Instructions For Form 1120-Ic-Disc - 2006 (Page 13 of 16) in pdf

Line 1. Export Receipts

attributable to excess qualified export

1. Accumulated IC-DISC income (for

receipts is also deemed distributed under

periods after 1984) of the IC-DISC as of

If there were no commission sales,

either line 1, 2, 3, or 4 of Part I, such

the close of the computation year over

leases, rentals, or services for the tax

amount of taxable income is only

2. The amount of

year, enter on line 1, Part II, the total of

includible on that line of Part I, and must

distributions-in-excess-of-income for the

lines 1c and 2k, column (e), Schedule B.

be subtracted from the amount otherwise

tax year of the IC-DISC following the

If there were commission sales,

reportable on line 7 of Part II and carried

computation year.

leases, rentals, or services for the tax

to line 5 of Part I. See Proposed

year, the total qualified export receipts to

For purposes of item 2 above,

Regulations section 1.995-8(d).

be entered on line 1, Part II, are figured

distributions-in-excess-of-income means

After filing the IC-DISC’s 2006 tax

as follows (section 993(f)):

the excess (if any) of:

return, the allocation of the $10 million

•

Actual distributions to shareholders out

limitation and the computation of the line

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

of accumulated IC-DISC income over

7 deemed distribution may be changed by

•

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

The amount of IC-DISC income (as

filing an amended Form 1120-IC-DISC

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

defined in section 996(f)(1)) for the tax

only under the conditions specified in

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

year following the computation year.

Proposed Regulations section

3. Add lines 1 and 2. Enter on line

For purposes of items 1 and 2 above,

1.995-8(b)(1).

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

see section 995(f) and Proposed

Part III—Deemed Distributions

Regulations section 1.995(f)-1 for a

Line 3. Controlled Group

Under Section 995(b)(2)

definition of computation year, examples,

Allocation

and other details on figuring deferred

If the corporation is a former DISC or a

If the IC-DISC is a member of a controlled

DISC income.

former IC-DISC that revoked IC-DISC

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

The amount on line 3, Part V, is

status or lost IC-DISC status for failure to

that includes more than one IC-DISC,

allocated to each shareholder on line 10,

satisfy one or more of the conditions

only one $10 million limit is allowed to the

Part III, of Schedule K (Form

specified in section 992(a)(1) for 2006,

group. If an allocation is required, a

1120-IC-DISC).

each shareholder is deemed to have

statement showing each member’s

received a distribution taxable as a

Shareholders of an IC-DISC must file

portion of the $10 million limit must be

dividend on the last day of the 2006 tax

Form 8404 if the IC-DISC reports

attached to Form 1120-IC-DISC. See

year. The deemed distribution equals the

deferred DISC income on line 10, Part III

Proposed Regulations section 1.995-8(f)

shareholder’s prorated share of the

of Schedule K.

for details.

DISC’s or IC-DISC’s income accumulated

Lines 4 and 5. Proration of $10

Schedule K

during the years just before DISC or

Million Limit

IC-DISC status ended. The shareholder

will be deemed to receive the distribution

Shareholder’s Statement of

The $10 million limit (or the controlled

in equal parts on the last day of each of

IC-DISC Distributions

group member’s share) is prorated on a

the 10 tax years of the corporation

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

Attach a separate Copy A, Schedule K

following the year of the termination or

2006 calendar tax year, an IC-DISC has a

(Form 1120-IC-DISC), to Form

disqualification of the IC-DISC (but in no

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

1120-IC-DISC for each shareholder who

case over more than twice the number of

member of a controlled group, the limit

received an actual or deemed distribution

years the corporation was a DISC or

that would be entered on line 5 of Part II

during the tax year or to whom the

IC-DISC).

is $2,000,000 (73/365 times $10 million).

corporation reported deferred DISC

Part IV—Actual Distributions

income for the tax year.

Line 7. Taxable Income

Enter the taxable income attributable to

Schedule L

Line 1. Distributions To Meet

line 6, qualified export receipts. The

Qualification Requirements under

IC-DISC may select the qualified export

Balance Sheets per Books

Section 992(c)

receipts to which the line 5 limitation is

The balance sheet should agree with the

If the corporation is required to pay

allocated.

IC-DISC’s books and records. Include

interest under section 992(c)(2)(B) on the

See Proposed Regulations section

certificates of deposits as cash on line 1.

amount of a distribution to meet the

1.995-8 for details on determining the

qualification requirements of section

Line 12. Accumulated Pre-1985

IC-DISC’s taxable income attributable to

992(c), report this interest on line 2c,

DISC Income

qualified export receipts in excess of the

Schedule E. Also include the amount on

$10 million amount. Special rules are

If the corporation was a qualified DISC as

line 1, Part IV of Schedule J and show the

provided for allocating the taxable income

of December 31, 1984, the accumulated

computation of the interest on an

attributable to any related and subsidiary

pre-1985 DISC income will generally be

attached schedule.

services, and for the ratable allocation of

treated as previously taxed income

the taxable income attributable to the first

Line 4a. Previously Taxed Income

(exempt from tax) when distributed to

transaction selected by the IC-DISC that

DISC shareholders after December 31,

Report on line 4a all actual distributions of

exceeds the $10 million amount.

1984.

previously taxed income. Also, include

Deductions must be allocated and

any distributions of pre-1985 accumulated

Exception: The exemption does not

apportioned according to the rules of

DISC income that are nontaxable (see the

apply to distributions of accumulated

Regulations section 1.861-8. The

instructions for Schedule L, line 12,

pre-1985 DISC income of an IC-DISC or

selection of the excess receipts by the

below). Enter on the dotted line to the left

former DISC that was made taxable

IC-DISC is intended to permit the

of the line 4a amount, the dollar amount

under section 995(b)(2) because of a

IC-DISC to allocate the $10 million

of the distribution that is nontaxable

prior revocation of the DISC election or

limitation to the qualified export receipts

pre-1985 DISC income and identify it as

disqualification of the DISC. For more

of those transactions occurring during the

such. Do not include distributions of

details on these distributions, see

tax year that permit the greatest amount

pre-1985 DISC income that are made

Temporary Regulations section

of taxable income to be allocated to the

under section 995(b)(2) because of prior

1.921-1T(a)(7).

IC-DISC under the intercompany pricing

year revocations or disqualifications.

Line 13. Accumulated IC-DISC

rules of section 994.

Part V—Deferred DISC Income

Income

To avoid double counting of the

Under Section 995(f)(3)

deemed distribution, if an amount of

Accumulated IC-DISC income (for periods

taxable income for the tax year

In general, deferred DISC income is:

after 1984) is accounted for on line 13 of

-13-

Instructions for Form 1120-IC-DISC

Instructions For Form 1120-Ic-Disc - 2006 Page 13

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