Instructions For Form 1120-Ic-Disc - 2007 (Page 5 of 16) in pdf

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The IC-DISC directly owns more

10% of the IC-DISC’s export promotion

Form 720, Quarterly Federal Excise

than 50% of the total voting power of the

expenses attributable to the receipts,

Tax Return;

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foreign corporation’s stock;

2. 50% of the IC-DISC’s and the

Form 941, Employer’s QUARTERLY

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For the tax year that ends with or

seller’s combined taxable income from

Federal Tax Return; or

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

qualified export receipts on the property,

Form 945, Annual Return of Withheld

95% of the foreign corporation’s gross

derived from the IC-DISC’s sale of the

Federal Income Tax.

receipts consists of the qualified export

property plus 10% of the IC-DISC’s export

The trust fund recovery penalty may

receipts described in items 1 – 4 of

promotion expenses attributable to the

be imposed on all persons who are

Qualified export receipts above and

receipts, or

determined by the IRS to have been

interest on the qualified export assets

3. Taxable income based on the sale

responsible for collecting, accounting for,

listed in items 3 and 4 of Qualified export

price actually charged, provided that

and paying over these taxes, and who

assets on page 4; and

under section 482 the price actually

acted willfully in not doing so. The penalty

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The adjusted basis of the qualified

charged clearly reflects the taxable

is equal to the unpaid trust fund tax. See

export assets in items 1 – 4 of Qualified

income of the IC-DISC and the related

the instructions for Form 720 or Pub. 15

export assets that the foreign corporation

person.

(Circular E), Employer’s Tax Guide, for

held at the end of the tax year is at least

details, including the definition of

Schedule P (Form 1120-IC-DISC),

95% of the adjusted basis of all assets it

responsible persons.

Intercompany Transfer Price or

held then.

Other penalties. Other penalties may be

Commission, explains the intercompany

2. A real property holding company

imposed for negligence, substantial

pricing rules in more detail.

is a related foreign export corporation if:

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understatement of tax, reportable

The IC-DISC directly owns more

Section 994(c), Export

transaction understatements, and fraud.

than 50% of the total voting power of the

Promotion Expenses

See sections 6662, 6662A, and 6663.

foreign corporation’s stock and

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Its exclusive function is to hold title

These are expenses incurred to help

to real property located outside the United

distribute or sell export property for use or

States for the exclusive use (under lease

distribution outside the United States.

Specific Instructions

or otherwise) of the IC-DISC and

These expenses do not include income

applicable foreign law forbids the IC-DISC

tax, but do include 50% of the cost of

to hold title to the property.

shipping the export property on

Period Covered

3. An associated foreign

U.S.-owned and U.S.-operated aircraft or

File the 2007 return for calendar year

corporation is a related foreign export

ships in those cases where U.S. law or

2007 and fiscal years that begin in 2007

corporation if:

regulations do not require that the export

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and end in 2008. For a fiscal or short tax

The IC-DISC or a controlled group

property be shipped on such aircraft or

year return, fill in the tax year space at the

of corporations to which the IC-DISC

ships.

top of the form.

belongs owns less than 10% of the total

Deficits in Earnings and Profits

voting power of the foreign corporation’s

Note. The 2007 Form 1120-IC-DISC

stock (section 1563 defines a controlled

A deficit in earnings and profits is

may also be used if:

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group in this sense, and sections 1563(d)

chargeable in the following order:

The corporation has a tax year of less

and (e) define ownership) and

than 12 months that begins and ends in

1. First, to any earnings and profits

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The IC-DISC’s ownership of the

2008 and

other than accumulated IC-DISC income

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foreign corporation’s stock or securities

The 2008 Form 1120-IC-DISC is not

or previously taxed income.

reasonably furthers transactions that lead

available at the time the corporation is

2. Second, to any accumulated

to qualified export receipts for the

required to file its return.

IC-DISC income.

IC-DISC.

3. Third, to previously taxed income.

The corporation must show its 2008

tax year on the 2007 Form 1120-IC-DISC

Do not apply any deficit in earnings and

See Regulations section 1.993-5 for

and take into account any tax law

profits against accumulated IC-DISC

more information about related foreign

changes that are effective for tax years

income that, as a result of the

export corporations.

beginning after December 31, 2007.

corporation’s revoking its election to be

Gross receipts are the IC-DISC’s total

treated as an IC-DISC (or other

Address

receipts from selling, leasing, or renting

disqualification), is deemed distributed to

property that the corporation holds for

Include the suite, room, or other unit

the shareholders. See section

sale, lease, or rent in the ordinary course

number after the street address. If the

995(b)(2)(A).

of its trade or business and gross income

post office does not deliver mail to the

from all other sources. For commissions

street address and the corporation has a

Penalties

on selling, leasing, or renting property,

P.O. box, show the box number instead.

The IC-DISC may have to pay the

include gross receipts from selling,

Item C — Employer Identification

following penalties unless it can show that

leasing, or renting the property on which

it had reasonable cause for not providing

Number (EIN)

the commissions arose. See Regulations

information or not filing a return.

section 1.993-6 for more information.

Enter the corporation’s EIN. If the

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$100 for each instance of not providing

corporation does not have an EIN, it must

required information, up to $25,000 during

Section 994, Intercompany

apply for one. An EIN may be applied for:

the calendar year.

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Pricing Rules

Online — Click on the EIN link at www.

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$1,000 for not filing a return.

irs.gov/businesses/smallThe EIN is

If a related person described in section

issued immediately once the application

If the return is filed late and the failure

482 sells export property to the IC-DISC,

information is validated.

to file timely is due to reasonable cause,

use the intercompany pricing rules to

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By telephone at 1-800-829-4933; from

please explain. See section 6686 for

figure taxable income for the IC-DISC and

7:00 a.m. to 10:00 p.m. in the

other details.

the seller. These rules generally do not

corporation’s local time zone.

permit the related person to price at a

Trust fund recovery penalty. This

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By mailing or faxing Form SS-4,

loss. Under intercompany pricing, the

penalty may apply if certain excise,

Application for Employer Identification

IC-DISC’s taxable income from the sale

income, social security, and Medicare

Number.

(regardless of the price actually charged)

taxes that must be collected or withheld

may not exceed the greatest of:

are not collected or withheld, or these

If the corporation has not received its

1. 4% of qualified export receipts on

taxes are not paid. These taxes are

EIN by the time the return is due, enter

the IC-DISC’s sale of the property plus

generally reported on:

“Applied for” and the date you applied in

-5-

Instructions for Form 1120-IC-DISC

Instructions For Form 1120-Ic-Disc - 2007 Page 5

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