Instructions For Schedule I (Form 1120-F) - 2017 (Page 9 of 10) in pdf

Lines 21 Through 25.

exempt income). The amount reportable

deferrals, enter the excess current year

on line 23 is reconciled and reported on

deferral as a negative number on

Summary – Interest

Form 1120-F, Section III, line 7c, and on

line 24b. If the current year deductible

Expense Allocation and

Schedule M-3 (Form 1120-F), Part III,

amount of prior year deferrals exceeds

Deduction Under

line 26b, columns (d) and (e).

the current year deferrals, enter the

excess deductible amount over the

Regulations Section

Line 24. Tax-exempt allocations, de-

current year deferrals as a positive

1.882-5

ferrals and capitalization of interest

number on line 24b.

expense allocation from line 23. The

Line 22. Interest expense directly al-

amount of interest expense allocable to

Note. If the corporation made an

locable under Regulations section

ECI entered on line 23 is subject to

election under section 108(i) to defer

1.882-5(a)(1)(ii). Enter the amount of

additional rules that may defer or

income from cancellation of debt in

interest expense directly allocable to

disallow deductibility in whole or in part.

connection with an applicable debt

ECI under Regulations section

instrument reacquired after December

Line 24a. Tax-exempt allocations

1.882-5(a)(1)(ii), including such

31, 2008, and before January 1, 2011,

and other disallowed interest

amounts from Schedule P (Form

and, as part of the reacquisition, issues

expense. Enter on line 24a the amount

1120-F), line 15(b). A foreign

a debt instrument with Original Issue

of allocable interest expense on line 23

corporation that has a U.S. asset and

Discount (“OID”) that is subject to

that is subject to further allocation and

indebtedness that meet the

section 108(i)(2), the interest deduction

apportionment to tax-exempt income

requirements of Temporary Regulations

for this OID is deferred. Include as a

under section 265 or under the

section 1.861-10T(b) or (c), as limited

negative number on line 24b the amount

provisions of an applicable income tax

by Temporary Regulations section

of allocable interest expense on line 23

treaty. Attach a statement showing how

1.861-10T(d)(1), shall directly allocate

that is subject to such deferral in the

such allocation between exempt and

interest expense from such

current tax year. The accrued OID is

non-exempt ECI has been made. See

indebtedness to income from such

allowed as a deduction ratably over the

Regulations section 1.882-5(a)(5) and

asset in the manner and to the extent

5-year period that the income from

Regulations section 1.882-5(a)(8),

provided in Temporary Regulations

cancellation of debt is includible in

examples (3) and (4). Treaty-exempt

section 1.861-10T.

income. The deduction is limited to the

income may include income that is ECI

income from the canceled debt with

under the force of attraction principle of

Note. See Temporary Regulations

respect to the debt instrument

section 864(c)(3) but which is business

section 1.861-10T(d) for rules requiring

reacquired. Include as a positive

profits not attributable to a U.S.

reductions in basis to assets required by

number on line 24b any such deduction

permanent establishment of the

the direct interest allocation rules in

which pertains to amounts deferred in a

corporation under an applicable treaty

Temporary Regulations section

prior tax year that is deductible in the

to which Regulations section 1.882-5

1.861-10T(b) or (c). The rules of

current tax year.

applies in determining the attributable

Temporary Regulations section

business profits. For such treaties, the

Attach a statement indicating the

1.861-10T(c) apply only to non-financial

amount allocable to ECI reported on

amount of current year deferral and the

institutions. Financial institutions are

line 23 requires additional allocation and

amount of current year deduction of a

permitted to directly allocate interest

apportionment between taxable ECI and

prior year deferral for each applicable

expense only under the non-recourse

treaty-exempt ECI under Regulations

provision. In the case of deferrals and

indebtedness rules described in

section 1.882-5(a)(5). Also include on

deductions under section 163(j), attach

Temporary Regulations section

line 24a any other interest expense that

Form 8926, Disqualified Corporate

1.861-10T(b).

is disallowed by a section of the Internal

Interest Expense Disallowed Under

Line 23. Total interest expense allo-

Revenue Code (e.g., section 163(f)(2))

Section 163(j) and Related Information,

cable to ECI under Regulations sec-

or an income tax treaty.

in lieu of, or in addition to, a statement.

tion 1.882-5. Add lines 21 and 22 and

Line 24c. Capitalized interest

enter the result on line 23. This result is

Note. Enter all amounts on line 24a as

expense. Enter on line 24c the amount

the total amount of interest expense

a negative amount. These line 24a

of interest expense allocation reported

allocable to ECI, including directly

amounts are a reduction of the

on line 23 that is capitalizable under

allocated interest. This allocable amount

allocation in determining the deductible

may not exceed the total interest

section 263A. Attach a statement

interest expense for the year.

expense paid or accrued by the

describing how such allocation has

Line 24b. Deferred interest

corporation. See Regulations section

been made.

expense. Enter on line 24b the amount

1.882-5(a)(3). If the corporation's total

of allocable interest expense on line 23

Note. Enter all amounts on line 24c as

interest expense paid or accrued is less

that is subject to deferral (for example,

a negative amount. These amounts are

than the amount of allocation that would

under sections 163(e)(3), 163(j), or

treated as a reduction of the allocation

result by adding lines 21 and 22, enter

267(a)(3)) in the current tax year. Also

in determining the deductible interest

such lesser amount on line 23. The

enter on line 24b the amount of

expense for the year.

amount entered on line 23 is the amount

allocable interest expense deferred

of interest expense taken into account

Line 24d. Total deferrals and

under any of these sections in a prior

for branch-level interest tax purposes

disallowances. Combine lines 24a,

year that is deductible in the current

under section 884(f)(1)(B) and

24b, and 24c and enter the result on

taxable year. If the amount of current

Regulations section 1.884-4(a),

line 24d. The amount entered on

year deferrals of the interest expense

regardless of whether the deductibility

line 24d is also reported and reconciled

allocated and reported on line 23

of such amount is temporarily deferred

for its temporary and permanent

exceeds the current year amount of the

or disallowed for allocation to

differences on Schedule M-3 (Form

deductible amount of prior year interest

tax-exempt income (including treaty

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Instructions For Schedule I (Form 1120-F) - 2017 Page 9

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