Instructions For Form 1120-Ic-Disc - 2004 (Page 11 of 15) in pdf

bribes or kickbacks, that it pays, directly or

1. Add lines 1c and 2k, column (b),

Schedule J

indirectly, to government officials,

Schedule B . . . . . . . . . . . . . . .

employees, or agents (section

2. Add lines 1c and 2k, column (d),

Deemed and Actual

995(b)(1)(F)(iii)).

Schedule B . . . . . . . . . . . . . . .

Distributions and Deferred

3. Add lines 1 and 2. Enter on line

Line 14. Earnings and Profits

DISC Income for the Tax Year

1, Part II, Schedule J . . . . . . . .

Attach a computation showing the earnings

Part I—Deemed Distributions

and profits for the tax year. See section 312

Line 3. Controlled Group

for rules on figuring earnings and profits for

Under Section 995(b)(1)

Allocation

the purpose of the section 995(b)(1)

limitation.

If the IC-DISC is a member of a controlled

Line 2. Recognized Gain on

group (as defined in section 993(a)(3)) that

Section 995(b)(1)(B) Property

Line 17. Foreign Investment

includes more than one IC-DISC, only one

Attributable to Producer Loans

Enter gain recognized during the tax year on

$10 million limit is allowed to the group. If an

the sale or exchange of property, other than

allocation is required, a statement showing

Line 17a. For shareholders other than C

property which in the hands of the IC-DISC

each member’s portion of the $10 million

corporations. To figure the amount for line

was a qualified export asset, previously

limit must be attached to Form

17a, attach a computation showing (1) the

transferred to the IC-DISC in a transaction in

1120-IC-DISC. See Proposed Regulations

IC-DISC’s foreign investment in producer’s

which the transferor realized gain but did not

section 1.995-8(f) for details.

loans during the tax year; (2) accumulated

recognize the gain in whole or in part. See

earnings and profits (including earnings and

section 995(b)(1)(B). Show the computation

Lines 4 and 5. Proration of $10

profits for the 2004 tax year) minus the

of the gain on a separate schedule. Include

amount on line 15, Part I; and (3)

Million Limit

no more of the IC-DISC’s gain than the

accumulated IC-DISC income. Enter the

The $10 million limit (or the controlled group

amount of gain the transferor did not

smallest of these amounts (but not less than

member’s share) is prorated on a daily

recognize on the earlier transfer.

zero) on line 17a.

basis. Thus, for example, if, for its 2004

calendar tax year, an IC-DISC has a short

Line 17b. For C corporation

Line 3. Recognized Gain on

tax year of 183 days, and it is not a member

shareholders. To figure the amount for line

Section 995(b)(1)(C) Property

of a controlled group, the limit that would be

17b, attach a computation showing (1) the

Enter gain recognized on the sale or

entered on line 5 of Part II is $5,000,000

IC-DISC’s foreign investment in producer’s

exchange of property described in section

loans during the tax year; (2) accumulated

(183/366 times $10 million).

995(b)(1)(C). Show the computation of the

earnings and profits (including earnings and

gain on a separate schedule. Do not include

profits for the 2004 tax year) minus the

Line 7. Taxable Income

any gain included in the computation of line

amount on line 16, Part I; and (3)

Enter the taxable income attributable to line

2. Include only the amount of the IC-DISC’s

accumulated IC-DISC income. Enter the

6, qualified export receipts. The IC-DISC

gain that the transferor did not recognize on

smallest of these amounts (but not less than

may select the qualified export receipts to

the earlier transfer and that would have

zero) on line 17b.

been treated as ordinary income if the

which the line 5 limitation is allocated.

property had been sold or exchanged rather

For purposes of lines 17a and 17b,

See Proposed Regulations section

than transferred to the IC-DISC. Do not

foreign investment in producer’s loans is the

1.995-8 for details on determining the

include gain on the sale or exchange of

smallest of (1) the net increase in foreign

IC-DISC’s taxable income attributable to

IC-DISC stock-in-trade or other property that

assets by members of the controlled group

either would be included in inventory if on

(defined in section 993(a)(3)) to which the

qualified export receipts in excess of the $10

hand at the end of the tax year or is held

IC-DISC belongs; (2) the actual foreign

million amount. Special rules are provided

primarily for sale in the normal course of

investment by the group’s domestic

for allocating the taxable income attributable

business.

members; or (3) the IC-DISC’s outstanding

to any related and subsidiary services, and

producer’s loans to members of the

for the ratable allocation of the taxable

controlled group.

Line 4. Income Attributable to

income attributable to the first transaction

selected by the IC-DISC that exceeds the

Military Property

Net increase in foreign assets and actual

$10 million amount. Deductions must be

foreign investment are defined in sections

Enter 50% of taxable income attributable to

allocated and apportioned according to the

995(d)(2) and (3).

military property (section 995(b)(1)(D)).

rules of Regulations section 1.861-8. The

Show the computation of this income. To

See Regulations section 1.995-5 for

selection of the excess receipts by the

figure taxable income attributable to military

additional information on computing foreign

IC-DISC is intended to permit the IC-DISC

property, use the gross income attributable

investment attributable to producer’s loans.

to allocate the $10 million limitation to the

to military property for the year and the

qualified export receipts of those

Lines 20 and 21. The percentages on lines

deductions properly allocated to that

transactions occurring during the tax year

income. See Regulations section 1.995-6.

20 and 21 must add up to 100%.

that permit the greatest amount of taxable

Line 22. Allocate the line 22 amount to

income to be allocated to the IC-DISC under

Line 9. Deemed Distributions to C

shareholders that are individuals,

the intercompany pricing rules of section

Corporations

partnerships, S corporations, trusts, and

994.

estates.

Line 9 provides for the computation of the

one-seventeenth deemed distribution of

To avoid double counting of the deemed

Part II—Section 995(b)(1)(E)

section 995(b)(1)(F)(i). Line 9 only applies to

distribution, if an amount of taxable income

shareholders of the IC-DISC that are C

for the tax year attributable to excess

Taxable Income

corporations.

qualified export receipts is also deemed

Generally, any taxable income of the

distributed under either line 1, 2, 3, or 4 of

IC-DISC attributable to qualified export

Part I, such amount of taxable income is

Line 10. International Boycott

receipts that exceed $10 million will be

only includible on that line of Part I, and

Income

deemed distributed.

must be subtracted from the amount

An IC-DISC is deemed to distribute any

otherwise reportable on line 7 of Part II and

Line 1. Export Receipts

income that resulted from cooperating with

carried to line 5 of Part I. See Proposed

If there were no commission sales, leases,

an international boycott (section

Regulations section 1.995-8(d).

rentals, or services for the tax year, enter on

995(b)(1)(F)(ii)). See Form 5713 to figure

line 1, Part II, the total of lines 1c and 2k,

this deemed distribution and for reporting

After filing the IC-DISC’s 2004 tax return,

column (e), Schedule B.

requirements for any IC-DISC with

the allocation of the $10 million limitation

operations related to a boycotting country.

and the computation of the line 7 deemed

If there were commission sales, leases,

distribution may be changed by filing an

rentals, or services for the tax year, the total

Line 11. Illegal Bribes, etc.

amended Form 1120-IC-DISC only under

qualified export receipts to be entered on

the conditions specified in Proposed

An IC-DISC is deemed to distribute the

line 1, Part II, are figured as follows (section

Regulations section 1.995-8(b)(1).

amount of any illegal payments, such as

993(f)):

-11-

Instructions for Form 1120-IC-DISC

Instructions For Form 1120-Ic-Disc - 2004 Page 11

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