Instructions For Form 1120-Ic-Disc - 2007 (Page 8 of 16) in pdf

foreign, unrelated buyer, or an unrelated

IC-DISC must complete the appropriate

Line 2, Column (a)

buyer when a related foreign entity acts

lines of Form 3115 to make the election.

Enter on line 2:

•

as commission agent.

Dividends (except those received on

Include any net positive section 481(a)

Line 2a. Enter the gross amount

debt-financed stock acquired after July

adjustment on page 2, Schedule B, line 2j

received from leasing or subleasing

18, 1984) that are received from

or 3f (depending on whether the

export property to unrelated persons for

20%-or-more-owned domestic

inventory, when sold, will generate

use outside the United States.

corporations subject to income tax and

qualified export receipts). If the net

that are eligible for the 80% deduction

section 481(a) adjustment is negative,

Receipts from leasing export property

under section 243(c) and

report it on page 3, Schedule E, line 2g.

may qualify in some years and not in

•

Taxable distributions from an IC-DISC

others, depending on where the lessee

Line 3b. Enter receipts from selling

or former DISC that are considered

uses the property. Enter only receipts that

products subsidized under a U.S.

eligible for the 80% deduction.

qualify during the tax year. (Use Schedule

program if they have been designated as

E to deduct expenses such as repairs,

excluded receipts.

Line 3, Column (a)

interest, taxes, and depreciation.)

Line 3c. Enter receipts from selling or

Enter dividends that are:

Line 2b. A service connected to a sale

•

leasing property or services for use by

Received on debt-financed stock

or lease is related to it if the service is

any part of the U.S. Government if law or

acquired after July 18, 1984, from

usually furnished with that type of sale or

regulations require U.S. products or

domestic and foreign corporations subject

lease in the trade or business where it

services to be used.

to income tax and that would otherwise

took place. A service is subsidiary if it is

be subject to the dividends-received

Line 3d. Enter receipts from any

less important than the sale or lease.

deduction under section 243(a)(1),

IC-DISC that belongs to the same

Line 2c. Include receipts from

243(c), or 245(a). Generally,

controlled group (as defined in section

engineering or architectural services on

debt-financed stock is stock that the

993(a)(3)).

foreign construction projects abroad or

corporation acquired by incurring a debt

Line 3f. Include in an attached schedule

proposed for location abroad. These

(e.g., it borrowed money to buy the

any nonqualifying gross receipts not

services include feasibility studies, design

stock).

reported on lines 3a through 3e. Do not

•

and engineering, and general supervision

Received from a RIC on debt-financed

offset an income item against a similar

of construction, but do not include

stock. The amount of dividends eligible

expense item.

services connected with mineral

for the dividends-received deduction is

exploration.

The IC-DISC may have to report a

limited by section 854(b). The corporation

section 481(a) adjustment on line 3f. See

Line 2d. Include receipts for export

should receive a notice from the RIC

Section 481(a) adjustment above for

management services provided to

specifying the amount of dividends that

additional information.

unrelated IC-DISCs.

qualify for the deduction.

Line 2f. Include interest received on any

Line 3, Columns (b) and (c)

Schedule C

loan that qualifies as a producer’s loan.

Dividends received on debt-financed

Line 2g. Enter interest on any qualified

Dividends and

stock acquired after July 18, 1984, are not

export asset other than interest on

entitled to the full 70% or 80%

Dividends-Received Deduction

producer’s loans. For example, include

dividends-received deduction. The 70%

interest on accounts receivable from

For purposes of the 20% ownership test

or 80% deduction is reduced by a

sales in which the IC-DISC acted as a

on lines 1 through 7, the percentage of

percentage that is related to the amount

principal or agent and interest on certain

stock owned by the corporation is based

of debt incurred to acquire the stock. See

obligations issued, guaranteed, or insured

on voting power and value of the stock.

section 246A. Also see section 245(a)

by the Export-Import Bank or the Foreign

Preferred stock described in section

before making this computation for an

Credit Insurance Association.

1504(a)(4) is not taken into account.

additional limitation that applies to

Line 2h. On Schedule D (Form 1120),

Line 1, Column (a)

dividends received from foreign

Capital Gains and Losses, report in detail

corporations. Attach a schedule to Form

Enter dividends (except those received on

every sale or exchange of a capital asset,

1120-IC-DISC showing how the amount

debt-financed stock acquired after July

even if there is no gain or loss.

on line 3, column (c), was figured.

18, 1984 – see section 246A) that:

•

In addition to Schedule D (Form 1120),

Are received from

Line 4, Column (a)

attach a separate schedule computing

less-than-20%-owned domestic

gain from the sale of qualified export

Enter dividends received on the preferred

corporations subject to income tax and

•

assets.

stock of a less-than-20%-owned public

Qualify for the 70% deduction under

utility that is subject to income tax and is

Line 2i. Enter the net gain or loss from

section 243(a)(1).

allowed the deduction provided in section

line 18, Part II, Form 4797, Sales of

Also include on line 1:

247 for dividends paid.

•

Business Property.

Taxable distributions from an IC-DISC

In addition to Form 4797, attach a

or former DISC that are designated as

Line 5, Column (a)

separate schedule computing gain from

being eligible for the 70% deduction and

Enter dividends received on preferred

the sale of qualified export assets.

certain dividends of Federal Home Loan

stock of a 20%-or-more-owned public

Banks. See section 246(a)(2).

Line 2j. Enter any other qualified export

utility that is subject to income tax and is

•

Dividends received (except those

receipts for the tax year not reported on

allowed the deduction under section 247

received on debt-financed stock acquired

lines 2a through 2i.

for dividends paid.

after July 18, 1984) from a regulated

Section 481(a) adjustment. The

investment company (RIC). The amount

Line 6, Column (a)

IC-DISC may have to make an

of dividends eligible for the

adjustment under section 481(a) to

Enter the U.S.-source portion of dividends

dividends-received deduction under

prevent amounts of income or expense

that:

•

section 243 is limited by section 854(b).

from being duplicated or omitted. This

Are received from

The corporation should receive a notice

section 481(a) adjustment period is

less-than-20%-owned foreign

from the RIC specifying the amount of

generally 1 year for a net negative

corporations and

•

dividends that qualify for the deduction.

adjustment and 4 years for a net positive

Qualify for the 70% deduction under

adjustment. However, an IC-DISC may

Report so-called dividends or earnings

section 245(a). To qualify for the 70%

elect to use a 1-year adjustment period if

received from mutual savings banks, etc.,

deduction, the corporation must own at

the net section 481(a) adjustment for the

as interest. Do not treat them as

least 10% of the stock of the foreign

change is less than $25,000. The

dividends.

corporation by vote and value.

-8-

Instructions for Form 1120-IC-DISC

Instructions For Form 1120-Ic-Disc - 2007 Page 8

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