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

may file a separate Form 8873 for each

qualifying foreign trade income. Complete

1. Determine the amount from line 52

group of transactions instead of filing a

this section to see if you will benefit by using

that is attributable to 80% transactions.

tabular schedule.

marginal costing. If you do not wish to use

2. Multiply the amount in step 1 by 80%

this method, skip Part III and complete Part

and enter the result on line 53b.

Note. If you are electing to group

IV using the instructions below.

transactions, 100% transactions, 80%

Line 53c. Determine the amount to enter on

transactions, and 60% transactions must be

this line using the following two steps:

Part IV–Extraterritorial

grouped separately. Therefore, transactions

1. Determine the amount from line 52

must be grouped both by product or product

Income Exclusion

that is attributable to 60% transactions.

line and by type of transaction (that is,

2. Multiply the amount in step 1 by 60%

100%, 80%, or 60%).

Line 45. Generally, your qualifying foreign

and enter the result on line 53c.

trade income is based on the greatest of

Format of tabular schedules. If a tabular

lines 33, 36, 38, 42, or 44. Under the

schedule is attached to Form 8873, the

Line 54. Add lines 53a through 53c. Report

alternative computation, however, you may

schedule must:

the total as follows: Although the total is an

•

instead choose to enter on line 45 the

Be in spreadsheet or similar format,

exclusion from income and not a deduction,

•

amount from any of those five lines (33, 36,

List your name and identifying number on

include it on the “Other deductions” or

38, 42, or 44). For example, although line 42

each numbered page,

“Other expenses” line of your tax return or

•

may produce the greatest exclusion for you,

Be formatted in columns that correspond

schedule. If you are filing Schedule C (Form

use of that line could eliminate or reduce the

to each line item of Form 8873, and

1040), enter “Extraterritorial income

•

exclusion for a related person because of

Show totals in each column.

exclusion from Form 8873” on a line in Part

the limitation under section 941(a)(3) on the

V of Schedule C. For filers of Form 1120,

use of the 1.2% of foreign trading gross

Part II–Foreign Trade

include the amount on Form 1120, page 1,

receipts method. Therefore, to maximize the

line 26.

Income and Foreign Sale

combined exclusion for you and that related

person, you may prefer to enter on line 45

and Leasing Income

Paperwork Reduction Act Notice. We ask

the greatest of lines 33, 36, 38, or 44

for the information on this form to carry out

(instead of the amount on line 42).

Lines 6 through 14. Enter your foreign

the Internal Revenue laws of the United

Line 50. If you had any operations in or

trading gross receipts identified on lines 6

States. You are required to give us the

related to a country associated with carrying

through 14 using the rules outlined under

information. We need it to ensure that you

out an international boycott or you

Foreign Trading Gross Receipts beginning

are complying with these laws and to allow

participated in or cooperated with an

on page 1.

us to figure and collect the right amount of

international boycott, your extraterritorial

Line 14, column (b). Enter on this line only

tax.

income exclusion may be reduced. See the

the sum of those portions of the amounts on

You are not required to provide the

separate instructions for Form 5713,

lines 6, 9, 12, and 13, column (a), that are

information requested on a form that is

International Boycott Report, for definitions

attributable to foreign economic processes

subject to the Paperwork Reduction Act

and other details and to find out if you are

(see definition on page 2). Because only

unless the form displays a valid OMB control

required to file Form 5713. If you are

foreign trading gross receipts attributable to

number. Books or records relating to a form

required to file Form 5713, also complete

foreign economic processes are included in

or its instructions must be retained as long

Schedule A (Form 5713), International

line 14, column (b), the amount entered on

as their contents may become material in

Boycott Factor (Section 999(c)(1)), and

line 14, column (b), will not necessarily

the administration of any Internal Revenue

Schedule C (Form 5713), Tax Effect of the

equal the total of the foreign trading gross

law. Generally, tax returns and return

International Boycott Provisions. Enter the

receipts amounts entered on lines 6, 9, 12,

information are confidential, as required by

amount from Schedule C (Form 5713), line

and 13, column (a).

section 6103.

6c, on Form 8873, line 50.

Line 17. For lines 17a through 17h,

The time needed to complete and file this

compute your cost of goods sold allocated

The exception from filing Form 5713

form will vary depending on individual

to your foreign trading gross receipts. See

that generally applies to foreign

circumstances. The estimated time burden

persons does not apply to a foreign

the instructions for the tax return to which

CAUTION

for individual taxpayers filing this form is

this form is attached for basic rules for

person that is claiming the extraterritorial

approved under OMB control number

income exclusion.

determining cost of goods sold.

1545-0074 and is included in the estimates

Line 19. Enter on line 19, column (a), the

Also include on line 50 the total of any

shown in the instructions for their individual

deductions, other than those you included in

illegal bribes, kickbacks, or other payments

income tax return. The estimated burden for

figuring your cost of goods sold, that are

(within the meaning of section 162(c)) paid

all other taxpayers who file this form is

allocable to the amount reported on line 15.

by or on behalf of the taxpayer directly or

shown below.

indirectly to government officials,

Enter on line 19, column (b), the

employees, or agents.

deductions, other than those you included in

Recordkeeping . . . . . . . 21 hr., 19 min.

figuring your cost of goods sold, that are

Line 53. For definitions of “100%

Learning about the law

transactions,” “80% transactions,” and “60%

directly allocable to the amount reported on

or the form . . . . . . . . . .

1 hr., 40 min.

line 16.

transactions,” see Definitions on page 1.

Preparing the form,

Note. Do not include your allocable portion

You may report 100% transactions, 80%

copying, assembling,

of general and administrative expenses on

transactions, and 60% transactions on the

and sending the form to

line 19, column (b).

same Form 8873 only if you are reporting on

the IRS . . . . . . . . . . . . .

2 hr., 6 min.

a transaction-by-transaction basis. If you are

For both column (a) and column (b),

reporting on a grouping basis, you must use

attach to Form 8873 a schedule listing these

If you have comments concerning the

a separate Form 8873 for each type of

amounts. See the instructions for the tax

accuracy of these time estimates or

transaction. See the instructions for line 5c

return to which this form is attached for

suggestions for making this form simpler, we

on page 3 for more details and for other

basic rules for determining expenses.

would be happy to hear from you. See the

restrictions that apply with respect to

instructions for the tax return with which this

reporting on a transaction-by-transaction

Part III–Marginal Costing

form is filed.

basis or on a grouping basis.

Marginal costing is a method under which

Line 53b. Determine the amount to enter

only direct production costs of producing a

on this line using the following two steps:

particular product or product line are taken

into account for purposes of computing your

-4-

Instructions For Form 8873 - 2005 Page 4

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