Instructions For Form 1120-Ic-Disc - 2006 (Page 4 of 16) in pdf

Change in accounting method. To

Section 993

domestic corporation makes export loans

change its method of accounting used to

that the Export-Import Bank guarantees.

Qualified export receipts are any of the

report taxable income (for income as a

9. Amounts (other than reasonable

following:

whole or for the treatment of any material

working capital) on deposit in the United

1. Gross receipts from selling,

item), the IC-DISC must file Form 3115,

States used to acquire qualified export

exchanging, or otherwise disposing of

Application for Change in Accounting

assets within the time provided by

export property.

Method.

Regulations section 1.993-2(j).

2. Gross receipts from leasing or

See Form 3115 and Pub. 538,

See Regulations section 1.993-2 for

renting export property that the lessee

Accounting Periods and Methods, for

more information.

uses outside the United States.

more information on accounting methods.

3. Gross receipts from supporting

Export property must be:

services related to any qualified sale,

Accounting Periods

1. Made, grown, or extracted in the

exchange, lease, rental, or other

United States by a person other than an

An IC-DISC must figure its taxable

disposition of export property by the

IC-DISC.

income on the basis of a tax year. A tax

IC-DISC.

2. Neither excluded under section

year is the annual accounting period an

4. Gross receipts from selling,

993(c)(2) nor declared in short supply

IC-DISC uses to keep its records and

exchanging, or otherwise disposing of

under section 993(c)(3).

report its income and expenses.

qualified export assets that are not export

3. Held mainly for sale, lease, or rent

Generally, IC-DISCs may use a calendar

property, but only if there is a recognized

in the ordinary course of a trade or

year or a fiscal year.

gain.

business, by or to an IC-DISC for direct

5. Dividends (or amounts includible in

Note. The tax year of an IC-DISC must

use, consumption, or disposition outside

gross income under section 951) with

be the same as the tax year of the

the United States.

principal shareholder which, at the

respect to stock of a related foreign

4. Property not more than 50% of the

beginning of the IC-DISC tax year, has

export corporation (defined below).

fair market value of which is attributable

the highest percentage of voting power. If

6. Interest on any obligation that is a

to articles imported into the United States.

two or more shareholders have the

qualified export asset.

5. Neither sold nor leased by or to

highest percentage of voting power, the

7. Gross receipts for engineering or

another IC-DISC that, immediately before

architectural services for construction

IC-DISC must have a tax year that

or after the transaction, either belongs to

projects outside the United States.

conforms to the tax year of any such

the same controlled group (defined in

shareholder. See section 441(h).

8. Gross receipts for the performance

section 993(a)(3)) as your IC-DISC or is

of managerial services in furtherance of

related to your IC-DISC in a way that

See Pub. 538 for more information on

the production of other qualified export

would result in losses being denied under

accounting periods and tax years.

receipts of an IC-DISC.

section 267.

Rounding Off to Whole

For more information, see Regulations

See Regulations section 1.993-3 for

Dollars

section 1.993-1.

details.

The IC-DISC may round off cents to

A producer’s loan must meet all the

Qualified export assets are any of the

whole dollars on its return and schedules.

following terms:

following:

If the IC-DISC does round to whole

1. Satisfy the requirements of sections

1. Export property (see below).

dollars, it must round all amounts. To

993(d)(2) and (3).

2. Assets used primarily in connection

round, drop amounts under 50 cents and

2. Not raise the unpaid balance due

with the sale, lease, rental, storage,

increase amounts from 50 to 99 cents to

the IC-DISC on all of its producer’s loans

handling, transportation, packaging,

the next dollar (for example, $1.39

above the level of accumulated IC-DISC

assembly, or servicing of export property,

becomes $1 and $2.50 becomes $3).

income it had at the start of the month in

or the performance of engineering or

If two or more amounts must be added

which it made the loan.

architectural services described in item 7

to figure the amount to enter on a line,

3. Be evidenced by a note (or other

of Qualified export receipts above or

include cents when adding the amounts

written evidence of indebtedness) with a

managerial services in furtherance of the

and round off only the total.

stated maturity date no more than 5 years

production of qualified export receipts

after the date of the loan.

described in items 1, 2, 3, and 7 above.

Recordkeeping

4. Be made to a person engaged in a

3. Accounts receivable produced by

U.S. trade or business of making,

transactions listed under Qualified export

Keep the IC-DISC’s records for as long as

growing, or extracting export property.

receipts, items 1-4, 7, or 8 above.

they may be needed for the

5. Be designated as a producer’s loan

administration of any provision of the

4. Temporary investments, such as

when made.

Internal Revenue Code. Usually, records

money and bank deposits, in an amount

that support an item of income, deduction,

reasonable to meet the IC-DISC’s needs

For more information, see Schedule Q

or credit on the return must be kept for 3

for working capital.

(Form 1120-IC-DISC), Borrower’s

years from the date the return is due or

5. Obligations related to a producer’s

Certificate of Compliance With the Rules

filed, whichever is later. Keep records that

loan.

for Producer’s Loans, and Regulations

verify the IC-DISC’s basis in property for

6. Stock or securities of a related

section 1.993-4.

as long as they are needed to figure the

foreign export corporation (defined

A related foreign export corporation

below).

basis of the original or replacement

includes the following:

7. Certain obligations that are issued

property.

or insured by the U.S. Export-Import Bank

1. A foreign international sales

The IC-DISC should keep copies of all

or the Foreign Credit Insurance

corporation is a related foreign export

filed returns. They help in preparing future

Association and that the IC-DISC

corporation if:

and amended returns.

•

acquires from such Bank or Association

The IC-DISC directly owns more

or from the person who sold or bought the

than 50% of the total voting power of the

Definitions

goods or services from which the

foreign corporation’s stock;

•

The following definitions are based on

obligations arose.

For the tax year that ends with or

sections 993 and 994.

8. Certain obligations held by the

within the IC-DISC’s tax year, at least

Note. “United States,” as used in the

IC-DISC that were issued by a domestic

95% of the foreign corporation’s gross

following instructions, includes Puerto

corporation organized to finance export

receipts consists of the qualified export

Rico and U.S. possessions, as well as the

property sales under an agreement with

receipts described in items 1-4 of

50 states and the District of Columbia.

the Export-Import Bank under which the

Qualified export receipts above and

-4-

Instructions for Form 1120-IC-DISC

Instructions For Form 1120-Ic-Disc - 2006 Page 4

Related Articles

Related forms

Related Categories