Instructions For Form 8873 - 2005 (Page 3 of 4) in pdf

instructions for line 5c for rules concerning

generally treated as transferring, as of the

Note. Taxpayers that check box (1)(a) of

grouping elections that may be made with

first day of the first tax year to which the

line 5c may aggregate 60% transactions,

respect to transactions. However, you may

election applies, all of its assets to a

80% transactions, and 100% transactions

not group sales and leases together, and

domestic corporation in an exchange under

on the same Form 8873 only if they are

you may not report foreign sale and leasing

section 354.

applying the same method (for example,

income in column (b) of Part II of the form

15% of FTI, 1.2% of FTGR, 30% of FSLI) to

Exception for old earnings and profits

on the basis of groups.

all transactions reported on the form and the

of certain corporations. If the exception

transactions (other than foreign sale and

described in section 5(c)(3) of the FSC

leasing income transactions) are included in

Repeal and Extraterritorial Income Exclusion

the same product or product line.

Specific Instructions

Act of 2000 applies, attach a statement

indicating the basis for your entitlement, if

(b) Aggregate on tabular schedule.

any, to that exception.

You may choose to aggregate your

Part I–Elections and Other

transactions on a tabular schedule rather

Effect of revocation or termination. If

than on Form 8873. To do so, file one Form

a foreign corporation has elected to be a

Information

8873 entering only your name and

domestic corporation and the election

identifying number at the top of the form.

ceases to apply for any subsequent tax

Line 1. Check the box if the taxpayer is

Also check box (1)(b) of line 5c. Attach a

year, the corporation is treated as a

electing, under section 942(a)(3), to exclude

domestic corporation transferring, as of the

tabular schedule to the partially completed

a portion of its gross receipts from treatment

Form 8873 reporting all information as if a

first day of the subsequent tax year to which

under the extraterritorial income exclusion

separate form were filed for each aggregate

the election no longer applies, all of its

provisions. Attach a schedule that lists the

of transactions described in (1)(a) above.

property to a foreign corporation in an

transactions being omitted.

Also see Format of tabular schedules on

exchange under section 354.

Note. A foreign tax credit may be available

page 4.

Note. A corporation may, under certain

for foreign taxes paid on the receipts the

circumstances, revoke a line 3 election

Note. To be eligible for either of the

taxpayer excludes from treatment under the

before October 22, 2005, without recognition

aggregate reporting formats described in

extraterritorial income exclusion provisions.

of gain or loss. See Revocation of Election

(1)(a) or (b) above, you must maintain a

Line 2. Check the box if the taxpayer is

to be Treated as a Domestic Corporation on

supporting schedule that contains all

electing to apply the extraterritorial income

page 1 for details.

information that would be reported if a

exclusion provisions to certain transactions

separate Form 8873 were filed for each

Line 4. Before completing lines 4a and 4b,

involving a FSC (see Eligible Transactions

transaction, including identification of each

see Foreign Economic Process

on page 1).

transaction as either a 100% transaction, an

Requirements on page 2.

Note. The extraterritorial income exclusion

80% transaction, or a 60% transaction. The

Line 5a. Enter the six-digit code that best

provisions and the FSC provisions may not

supporting schedule should not be filed with

describes the business activity for which the

be applied to the same transaction.

the Form 8873.

form is being filed from the list of Principal

Attach a schedule listing those

Business Activity Codes included in your tax

transactions. Once the election is made with

Instead of aggregate reporting, you may

return instructions.

respect to a transaction, the election applies

choose to report transactions on a tabular

Line 5b. Enter your product or product line

to the tax year for which it was made and all

schedule. File one Form 8873 entering only

that meets one of the two standards below.

later tax years. The election may be revoked

•

your name and identifying number at the top

The product or product line based on the

only with IRS consent. See Rev. Proc.

of the form. Also check box (1)(c) of line 5c.

North American Industry Classification

2001-37, 2001-1 C.B. 1327.

Attach a tabular schedule to the partially

System (NAICS) or

Line 3. Check the box if the taxpayer is an

•

completed Form 8873 reporting all

A recognized industry or trade usage.

“applicable foreign corporation” that elects to

information as if a separate Form 8873 were

Line 5c. Check the applicable box to

be treated as a domestic corporation under

filed for each transaction. Also, see Format

indicate the basis on which the amounts on

section 943(e). To be eligible, the foreign

of tabular schedules on page 4.

Form 8873 are determined using either the

corporation must waive the right to claim all

(2) Group of transactions. You may

transaction-by-transaction basis or an

benefits granted to it by the United States

elect to group transactions (other than

election to group transactions. Use one of

under any treaty. If the election is made, the

foreign sale and leasing income

the following formats.

corporation will be treated as a domestic

transactions) by product or product line. The

corporation for all purposes of the Internal

(1) Transaction-by-transaction. If your

grouping of transactions applies to all

Revenue Code. However, the corporation

determination is based on each transaction

transactions completed during the tax year

may not elect to be an S corporation.

rather than an election to group

for that product or product line.

transactions, check box (1)(a), (1)(b), or

An “applicable foreign corporation” is a

To make the election, complete one

(1)(c), depending on your preferred

foreign corporation that:

Form 8873 entering only your name and

reporting format.

1. Manufactures, produces, grows, or

identifying number at the top of the form.

(a) Aggregate on Form 8873. If you

extracts property in the ordinary course of

Also check box (2) of line 5c. Attach a

choose to aggregate your transactions on

the corporation’s trade or business or

tabular schedule to the partially completed

one or more Forms 8873, check box (1)(a)

2. Substantially all of its gross receipts

Form 8873 reporting all information as if a

of line 5c. Aggregate on one Form 8873

are foreign trading gross receipts.

separate Form 8873 were filed for each

those transactions for which the same

group of transactions. See Format of tabular

Once made, the election applies to the

method is applied, provided all the

schedules on page 4.

tax year made and remains in effect for all

transactions (other than foreign sale and

Note. If a grouping basis is elected,

subsequent years unless revoked or

leasing income transactions) are included in

aggregate reporting is not permitted.

the same product or product line indicated

terminated. Any revocation or termination

on line 5b. If a different method is applied to

applies to tax years beginning after the tax

Attach Form 8873 to your tax return.

some of the transactions in one or more of

year during which made. The election will

Once the election is made, grouping

automatically terminate if the corporation

the separate product lines, additional Forms

redeterminations are permitted until one

meets neither of the two requirements

8873 must be filed.

year after the later of:

above. If an election is revoked by the

Example. If you have no foreign sale

1. The due date of your timely filed

corporation or is automatically terminated,

and leasing income and you apply the 15%

return (including extensions) or

the corporation (and any successor

of foreign trade income method to all

2. In the event of an examination of your

corporation) may not elect to be a domestic

transactions in three separate product lines,

return by the IRS, notification by the IRS of

corporation again for 5 tax years beginning

you would file three aggregate Forms 8873.

such examination (provided you agree to

with the first tax year after the revocation or

However, if you use the 1.2% of foreign

extend the statute of limitations for

termination. See Rev. Proc. 2001-37.

trading gross receipts method for some of

assessment by one year).

Effect of election. For purposes of

the transactions in one of the product lines,

section 367, a foreign corporation that has

you would then file four aggregate Forms

Note. If your foreign trading gross receipts

elected to be a domestic corporation is

8873.

are $5 million or less for the tax year, you

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Instructions For Form 8873 - 2005 Page 3

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