Instructions For Form 1120-Ic-Disc - 2003 (Page 12 of 16) in pdf

Line 3. Recognized Gain on

smallest of these amounts (but not less than

Lines 4 and 5. Proration of $10

zero) on line 17a.

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

Million Limit

Line 17b. For C corporation

Enter gain recognized on the sale or

The $10 million limit (or the controlled group

shareholders. To figure the amount for line

exchange of property described in section

member’s share) is prorated on a daily

17b, attach a computation showing (1) the

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

basis. Thus, for example, if, for its 2003

IC-DISC’s foreign investment in producer’s

gain on a separate schedule. Do not include

calendar tax year, an IC-DISC has a short

loans during the tax year; (2) accumulated

any gain included in the computation of line

tax year of 73 days, and it is not a member

earnings and profits (including earnings and

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

of a controlled group, the limit that would be

profits for the 2003 tax year) minus the

gain that the transferor did not recognize on

entered on line 5 of Part II is $2,000,000

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

the earlier transfer and that would have

(73/365 times $10 million).

accumulated IC-DISC income. Enter the

been treated as ordinary income if the

Line 7. Taxable Income

smallest of these amounts (but not less than

property had been sold or exchanged rather

Enter the taxable income attributable to line

zero) on line 17b.

than transferred to the IC-DISC. Do not

6, qualified export receipts. The IC-DISC

include gain on the sale or exchange of

For purposes of lines 17a and 17b,

may select the qualified export receipts to

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

foreign investment in producer’s loans is the

which the line 5 limitation is allocated.

either would be included in inventory if on

smallest of (1) the net increase in foreign

hand at the end of the tax year or is held

See Proposed Regulations section

assets by members of the controlled group

primarily for sale in the normal course of

1.995-8 for details on determining the

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

business.

IC-DISC’s taxable income attributable to

IC-DISC belongs; (2) the actual foreign

qualified export receipts in excess of the $10

investment by the group’s domestic

Line 4. Income Attributable to

million amount. Special rules are provided

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

Military Property

for allocating the taxable income attributable

producer’s loans to members of the

Enter 50% of taxable income attributable to

to any related and subsidiary services, and

controlled group.

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

for the ratable allocation of the taxable

Net increase in foreign assets and actual

income attributable to the first transaction

Show the computation of this income. To

foreign investment are defined in sections

selected by the IC-DISC that exceeds the

figure taxable income attributable to military

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

property, use the gross income attributable

$10 million amount. Deductions must be

to military property for the year and the

allocated and apportioned according to the

See Regulations section 1.995-5 for

rules of Regulations section 1.861-8. The

deductions properly allocated to that

additional information on computing foreign

income. See Regulations section 1.995-6.

selection of the excess receipts by the

investment attributable to producer’s loans.

IC-DISC is intended to permit the IC-DISC

Lines 20 and 21. The percentages on lines

Line 9. Deemed Distributions to C

to allocate the $10 million limitation to the

20 and 21 must add up to 100%.

Corporations

qualified export receipts of those

transactions occurring during the tax year

Line 22. Allocate the line 22 amount to

Line 9 provides for the computation of the

that permit the greatest amount of taxable

shareholders that are individuals,

one-seventeenth deemed distribution of

income to be allocated to the IC-DISC under

partnerships, S corporations, trusts, and

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

the intercompany pricing rules of section

estates.

shareholders of the IC-DISC that are C

994.

corporations.

Part II—Section 995(b)(1)(E)

To avoid double counting of the deemed

Line 10. International Boycott

Taxable Income

distribution, if an amount of taxable income

Income

for the tax year attributable to excess

Generally, any taxable income of the

qualified export receipts is also deemed

An IC-DISC is deemed to distribute any

IC-DISC attributable to qualified export

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

income that resulted from cooperating with

receipts that exceed $10 million will be

Part I, such amount of taxable income is

an international boycott (section

deemed distributed.

only includible on that line of Part I, and

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

must be subtracted from the amount

this deemed distribution and for reporting

Line 1. Export Receipts

otherwise reportable on line 7 of Part II and

requirements for any IC-DISC with

If there were no commission sales, leases,

carried to line 5 of Part I. See Proposed

operations related to a boycotting country.

rentals, or services for the tax year, enter on

Regulations section 1.995-8(d).

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

Line 11. Illegal Bribes, etc.

After filing the IC-DISC’s 2003 tax return,

column (e), Schedule B.

An IC-DISC is deemed to distribute the

the allocation of the $10 million limitation

If there were commission sales, leases,

amount of any illegal payments, such as

and the computation of the line 7 deemed

rentals, or services for the tax year, the total

bribes or kickbacks, that it pays, directly or

distribution may be changed by filing an

qualified export receipts to be entered on

indirectly, to government officials,

amended Form 1120-IC-DISC only under

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

employees, or agents (section

the conditions specified in Proposed

993(f)):

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

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

Line 14. Earnings and Profits

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

Part III—Deemed Distributions

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

Attach a computation showing the earnings

Under Section 995(b)(2)

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

and profits for the tax year. See section 312

If the corporation is a former DISC or a

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

for rules on figuring earnings and profits for

former IC-DISC that revoked IC-DISC status

3. Add lines 1 and 2. Enter on line

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

or lost IC-DISC status for failure to satisfy

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

limitation.

one or more of the conditions specified in

section 992(a)(1) for 2003, each

Line 17. Foreign Investment

Line 3. Controlled Group

shareholder is deemed to have received a

Attributable to Producer Loans

Allocation

distribution taxable as a dividend on the last

Line 17a. For shareholders other than C

If the IC-DISC is a member of a controlled

day of the 2003 tax year. The deemed

corporations. To figure the amount for line

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

distribution equals the shareholder’s

17a, attach a computation showing (1) the

includes more than one IC-DISC, only one

prorated share of the DISC’s or IC-DISC’s

IC-DISC’s foreign investment in producer’s

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

income accumulated during the years just

loans during the tax year; (2) accumulated

allocation is required, a statement showing

before DISC or IC-DISC status ended. The

earnings and profits (including earnings and

each member’s portion of the $10 million

shareholder will be deemed to receive the

profits for the 2003 tax year) minus the

limit must be attached to Form

distribution in equal parts on the last day of

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

1120-IC-DISC. See Proposed Regulations

each of the 10 tax years of the corporation

accumulated IC-DISC income. Enter the

section 1.995-8(f) for details.

following the year of the termination or

-12-

Instructions for Form 1120-IC-DISC

Instructions For Form 1120-Ic-Disc - 2003 Page 12

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