Instructions For Form 1118 (Rev. December 2015) printable pdf download

Instructions for Form 1118

Department of the Treasury

Internal Revenue Service

(Rev. December 2015)

Foreign Tax Credit—Corporations

How To Complete

Section references are to the Internal Revenue

company income (defined in section

Code unless otherwise noted.

954(c)) if the corporation were a controlled

Form 1118

foreign corporation (CFC) (defined in

Future Developments

section 957). This includes any gain on

Important. Complete a separate

the sale or exchange of stock that is more

Schedule A; Schedule B, Parts I & II;

For the latest information about

than the amount treated as a dividend

Schedules C through G; Schedule I; and

developments related to Form 1118 and

under section 1248. However, in

its instructions, such as legislation

Schedule K for each applicable separate

determining if any income would be

enacted after they were published, go to

category of income. See

Categories of

foreign personal holding company income,

Income, later. Complete Schedule B, Part

the rules of section 864(d)(6) will apply

III; Schedule H; and Schedule J only once.

only for income of a CFC.

Use Schedule A to compute the

General Instructions

Any amount includible in gross income

corporation's income or loss before

under section 1293 (which relates to

adjustments for each applicable category

Purpose of Form

certain passive foreign investment

of income.

companies).

Use Form 1118 to compute a

Use Schedule B to determine the total

Passive income does not include:

corporation's foreign tax credit for certain

foreign tax credit after certain limitations.

Any financial services income that is

taxes paid or accrued to foreign countries

Use Schedule C to compute taxes

general category income (see

General

or U.S. possessions. See

Taxes Eligible

deemed paid by the domestic corporation

Category

Income, later),

for a

Credit, later.

filing the return.

Any export financing interest unless it is

Use Schedules D and E to compute

Who Must File

also related person factoring income (see

taxes deemed paid by lower-tier foreign

section 904(d)(2)(G) and Regulations

corporations.

Any corporation that elects the benefits of

section 1.904-4(h)(3)),

Use Schedule F to report gross income

the foreign tax credit under section 901

Any high-taxed income (see

General

and definitely allocable deductions from

must complete and attach Form 1118 to

Category Income

and the instructions for

foreign branches.

its income tax return.

Schedule A, later), or

Use Schedule G to report required

Any active rents or royalties. See

When to Make the Election

reductions of tax paid, accrued, or

Regulations section 1.904-4(b)(2)(iii) for

deemed paid.

The election to claim the foreign tax credit

definitions and exceptions.

Use Schedule H to apportion

(or a deduction in lieu of a credit) for any

deductions that cannot be definitely

tax year may be made or changed at any

Note. Certain income received from a

allocated to some item or class of income.

time before the end of a special 10-year

CFC and certain dividends from a 10/50

Use Schedule I (a separate schedule)

period described in section 6511(d)(3) (or

corporation that would otherwise be

to compute reductions of taxes paid,

section 6511(c) if the period is extended

passive income may be assigned to

accrued, or deemed paid on foreign oil

by agreement). Note that while the

another separate category under the

and gas extraction income.

limitations period for refund claims relating

look-through rules. See

Look-Through

Use Schedule J (a separate schedule)

to a foreign tax credit generally runs

Rules, later.

to compute adjustments to separate

parallel with the election period, the

Specified passive category income.

limitation income or losses in determining

limitations period for refund claims relating

This term includes:

the numerators of limitation fractions,

to a deduction of foreign tax does not, and

Dividends from a DISC or former DISC

year-end recharacterization balances, and

may expire before the end of the election

(as defined in section 992(a)) to the extent

overall foreign and domestic loss account

period.

such dividends are treated as foreign

balances.

source income, and

Computer-Generated

Use Schedule K (a separate schedule)

Distributions from a former FSC out of

to reconcile the corporation's prior year

Form 1118

earnings and profits attributable to foreign

foreign tax carryover with its current year

trade income or interest or carrying

The corporation may submit a

foreign tax carryover.

computer-generated Form 1118 and

charges (as defined in section 927(d)(1),

Categories of Income

schedules if they conform to the IRS

before its repeal) derived from a

transaction which results in foreign trade

version. However, if a software program is

Compute a separate foreign tax credit for

income (as defined in section 932(b),

used, it must be approved by the IRS for

each applicable separate category

before its repeal).

use in filing substitute forms. This ensures

described below.

the proper placement of each item

Section 901(j) Income

Passive Category Income

appearing on the IRS version. For more

No credit is allowed for foreign taxes

information, see Pub. 1167, General Rules

Passive category income includes passive

imposed by and paid or accrued to certain

and Specifications for Substitute Forms

income and specified passive category

sanctioned countries. However, income

and Schedules.

income.

derived from each such country is subject

Passive income. Generally, passive

to a separate foreign tax credit limitation.

income is:

Therefore, the corporation must use a

Any income received or accrued that

separate Form 1118 for income derived

would be foreign personal holding

from each such country. On each Form

Sep 29, 2015

Cat. No. 10905I

Instructions For Form 1118 (Rev. December 2015)

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