Instructions For Schedule I (Form 1120-F) - 2017 (Page 8 of 10) in pdf

Lines 16a Through 20.

A transaction that hedges a U.S.

allocation is made in additional

asset is taken into account for purposes

columns. See Regulations section

Step 3: Separate Currency

of determining the currency

1.882-5(e)(2). The worldwide interest

Pools Method

denomination and the value of the U.S.

expense in each currency pool includes

Corporations that allocate interest

asset. See Regulations section

interest expense in each currency that is

expense under a Separate Currency

1.882-5(e)(1)(i).

recorded on the Schedule L books and

Pools election report the allocations

reportable on Schedule I, line 9, column

Line 17b. U.S.-connected liabilities

under a three-step method for each

(c).

per currency. Complete line 17b as

currency in which the corporation has

follows:

Line 18b. Worldwide average liabili-

U.S. assets (as defined in Regulations

ties in each separate currency pool.

section 1.884-1(d)), on Schedule I, lines

Determination of U.S.-connected

Enter on line 18b, the average liabilities

16a through 20. The amount of the

liabilities if no U.S. liability reduction

(whether or not interest bearing)

interest expense allocation is the sum of

election is made. For each applicable

denominated in each separate currency

the separate interest expense

column, multiply the U.S. assets on

pool. In column (a), enter the average

allocations in each currency. If the

line 16a by the U.S.-connected liability

worldwide liabilities (whether or not

corporation makes a 3% currency

ratio on line 17a and enter the amount

interest bearing) denominated in U.S.

election under Regulations section

on line 17b. The resulting amount

dollars. For all other separate currency

1.882-5(e)(1)(i), check the box on

constitutes the U.S.-connected liabilities

pools, enter the average amount of

line 16b and include the U.S. dollar

for each currency pool when the

liabilities (whether or not interest

value of all currencies for which the 3%

corporation does not make a U.S.

bearing) denominated in the currency of

currency election applies in the U.S.

liability reduction election under

the currency pool. Do not enter the U.S.

dollar denominated column on line 16a.

Regulations section 1.884-1(e)(3).

dollar value of the currency pool for any

column other than column (a). In

Schedule I accommodates reporting

Determination of U.S.-connected

determining the average worldwide

of the interest expense allocations in

liabilities if a U.S. liability reduction

borrowing rate, the liabilities in each

four currencies (including the U.S. dollar

election is made. If the corporation

currency pool include the amounts

and the foreign corporation's functional

makes one or more U.S. liability

recorded on the sets of books

currency). If the foreign corporation has

reduction elections for the tax year

reportable on Schedule L and included

U.S. assets in more than four currencies

under Regulations section 1.884-1(e)

on Schedule I, line 8, column (c).

that are not subject to a 3% currency

(3), the total amount of the liability

Determine the average third-party

election, attach separate sheets using

reduction shown on line 7b must be

liabilities using the most frequent

the same size and format as shown on

allocated to each of the separate

averaging period for which data is

the schedule and provide the

currency pools in proportion to the U.S.

reasonably available in accordance with

information requested on lines 16a

assets in each pool. The amount

the principles of Regulations sections

through 19 on the attached sheets for all

entered on line 17b for each column is

1.882-5(b)(3) and (c)(2)(iv).

such additional currencies. Report on

computed as:

Schedule I, line 20, column (d), the total

1. The amount on line 16a multiplied

Line 18c. Borrowing rate. Divide

results for all separate currency

by the ratio on line 17a, less

line 18a by line 18b. The result is the

allocations shown on line 19 for

average worldwide borrowing rate for

2. The amount of the liability

columns (a) through (d), plus any

each separate currency pool.

reduction election entered on line 7b

additional line 19 amounts shown on

multiplied by the proportion that the

Line 19. Interest expense allocation

attached separate sheets (if any).

average U.S. assets in the separate

by separate currency pool. For each

Line 16a. U.S. Assets — U.S. dollar

currency pool bears to all of the U.S.

column, multiply the amount on line 17b

value denominated in currency.

assets in all separate currencies (i.e.,

by the borrowing rate on line 18c and

Enter the U.S. dollar value of the

the total average U.S. assets entered on

enter the result on line 19. The amount

average amount of U.S. assets in the

line 5, column (d)).

on line 19 is the amount of interest

appropriate column (a) through (d) (or

expense allocable to ECI in each

Attach a statement showing the

on the attached separate sheets for

separate currency pool.

computation and the allocation of the

additional currencies). Enter in column

liability reduction election to each

Line 20. Total interest expense allo-

(a) the U.S. dollar denominated U.S.

separate currency pool.

cable to ECI under the separate cur-

assets, plus the U.S. dollar value of any

rency pools method. On line 20, enter

U.S. assets for which a 3% currency

Line 18a. Worldwide book interest

the sum of the amounts in each column

election is applicable for the tax year. In

expense for each separate currency

on line 19 (including amounts from

column (b), enter the average U.S.

pool. Enter for each column on

line 19 of attached statement, if any).

dollar value of U.S. assets denominated

line 18a, the corporation's worldwide

The amount on line 20 is the total

in the corporation's home country

interest expense paid or accrued for the

amount of interest expense allocable to

functional currency. Enter the average

tax year in the separate currency pool.

ECI under the Separate Currency Pools

U.S. assets of all other currency pools

In column (a), enter the worldwide U.S.

method. The amount on line 20 does

beginning with column (c).

dollar interest paid or accrued. For all

not include any amount of interest

other separate currency pools, enter the

expense directly allocable under

Note. The sum of all U.S. assets in

worldwide interest expense in the

Regulations section 1.882-5(a)(1)(ii).

columns (a) through (d) (and in any

functional currency of the currency pool.

columns shown on any attached

Do not enter the U.S. dollar value of the

separate sheets) must equal the total

functional currency pool in column (b) or

average U.S. assets entered on line 5,

for any other non-U.S. dollar currencies

column (d).

for which a separate currency pool

-8-

Instructions For Schedule I (Form 1120-F) - 2017 Page 8

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