Instructions For Form 1120-Ic-Disc - 2007 (Page 4 of 16) in pdf

that uses the accrual method and pays

or from the person who sold or bought the

Definitions

the IC-DISC its commission more than 2

goods or services from which the

The following definitions are based on

months after the sale. In this case, the

obligations arose.

sections 993 and 994.

IC-DISC should not use the cash method

8. Certain obligations held by the

of accounting because that method

IC-DISC that were issued by a domestic

Note. “United States,” as used in the

materially distorts its income.

corporation organized to finance export

following instructions, includes Puerto

property sales under an agreement with

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

Change in accounting method. To

the Export-Import Bank under which the

50 states and the District of Columbia.

change its method of accounting used to

domestic corporation makes export loans

report taxable income, for income as a

Section 993

that the Export-Import Bank guarantees.

whole or for the treatment of any material

9. Amounts (other than reasonable

Qualified export receipts are any of the

item, the IC-DISC must file Form 3115,

working capital) on deposit in the United

following.

Application for Change in Accounting

States used to acquire qualified export

Method.

1. Gross receipts from selling,

assets within the time provided by

exchanging, or otherwise disposing of

Regulations section 1.993-2(j).

See Form 3115 and Pub. 538,

export property.

Accounting Periods and Methods, for

2. Gross receipts from leasing or

See Regulations section 1.993-2 for

more information on accounting methods.

renting export property that the lessee

more information.

uses outside the United States.

Export property must be:

Accounting Periods

3. Gross receipts from supporting

1. Made, grown, or extracted in the

services related to any qualified sale,

An IC-DISC must figure its taxable

United States by a person other than an

exchange, lease, rental, or other

income on the basis of a tax year. A tax

IC-DISC;

disposition of export property by the

year is the annual accounting period an

2. Neither excluded under section

IC-DISC.

IC-DISC uses to keep its records and

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

4. Gross receipts from selling,

report its income and expenses.

under section 993(c)(3);

exchanging, or otherwise disposing of

Generally, IC-DISCs may use a calendar

3. Held mainly for sale, lease, or rent

qualified export assets that are not export

year or a fiscal year.

in the ordinary course of a trade or

property, but only if there is a recognized

Note. The tax year of an IC-DISC must

business, by or to an IC-DISC for direct

gain.

be the same as the tax year of the

use, consumption, or disposition outside

5. Dividends (or amounts includible in

principal shareholder which, at the

the United States;

gross income under section 951) with

beginning of the IC-DISC tax year, has

4. Property not more than 50% of the

respect to stock of a related foreign

the highest percentage of voting power. If

fair market value of which is attributable

export corporation (defined below).

two or more shareholders have the

to articles imported into the United States;

6. Interest on any obligation that is a

highest percentage of voting power, the

and

qualified export asset.

IC-DISC must have a tax year that

5. Neither sold nor leased by or to

7. Gross receipts for engineering or

conforms to the tax year of any such

another IC-DISC that, immediately before

architectural services for construction

shareholder. See section 441(h).

or after the transaction, either belongs to

projects outside the United States.

the same controlled group (defined in

8. Gross receipts for the performance

See Pub. 538 for more information on

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

of managerial services in furtherance of

accounting periods and tax years.

related to your IC-DISC in a way that

the production of other qualified export

would result in losses being denied under

receipts of an IC-DISC.

Rounding Off To Whole

section 267.

For more information, see Regulations

Dollars

See Regulations section 1.993-3 for

section 1.993-1.

details.

The IC-DISC may round off cents to

Qualified export assets are any of

whole dollars on its return and schedules.

A producer’s loan must meet all the

the following.

If the IC-DISC does round to whole

following terms.

1. Export property (see below).

dollars, it must round all amounts. To

1. Satisfy the requirements of sections

2. Assets used primarily in connection

round, drop amounts under 50 cents and

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

with the sale, lease, rental, storage,

increase amounts from 50 to 99 cents to

2. Not raise the unpaid balance due

handling, transportation, packaging,

the next dollar (for example, $1.39

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

assembly, or servicing of export property,

becomes $1 and $2.50 becomes $3).

above the level of accumulated IC-DISC

or the performance of engineering or

income it had at the start of the month in

If two or more amounts must be added

architectural services described in item 7

which it made the loan.

to figure the amount to enter on a line,

of Qualified export receipts above or

3. Be evidenced by a note, or other

include cents when adding the amounts

managerial services in furtherance of the

written evidence of indebtedness, with a

and round off only the total.

production of qualified export receipts

stated maturity date no more than 5 years

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

after the date of the loan.

Recordkeeping

3. Accounts receivable produced by

4. Be made to a person engaged in a

transactions listed under Qualified export

Keep the IC-DISC

s records for as long

U.S. trade or business of making,

receipts, items 1 – 4, 7, or 8 above.

as they may be needed for the

growing, or extracting export property.

4. Temporary investments, such as

administration of any provision of the

5. Be designated as a producer’s loan

money and bank deposits, in an amount

Internal Revenue Code. Usually, records

when made.

reasonable to meet the IC-DISC’s needs

that support an item of income, deduction,

for working capital.

or credit on the return must be kept for 3

For more information, see Schedule Q

5. Obligations related to a producer’s

years from the date the return is due or

(Form 1120-IC-DISC), Borrower’s

loan.

filed, whichever is later. Keep records that

Certificate of Compliance With the Rules

6. Stock or securities of a related

verify the IC-DISC’s basis in property for

for Producer’s Loans, and Regulations

foreign export corporation (defined

as long as they are needed to figure the

section 1.993-4.

below).

basis of the original or replacement

A related foreign export corporation

7. Certain obligations that are issued

property.

includes the following.

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

The IC-DISC should keep copies of all

or the Foreign Credit Insurance

1. A foreign international sales

filed returns. They help in preparing future

Association and that the IC-DISC

corporation is a related foreign export

and amended returns.

acquires from such Bank or Association

corporation if:

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Instructions for Form 1120-IC-DISC

Instructions For Form 1120-Ic-Disc - 2007 Page 4

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