4.119.4  BMF Underreporter (BMF-AUR) Program (Cont. 1)

4.119.4.7 
Form 1120 Analysis of Income Types

4.119.4.7.5  (09-17-2014)
Form 1120 Royalties - General

  1. Royalties are compensation for the use of property, usually copyrighted works, patented inventions, or natural resources, by someone than the owner.

  2. Royalties display on IDRS CC:IRPTR with the following Amount Type and Document Type:

    Income Type Amount Type (IRPTR Literal) Document Type
    Royalties ROYALTIES 1099-MISC
    Royalties ROYALTIES 1065 K-1
    Royalties ROYALTIES 1120S K-1

4.119.4.7.5.1  (09-17-2014)
Form 1120 Royalties - Analyzation

  1. Compare Royalties amounts with entries on:

    1. Form 1120, line 7.

    2. Form 1040, Schedule F, Part I or Part III, lines 8 or 43. The amount must match within $1 or be clearly identified as Royalties.

    3. Form 1120, line 10. The amount must match within $1 or be clearly identified as Royalties.

    4. Form 1120, line 1a when the taxpayer name or Business Activity as shown on Form 1120, Schedule K lines 2a - c relates to Mining, Independent Artists (including Writers and/or Performers), Advertising or Publishing (including Software Development and/or Film Production) activities. See IRM 4.119.4.7.1, Form 1120 Gross Receipts or Sales (Bartering/Payment Card Transactions/Attorney's Proceeds/Fishing Proceeds/Medical Payments/Nonemployee Compensation) - General for additional information. Consider any other Gross Receipts related IRs when determining the total amount to compare to Form 1120, line 1a.

      Exception:

      Do not give credit for any amounts reported on Form 1120, line 1a when the taxpayer has reported an amount on Form 1120, line 7 (Gross Royalties).

  2. When more than one information return containing Royalties are present and the taxpayer does not provide a breakdown:

    1. Group all Royalties together.

    2. Compare the group total amount to the total reported Royalties.

    3. If the group total is smaller, consider the issue resolved.

    4. If the group total is larger, consider the difference underreported.

  3. When an attachment or statement indicates Nominee income. See IRM 4.119.4.4.7, Nominee Recipient for further instructions.

4.119.4.7.5.2  (09-17-2014)
Form 1120 Royalties - Miscellaneous

  1. If Royalties are U/R, enter the following on the CP 2030:

    1. Select ROYALTIES from the drop down menu in the "Your income and deductions" field.

    2. Enter the gross reported amount in the "Shown on return" field.

    3. Enter the total of all U/R Royalty IRs PLUS the "Shown on return" amount in the "As corrected by IRS" field.

      Caution:

      It may be necessary to include any additional amounts identified on the return.

    4. Verify the "Difference" field matches the U/R amount.

4.119.4.7.6  (09-17-2014)
Form 1120 Securities Sales and Cost Basis - General

  1. Securities Sales are the proceeds from transactions involving stocks, bonds, other debt obligations, commodities or forward contracts.

  2. Cost Basis represents the purchase price of the securities sale.

  3. Securities Sales are identified on IDRS CC:IRPTR with Document Type 1099-B and Amount Type (IRPTR Literal) STOCK&BOND.

  4. Cost Basis is identified on IDRS CC:IRPTR with Document Type 1099-B and Amount Type (IRPTRL Literal) COST&BASIS.

    Note:

    Amount Type SALE&LOSS is for information purposes only.

    Note:

    Payers report COST&BASIS on "covered securities" (i.e., the sale of a stock transaction that was purchased in 2011 or later). Therefore, not all Form 1099-B IRs will contain a COST&BASIS.

4.119.4.7.6.1  (09-17-2014)
Form 1120 Securities Sales and Cost Basis - Analyzation

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  2. Generally, Form 1099-B STOCK&BOND IRs contain a CUSIP (Committee on Uniform Security Identification Procedures) number. This number is usually nine characters long, consisting of alpha and/or numeric characters. The CUSIP number identifies the issuer of the transaction and the type of transaction. Alpha characters in the 7th and/or 8th position(s) of the CUSIP number denote fixed income obligation securities. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ When the taxpayer has reported these amounts, the IRs must be taken into consideration when determining the U/R amount.

    1. Be careful when determining the position of the CUSIP number containing the alpha characters. The first six digits represent the issuer number and the 4th and 5th and/or 6th positions may contain alpha character(s).

    2. Pursue STOCK&BOND IRs whose entity includes nontaxable Municipal Bond, tax free exchange or tax free unless the CUSIP number meets the conditions provided above.

  3. Some STOCK&BOND IR(s) appear to be duplicates because the account numbers, the amounts, AND the source (paper or tape) are identical. DO NOT consider these IR(s) as duplicates if the transaction (sales) dates shown on the IR(s) are different.

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    Example:

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  5. If Form 1120, Schedule D is present without Form 8949, Sales and Other Dispositions of Capital Assets, compare STOCK&BOND amounts with entries on:

    1. Form 1120, Schedule D, Part I, line(s) 1a through 3, column (d).

    2. Form 1120, Schedule D, Part II, line(s) 8a through 10, column (d).

      Note:

      Use the IR payer name or item description to identify the stock transactions reported on the tax return.

      Note:

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    3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      Reminder:

      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    4. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      ≡ ≡
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      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
  6. If the Form 8949, or attachment provides a breakdown of stock transactions by payer name, sales date or item description:

    1. Compare Form 8949 Part I, line 1, column (d) or Part II, line 1, column (d) entries to the STOCK&BOND and give credit for identified reported amounts.

    2. If there are multiple IRs with the same payer name or item description, compare the total to the identified amount(s) reported on the return.

    3. Do not give credit for any amounts reported on the Form 8949 when the payer name or item description does not match the IR, unless there is a dollar match.

    4. Ensure that any amounts reported on attachments/forms are properly included as income on page one of the return.

    5. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    6. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      Reminder:

      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    7. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
  7. If the taxpayer does not file a Form 1120 Schedule D, Form 8949 or a breakdown of securities sales is not provided and there is more than one Securities Sales IR, take the following action:

    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. Group the remaining IRs by Amount Type STOCK&BOND and compare the total to the gross amounts reported on Form 1120, line 8.

    3. If the STOCK&BOND group total is smaller, consider the issue resolved.

    4. If the STOCK&BOND group total is larger, consider the difference underreported.

    5. Group any COST&BASIS Amount Types, consider the difference underreported and enter zero as the reported amount.

    6. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      ≡ ≡ ≡ ≡ ≡
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      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
  8. When an attachment or statement indicates Nominee income. See IRM 4.119.4.4.7, Nominee Recipient for further instruction.

4.119.4.7.6.2  (09-17-2014)
Form 1120 Securities Sales and Cost Basis - Miscellaneous

  1. When STOCK&BOND is U/R, enter the following on the CP 2030:

    1. Select SECURITIES SALES from the drop down menu in the "Your income and deductions" field.

    2. Enter the gross reported amount in the "Shown on return" field.

    3. Enter the total of all U/R Securities Sales IRs PLUS the "Shown on return" amount in the "As corrected by IRS" field.

      Caution:

      It may be necessary to include any additional amounts identified on the return.

    4. Verify the "Difference" field matches the U/R amount.

  2. Send PARAGRAPH 13 when Securities Sales are U/R.

  3. When COST&BASIS is U/R, enter the following on the CP 2030:

    1. Select COST BASIS from the drop down menu in the "Your income and deductions" field.

    2. Enter the gross reported amount as a negative in the "Shown on return" field.

    3. Enter the total of all U/R Cost Basis IRs PLUS the "Shown on return" amount as a negative in the "As corrected by IRS" field.

      Caution:

      It may be necessary to include any additional amounts identified on the return.

    4. Verify the "Difference" field matches the U/R amount.

4.119.4.7.7  (09-17-2014)
Form 1120 Aggregate Profit Or Loss On Contracts - General

  1. Transactions relating to regulated futures contracts are taxable under IRC Section 1256 and are generally referred to as "Section 1256 Contracts" . Payers report these transactions on Form 1099-B, boxes 9-12. The overall aggregate profit or loss on contracts is reported in box 12.

  2. Aggregate Profit or Loss on Contracts are identified with Document Type 1099-B and Amount Type (IRPTR Literal) PROFT&LOSS.

    Note:

    UNREAL PY, REALIZED, and UNREAL CY are for information purposes only.

4.119.4.7.7.1  (09-17-2014)
Form 1120 Aggregate Profit Or Loss On Contracts - Analyzation

  1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  3. When more than one information return containing Aggregate Profit Or Loss On Contracts is present and the taxpayer does not provide a breakdown:

    1. Group all Aggregate Profit Or Loss On Contracts together.

    2. Compare the group total amount to the total reported Aggregate Profit Or Loss On Contracts on Form 1120, line 8.

    3. If the group total is smaller, consider the issue resolved.

    4. If the group total is larger, consider the difference underreported.

  4. When an attachment or statement indicates Nominee income. See IRM 4.119.4.4.7, Nominee Recipient for further instruction .

4.119.4.7.7.2  (09-17-2014)
Form 1120 Aggregate Profit Or Loss On Contracts - Miscellaneous

  1. If Aggregate Profit Or Loss on Contracts Income is U/R, enter the following on the CP 2030:

    1. Select AGGREGATE PROFIT OR LOSS from the drop down menu in the "Your income and deductions" field.

    2. Enter the gross reported amount in the "Shown on return" field.

    3. Enter the total of all U/R Aggregate Profit Or Loss on Contracts IRs PLUS the "Shown on return" amount in the "As corrected by IRS" field.

      Caution:

      It may be necessary to include any additional amounts identified on the return.

    4. Verify the "Difference" field matches the U/R amount.

  2. Include PARAGRAPH 14 when Aggregate Profit Or Loss is U/R.

4.119.4.7.8  (09-17-2014)
Form 1120 Cooperative Distributions - General

  1. Cooperative Distributions are paid by cooperatives to their members.

  2. Cooperative Distributions display on IDRS CC:IRPTR with the following Amount Type and Document Type:

    Income Type Amount Type (IRPTR Literal) Document Type
    Patronage Dividends PATRONAGE 1099-PATR
    Per-unit Retained Allocations RTAIN ALLC 1099-PATR
    Redemption of Nonqualified Notices and Retain Allocations REDEMPTION 1099-PATR
    Non Patronage Distributions NONPAT DIS 1099-PATR

    Note:

    INVEST CRD, WRK OP CRD, PT AMT ADJ, PROD DEDCT and OTH CDT&DD are for information purposes only.

4.119.4.7.8.1  (09-17-2014)
Form 1120 Cooperative Distributions - Analyzation

  1. Group Patronage Dividends, Per-unit Retain Allocations, Redemption Amount and Non Patronage Distributions IRs to determine the overall amount AND compare with the following entries:

    1. Form 1120, line 10. Taxpayers are instructed to identify any amounts reported on Form 1120, line 10. DO NOT give credit for any unidentified amounts reported on line 10, unless there is a $1 match.

    2. Form 1040, Schedule F, Profit or Loss From Farming, line 3a (use 3b if line 3a is zero or blank) or 38a (use line 38b if line 38a is zero or blank).

      Caution:

      Per Unit Retain Allocations may be reported on Form 1040, Schedule F line 2. Only give credit if the amount reported on line 2 matches within $1 or is clearly identified as Per Unit Retain Allocations.

    3. Form 4835, line 2a (line 2b if line 2a is zero or blank).

      Reminder:

      Give credit for amounts reported on Form 1120, line 10 when identified as Gross Farm Income ONLY when Form 1040, Schedule F or Form 4835 is not attached.

    4. Form 1120, line 1a when the taxpayer name or Business Activity as shown on Form 1120, Schedule K, lines 2a – 2c relates to farming activity. See IRM 4.119.4.7.1, Form 1120 Gross Receipts or Sales (Bartering/Payment Card Transactions/Attorney's Proceeds/Fishing Proceeds/Medical Payments/Nonemployee Compensation) - General for additional information. Consider any other Gross Receipts and farming related IRs when determining the total amount to compare to Form 1120, line 1a.

      Exception:

      Do not give credit for any amounts reported on Form 1120, line 1a when the taxpayer has reported farming income on Form 1120, line 10.

  2. When an attachment or statement indicates Nominee income see IRM 4.119.4.4.7, Nominee Recipient for further instruction.

4.119.4.7.8.2  (09-17-2014)
Form 1120 Cooperative Distributions - Miscellaneous

  1. If Cooperative Distributions is U/R, enter the following on the CP 2030:

    1. Select COOPERATIVE DISTRIBUTION from the drop down menu in the "Your income and deductions" field.

    2. Enter the gross reported amount in the "Shown on return" field.

    3. Enter the total of all U/R Cooperative Distribution IRs PLUS the "Shown on return" amount in the "As corrected by IRS" field.

      Caution:

      It may be necessary to include any additional amounts identified on the return.

    4. Verify the "Difference" field matches the U/R amount.

4.119.4.7.9  (09-17-2014)
Form 1120 Agriculture Payments and Market Gain on Commodity Credit Corp (CCC) Loans - General

  1. Agriculture Payments are governmental subsidies paid to farmers and agricultural businesses to supplement their income. Market Gain on Commodity Credit Corp (CCC) Loans are the market gain associated with the repayment of a CCC loan.

  2. Agriculture Payments and Market Gain on Commodity Credit Corp (CCC) Loans display on IDRS CC:IRPTR with the following Amount Type and Document Type:

    Income Type Amount Type (IRPTR Literal) Document Type
    Agriculture Payments AG SUBS 1099-G
    Market Gain on Commodity Credit Corporation loans repaid using cash or CCC certificates MRKGAINCCC 1099-G

4.119.4.7.9.1  (09-17-2014)
Form 1120 Agriculture Payments and Market Gain on Commodity Credit Corp (CCC) Loans - Analyzation

  1. Compare Agriculture Payments and/or Market Gain amounts with entries on:

    1. Form 1120, line 10. Taxpayers are instructed to identify any amounts reported on Form 1120, line 10. DO NOT give credit for any unidentified amounts reported on line 10, unless there is a $1 match.

    2. Form 1040, Schedule F, lines 4a (line 4b if line 4a is zero or blank) or line 39a (line 39b if line 39a is zero or blank).

    3. Form 4835, line 3a (line 3b if line 3a is zero or blank).

      Note:

      Give credit for amounts reported on Form 1120, line 10 when identified as Gross Farm Income ONLY when Form 1040, Schedule F or Form 4835 is not attached.

    4. Form 1120, line 1a when the taxpayer name or Business Activity as shown on Form 1120, Schedule K, lines 2a – 2c relates to farming activity. See IRM 4.119.4.7.1, Form 1120 Gross Receipts or Sales (Bartering/Payment Card Transactions/Attorney's Proceeds/Fishing Proceeds/Medical Payments/Nonemployee Compensation) - General for additional information. Consider any other Gross Receipts and farming related IRs when determining the total amount to compare to Form 1120, line 1a.

      Exception:

      Do not give credit for any amounts reported on Form 1120, line 1a when the taxpayer has reported farming income on Form 1120, line 10.

  2. When more than one information return containing Agriculture Payments and/or Market Gain amounts are present and the taxpayer does not provide a breakdown:

    1. Group all Agriculture Payments and/or Market Gain together.

    2. Compare the group total amount to the total reported.

    3. If the group total is smaller, consider the issue resolved.

    4. If the group total is larger, consider the difference underreported.

  3. When an attachment or statement indicates Nominee income see IRM 4.119.4.4.7, Nominee Recipient for further instruction.

4.119.4.7.9.2  (09-17-2014)
Form 1120 Agriculture Payments and Market Gain on Commodity Credit Corp (CCC) Loans - Miscellaneous

  1. If Agriculture Payments or Market Gain on Commodity Credit Corp (CCC) Loans are U/R, enter the following on the CP 2030:

    1. Select AGRICULTURE PAYMENTS OR MARKET GAIN ON CCC LOAN from the drop down menu in the "Your income and deductions" field.

    2. Enter the gross reported amount in the "Shown on return" field.

    3. Enter the total of all U/R Agriculture Payments or Market Gain on Commodity Credit Corp (CCC) Loan IRs PLUS the "Shown on return" amount in the "As corrected by IRS" field.

      Caution:

      It may be necessary to include any additional amounts identified on the return.

    4. Verify the "Difference" field matches the U/R amount.

4.119.4.7.10  (09-17-2014)
Form 1120 Commodity Credit Corporation (CCC) Loans Forfeited - General

  1. Commodity Credit Corporation (CCC) Loans Forfeited are reported on Form 1099-A, Acquisition or Abandonment of Secured Property, and displays on IDRS CC:IRPTR as Amount Type (IRPTR Literal) DEBT OUT.

    Note:

    PRPTY FMV is displayed for information purposes only.

4.119.4.7.10.1  (09-17-2014)
Form 1120 Commodity Credit Corporation (CCC) Loans Forfeited - Analyzation

  1. When the outstanding debt relates to a forfeited Commodity Credit Corporation loan, the payer is instructed to indicate "CCC" in the property description on Form 1099-A, box 6.

  2. The debt (principal only) owed at the time that the Commodity Credit Corporation (CCC) loan is forfeited is considered income.

  3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡

  4. Compare Debts Out (ie: CCC Loan Forfeited) with entries on:

    1. Form 1120, line 10. Taxpayers are instructed to identify any amounts reported on Form 1120, line 10. DO NOT give credit for any unidentified amounts reported on line 10, unless there is a $1 match.

    2. Form 1040, Schedule F, line 5b (use line 5c if line 5b is zero or blank) or line 40b (use line 40c if line 40b is zero or blank).

    3. Form 4835, line 4b (use line 4c if line 4b is zero or blank).

    4. Give credit for amounts reported on Form 1120, line 10 when identified as Gross Farm Income ONLY when Form 1040, Schedule F or Form 4835 is not attached.

    5. Form 1120, line 1a when the taxpayer name or Business Activity as shown on Form 1120, Schedule K, lines 2a – 2c relates to farming activity. See IRM 4.119.4.7.1, Form 1120 Gross Receipts or Sales (Bartering/Payment Card Transactions/Attorney's Proceeds/Fishing Proceeds/Medical Payments/Nonemployee Compensation) - General for additional information. Consider any other Gross Receipts and farming related IRs when determining the total amount to compare to Form 1120, line 1a.

      Exception:

      Do not give credit for any amounts reported on Form 1120, line 1a when the taxpayer has reported farming income on Form 1120, line 10.

  5. When more than one information return containing CCC Loan Forfeited amounts are present and the taxpayer does not provide a breakdown:

    1. Group all CCC Loan Forfeited together.

    2. Compare the group total amount to the total reported.

    3. If the group total is smaller, consider the issue resolved.

    4. If the group total is larger, consider the difference underreported.

  6. When an attachment or statement indicates Nominee income see IRM 4.119.4.4.7, Nominee Recipient for further instruction.

4.119.4.7.10.2  (09-17-2014)
Form 1120 Commodity Credit Corporation (CCC) Loans Forfeited - Miscellaneous

  1. If CCC Loans forfeited are U/R, enter the following on the CP 2030:

    1. Select COMMODITY CREDIT CORPORATION LOANS FORFEITED from the drop down menu in the "Your income and deductions" field.

    2. Enter the gross reported amount in the "Shown on return" field.

    3. Enter the total of all U/R Commodity Credit Corporation (CCC) Loans Forfeited IRs PLUS the "Shown on return" amount in the "As corrected by IRS" field.

      Caution:

      It may be necessary to include any additional amounts identified on the return.

    4. Verify the "Difference" field matches the U/R amount.

4.119.4.7.11  (09-17-2014)
Form 1120 Crop Insurance - General

  1. Crop Insurance proceeds are payments received by farmers or agricultural businesses as a result of destruction or damage to crops. Crop Insurance is reported on Form 1099-MISC and displays on IDRS CC:IRPTR as Amount Type (IRPTR Literal) CROP INS.

4.119.4.7.11.1  (09-17-2014)
Form 1120 Crop Insurance - Analyzation

  1. Compare Crop Insurance with entries on:

    1. Form 1120, line 10. Taxpayers are instructed to identify any amounts reported on Form 1120, line 10. DO NOT give credit for any unidentified amounts reported on line 10, unless there is a $1 match.

    2. Form 1040, Schedule F, line 6a (use line 6b if line 6a is zero or blank) or line 41.

    3. Form 4835, line 5a (use line 5b if line 5a is zero or blank).

      Note:

      Give credit for amounts reported on Form 1120, line 10 when identified as Gross Farm Income ONLY when Form 1040, Schedule F or Form 4835 is not attached.

    4. Form 1120, line 1a when the taxpayer name or Business Activity as shown on Form 1120, Schedule K, lines 2a – 2c relates to farming activity. See IRM 4.119.4.7.1, Form 1120 Gross Receipts or Sales (Bartering/Payment Card Transactions/Attorney's Proceeds/Fishing Proceeds/Medical Payments/Nonemployee Compensation) - General for additional information. Consider any other Gross Receipts and farming related IRs when determining the total amount to compare to Form 1120, line 1a.

      Exception:

      Do not give credit for any amounts reported on Form 1120, line 1a when the taxpayer has reported farming income on Form 1120, line 10.

  2. Apparent Crop Insurance discrepancies may be due to the taxpayer electing to defer reporting the proceeds to the next year. Consider any Crop Insurance discrepancies resolved when ALL of the following conditions are met:

    1. Uses a cash accounting method (see Form 1120, Schedule K), AND

    2. Attaches a statement electing to defer Crop Insurance proceeds to the subsequent year (under IRC Section 451(d) and Regulation Section 1.451-6).

      Note:

      If the taxpayer filed Form 1040, Schedule F, box 6c should be checked. If Form 4835 is filed, box 5c should be checked.

  3. When more than one information return containing Crop Insurance amounts are present and the taxpayer does not provide a breakdown:

    1. Group all Crop Insurance together.

    2. Compare the group total amount to the total reported.

    3. If the group total is smaller, consider the issue resolved.

    4. If the group total is larger, consider the difference underreported.

  4. When an attachment or statement indicates Nominee income. See IRM 4.119.4.4.7, Nominee Recipient for further instruction.

4.119.4.7.11.2  (09-17-2014)
Form 1120 Crop Insurance - Miscellaneous

  1. If Crop Insurance is U/R, enter the following on the CP 2030:

    1. Select CROP INSURANCE from the drop down menu in the "Your income and deductions" field.

    2. Enter the gross reported amount in the "Shown on return" field.

    3. Enter the total of all U/R Crop Insurance IRs PLUS the "Shown on return" amount in the "As corrected by IRS" field.

      Caution:

      It may be necessary to include any additional amounts identified on the return.

    4. Verify the "Difference" field matches the U/R amount.

  2. Include PARAGRAPH 20 whenever Crop Insurance is U/R.

4.119.4.7.12  (09-17-2014)
Form 1120 Taxable Grants - General

  1. A grant is subsidized financing paid by a federal, state, or local programs for energy conservation or production projects, and is income to the recipient.

  2. Taxable grants are reported on Form 1099-G.

  3. Taxable grants are identified on IDRS CC:IRPTR as Amount type (IRPTR Literal) TX GRANT.

4.119.4.7.12.1  (09-17-2014)
Form 1120 Taxable Grants - Analyzation

  1. Compare Taxable Grants with entries on Form 1120, line 10. Taxpayers are instructed to identify any amounts reported on Form 1120, line 10. DO NOT give credit for any unidentified amounts reported on line 10, unless there is a $1 match.

  2. If the payer is the US Department of Agriculture, compare Taxable Grant amount(s) with entries on:

    1. Form 1040, Schedule F, lines 4a (line 4b if line 4a is zero or blank) or line 39a (line 39b if line 39a is zero or blank).

    2. Form 1040, Schedule F, lines 8 or 43. The amount must match within $1 or be clearly identified as grants.

    3. Form 4835, line 3a (line 3b if line 3a is zero or blank).

    4. Give credit for amounts reported on Form 1120, line 10 when identified as Gross Farm Income ONLY when Form 1040, Schedule F or Form 4835 is not attached.

      Note:

      If agriculture payments are present, consider these amounts when determining the U/R.

    5. Form 1120, line 1a when the taxpayer name or Business Activity as shown on Form 1120, Schedule K, lines 2a – 2c relates to farming activity. See IRM 4.119.4.7.1, Form 1120 Gross Receipts or Sales (Bartering/Payment Card Transactions/Attorney's Proceeds/Fishing Proceeds/Medical Payments/Nonemployee Compensation) - General for additional information. Consider any other Gross Receipts and farming related IRs when determining the total amount to compare to Form 1120, line 1a.

      Exception:

      Do not give credit for any amounts reported on Form 1120, line 1a when the taxpayer has reported farming income on Form 1120, line 10.

  3. When more than one information return containing Taxable Grants amounts are present and the taxpayer does not provide a breakdown:

    1. Group all Taxable Grants together.

    2. Compare the group total amount to the total reported.

    3. If the group total is smaller, consider the issue resolved.

    4. If the group total is larger, consider the difference underreported.

  4. When an attachment or statement indicates Nominee income. See IRM 4.119.4.4.7, Nominee Recipient for further instruction.

4.119.4.7.12.2  (09-17-2014)
Form 1120 Taxable Grants - Miscellaneous

  1. If Taxable Grants are U/R, enter the following on the CP 2030:

    1. Select TAXABLE GRANTS from the drop down menu in the "Your income and deductions" field.

    2. Enter the gross reported amount in the "Shown on return" field.

    3. Enter the total of all U/R Taxable Grants IRs PLUS the "Shown on return" amount in the "As corrected by IRS" field.

      Caution:

      It may be necessary to include any additional amounts identified on the return.

    4. Verify the "Difference" field matches the U/R amount.

4.119.4.7.13  (09-17-2014)
Form 1120 Cancellation of Debt - General

  1. Cancellation of Debt is considered income to the taxpayer if a debt owed to the Federal Government, financial institution, credit union or other creditor was discharged and is not otherwise excluded from gross income.

  2. Cancellation of Debt are reported on Form 1099-C.

  3. Cancellation of Debt are identified on IDRS CC:IRPTR as Amount Type (IRPTR Literal) AMT DBT CN.

    Note:

    PRPTY FMV and INT FORGVN are displayed for information purposes only.

4.119.4.7.13.1  (09-17-2014)
Form 1120 Cancellation of Debt - Analyzation

  1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      Exception:

      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    4. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  2. Compare AMT DBT CN with entries on Form 1120, line 10. Taxpayers are instructed to identify any amounts reported on Form 1120, line 10. DO NOT give credit for any unidentified amounts reported on line 10, unless there is a $1 match. If the taxpayer reduces the reported AMT DBT CN amount by the INT FORGVN amount,≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  3. Compare the description of debt property from the IR(s) to Form 4797, Column (a) in Parts I, II, and III and allow credit for gross amounts reported. If the IR is not clearly identified, purse the income. If the PRPTY FMV amount is less than the AMT DBT CN, pursue difference.

  4. If the taxpayer received AMT DBT CN from a Foreclosure or Repossession and the taxpayer is personally liable (recourse debt), the amount by which the canceled debt exceeds the PRPTY FMV of the property must generally be reported as ordinary income on Form 1120, line 10.

    Note:

    The payer may indicate on the Form 1099-C that the taxpayer is personally liable for repayment of the debt. The 1099-C IR indicates Personally liable in the "Was Debtor Personal liable" field on IDRS CC:IRPTR.

  5. If the taxpayer has received AMT DBT CN from a Foreclosure or Repossession and the taxpayer is not personally liable (non-recourse debt), the gain or loss is computed by comparing the balance of the loan amount (1099-C) with the adjusted basis.

    1. Losses are non-deductible, unless the property was used in trade or business or held for investment. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ . Include a Special Paragraph to inform the taxpayer these losses are not deductible.

    2. Losses in excess of gains from sales of property used in trade or business are deductible as ordinary losses.

  6. If the taxpayers indicate that the income is not taxable because they are insolvent, (e.g., Form 982, Box 1b, is checked or on an attached statement), they MUST provide a statement showing the amount of their insolvency. If taxpayers do not provide a breakdown of their assets and liabilities, DO NOT consider them to be insolvent. The taxpayers are considered insolvent if the net liability amount(s) shown on the attached statement is GREATER than the total fair market value of assets immediately prior to the debt cancellation.

    1. If the AMT DBT CN amount(s) is less than or equal to the insolvency amount, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

    2. If the AMT DBT CN amount(s) is more than the insolvency amount, the amount of the taxpayers insolvency must be considered. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      Example:

      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  7. When more than one information return containing Cancellation of Debt amounts are present and the taxpayer does not provide a breakdown:

    1. Group all Cancellation of Debt together.

    2. Compare the group total amount to the total reported.

    3. If the group total is smaller, consider the issue resolved.

    4. If the group total is larger, consider the difference underreported.

4.119.4.7.13.2  (09-17-2014)
Form 1120 Cancellation of Debt - Miscellaneous

  1. If Cancellation of Debt is U/R, enter the following on the CP 2030:

    1. Select CANCELLATION OF DEBT from the drop down menu in the "Your income and deductions" field.

    2. Enter the gross reported amount in the "Shown on return" field.

    3. Enter the total of all U/R Cancellation of Debt IRs PLUS the "Shown on return" amount in the "As corrected by IRS" field.

      Caution:

      It may be necessary to include any additional amounts identified on the return.

    4. Verify the "Difference" field matches the U/R amount.

  2. Include the following Special paragraph on the notice "If the canceled debt is excludable due to insolvency, please provide us with a breakdown of your total assets and liabilities immediately before the debt was discharged. You are insolvent to the extent that just prior to the debt cancellation your total liabilities exceeded your total assets (e.g., if your liabilities totaled $15,000 and your assets totaled $12,000, you are insolvent by $3,000). A worksheet that you may use for calculating insolvency is included in Publication 4681, Canceled Debts, Foreclosures, Repossessions and Abandonments. Debt cancellation is excludable only up to the insolvent amount. You must include any canceled debt that exceeds the amount of your insolvency as income on your tax return, unless an exclusion applies."

4.119.4.7.14  (09-17-2014)
Form 1120 Other Income on Form 1099-MISC - General

  1. Other income is identified with Document Type "1099-MISC" and displays on IDRS CC:IRPTR as Amount Type (IRPTR Literal) MISC OTH I.

4.119.4.7.14.1  (09-17-2014)
Form 1120 Other Income on Form 1099-MISC - Analyzation

  1. Compare Amount Type MISC OTH I with entries on:

    1. Form 1120, line 10. Taxpayers are instructed to identify any amounts reported on Form 1120, line 10. DO NOT give credit for any unidentified amounts reported on line 10, unless there is a $1 match.

    2. Form 1040, Schedule F, lines 8 or 43. The amount must match within $1 or be clearly identified.

    3. Form 4835, line 6. The amount must match within $1 or be clearly identified.

  2. When more than one information return containing Other Income amounts are present and the taxpayer does not provide a breakdown:

    1. Group all Other Income together.

    2. Compare the group total amount to the total reported.

    3. If the group total is smaller, consider the issue resolved.

    4. If the group total is larger, consider the difference underreported.

  3. The Other Income amount on a Form 1099-MISC IR represents the full value of Other Income. If the taxpayer reports a lesser amount, consider the difference U/R, unless documentation is attached to the return.

  4. When an attachment or statement indicates Nominee income. See IRM 4.119.4.4.7, Nominee Recipient for further instruction.

4.119.4.7.14.2  (09-17-2014)
Form 1120 Other Income on Form 1099-MISC - Miscellaneous

  1. If Other Income is U/R, enter the following on the CP 2030:

    1. Select OTHER INCOME from the drop down menu in the "Your income and deductions" field.

    2. Enter the gross reported amount in the "Shown on return" field.

    3. Enter the total of all U/R Other Income IRs PLUS the "Shown on return" amount in the "As corrected by IRS" field.

      Caution:

      It may be necessary to include any additional amounts identified on the return.

    4. Verify the "Difference" field matches the U/R amount.

4.119.4.7.15  (09-17-2014)
Form 1120 Substitute Payments in Lieu of Dividends or Interest - General

  1. Substitute Payments in lieu of dividends or interest are made by a broker who transfers a taxpayer’s securities for use in a short sale or in securities lending transaction and receives certain substitute dividend or interest payments on the taxpayer’s behalf while the short sale or securities lending transaction is open.

  2. Substitute Payments in lieu of dividends or interest are identified with Document Type "1099-MISC" and displays on IDRS CC:IRPTR as Amount Type (IRPTR Literal) SUB PAYMTS.

4.119.4.7.15.1  (09-17-2014)
Form 1120 Substitute Payments in Lieu of Dividends or Interest - Analyzation

  1. Compare Amount Type SUB PAYMTS. with entries on Form 1120, line 10. Taxpayers are instructed to identify any amounts reported on Form 1120, line 10. DO NOT give credit for any unidentified amounts reported on line 10, unless there is a $1 match.

  2. When more than one information return containing Substitute Payments in Lieu of Dividends or Interest amounts are present and the taxpayer does not provide a breakdown:

    1. Group all Substitute Payments in Lieu of Dividends or Interest together.

    2. Compare the group total amount to the total reported.

    3. If the group total is smaller, consider the issue resolved.

    4. If the group total is larger, consider the difference underreported.

  3. When an attachment or statement indicates Nominee income. See IRM 4.119.4.4.7, Nominee Recipient for further instruction.

4.119.4.7.15.2  (09-17-2014)
Form 1120 Substitute Payments in Lieu of Dividends or Interest - Miscellaneous

  1. If Substitute Payments in Lieu of Dividends or Interest is U/R, enter the following on the CP 2030:

    1. Select PAYMENTS IN LIEU OF DIVIDENDS from the drop down menu in the "Your income and deductions" field.

    2. Enter the gross reported amount in the "Shown on return" field.

    3. Enter the total of all U/R Substitute Payments in Lieu of Dividends or Interest IRs PLUS the "Shown on return" amount in the "As corrected by IRS" field.

      Caution:

      It may be necessary to include any additional amounts identified on the return.

    4. Verify the "Difference" field matches the U/R amount.

4.119.4.7.16  (09-17-2014)
Form 1120 Partnership/Trust/S-Corporation (Conduit Income) - General

  1. Conduit income is the taxpayer's distributive share from a Form 1065, U.S. Return of Partnership Income, Form 1120-S, U.S. Income Tax Return for an S Corporation or Form 1041, U.S. Income Tax Return for Estates and Trusts.

  2. Conduit income displays on IDRS CC:IRPTR with the following Amount Type and Document Type:

    Income Type Amount Type (IRPTR Literal) Document Type
    Ordinary Dividends DIVIDENDS
    • K-1 1120S

    • K-1 1041

    • K-1 1065

    Interest Income INTEREST
    • K-1 1120S

    • K-1 1041

    • K-1 1065

    Net Rental Real Estate Income REAL EST
    • K-1 1120S

    • K-1 1065

    Net Rental Real Estate Income NET RENTAL
    • K-1 1041

    Other Net Rental Income OTHER RENT
    • K-1 1120S

    • K-1 1065

    Other Rental Income OTH RENTAL
    • K-1 1041

    Net Short Term Capital Gain SHT TRM CG
    • K-1 1120S

    • K-1 1041

    • K-1 1065

    Net Long Term Capital Gain LNG TRM CG
    • K-1 1120S

    • K-1 1041

    • K-1 1065

    Other Portfolio and Non-Business Income OTH PRTFLO
    • K-1 1041

    Royalties ROYALTIES
    • K-1 1120S

    • K-1 1065

    Ordinary Business Income OR INC K-1
    • K-1 1120S

    • K-1 1065

    Ordinary Business Income BUSI INC
    • K-1 1041

    Guaranteed Payments GUAR PAYMT
    • K-1 1065

    Section 179 Deduction SECT179 EX
    • K-1 1120S

    • K-1 1065

    Note:

    The literal SECT179 EX is shown for information only. Do not pursue the 179EX amount.

4.119.4.7.16.1  (09-17-2014)
Form 1120 Partnership/Trust/S-Corporation (Conduit Income) - Analyzation

  1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    Caution:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  4. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    4. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    5. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  5. Compare Amount Types: REAL EST, NET RENTAL, OTHER RENT, OTH RENTAL, OR INC K-1, BUSI INC, OTH PRTFLO, and GUAR PAYMT with entries on Form 1120, line 10. Taxpayers are instructed to identify any amounts reported on Form 1120, line 10. DO NOT give credit for any unidentified amounts reported on line 10, unless there is a $1 match.

    1. These Amount Types may be found elsewhere on the return and/or attachments. Thoroughly review the entire return, schedules, forms and attachments before pursuing discrepant K-1 amounts.

    2. The taxpayer may combine Schedule K-1 amounts with SECTION 179 DEDUCTION and report the net on Form 1120, line 10. If the taxpayer did not claim the SECTION 179 DEDUCTION do not pursue.

  6. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  7. If multiple conduit IRs are present from the same payer for the same taxpayer take the following action:

    1. Review IDRS CC:IRPTRL for each IR to determine the On File Date.

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    4. If the On File Date is the same for multiple IRs and none of the IRs are reported, pursue all IRs.

  8. IDRS research is required to determine if fully U/R Schedule K-1 (1041) IRs Trusts are the result of a fiscal year filling requirement. Using the payer EIN, research IDRS CC:BMFOLI to determine the following:

    1. Presence of MFT 05 with a Return Posted indicator of "Y" , denoting that a Schedule K-1 (1041) was filed.

    2. If the MFT 05 indicates that it is for our BMF-AUR tax year pursue the U/R amount. If for another tax year, consider the issue resolved.

    3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  9. Conduit income may be found elsewhere on the return and/or attachments. Thoroughly review the entire return, schedules and attachments before pursuing discrepant K-1 amounts.

    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. Consider each component of a K-1 IR separately. For example, if the taxpayer only reports the INTEREST/DIVIDENDS portion of the IR but fails to report the remaining K-1 income types included on the IR (e.g. OR INC K-1, GUAR PAYMT, etc.), pursue the remaining income types based on the applicable IRM procedures.

  10. DIVIDENDS - See IRM 4.119.4.7.4, Form 1120 Dividends - Analyzation, for further instructions.

  11. INTEREST - See IRM 4.119.4.7.3, Form 1120 Interest - Analyzation, for further instructions.

  12. ROYALTIES - See IRM 4.119.4.7.5, Form 1120 Royalties – Analyzation, for further instructions.

  13. Compare Schedule K-1 Amount Type SHT TRM CG with entries on:

    1. Form 8949, Part I, line 1. Taxpayers are instructed to write "from Schedule K-1" and to enter the amount in column (h).

    2. If the taxpayer did not file a Schedule D, determine if the Short Term Capital Gains are reported on Form 1120, line 8.

    3. Form 1120, line 10. Taxpayers are instructed to identify any amounts reported on Form 1120, line 10. DO NOT give credit for any unidentified amounts reported on line 10, unless there is a $1 match.

  14. Compare Schedule K-1 Amount Type LNG TRM CG with entries on:

    1. Form 8949, Part II, line 1. Taxpayers are instructed to write "from Schedule K-1" and to enter the amount in column (h).

    2. If the taxpayer did not file a Schedule D, determine if the Capital Gains are reported on Form 1120, line 8.

    3. Form 1120, line 10. Taxpayers are instructed to identify any amounts reported on Form 1120, line 10. DO NOT give credit for any unidentified amounts reported on line 10, unless there is a $1 match.

  15. When an attachment or statement indicates Nominee income. See IRM 4.119.4.4.7, Nominee Recipient for further instruction.

4.119.4.7.16.2  (09-17-2014)
Form 1120 Partnership/Trust/S-Corporation (Conduit Income) - Miscellaneous

  1. If Conduit Income is U/R, enter the following on the CP 2030:

    1. Select the PARTNERSHIP/TRUST/SMALL BUSINESS from the drop down menu in the "Your income and deductions" field.

    2. Enter the gross reported amount in the "Shown on return" field.

    3. Enter the total of all U/R Conduit Income IRs PLUS the "Shown on return" amount in the "As corrected by IRS" field.

      Caution:

      It may be necessary to include any additional amounts identified on the return.

    4. Verify the "Difference" field matches the U/R amount.

4.119.4.7.17  (09-17-2014)
Form 1120 Real Estate Sales - General

  1. Real estate transactions are the proceeds from the transfer (sale or exchange) of real estate.

  2. Real estate transactions are identified with Document Type "1099-S" and are displayed on IDRS CC:IRPTR as Amount Type (IRPTR Literal) REAL ES SL.

    Note:

    BYR RE TAX is displayed for information only.

4.119.4.7.17.1  (09-17-2014)
Form 1120 Real Estate Sales - Analyzation

  1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  3. Compare Real Estate Sales amounts with entries on:

    1. Form 1120, line 10. Taxpayers are instructed to identify any amounts reported on Form 1120, line 10. DO NOT give credit for any unidentified amounts reported on line 10, unless there is a $1 match.

    2. Form 1120, line 1a (Gross Receipts) ONLY when the taxpayer name or Business Activity on Form 1120, Schedule K lines 2a - c relates to Real Estate activities See IRM 4.119.4.7.1, Form 1120 Gross Receipts or Sales (Bartering/Payment Card Transactions/Attorney's Proceeds/Fishing Proceeds/Medical Payments/Nonemployee Compensation) – General, for additional information on information returns that are related to Gross Receipts or Sales. Consider any other Gross Receipts related IRs when determining the total amount to compare to Form 1120 , line 1a.

    3. Form 4797, Sale of Business Property, lines 1, 2(d), 10(d), or 20.

    4. Form 6252, Installment Sale Income, lines 5 or 21.

    5. Form 1120, Schedule D, line Part I, line(s) 1 - 3 or Part II line(s) 8 - 10, column (d).

    6. Form 8949, lines Part I line 1 column (d) or Part II line 1 column (d).

    7. Form 8824, Like-Kind Exchanges, line 15.

      Reminder:

      If the amounts reported on these Forms or Schedules is equal to or greater than the REAL ES SL IR(s) amounts, consider the issue resolved. If the amount reported is less, consider the difference U/R.

  4. When an attachment or statement indicates Nominee income see IRM 4.119.4.4.7, Nominee Recipient for further instruction.

  5. Ensure that amounts reported on Forms and Schedules are properly carried forward to page 1 of the Form 1120.

4.119.4.7.17.2  (09-17-2014)
Form 1120 Real Estate Sales - Miscellaneous

  1. If Real Estate Sales is U/R, enter the following on the CP 2030:

    1. Select REAL ESTATE SALES from the drop down menu in the "Your income and deductions" field.

    2. Enter the gross reported amount in the "Shown on return" field.

    3. Enter the total of all U/R Real Estate Sales IRs PLUS the "Shown on return" amount in the "As corrected by IRS" field.

      Caution:

      It may be necessary to include any additional amounts identified on the return.

    4. Verify the "Difference" field matches the U/R amount.

  2. Include PARAGRAPH 18 when Real Estate Sales are U/R.

4.119.4.7.18  (09-17-2014)
Form 1120 Gambling Winnings - General

  1. Gambling winnings are identified with Document Type "W-2G" and is displayed on IDRS CC:IRPTR as Amount Type (IRPTR Literal) GR WINNING.

    Note:

    IDEN WAGER is displayed for information purpose only.

4.119.4.7.18.1  (09-17-2014)
Form 1120 Gambling Winnings - Analyzation

  1. Compare Gambling winnings with entries on:

    1. Form 1120, line 10. Taxpayers are instructed to identify any amounts reported on Form 1120, line 10. DO NOT give credit for any unidentified amounts reported on line 10, unless there is a $1 match.

    2. Form 1120, line 1a (Gross Receipts) ONLY when the Business Activity on Form 1120, Schedule K lines 2a - c relates to Gambling Industries - including Casino and Racetrack activities. See IRM 4.119.4.7.1, Gross Receipts or Sales (Bartering/Payment Card Transactions/Attorney's Proceeds/Fishing Proceeds/Medical Payments/Nonemployee Compensation) – General, for additional information on information returns that are related to Gross Receipts or Sales. Consider any other Gross Receipts related IRs when determining the total amount to compare to Form 1120, line 1a.

  2. When more than one information return containing Gambling Winnings amounts are present and the taxpayer does not provide a breakdown:

    1. Group all Gambling Winnings together.

    2. Compare the group total amount to the total reported.

    3. If the group total is smaller, consider the issue resolved.

    4. If the group total is larger, consider the difference underreported.

  3. When an attachment or statement indicates Nominee income. See IRM 4.119.4.4.7, Nominee Recipient for further instruction.

4.119.4.7.18.2  (09-17-2014)
Form 1120 Gambling Winnings - Miscellaneous

  1. If Gambling winnings is U/R, enter the following on the CP 2030:

    1. Select GAMBLING INCOME from the drop down menu in the "Your income and deductions" field.

    2. Enter the gross reported amount in the "Shown on return" field.

    3. Enter the total of all U/R Gambling winning IRs PLUS the "Shown on return" amount in the "As corrected by IRS" field.

      Caution:

      It may be necessary to include any additional amounts identified on the return.

    4. Verify the "Difference" field matches the U/R amount.

4.119.4.8  (09-17-2014)
Form 1041 Analysis of Income Types

  1. BMF-AUR evaluates third party income from information returns (IRs) against amounts reported on the income section of Form 1041, U.S. Income Tax Return for Estates and Trusts for the following areas of income to determine the Underreported amount (U/R) for each income type:

    • Interest income, line 1

    • Total ordinary dividends, line 2a

    • Business income or (loss), line 3

    • Capital gain or (loss), line 4

    • Rents, royalties, partnerships, other estates and trusts, line 5

    • Farm income or (loss), line 6

    • Ordinary gain or (loss), line 7

    • Other income, line 8

  2. The following instructions are used to process the various U/R income amounts by each income type. Review the complete return including all attached statements and schedules to make determinations.

  3. Analyze all income elements on all of the IR(s) following the guidelines for specific income types as provided in this Guide.

  4. See IRM 4.119.4.15, Withholding (W/H) - General, anytime the taxpayer claims withholding or the Information Return contains Amount Type (IRPTR Literal) FED TAX W/H.

4.119.4.8.1  (09-17-2014)
Form 1041 Interest - General

  1. Interest income is displayed on IDRS CC:IRPTR with the following Amount Type and Document Type:

    Income Type Amount Type (IRPTR Literal) Document Type
    Interest INTEREST 1099-INT
    Interest on U.S. Savings Bonds and Treasury Obligations SAV BOND 1099-INT
    Early Withdrawal Penalty INT FORFET 1099-INT
    Original Issue Discount on U.S. Treasury Obligation OID TRS OB 1099-OID
    Original Issue Discount for Current Year OR ISS DSC 1099-OID
    Other Periodic Interest INTEREST 1099-OID
    Early Withdrawal Penalty INT FORFET 1099-OID
    Interest INTEREST K-1 1120S
    Interest INTEREST K-1 1041
    Interest INTEREST K-1 1065

    Note:

    INVEST EXP, FRGN TX PD, TX EXM INT, SP PR INT are for information purposes only.

  2. Original issue discount (OID), which is treated as interest income, is the difference between the issue price and stated redemption price of a debt instrument (e.g., bond).

4.119.4.8.1.1  (09-17-2014)
≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    • Municipal Bonds

    • Keogh (HR-10) or Tax Sheltered Annuities (403(b)) accounts

    • Simplified Employee Pensions (SEP) or Individual Retirement Accounts (IRA)

    • A Pension Plan or Profit Sharing Plan (including a 401(k) plan)

    • A Capital Construction Fund (CCF) account

    Exception:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  3. Compare Interest, Savings Bond and OID amounts with entries on Form 1041, line 1.

  4. The taxpayer may reduce Interest amounts by the Early Withdrawal Penalty shown on the information return as Amount Type "INT FORFET" and report the difference on Form 1041, line 1.

    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  5. When more than one information return containing Interest, Savings Bond and/or OID are present and the taxpayer does not provide a breakdown:

    1. Group all Interest, Savings Bond and OID IRs together.

    2. Compare the group total amount to the total reported interest.

    3. If the group total is smaller, consider the issue resolved.

    4. If the group total is larger, consider the difference underreported.

  6. Interest comparisons for the following entries must match within $1 or be CLEARLY IDENTIFIED as interest:

    • Form 1040 Schedule C, line 6

    • Form 1040 Schedule E, Parts II, III or IV

    • Form 1040 Schedule F, lines 8 or 43

  7. Interest income may be reduced by any of the following. The Form 1041, line 1 amount should then reflect the taxable amount of interest minus these adjustments:

    • Accrued Interest - Interest on securities transferred between interest payment dates

    • Tax-Exempt Interest - (e.g., Municipal Bonds, etc.)

    • Amortizable Bond Premium - Premium offsets interest on taxable bonds acquired after December 31, 1987

    • Frozen Deposits - An account from which the taxpayer is unable to withdraw funds because the financial institution or others in the area are bankrupt, insolvent, or in receivership

  8. Interest and Dividends income may be interchanged. Check any dividend income area when comparing IR amounts. Offset interest/OID income against dividend income ONLY if an unidentified amount matches the U/R interest/OID amount within a $1.

  9. When an attachment or statement indicates Nominee income. See IRM 4.119.4.4.7, Nominee Recipient for further instruction.

4.119.4.8.1.2  (09-17-2014)
Form 1041 Interest - Miscellaneous

  1. If Interest is U/R, enter the following on the CP 2030:

    1. Select INTEREST from the drop down menu in the "Your income and deductions" field.

    2. Enter the gross reported amount in the "Shown on return" field.

    3. Enter the total of all U/R Interest IRs PLUS the "Shown on return" amount in the "As corrected by IRS" field.

      Caution:

      It may be necessary to include any additional amounts identified on the return.

    4. Verify the "Difference" field matches the U/R amount.

4.119.4.8.2  (09-17-2014)
Form 1041 Dividends and Capital Gain Distributions

  1. Dividends are distributions of property made by a corporation to its shareholders out of its current or accumulated earnings and profits. Dividends paid directly to a shareholder are reported on Form 1099-DIV, Dividends and Distributions. Dividends received indirectly through a pass-through entity are reported on Schedules K-1 from Form 1065, U.S. Return of Partnership Income, Form 1041, U.S. Income Tax Return for Estates & Trusts, and Form 1120-S, U.S. Income Tax Return for an S Corporation.

  2. Capital gain distributions are normally paid by regulated investment companies, mutual funds, and real estate investment trusts from their net long term capital gains.

4.119.4.8.2.1  (09-17-2014)
Form 1041 Dividends - General

  1. Dividends are displayed on IDRS CC:IRPTR with the following Amount Type and Document Type:

    Income Type Amount Type (IRPTR Literal) Document Type
    Ordinary Dividend ORD DIV 1099-DIV
    Dividends DIVIDENDS K-1 1120S
    Dividends DIVIDENDS K-1 1041
    Dividends DIVIDENDS K-1 1065

    Note:

    QLF DVDNDS, 28% RT GN, UN 1250 GN, CASH LIQ, NO CASH LIQ, SC 1202 GN, NONDV DIST, NONTX DIST, INVEST EXP, FRGN TX PD, EXMTINTDIV, AND SPRVACTBID, are for information purposes only.

4.119.4.8.2.2  (09-17-2014)
Form 1041 Dividends - Analyzation

  1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ :

    • Keogh (HR-10) or Tax Sheltered Annuities (403(b)) accounts

    • Simplified Employee Pensions (SEP) or Individual Retirement Accounts (IRA)

    • A pension plan or profit sharing plan (PSP) (including a 401(k) plan)

    • An Escrow Account (Attorneys)

    • Municipal Bonds

  2. Compare Ordinary dividends and/or Dividend amounts with entries on:

    1. Form 1041, line 2a.

    2. Form 1040, Schedule E, Parts II, III, and/or IV. The amounts must match within $1 or be clearly identified as Dividend Income.

  3. Do not screen the QLF DVDNDS element of the IR(s). The taxpayer determines the portion of QLF DVDNDS (from Form 1099-DIV , Box 1b) that is entered on Form 1041, line 2b. For all 1099-DIV IRs where the ORD DIV element is fully or partially U/R and a QLF DVDNDS element is present, take the following action:

    1. Include the QLF DVDNDS element(s) on the IRs.

    2. Include PARAGRAPH 6.

      Note:

      Any changes to reported QLF DVDNDS are used in determining the proper Form 1041, Schedule D tax rate.

  4. When more than one information return containing Ordinary Dividends and/or Dividends are present and the taxpayer does not provide a breakdown:

    1. Group all Ordinary Dividend and/or Dividend IRs together.

    2. Compare the group total amount to the total reported.

    3. If the group total is smaller, consider the issue resolved.

    4. If the group total is larger, consider the difference underreported.

  5. Dividends and Interest income may be interchanged. Check any interest income areas when comparing IR amounts. Offset dividend income against interest income ONLY if an unidentified amount matches the U/R dividend amount within $1.

  6. When an attachment or statement indicates Nominee income. See IRM 4.119.4.4.7, Nominee Recipient for further instruction.

4.119.4.8.2.3  (09-17-2014)
Form 1041 Dividends - Miscellaneous

  1. If Dividends are U/R, enter the following on the CP 2030:

    1. Select DIVIDENDS from the drop down menu in the "Your income and deductions" field.

    2. Enter the gross reported amount in the "Shown on return" field.

    3. Enter the total of all U/R Dividends IRs PLUS the "Shown on return" amount in the "As corrected by IRS" field.

      Caution:

      It may be necessary to include any additional amounts identified on the return.

    4. Verify the "Difference" field matches the U/R amount.

  2. Include PARAGRAPH 6 when applicable.

4.119.4.8.2.4  (09-17-2014)
Form 1041 Capital Gains Distribution - General

  1. Capital Gain distributions display on IDRS CC:IRPTR with Amount Type (IRPTR Literal) CAPTL GAIN and Document Type Form 1099-DIV.

  2. Capital Gain Distributions are considered separately from Ordinary Dividends.

4.119.4.8.2.5  (09-17-2014)
Form 1041 Capital Gains Distribution - Analyzation

  1. Compare Amount Type CAPTL GAIN amounts with entries on:

    1. Form 1041, Schedule D, line 13.

    2. Form 1041, line 4, if Form 1041, Schedule D is not attached.

  2. If the taxpayer provides a breakdown of Capital Gains Distributions (for example on an attachment/statement), ensure that the amount was properly transferred to either Form 1041, Schedule D, line 13, or Form 1041, line 4 before considering them reported. If not, consider the amount U/R.

  3. Verify that Capital Gain Distributions reported on Form 1041, Schedule D, are appropriately carried forward to Form 1041, line 4, before considering them reported. If not, then consider the amount U/R and include PARAGRAPH 12.

  4. When more than one information return containing Capital Gain Distributions are present and the taxpayer does not provide a breakdown:

    1. Group all Capital Gain Distributions IRs together.

    2. Compare the group total to the amount reported on Form 1041, Schedule D, line 13, or if Form 1041, Schedule D is not attached Form 1041, line 4.

    3. If the group total is smaller, consider the issue resolved.

    4. If the group total is larger, consider the difference underreported.

  5. When an attachment or statement indicates Nominee income. See IRM 4.119.4.4.7, Nominee Recipient for further instruction.

4.119.4.8.2.6  (09-17-2014)
Form 1041 Capital Gains Distribution - Miscellaneous

  1. If Capital Gain Distributions is U/R, enter the following on the CP 2030:

    1. Select CAPITAL GAIN DISTRIBUTIONS from the drop down menu in the "Your income and deductions" field.

    2. Enter the gross reported amount in the "Shown on return" field.

    3. Enter the total of all U/R Capital Gain Distribution IRs PLUS the "Shown on return" amount in the "As corrected by IRS" field.

      Caution:

      It may be necessary to include any additional amounts identified on the return.

    4. Verify the "Difference" field matches the U/R amount.

  2. Include PARAGRAPH 12 when applicable.

4.119.4.8.3  (09-17-2014)
Form 1041 Business Income or (Loss) - General

  1. If an estate operated a business, income and expenses are reported on Form 1040, Schedule C Profit or Loss From Business (or Schedule C-EZ, Net Profit From Business). net profit or (loss) from Schedule C (or Schedule C-EZ) is carried forward to Form 1041, line 3.

  2. Income types generally considered Business Income display on IDRS CC:IRPTR with the following Amount Type and Document Type:

    Income Type Amount Type (IRPTR Literal) Document Type Income Description
    Bartering BARTERING Form 1099-B An exchange of one taxpayer’s property or services for another taxpayer’s property or services. The fair market value of property or services received through barter is taxable income.
    Gross Attorney's Proceeds ATTRNY FEE Form 1099-MISC Gross proceeds paid to an attorney in connection with legal services.
    Gross Amount of Payment Card / Third Party Network Payments GAMC&TN Form 1099-K Consist of total transactions received by third party settlement organizations, such as Payment Card Transactions and Third Party Network Payment providers (ie: Master Card, Visa, etc.) or electronic payment facilitators (ie: PayPal, etc.).
    Fishing Boat Proceeds FISH INC Form 1099-MISC Proceeds from the sale of a catch.
    Medical Payments MED PAYMTS Form 1099-MISC Compensation for medically related services provided or goods sold.
    Nonemployee Compensation NONEMP COM Form 1099-MISC Compensation for services provided or goods sold.
  3. Payers (generally insurance companies) report gross proceeds paid to an attorney (ie: Attorney’s Fees) on Form 1099-MISC when they cannot determine the specific portion of the payment attributable to the taxpayer. The taxpayer is instructed to report only the taxable portion as income on their return. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    1. During Case Analysis, do not consider this amount type when determining U/R UNLESS the taxpayer provides a specific breakdown of their Gross Receipts or Sales and includes this amount type on their tax return.

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    3. During response phase it may be necessary to account for this amount type when evaluating the taxpayer's response.

4.119.4.8.3.1  (09-17-2014)
Form 1041 Bartering - Analyzation

  1. Compare Bartering amounts with entries on:

    1. Form 1040, Schedule C, lines 1 or 6 or C-EZ, line 1.

    2. Form 1040, Schedule F, lines 1a, 2, 7, 8, 9, 37, 42, 43, or 44. (Consider bartering reported here only if it can determine from the payer name or business activity that it is farm related income).

    3. Form 1041, line 3.

  2. Comparisons for the following entries must match within $1 or be CLEARLY IDENTIFIED as Bartering:

    1. Form 1041, line 8.

    2. Form 1041, Schedule D.

      Note:

      Payers may erroneously report securities transactions as bartering since both income types are reported on Form 1099-B

      .

    3. Form 8949.

    4. Form 1040, Schedule E, lines 3 or 4.

    5. Form 4835, lines 1, 6 or 7.

  3. When an attachment or statement indicates Nominee income. See IRM 4.119.4.4.7, Nominee Recipient for further instruction.

4.119.4.8.3.2  (09-17-2014)
Form 1041 Bartering - Miscellaneous

  1. If Bartering is U/R, enter the following on the CP 2030:

    1. Select BARTERING from the drop down menu in the "Your income and deductions" field.

    2. Enter the gross reported amount in the "Shown on return" field.

    3. Enter the total of all U/R Bartering IRs PLUS the "Shown on return" amount in the "As corrected by IRS" field.

      Caution:

      It may be necessary to include any additional amounts identified on the return.

    4. Verify the "Difference" field matches the U/R amount.

4.119.4.8.3.3  (09-17-2014)
Form 1041 Payment Card / Third Party Network Payments - Analyzation

  1. Compare Payment Card / Third Party Network Payments amounts with entries on:

    1. Form 1040, Schedule C, Part I, line 1.

    2. Form 1040, Schedule C-EZ, Part II, line 1.

    3. Form 1040, Schedule F.

    4. Consider Payment Card / Third Party Network Payments reported if it is included in a larger total for the applicable taxpayer on Form 1040 Schedule C, C-EZ, or F, unless the IR is obviously not the same type of income.

    5. Form 1041, line 3.

  2. If a Form 1099-K and Form 1099-MISC are present with identical money amounts, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  3. Gross Payment Card transactions are not adjusted for any authorized returns or other allowances.

    1. During Case Analysis consider the entire IR amount when determining underreported income UNLESS the taxpayer provides a specific breakdown of their Gross Receipts or Sales and includes this amount type on their tax return.

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  4. When comparing Payment Card / Third Party network Payment IRs with entries on any line not specifically identified for Payment Card / Third Party Network Payments the amount must match within $1 or be CLEARLY IDENTIFIED by payer name, activity or as Payment Card / Third Party Network Payments income:

    1. Form 1041, Schedule D, Part I, lines 1a - 3, column (d) or Part II, lines 8a, 9 or 10, column (d).

    2. Form 1040, Schedule E, Part I.

    3. Form 8949, Part I, line 1 column (d) or Part II, line 1, column (d).

    4. Form 4797, Parts I, II, or III.

  5. When an attachment or statement indicates Nominee income. See IRM 4.119.4.4.7, Nominee Recipient for further instruction.

4.119.4.8.3.4  (09-17-2014)
Form 1041 Payment Card / Third Party Network Payments - Miscellaneous

  1. If Payment Card / Third Party Network Payments is U/R, enter the following on the CP 2030:

    1. Select GROSS PAYMENT CARD PAYMENTS from the drop down menu in the "Your income and deductions" field.

    2. Enter the gross reported amount in the "Shown on return" field.

    3. Enter the total of all U/R Payment Card / Third Party network Payment IRs PLUS the "Shown on return" amount in the "As corrected by IRS" field.

      Caution:

      It may be necessary to include any additional amounts identified on the return.

    4. Verify the "Difference" field matches the U/R amount.

  2. Include PARAGRAPH 1 when Payment Card / Third Party Network Payments is U/R.


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