  (3) If this test cannot be corrected, the Test Release Key [F17] may be used.
 
             
Other Schedule C Adjustments, Page 2, Schedule C, Line 11(b)
             
Average Equity Base Page 2, Schedule C, Line 12(a)
             
Test Description
             
E1555 Components of Average Equity Base do not add to total.
             
Correction Procedure:
  (1) Check the return to verify entries for the amounts in Schedule C.
  (2) See if you can correct this test by substituting the computed amount.
  (3) If this test cannot be corrected, the Test Release Key [F17] may be used.
 
             
Differential Earnings Page 2, Schedule C, Line 13(b)
             
Editing Instructions:
  (1) The differential earnings amount is expected to be near zero in 1996. Enter this amount with caution, it's forwarded to the Schedule E

Exhibit 1.13.9-9  (04/04/98)
Schedule E, Policyholder Dividends

(1) Exhibit 1.13.9–9 provides specific instructions for the editing of the Schedule E, Policyholder Dividends items and resolution of the associated tests.
             
(2) Most returns which do not have amounts reported on the Schedule E reference lines will have attached forms or schedules containing the same information. These attachments should be used to edit Policyholder Dividends.
             
Data Item Line Reference
             
Amounts Paid or Accrued Page 3, Schedule E, Line 1
             
Excess Interest Page 3, Schedule E, Line 2
             
Premium Adjustments Page 3, Schedule E, Line 3
             
Experience-Rated Refunds Page 3, Schedule E, Line 4
             
Total Policyholder Dividends Page 3, Schedule E, Line 5
             
Test Description
             
E1560 Components of Total Policyholder Dividends, do not add to total.
             
Correction Procedure:
  (1) Check the return to verify entries for the amounts in Schedule E.
  (2) See if you can correct this test by substituting the computed amount.
  (3) If this test cannot be corrected, the Test release (F17) key may be used.
             
Differential Earnings Amount Page 3, Schedule E, Line 6
             
Editing instructions:
  (1) This is a display field from the Schedule C. If it is necessary to make a change to this field, navigate back to the Schedule C. See Section 8.2.4:(4) of IRM 1.13.8 for navigation instructions.
             
Deductible Policyholder Dividends Page 3, Schedule E, Line 7
             
Test Description
             
E1565 Components of Deductible Policyholder Dividends do not add to total.
             
Correction Procedure:
  (1) Check the return to verify entries for the amounts in Schedule E.
  (2) See if you can correct this test by substituting the computed amount.
  (3) If this test cannot be corrected, the Test release (F17) key may be used.
 
Data Item   Line Reference
             
Adjustment to Reserves Page 3, Schedule E, Line 8
             
Test Description
             
E1570 Adjustment to Reserves of Mutual Insurance Companies is out of balance.
             
Correction Procedure:
  (1) Check the return to verify entries for the amounts in Schedule E.
  (2) See if you can correct this test by substituting the computed amount.
  (3) If this test cannot be corrected, the Test release (F17) key may be used.

Exhibit 1.13.9-10  (04/04/98)
Schedule F, Increase or (Decrease) in Reserves

(1) Exhibit 1.13.9–10 provides specific instructions for the editing of the Schedule F, Increase or Decrease in Reserves And Company/Policyholder Share Percentage items and resolution of the associated tests.
             
(2) Most returns which do not have amounts reported on the Schedule F reference lines will have attached forms or schedules containing the same information. These attachments should be used to edit this section.
             
(3) For Giant Returns, if the Schedule F is blank, call the National Office.
             
Data Item Line Reference
             
Life Insurance Reserves, Beginning of Year Page 3, Schedule F, Line 1(a)
             
Life Insurance Reserves, End of Year Page 3, Schedule F, Line 1(b)
             
Unearned Premiums
and Unpaid Losses—Beginning of Year
Page 3, Schedule F, Line 2(a)
             
Unearned Premiums
and Unpaid Losses—End of Year
Page 3, Schedule F, Line 2(b)
             
Supplementary Contracts, Beginning of Year Page 3, Schedule F, Line 3(a)
             
Supplementary Contracts, End of Year Page 3, Schedule F, Line 3(b)
             
Dividend Accumulations, Beginning of Year Page 3, Schedule F, Line 4(a)
             
Dividend Accumulations, End of Year Page 3, Schedule F, Line 4(b)
             
Advance Premiums, Beginning of Year Page 3, Schedule F, Line 5(a)
             
Advance Premiums, End of Year Page 3, Schedule F, Line 5(b)
             
Special Contingency Reserves, Beginning of Year Page 3, Schedule F, Line 6(a)
             
Special Contingency Reserves, End of Year Page 3, Schedule F, Line 6(b)
             
Total Reserves, Beginning of Year Page 3, Schedule F, Line 7(a)
             
Test Description
             
E1575 Components of Total Reserves, Beginning of Year, do not add to total.
             
Correction Procedure:
  (1) Check the return to verify entries for the amounts in Schedule F.
  (2) See if you can correct this test by substituting the computed amount.
Data Item   Line Reference
             
Total Reserves, Beginning of Year—cont.
             
Test Description
             
E1575—cont.
             
  (3) If this test cannot be corrected, the Test release (F17) key may be used.
  (4) If the taxpayer enters only an amount in the total reserves, enter this amount also in line 1, Life insurance reserves.
 
             
Total Reserves, End of Year Page 3, Schedule F, Line 7(b)
             
Test Description
             
E1580 Components of Total Reserves, End of Year, do not add to total.
             
Correction Procedure:
  (1) Check the return to verify entries for the amounts in Schedule F.
  (2) See if you can correct this test by substituting the computed amount.
  (3) If the taxpayer enters only an amount in the total reserves, enter this amount also in line 1, Life insurance reserves.
  (4) If this test cannot be corrected, the Test release (F17) key may be used.
 
             
Increase (Decrease), in Reserves Page 3, Schedule F, Line 8
             
Test Description
             
E1585 Change in Reserves is out of balance.
             
Correction Procedure:
  (1) Check the return to verify entries for the amounts in Schedule F.
  (2) See if you can correct this test by substituting the computed amount.
  (3) If this test cannot be corrected, the Test release (F17) key may be used.
 
             
Gross Investment Income Page 3, Schedule F, Line 9
             
Editing instructions:
  (1) This amount should equal the amount on Schedule B, line 12.
Data Item   Line Reference
             
Required Interest on Reserves Page 3, Schedule F, Line 10a
             
Deductible Excess Interest Page 3, Schedule F, Line 10b
             
Deductible Amounts, Pension Funds Page 3, Schedule F, Line 10c
             
Deductible Amounts, Deferred Annuities Page 3, Schedule F, Line 10d
             
Deductible Interest, Amounts on Deposit Page 3, Schedule F, Line 10e
             
Total Policy Interest Page 3, Schedule F, Line 10f
             
Test Description
             
E1700 Component Policy Interest items do not add to total.
             
Correction Procedure:
  (1) Check the return to verify entries for the amounts in Schedule F.
  (2) See if you can correct this test by substituting the computed amount.
  (3) If this test cannot be corrected, the Test release (F17) key may be used.
 
             
Line 9 less Line 10f Page 3, Schedule F, Line 11
             
Editing Instructions:
  (1) This is a generated field
             
Life Insurance Company Gross Income Page 3, Schedule F, Line 12
             
Editing Instructions:
  (1) Life Insurance Company Gross Income should equal amount on Page 1, Line 8.
             
Tax Exempt Interest Page 3, Schedule F, Line 13
             
Editing Instructions:
  (1) Tax Exempt Interest should equal amount on Schedule B, Line 9.
             
Add lines 12 and 13 Page 3, Schedule F, Line 14
             
Editing Instructions:
  (1) This is a generated field.
Data Item   Line Reference
             
Increase in Reserves Page 3, Schedule F, Line 15
             
Test Description
             
E1705 Change in Reserves does not equal Line 8 amount.
             
Correction Procedures:
  (1) Verify taxpayer entries and edited amounts for Schedule F items according to the instructions above.
  (2) Check Schedule F, Line 8 to make sure that the amount was edited forward correctly.
  (3) If this test cannot be corrected, the Test Release (F17) key may be used.
             
Test Description
             
E1710 Line 8 Change in Reserves is negative, but Line 15 amount is not zero.
             
Correction Procedures:
  (1) Verify taxpayer entries and edited amounts for Schedule F items according to the instructions above.
  (2) Check Schedule F, Line 8 to make sure that the amount was edited correctly.
  (3) If this test cannot be corrected, the Test Release (F17) key may be used.
 
             
Line 14 less Line 15 Page 3, Schedule F, Line 16
             
Editing Instructions:
  (1) This is a generated field
             
Investment Income Ratio Page 3, Schedule F, Line 17
             
Editing Instructions:
  (1) The Investment Income Ratio should equal Line 11 divided by Line 16. For consolidated returns, enter the result of this computation (this amount is present in the error message for E1715). Taxpayers present it in two ways.
    (a) Decimal Format:
Line 11 = 500
Line 16 = 1000
Taxpayer Investment Income Ratio = 500/1000 = .5
Enter .5 in Line 17
    (b) Percentage Format:
Line 11 = 500
Line 16 = 1000
Taxpayer Investment Income Ratio = 500/1000 × 100% = 50%
Enter this amount divided by the 100%, 50%/100% = .5, in Line 17
Data Item   Line Reference
             
Investment Income Ratio—cont.
             
  (2) Numbers should be rounded up to four decimal places e.g. .57565 = .5757.
  (3) If the taxpayer leaves this field blank, enter the computed amount.
  (4) If the taxpayer reports a negative percent, inform National Office via the Comm Log.
             
Test Description
             
E1715 Investment Income ratio is out of balance.
             
Correction Procedures:
  (1) Verify taxpayer entries and edited amounts for Lines 11 and 16.
  (2) If the return is consolidated, the amount in the error message should equal the expected amount—Line 11 divided by line 16.
  (3) See if you can correct this test by substituting the computed amount.
  (4) If this test cannot be corrected, the Test Release (F17) key may be used.
 
             
Deductible Policyholder Dividends Page 3, Schedule F, Line 18
             
Deductible Excess Interest Page 3, Schedule F, Line 19
             
  (1) This is a display item from the Schedule E. If it is necessary to make changes to this field, navigate back to the Schedule E. See Section 8.2.4:(4) of IRM 1.13.8 for navigation instructions.
  (2) The amount on Schedule F take priority over the amounts on Schedule E for computational purposes. When in doubt use the Schedule F amounts.
             
Deductible Dividends on Employee Pension Funds Page 3, Schedule F, Line 20
             
Deductible Dividends, Deferred Annuities Page 3, Schedule F, Line 21
             
Deductible Premiums, Excess Interest Page 3, Schedule F, Line 22
             
Add Lines 19 through 22 Page 3, Schedule F, Line 23
             
Editing Instructions:
  (1) This is a generated field
Data Item   Line Reference
             
Line 18 Less line 23 Page 3, Schedule F, Line 24
             
Test Description
             
E1720 Line 24 doesn't equal expected amount.
             
Correction Procedures:
  (1) Verify taxpayer entries and edited amounts for Schedule F items according to the instructions above.
  (2) See if you can correct this test by substituting the computed amount in this field.
  (3) If this test cannot be corrected, the Test Release (F17) key may be used.
             
Investment Portion of Dividends Page 3, Schedule F, Line 25
             
Test Description
             
E1725 Component Investment portion of Dividends do not factor to total.
             
Correction Procedures:
  (1) Verify taxpayer entries and edited amounts for Schedule F, Lines 17 and 24 according to the instructions above.
  (2) See if you can correct this test by substituting the computed amount in this field.
  (3) If this test cannot be corrected, the Test Release (F17) key may be used.
 
             
Policy Interest Page 3, Schedule F, Line 26
             
Editing Instructions:
  (1) This is a display item from the line 10f. If it is necessary to make changes to this field, F12 back to that point. See Section 8.2.4:(4) of IRM 1.13.8 for navigation instructions.
             
Policyholder Share Amount
Add lines 25 and 26
Page 3, Schedule F, Line 27
             
Test Description
             
E1730 Components of Policyholder share amount do not add to total.
             
Correction Procedures:
  (1) Verify taxpayer entries and edited amounts for Lines 25 and 26 above.
  (2) See if you can correct this test by substituting the computed amount in this field.
  (3) If this test cannot be corrected, the Test Release (F17) key may be used.
 
             
Data Item   Line Reference
             
Net Investment Income Page 3, Schedule F, Line 28
             
Policyholder Share Amount Page 3, Schedule F, Line 29
             
Editing Instructions:
  (1) Policyholder Share Amount should equal that reported on Line 27.
             
Company's Share of Net Investment Income Page 3, Schedule F, Line 30
             
Test Description
             
E1735 Components of Company's Share of Investment Income do not add to total.
             
Correction Procedures:
  (1) Verify taxpayer entries and edited amounts for Schedule F items according to the instructions above.
  (2) Components of Company's Share of Investment Income should equal Line 28 minus Line 29.
  (3) See if you can correct this condition by inserting the computed amount in this field.
  (4) If this test cannot be corrected, the Test Release (F17) key may be used.
 
             
Company's Share Percentage Page 3, Schedule F, Line 32
             
Editing Instructions:
  (1) Edit the percentage shown to the nearest ten thousandth or to four decimal places.
    (a) If the percentage shown is 60, enter ".6."
    (b) If the percentage shown is 18.375, enter ".1838." (Round the number to the nearest hundredth).
  (2) If the taxpayer does not show the number as a percent, pick up the number as shown by the taxpayer.
    (a) If the taxpayer shows .60 for sixty percent, enter ".6."
    (b) If the taxpayer shows .18375 for eighteen point three seven five percent, enter ".1838."
  (3) If the taxpayer reports the percentage as "100%" , enter "1" .
  (4) If Schedule F, Line 32 is not filled out, see if you can pick up the figure from Schedule A, Line 11(c).
  (5) On consolidated returns, use the percentage reported on the consolidated return.
  (6) The amounts on Schedule A and Schedule F should always be equal.
  (7) If the taxpayer does not submit a single consolidated return, you must average the company share percentages together.
Data Item   Line Reference
             
Company's Share Percentage—cont.
             
    Example: Return 1: .432
Return 2: .354
Return 3: .500
Sum =  1.286
Divided by the total number of returns (3)
Company Share Percent = .43