Form 8860 PDF Details

Understanding and navigating the complexities of tax forms is crucial for corporations, especially when it comes to taking advantage of tax credits that can significantly reduce tax liabilities. The Form 8860, associated with the Qualified Zone Academy Bond Credit, is a critical document for eligible holders of qualified zone academy bonds, providing a unique opportunity for those in the business of lending money. This form enables banks, insurance companies, and other qualifying corporations to claim a tax credit for investing in bonds that support improvements to public schools in designated zones. The process involves calculating a tentative credit based on the outstanding principal amount of the bond and the applicable credit rate, then assessing how this credit impacts the corporation’s gross income and tax liability limits. It’s a form that not only requires meticulous attention to detail during completion—including the accurate entry of bond issuer information, bond issuance dates, and principal amounts—but also demands a thorough understanding of how this credit interacts with other tax obligations, such as the alternative minimum tax and potential foreign or possessions credits. The aim is to navigate these tax advantages while being mindful of the bottom line impact, ensuring that corporations actively contributing to community development through these bonds receive the rightful benefits, all within the framework set by the Department of the Treasury and the Internal Revenue Service.

QuestionAnswer
Form NameForm 8860
Form Length2 pages
Fillable?No
Fillable fields0
Avg. time to fill out30 sec
Other namesAFR, unallowed, 17b, form 8860

Form Preview Example

Form 8 8 6 0

Qualified Z one Academy Bond Credit

 

OMB No. 1545-1606

 

 

 

199 9

 

Attach to the corporation’s tax return.

 

Department of the Treasury

See instructions on back.

 

Internal Revenue Service

 

 

 

 

 

 

 

 

Name

 

Employer identification number

 

 

 

 

Part I Tentative Credit

1Computation of credit:

(a)

Bond issuer’s name, city

or town, and state

(b)

Month and year

bond issued

(c)

Outstanding principal

amount of bond

(d)

Credit rate

(e)

Credit ((c) x (d))

2Tentative qualified zone academy bond credit. Add all amounts in column (e). Caution: You must include this amount in the corporation’s gross income BEFORE proceeding to line 3 below

2

Part II Tax Liability Limit

3Regular tax before credits. Enter the amount from Form 1120, Schedule J, line 3, or the comparable line of the corporation’s return

4Alternative minimum tax. Enter the amount from Form 4626, line 15

5Add line 3 and line 4

6a

Foreign tax credit (Form 1118, Sch. B, Part III, line 13)

6a

 

 

b

Possessions credit (Form 5735)

6b

 

 

c

Credit for fuel from a nonconventional source

6c

 

 

d

Qualified electric vehicle credit (Form 8834, line 19)

6d

 

 

e

General business credit (see instructions)

6e

 

 

f

Credit for prior year minimum tax (Form 8827, line 8)

6f

 

 

gAdd lines 6a through 6f

7Net income tax. Subtract line 6g from line 5

8Qualified zone academy bond credit. Enter the smaller of line 2 or line 7 here and on Form 1120, Schedule J, line 11, or the comparable line of the corporation’s return. Caution: If line 8 is SMALLER than line 2, the corporation should deduct the unallowed credit in figur ing its taxable income. Because this deduction will affect the tax liability limit, refigure the unallowed credit until it equals the deduction

3

4

5

6g

7

8

For Paperwork Reduction Act Notice, see back of form.

Cat. No. 24804G

Form 8860 (1999)

Form 8860 (1999)

Page 2

General Instructions

Section references are to the Inter nal Revenue Code unless otherwise noted.

Purpose of Form

Eligible holders of qualified zone academy bonds use Form 8860 to claim the qualified zone academy bond credit. A qualified zone academy bond is a taxable bond issued after 1997 by a state or local government, the proceeds of which are used to improve certain eligible public schools. In lieu of receiving periodic interest payments from the issuer, an eligible holder of the bond is generally allowed an annual income tax credit while the bond is outstanding. The credit compensates the holder for lending money to the issuer and functions as interest paid on the bond.

Who May Claim the Credit

An eligible holder of a qualified zone academy bond files Form 8860 for each tax year it holds a bond on a credit allowance date. To be an eligible holder, the taxpayer must be a bank, insurance company, or other corporation actively engaged in the business of lending money. A taxpayer that is an ineligible holder cannot claim the credit. The credit allowance date is the last day of (a) the 1-year period beginning on the date the bond was issued and (b) each successive 1-year period thereafter. The credit is deemed paid on the credit allowance date.

Specific Instructions

Part I—Tentative Credit

Line 1, Column (c)

Enter the face amount of the bond minus any payments of principal received.

Line 1, Column (d)

For bonds sold before July 1, 1999, the credit rate is 110% of the long-term applicable federal rate (AFR), compounded annually, for the month and year the bond is issued. The IRS announced the long-term AFR monthly in a series of revenue rulings published in the Internal Revenue Bulletin.

For bonds sold after June 30, 1999, the credit rate is the rate published daily by the Bureau of the Public Debt under

SLGS and Other Special Investments” on its Internet Web Site at www.publicdebt.treas.gov. The rate is applied to the bond on the first day on which there is a binding contract in writing for the sale or exchange of the bond. The rate is determined by the Department of the Treasury based on its estimate of the yield on outstanding AA rated corporate bonds of a similar maturity for the business day immediately prior to the date on which there is a binding contract in writing for the sale or exchange of the bond.

Line 2

The tentative credit on line 2 is deemed to be a payment of qualified stated interest (as defined in Regulations section 1.1273-1(c)) on the credit allowance date. Therefore, a holder on the accrual method must accrue the credit amount as taxable interest income over the 1-year period that ends on the credit allowance date.

If the holder buys a bond between credit allowance dates, the interest (credit) accrued at the time of purchase is not interest income, and is not taxable as interest when paid. Instead, the payment of the interest (credit) on the credit

allowance date is treated as a return of capital (to the extent of the accrued interest (credit) at the time of purchase), which reduces the holder’s cost basis in the bond. If the holder sells a bond between credit allowance dates, part of the sales price is treated as interest accrued to the date of sale and must be reported as interest income.

Part II—Tax Liability Limit

Line 6e

If the corporation claimed only one of the credits that make up the general business credit, enter on line 6e the credit allowed for the current year (after the tax liability limit), including any suspended research credit allowed for the current year. See the instructions for Form 3800, General Business Credit, for a list of the credits included in the general business credit. If the corporation filed Form 3800, but not Form 8844, Empowerment Zone Employment Credit, enter the credit from Form 3800, line 17b (plus any amount shown on Form 3800, line 37). If the corporation filed both Forms 3800 and 8844, enter the sum of the credits from Form 3800, lines 17b and 37, and Form 8844, line 23. If the corporation filed Form 8844, but not Form 3800, enter the sum of the credit from Form 8844, line 23, plus any other general business credit allowed for the current year (after the tax liability limit), including any suspended research credit allowed for the current year.

Line 8

If the holder cannot use all of the credit on line 2 because of the tax liability limit in Part II (i.e., line 2 is more than line 8), the holder’s income is adjusted by deducting any unused credit for the tax year that includes the credit allowance date. Because this deduction may further reduce the tax liability limit, the holder may need to refigure the tax liability limit and the unallowed credit. Refigure the unallowed credit until it equals the deduction. It may be necessary to use the “ trial and error” method.

Paperwork Reduction Act Notice. We ask for the information on this form to carry out the Internal Revenue laws of the United States. You are required to give us the information. We need it to ensure that you are complying with these laws and to allow us to figure and collect the right amount of tax.

You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the form displays a valid OMB control number. Books or records relating to a form or its instructions must be retained as long as their contents may become material in the administration of any Internal Revenue law. Generally, tax returns and return information are confidential, as required by section 6103.

The time needed to complete and file this form will vary depending on individual circumstances. The estimated average time is:

Recordkeeping

4 hr., 47 min.

Learning about

 

the law or the form

12 min.

Preparing and sending the form to the IRS

17 min.

If you have comments concerning the accuracy of these time estimates or suggestions for making this form simpler, we would be happy to hear from you. See the instructions for the tax return with which this form is filed.

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Step # 1 of filling out form 8860

2. Just after the prior part is completed, go to enter the suitable details in all these: Tentative qualified zone academy, Part II, Tax Liability Limit, a b c d e f g, Regular tax before credits Enter, a b c d e f, and Qualified zone academy bond credit.

form 8860 completion process explained (part 2)

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form 8860 writing process clarified (portion 3)

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