Instructions For Form 1120-Ic-Disc - 2006 (Page 3 of 16) in pdf

Worldwide Express Plus, and UPS

establishment in the United States and

under section 362(e)(2)(C) to limit the

Worldwide Express.

derived from sources within the United

transferor’s basis in the stock received

States.

instead of the transferee’s basis in the

The private delivery service can tell

transferred property. The transferor and

you how to get written proof of the mailing

Reportable transaction disclosure

transferee may make the election by

date.

statement. Disclose information for

attaching the statement as provided in

each reportable transaction in which the

Private delivery services cannot

Notice 2005-70, 2005-41 I.R.B. 694, to

corporation participated. Form 8886,

deliver items to P.O. boxes. You

their tax returns filed by the due date

Reportable Transaction Disclosure

must use the U.S. Postal Service

(including extensions) for the tax year in

CAUTION

Statement, must be filed for each tax year

to mail any item to an IRS P.O. box

which the transaction occurred. Once

that the federal income tax liability of the

address.

made, the election is irrevocable. See

corporation is affected by its participation

section 362(e)(2)(C) and Notice 2005-70.

in the transaction. The corporation may

Where To File

Other forms and statements. See Pub.

have to pay a penalty if it is required to

File Form 1120-IC-DISC at the following

542 for a list of other forms and

file Form 8886 and does not do so. The

address: Internal Revenue Service, 201

following are reportable transactions.

statements a corporation may need to file

W. Rivercenter Blvd., Covington, KY

in addition to the forms and statements

1. Any listed transaction, which is a

41019.

discussed throughout these instructions.

transaction that is the same as or

substantially similar to tax avoidance

Who Must Sign

Assembling the Return

transactions identified by the IRS.

The return must be signed and dated by:

2. Any transaction offered under

To ensure that the corporation’s tax return

•

The president, vice president,

conditions of confidentiality for which the

is correctly processed, attach all

treasurer, assistant treasurer, chief

corporation paid an advisor a fee of at

schedules and other forms after page 6,

accounting officer or

least $250,000.

Form 1120-IC-DISC, and in the following

•

Any other corporate officer (such as tax

3. Certain transactions for which the

order.

officer) authorized to sign.

corporation has contractual protection

1. Schedule N (Form 1120).

against disallowance of the tax benefits.

If a return is filed on behalf of a

2. Form 4136.

4. Certain transactions resulting in a

corporation by a receiver, trustee or

3. Additional schedules in alphabetical

loss of at least $10 million in any single

assignee, the fiduciary must sign the

order.

year or $20 million in any combination of

return, instead of the corporate officer.

4. Additional forms in numerical order.

years.

Returns and forms signed by a receiver or

5. Certain transactions resulting in a

Complete every applicable entry space

trustee in bankruptcy on behalf of a

tax credit of more than $250,000, if the

on Form 1120-IC-DISC. Do not enter

corporation must be accompanied by a

corporation held the asset generating the

“See Attached” instead of completing the

copy of the order or instructions of the

credit for 45 days or less.

entry spaces. If more space is needed on

court authorizing signing of the return or

the forms or schedules, attach separate

form.

Penalties. The corporation may have

sheets using the same size and format as

If an employee of the corporation

to pay a penalty if it is required to disclose

the printed forms. If there are supporting

completes Form 1120-IC-DISC, the paid

a reportable transaction under section

statements and attachments, arrange

preparer’s space should remain blank.

6011 and fails to properly complete and

them in the same order as the schedules

Anyone who prepares Form

file Form 8886. The penalty is $50,000

or forms they support and attach them

1120-IC-DISC but does not charge the

($200,000 if the reportable transaction is

last. Show the totals on the printed forms.

corporation should not complete that

a listed transaction) for each failure to file

Enter the corporation’s name and EIN on

section. Generally, anyone who is paid to

Form 8886 with its corporate return or for

each supporting statement or attachment.

prepare Form 1120-IC-DISC must sign it

failure to provide a copy of Form 8886 to

and fill in the “Paid Preparer’s Use Only”

the Office of Tax Shelter Analysis

Accounting Methods

area.

(OTSA). Other penalties, such as an

Figure taxable income using the method

accuracy-related penalty under section

The paid preparer must complete the

of accounting regularly used in keeping

6662A, may also apply. See the

required preparer information and

the IC-DISC’s books and records. In all

•

instructions for Form 8886 for details.

Sign the return in the space provided

cases, the method used must clearly

for the preparer’s signature.

Reportable transactions by material

show taxable income. Permissible

•

Give a copy of the return to the

advisors. Until further guidance is

methods include cash, accrual, or any

taxpayer.

issued, material advisors who provide

other method authorized by the Internal

material aid, assistance, or advice with

Note. A paid preparer may sign

Revenue Code.

respect to any reportable transaction,

original or amended returns by rubber

Generally, the following rules apply.

must use Form 8264, Application for

stamp, mechanical device, or computer

•

An IC-DISC must use the accrual

Registration of a Tax Shelter, to disclose

software program.

method of accounting if its average

reportable transactions in accordance

annual gross receipts exceed $5 million.

Other Forms and

with interim guidance provided in Notice

•

Unless it is a qualifying taxpayer or a

2004-80, 2004-50 I.R.B. 963; Notice

Statements That May Be

qualifying small business taxpayer, an

2005-17, 2005-8 I.R.B. 606; and Notice

IC-DISC must use the accrual method for

Required

2005-22, 2005-12 I.R.B. 756.

sales and purchases of inventory items.

Transfers to a corporation controlled

See Cost of Goods Sold on page 6.

•

by the transferor. If a person receives

Shareholders who are foreign persons.

A member of a controlled group may

stock of a corporation in exchange for

The corporation should inform

not use an accounting method that would

property and no gain or loss is recognized

shareholders who are nonresident alien

distort any group member’s income,

under section 351, the person (transferor)

individuals or foreign corporations, trusts,

including its own. For example, an

and the transferee must each attach to

or estates that if they have gains from

IC-DISC acts as a commission agent for

their tax returns the statements required

disposal of stock in the IC-DISC, former

property sales by a related corporation

by Temporary Regulations section

DISC, or former IC-DISC, or distributions

that uses the accrual method and pays

1.351-3T.

from accumulated IC-DISC income,

the IC-DISC its commission more than 2

including deemed distributions, they must

Election to reduce basis under section

months after the sale. In this case, the

treat these amounts as effectively

362(e)(2)(C). The transferor and

IC-DISC should not use the cash method

connected with the conduct of a trade or

transferee in certain section 351

of accounting because that method

business conducted through a permanent

transactions may make a joint election

materially distorts its income.

-3-

Instructions for Form 1120-IC-DISC

Instructions For Form 1120-Ic-Disc - 2006 Page 3

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