Instructions For Form 1118 - 2007 Page 10
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12the general rule of fungibility (such as
Line 1b. Enter the interest deductions
(b) multiply the result by the amount on
qualified nonrecourse indebtedness and
associated with the assets on line 1b of
line 2, column (b)(iv).
integrated financial transactions).
columns (a)(i) and (a)(ii), respectively,
Column (c)
that attract specifically allocable interest
Line 1d. Enter the total of the exempt
deductions under Temporary Regulations
Complete this column to apportion all
assets and assets without directly
section 1.861-10T(e).
other deductions not definitely allocable
identifiable yield that are to be excluded
(other than interest deductions and R&D
from the interest apportionment formula
Note. These interest deductions will be
deductions). See Regulations sections
(Temporary Regulations sections
divided among the statutory groupings
1.861-8 and 1.861-14 and Temporary
1.861-8T(d)(2) and 1.861-9T(g)(3)).
and will appear as a definitely allocable
Regulations sections 1.861-8T and
deduction in Schedule A, column 9(d).
Lines 3a through 3d. The assets on line
1.861-14T.
2 are characterized as assets in one of
Line 1c. Enter the interest deductions
the statutory groupings or as belonging to
Line 1a. Enter the total other deductions.
associated with the assets on line 1c of
the residual grouping. Enter the value of
Examples include: stewardship expenses;
columns (a)(i) and (a)(ii), respectively,
the assets in each of the statutory
legal and accounting expenses; and other
that attract specifically allocable interest
groupings on line 3a through 3d. See
expenses related to certain supportive
deductions.
Temporary Regulations sections
functions such as overhead, general and
Lines 3a through 3d. To figure the
1.861-9T(g)(3), 1.861-12T(g)(2), and
administrative, advertising, and
amount of interest deductions to
1.861-12T(h)(2) for the rules for
marketing. Deductions for charitable
apportion to each statutory grouping,
characterizing the assets.
contributions made on or after July 28,
divide the assets apportioned to the
2004, generally are definitely related and
Columns (b)(iii) and (b)(iv)
grouping by the total assets apportioned
allocable to all gross income and
and multiply the result by the interest
Line 1a. Enter the total interest
apportioned solely to domestic source
deductions to be apportioned.
deductions for the members of the
income.
Example 1. To figure the amount to
corporation’s affiliated group. These
Lines 3a through 3d. Enter the
enter on line 3a, column (b)(iii): (a) divide
include any expense that is currently
amounts apportioned to each statutory
the amount entered on line 3a, column
deductible under section 163 (including
grouping.
(a)(i), by the amount on line 2, column
original issue discount), and interest
(a)(i); and (b) multiply the result by the
equivalents. See Temporary Regulations
amount on line 2, column (b)(iii).
section 1.861-9T for the definition of
Schedules I and J
interest equivalents and a list of the
Example 2. To figure the amount to
sections that disallow or suspend interest
enter on line 3b, column (b)(iv): (a) divide
See the separate instructions for
deductions or require the capitalization of
the amount on line 3b, column (a)(ii) by
Schedule I and Schedule J to see if the
interest deductions.
the amount on line 2, column (a)(ii); and
corporation must file these schedules.
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