Instructions For Form 1120-Ic-Disc - 2007 (Page 3 of 16) in pdf

Reportable transaction disclosure

Election to reduce basis under section

Private delivery services cannot

statement. Disclose information for

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

deliver items to P.O. boxes. You

each reportable transaction in which the

transferee in certain section 351

must use the U.S. Postal Service

CAUTION

corporation participated. Form 8886,

transactions may make a joint election

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

Reportable Transaction Disclosure

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

address.

Statement, must be filed for each tax year

transferor’s basis in the stock received

that the federal income tax liability of the

instead of the transferee’s basis in the

Where To File

corporation is affected by its participation

transferred property. The transferor and

File Form 1120-IC-DISC at the following

in the transaction. The corporation may

transferee may make the election by

address: Internal Revenue Service, 201

have to pay a penalty if it is required to

attaching the statement as provided in

W. Rivercenter Blvd., Covington, KY

file Form 8886 and does not do so. The

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

41019.

following are reportable transactions.

their tax returns filed by the due date

(including extensions) for the tax year in

1. Any listed transaction, which is a

Who Must Sign

which the transaction occurred. Once

transaction that is the same as or

made, the election is irrevocable. See

substantially similar to tax avoidance

The return must be signed and dated by:

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

•

transactions identified by the IRS.

The president, vice president,

Other forms and statements. See

2. Any transaction offered under

treasurer, assistant treasurer, chief

Pub. 542 for a list of other forms and

conditions of confidentiality for which the

accounting officer or

•

statements a corporation may need to file

corporation, or a related party, paid an

Any other corporate officer (such as tax

in addition to the forms and statements

advisor a fee of at least $250,000.

officer) authorized to sign.

discussed throughout these instructions.

3. Certain transactions for which the

If a return is filed on behalf of a

corporation, or a related party, has

Assembling the Return

corporation by a receiver, trustee, or

contractual protection against

assignee, the fiduciary must sign the

disallowance of the tax benefits.

To ensure that the corporation’s tax return

return, instead of the corporate officer.

is correctly processed, attach all

4. Certain transactions resulting in a

Returns and forms signed by a receiver or

schedules and other forms after page 6,

loss of at least $10 million in any single

trustee in bankruptcy on behalf of a

Form 1120-IC-DISC, and in the following

year or $20 million in any combination of

corporation must be accompanied by a

order.

years.

copy of the order or instructions of the

5. Certain transactions resulting a tax

1. Schedule N (Form 1120).

court authorizing signing of the return or

credit of more than $250,000, if the

2. Form 4136.

form.

corporation held an asset generating the

3. Additional schedules in alphabetical

credit for 45 days or less.

order.

If an employee of the corporation

6. Any transaction identified by the

4. Additional forms in numerical order.

completes Form 1120-IC-DISC, the paid

IRS in published guidance as a

preparer’s space should remain blank.

Complete every applicable entry space

Anyone who prepares Form

‘‘transaction of interest’’ (a transaction

on Form 1120-IC-DISC. Do not enter

1120-IC-DISC but does not charge the

that the IRS believes has a potential for

“See Attached” instead of completing the

corporation should not complete that

tax avoidance or evasion, but has not yet

entry spaces. If more space is needed on

section. Generally, anyone who is paid to

been identified as a listed transaction).

the forms or schedules, attach separate

prepare Form 1120-IC-DISC must sign it

sheets using the same size and format as

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

Penalties. The corporation may have

the printed forms. If there are supporting

area.

to pay a penalty if it is required to disclose

statements and attachments, arrange

a reportable transaction under section

The paid preparer must complete the

them in the same order as the schedules

6011 and fails to properly complete and

required preparer information and

or forms they support and attach them

file Form 8886. Penalties also apply

•

Sign the return in the space provided

last. Show the totals on the printed forms.

under section 6707A if the corporation

for the preparer’s signature, and

Enter the corporation’s name and EIN on

fails to file Form 8886 with its corporate

•

Give a copy of the return to the

each supporting statement or attachment.

return or for failure to provide a copy of

taxpayer.

Form 8886 to the Office of Tax Shelter

Accounting Methods

Analysis (OTSA) or files a form that fails

Note. A paid preparer may sign original

to include all information required (or

Figure taxable income using the method

or amended returns by rubber stamp,

includes incorrect information). Other

of accounting regularly used in keeping

mechanical device, or computer software

penalties, such as an accuracy-related

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

program.

penalty under section 6662A, may also

cases, the method used must clearly

apply. See the instructions for Form 8886

show taxable income. Permissible

Other Forms and

for details on these and other penalties.

methods include cash, accrual, or any

other method authorized by the Internal

Statements That May Be

Reportable transactions by material

Revenue Code.

advisors. Material advisors to any

Required

Generally, the following rules apply.

reportable transaction must disclose

•

An IC-DISC must use the accrual

certain information about the reportable

Shareholders who are foreign persons.

method of accounting if its average

transaction by filing Form 8918, Material

The corporation should inform

annual gross receipts exceed $5 million.

Advisor Disclosure Statement, with the

shareholders who are nonresident alien

However, see Nonaccrual experience

IRS. Form 8918 replaces Form 8264,

individuals or foreign corporations, trusts,

method on page 7.

which was previously used by material

•

or estates that if they have gains from

Unless it is a qualifying taxpayer or a

advisors for disclosure.

disposal of stock in the IC-DISC, former

qualifying small business taxpayer, an

DISC, or former IC-DISC, or distributions

Transfers to a corporation controlled

IC-DISC must use the accrual method for

from accumulated IC-DISC income,

by the transferor. If a person receives

sales and purchases of inventory items.

including deemed distributions, they must

stock of a corporation in exchange for

See Cost of Goods Sold on page 6.

•

treat these amounts as effectively

property and no gain or loss is recognized

A member of a controlled group may

connected with the conduct of a trade or

under section 351, the person (transferor)

not use an accounting method that would

business conducted through a permanent

and the corporation (transferee) must

distort any group member’s income,

establishment in the United States and

each attach to their tax returns the

including its own. For example, an

derived from sources within the United

statements required by Regulations

IC-DISC acts as a commission agent for

States.

section 1.351-3.

property sales by a related corporation

-3-

Instructions for Form 1120-IC-DISC

Instructions For Form 1120-Ic-Disc - 2007 Page 3

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