Instructions For Form 1120-Ic-Disc - 2004 (Page 7 of 15) in pdf

the same controlled group (as defined in

unrelated buyer, or an unrelated buyer when

offset an income item against a similar

section 993(a)(3)) as the IC-DISC. All other

a related foreign entity acts as commission

expense item.

purchasers are unrelated.

agent.

Schedule C

A qualified export sale or lease must

Line 2a. Enter the gross amount received

meet a use test and a destination test in

from leasing or subleasing export property

to unrelated persons for use outside the

order to qualify.

Dividends and

United States.

The use test applies at the time of the

Dividends-Received Deduction

Receipts from leasing export property

sale or lease. If the property is used

For purposes of the 20% ownership test on

may qualify in some years and not in others,

predominantly outside the United States,

lines 1 through 7, the percentage of stock

depending on where the lessee uses the

and the sale or lease is not for ultimate use

owned by the corporation is based on voting

in the United States, it is a qualified export

property. Enter only receipts that qualify

power and value of the stock. Preferred

sale or lease. Otherwise, if a reasonable

during the tax year. (Use Schedule E to

stock described in section 1504(a)(4) is not

person would believe that the property will

deduct expenses such as repairs, interest,

taken into account.

taxes, and depreciation.)

be used in the United States, the sale or

lease is not a qualified export sale or lease.

Line 1, Column (a)

Line 2b. A service connected to a sale or

For example, if property is sold to a foreign

lease is related to it if the service is usually

Enter dividends (except those received on

wholesaler and it is known in trade circles

furnished with that type of sale or lease in

debt-financed stock acquired after July 18,

that the wholesaler, to a substantial extent,

the trade or business where it took place. A

1984 – see section 246A) that:

•

supplies the U.S. retail market, the sale

service is subsidiary if it is less important

Are received from less-than-20%-owned

would not be a qualified export sale, and the

than the sale or lease.

domestic corporations subject to income tax

receipts would not be qualified export

and

Line 2c. Include receipts from engineering

•

receipts.

Qualify for the 70% deduction under

or architectural services on foreign

Regardless of where title or risk of loss

section 243(a)(1).

construction projects abroad or proposed for

shifts from the seller or lessor, the property

location abroad. These services include

Also include on line 1:

•

must be delivered under one of the following

feasibility studies, design and engineering,

Taxable distributions from an IC-DISC or

conditions to meet the destination test:

and general supervision of construction, but

former DISC that are designated as being

do not include services connected with

1. Within the United States to a carrier

eligible for the 70% deduction and certain

mineral exploration.

or freight forwarder for ultimate delivery

dividends of Federal Home Loan Banks.

outside the United States to a buyer or

See section 246(a)(2).

Line 2d. Include receipts for export

•

lessee.

Dividends received (except those

management services provided to unrelated

2. Within the United States to a buyer or

received on debt-financed stock acquired

IC-DISCs.

lessee who, within 1 year of the sale or

after July 18, 1984) from a regulated

Line 2f. Include interest received on any

lease, delivers it outside the United States

investment company (RIC). The amount of

loan that qualifies as a producer’s loan.

or delivers it to another person for ultimate

dividends eligible for the dividends-received

Line 2g. Enter interest on any qualified

delivery outside the United States.

deduction under section 243 is limited by

export asset other than interest on

3. Within or outside the United States to

section 854(b). The corporation should

producer’s loans. For example, include

an IC-DISC that is not a member of the

receive a notice from the RIC specifying the

interest on accounts receivable from sales in

same controlled group (as defined in section

amount of dividends that qualify for the

which the IC-DISC acted as a principal or

993(a)(3)) as the seller or lessor.

deduction.

agent and interest on certain obligations

4. Outside the United States by means

Report so-called dividends or earnings

issued, guaranteed, or insured by the

of the seller’s delivery vehicle (ship, plane,

received from mutual savings banks, etc., as

Export-Import Bank or the Foreign Credit

etc.).

interest. Do not treat them as dividends.

Insurance Association.

5. Outside the United States to a buyer

Line 2h. On Schedule D (Form 1120),

Line 2, Column (a)

or lessee at a storage or assembly site if the

Capital Gains and Losses, report in detail

property was previously shipped from the

Enter on line 2:

•

every sale or exchange of a capital asset,

United States by the seller or lessor.

Dividends (except those received on

even if there is no gain or loss.

6. Outside the United States to a

debt-financed stock acquired after July 18,

purchaser or lessee if the property was

In addition to Schedule D (Form 1120),

1984) that are received from

previously shipped by the seller or lessor

attach a separate schedule computing gain

20%-or-more-owned domestic corporations

from the United States and if the property is

from the sale of qualified export assets.

subject to income tax and that are eligible

located outside the United States pursuant

for the 80% deduction under section 243(c)

Line 2i. Enter the net gain or loss from line

to a prior lease by the seller or lessor, and

and

18, Part II, Form 4797, Sales of Business

•

either (a) the prior lease terminated at the

Taxable distributions from an IC-DISC or

Property.

expiration of its term (or by the action of the

former DISC that are considered eligible for

In addition to Form 4797, attach a

prior lessee acting alone), (b) the sale

the 80% deduction.

separate schedule computing gain from the

occurred or the term of the subsequent

sale of qualified export assets.

Line 3, Column (a)

lease began after the time at which the term

Line 2j. Enter any other qualified export

of the prior lease would have expired, or (c)

Enter dividends that are:

•

receipts for the tax year not reported on

the lessee under the subsequent lease is

Received on debt-financed stock acquired

lines 2a through 2i.

not a related person (a member of the same

after July 18, 1984, from domestic and

controlled group as defined in section

In some cases, an IC-DISC may have to

foreign corporations subject to income tax

993(a)(3) or a relationship that would result

enter a section 481(a) adjustment on line 2j.

and that would otherwise be subject to the

in a disallowance of losses under section

See Change in accounting method on page

dividends-received deduction under section

267 or section 707(b)) immediately before or

243(a)(1), 243(c), or 245(a). Generally,

after the lease with respect to the lessor,

debt-financed stock is stock that the

Line 3b. Enter receipts from selling

and the prior lease was terminated by the

corporation acquired by incurring a debt

products subsidized under a U.S. program if

action of the lessor (acting alone or together

(e.g., it borrowed money to buy the stock).

they have been designated as excluded

•

with the lessee).

Received from a RIC on debt-financed

receipts.

stock. The amount of dividends eligible for

Line 3c. Enter receipts from selling or

Line-by-Line Instructions

the dividends-received deduction is limited

leasing property or services for use by any

by section 854(b). The corporation should

part of the U.S. Government if law or

Line 1a. Enter the IC-DISC’s qualified

receive a notice from the RIC specifying the

regulations require U.S. products or services

export receipts from export property sold to

amount of dividends that qualify for the

to be used.

foreign, unrelated buyers for delivery outside

deduction.

the United States. Do not include amounts

Line 3d. Enter receipts from any IC-DISC

Line 3, Columns (b) and (c)

entered on line 1b.

that belongs to the same controlled group

(as defined in section 993(a)(3)).

Line 1b. Enter the IC-DISC’s qualified

Dividends received on debt-financed stock

export receipts from export property sold for

Line 3f. Include in an attached schedule

acquired after July 18, 1984, are not entitled

delivery outside the United States to a

any nonqualifying gross receipts not

to the full 70% or 80% dividends-received

related foreign entity for resale to a foreign,

reported on lines 3a through 3e. Do not

deduction. The 70% or 80% deduction is

-7-

Instructions for Form 1120-IC-DISC

Instructions For Form 1120-Ic-Disc - 2004 Page 7

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