Instructions For Form 1120-Ic-Disc - 2004 (Page 8 of 15) in pdf

Line 15, Column (a)

reduced by a percentage that is related to

4. Enter the smaller of line 2 or

the amount of debt incurred to acquire the

line 3. If line 3 is larger than line

Qualified dividends are dividends that

stock. See section 246A. Also see section

2, do not complete the rest of

qualify as qualified export receipts. They

245(a) before making this computation for

this worksheet. Instead, enter

include all dividends (or amounts) includible

an additional limitation that applies to

the amount from line 4 in the

in gross income (under section 951) that are

dividends received from foreign

margin next to line 9 of

attributable to stock of related foreign export

corporations. Attach a schedule to Form

Schedule C and on line 6b,

corporations. See item 6 under Qualified

1120-IC-DISC showing how the amount on

page 1, Form 1120-IC-DISC . .

export receipts and A related foreign export

line 3, column (c), was figured.

5. Enter the total amount of

corporation on page 4 for more details.

dividends received from

Line 4, Column (a)

20%-or-more-owned

Schedule E

Enter dividends received on the preferred

corporations that are included

stock of a less-than-20%-owned public utility

on lines 2, 3, 5, 7, and 8 of

Deductions

that is subject to income tax and is allowed

column (a) . . . . . . . . . . . . . .

the deduction provided in section 247 for

6. Subtract line 5 from line 1 . . . .

Limitations on Deductions

dividends paid.

7. Multiply line 6 by 70% (.70) . . .

8. Subtract line 3 above from

Section 263A uniform capitalization

Line 5, Column (a)

column (c) of line 9 . . . . . . . .

rules. The uniform capitalization rules of

9. Enter the smaller of line 7 or

Enter dividends received on preferred stock

section 263A generally require corporations

of a 20%-or-more-owned public utility that is

line 8 . . . . . . . . . . . . . . . . .

to capitalize, or include in inventory, certain

subject to income tax and is allowed the

10. Dividends-received

costs incurred in connection with:

•

deduction under section 247 for dividends

deduction after limitation.

Personal property (tangible and certain

paid.

Add lines 4 and 9. (If this is less

intangible property) acquired for resale.

•

than line 9 of Schedule C, enter

The production of real property and

Line 6, Column (a)

the smaller amount on line 6b,

tangible personal property produced by a

page 1, Form 1120-IC-DISC,

Enter the U.S.-source portion of dividends

corporation for use in its trade or business

and in the margin next to line 9

that:

or in an activity engaged in for profit.

•

Are received from less-than-20%-owned

of Schedule C.) . . . . . . . . . .

Tangible personal property produced by

foreign corporations and

•

a corporation includes a film, sound

Qualify for the 70% deduction under

Line 13, Column (a)

recording, videotape, book, or similar

section 245(a). To qualify for the 70%

property.

Include the following:

deduction, the corporation must own at least

IC-DISCs subject to the section 263A

10% of the stock of the foreign corporation

1. Dividends (other than capital gain

uniform capitalization rules are required to

by vote and value.

distributions reported on Schedule D (Form

capitalize:

1120) and exempt-interest dividends) that

Line 7, Column (a)

1. Direct costs and

are received from RICs and that are not

Enter the U.S.-source portion of dividends

2. An allocable part of most indirect

subject to the 70% deduction.

that are received from 20%-or-more-owned

costs (including taxes) that (a) benefit the

2. Dividends from tax-exempt

foreign corporations and that qualify for the

assets produced or acquired for resale or (b)

organizations.

80% deduction under section 245(a).

are incurred by reason of the performance

3. Dividends (other than capital gain

of production or resale activities.

Line 8, Column (a)

distributions) received from a real estate

investment trust that, for the tax year of the

For inventory, some of the indirect

Enter dividends received from wholly owned

trust in which the dividends are paid,

expenses that must be capitalized are:

foreign subsidiaries that are eligible for the

•

qualifies under sections 856 through 860.

Administration expenses.

100% deduction under section 245(b).

•

4. Dividends not eligible for a

Taxes.

•

In general, the deduction under section

dividends-received deduction, which include

Depreciation.

•

245(b) applies to dividends paid out of the

the following:

Insurance.

•

earnings and profits of a foreign corporation

Compensation paid to officers attributable

a. Dividends received on any share of

for a tax year during which:

to services.

•

stock held for less than 46 days during the

•

All of its outstanding stock is owned

Rework labor.

91-day period beginning 45 days before the

•

(directly or indirectly) by the domestic

Contributions to pension, stock bonus,

ex-dividend date. When counting the

corporation receiving the dividends and

and certain profit-sharing, annuity, or

•

number of days the corporation held the

All of its gross income from all sources is

deferred compensation plans.

stock, you cannot count certain days during

effectively connected with the conduct of a

Regulations section 1.263A-1(e)(3)

which the corporation’s risk of loss was

trade or business within the United States.

specifies other indirect costs that relate to

diminished. See section 246(c)(4) and

Line 9, Column (c)

production or resale activities that must be

Regulations section 1.246-5 for more

capitalized and those that may be currently

details.

Generally, line 9, column (c), may not

deductible.

b. Dividends attributable to periods

exceed the amount from the worksheet

totaling more than 366 days that the

below. However, in a year in which an NOL

Interest expense paid or incurred during

IC-DISC received on any share of preferred

occurs, this limitation does not apply even if

the production period of designated property

stock held for less than 91 days during the

the loss is created by the dividends-received

must be capitalized and is governed by

deduction. See sections 172(d) and 246(b).

181-day period that began 90 days before

special rules. For more details, see

the ex-dividend date. When counting the

Regulations sections 1.263A-8 through

number of days the IC-DISC held the stock,

1.263A-15.

Line 9, Column (c) Worksheet

you cannot count certain days during which

The costs required to be capitalized

the IC-DISC’s risk of loss was diminished.

under section 263A are not deductible until

1. Refigure line 5, page 1, Form

See section 246(c)(4) and Regulations

the property (to which the costs relate) is

1120-IC-DISC, without any

section 1.246-5 for more details. Preferred

sold, used, or otherwise disposed of by the

adjustment under section 1059

dividends attributable to periods totaling less

corporation.

and without any capital loss

than 367 days are subject to the 46-day

carryback to the tax year under

Exceptions. Section 263A does not apply

holding period rule above.

section 1212(a)(1) . . . . . . . . .

to:

•

c. Dividends on any share of stock to

Personal property acquired for resale if

2. Multiply line 1 by 80% (.80) . . .

the extent the IC-DISC is under an

the IC-DISC’s average annual gross

3. Add lines 2, 5, 7, and 8, column

obligation (including a short sale) to make

receipts for the 3 prior tax years were $10

(c), and the part of the

related payments with respect to positions in

million or less.

deduction on line 3, column (c),

•

substantially similar or related property.

that is attributable to dividends

Inventoriable items accounted for in the

5. Any other taxable dividend income

received from

same manner as materials and supplies that

not properly reported above (including

20%-or-more-owned

are not incidental. See Cost of Goods Sold

distributions under section 936(h)(4)).

on page 6 for details.

corporations . . . . . . . . . . . . .

-8-

Instructions for Form 1120-IC-DISC

Instructions For Form 1120-Ic-Disc - 2004 Page 8

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