Instructions For Form 1120-Ic-Disc - 2007 (Page 9 of 16) in pdf

Line 7, Column (a)

9. Enter the smaller of line 7 or

Schedule E

line 8 . . . . . . . . . . . . . . . . .

Enter the U.S.-source portion of dividends

10. Dividends-received

that are received from

Deductions

deduction after limitation.

20%-or-more-owned foreign corporations

Add lines 4 and 9. (If this is less

and that qualify for the 80% deduction

Limitations on Deductions

than line 9 of Schedule C, enter

under section 245(a).

the smaller amount on line 6b,

Section 263A uniform capitalization

Line 8, Column (a)

page 1, Form 1120-IC-DISC,

rules. The uniform capitalization rules of

and in the margin next to line 9

section 263A generally require

Enter dividends received from wholly

of Schedule C.) . . . . . . . . . .

corporations to capitalize, or include in

owned foreign subsidiaries that are

inventory, certain costs incurred in

eligible for the 100% deduction under

Line 13, Column (a)

connection with:

section 245(b).

•

Personal property (tangible and certain

Include the following:

In general, the deduction under section

intangible property) acquired for resale.

•

245(b) applies to dividends paid out of the

Dividends (other than capital gain

•

The production of real property and

earnings and profits of a foreign

distributions reported on Schedule D

tangible personal property by a

corporation for a tax year during which:

(Form 1120) and exempt-interest

•

corporation for use in its trade or business

All of its outstanding stock is owned

dividends) that are received from RICs

or in an activity engaged in for profit.

(directly or indirectly) by the domestic

and that are not subject to the 70%

corporation receiving the dividends and

deduction.

Tangible personal property produced

•

All of its gross income from all sources

•

by a corporation includes a film, sound

Dividends from tax-exempt

is effectively connected with the conduct

recording, videotape, book, or similar

organizations.

of a trade or business within the United

•

property.

Dividends (other than capital gain

States.

distributions) received from a real estate

IC-DISCs subject to the section 263A

Line 9, Column (c)

investment trust that, for the tax year of

uniform capitalization rules are required to

the trust in which the dividends are paid,

Generally, line 9, column (c), may not

capitalize:

qualifies under sections 856 through 860.

exceed the amount from the worksheet

1. Direct costs and

•

below. However, in a year in which an

Dividends not eligible for a

2. An allocable part of most indirect

NOL occurs, this limitation does not apply

dividends-received deduction, which

costs (including taxes) that (a) benefit the

even if the loss is created by the

include the following:

assets produced or acquired for resale or

dividends-received deduction. See

1. Dividends received on any share of

(b) are incurred by reason of the

sections 172(d) and 246(b).

stock held for less than 46 days during

performance of production or resale

the 91-day period beginning 45 days

activities.

before the ex-dividend date. When

Line 9, Column (c) Worksheet

counting the number of days the

For inventory, some of the indirect

corporation held the stock, you may not

1. Refigure line 5, page 1, Form

expenses that must be capitalized are:

•

count certain days during which the

1120-IC-DISC, without any

Administration expenses,

•

corporation’s risk of loss was diminished.

adjustment under section 1059

Taxes,

•

and without any capital loss

See section 246(c)(4) and Regulations

Depreciation,

carryback to the tax year under

•

section 1.246-5 for more details.

Insurance,

section 1212(a)(1) . . . . . . . . .

•

2. Dividends attributable to periods

Compensation paid to officers

2. Multiply line 1 by 80% (.80) . . .

totaling more than 366 days that the

attributable to services,

3. Add lines 2, 5, 7, and 8, column

•

IC-DISC received on any share of

Rework labor, and

(c), and the part of the

•

preferred stock held for less than 91 days

Contributions to pension, stock bonus,

deduction on line 3, column (c),

during the 181-day period that began 90

and certain profit-sharing, annuity, or

that is attributable to dividends

days before the ex-dividend date. When

deferred compensation plans.

received from

counting the number of days the IC-DISC

20%-or-more-owned

Regulations section 1.263A-1(e)(3)

held the stock, you may not count certain

corporations . . . . . . . . . . . . .

specifies other indirect costs that relate to

days during which the IC-DISC’s risk of

4. Enter the smaller of line 2 or

production or resale activities that must

loss was diminished. See section

line 3. If line 3 is larger than line

be capitalized and those that may be

246(c)(4) and Regulations section

2, do not complete the rest of

currently deductible.

1.246-5 for more details. Preferred

this worksheet. Instead, enter

dividends attributable to periods totaling

the amount from line 4 in the

Interest expense paid or incurred

margin next to line 9 of

less than 367 days are subject to the

during the production period of

Schedule C and on line 6b,

46-day holding period rule above.

designated property must be capitalized

page 1, Form 1120-IC-DISC . .

3. Dividends on any share of stock to

and is governed by special rules. For

5. Enter the total amount of

the extent the IC-DISC is under an

more details, see Regulations sections

dividends received from

obligation (including a short sale) to make

1.263A-8 through 1.263A-15.

20%-or-more-owned

related payments with respect to positions

corporations that are included

The costs required to be capitalized

in substantially similar or related property.

on lines 2, 3, 5, 7, and 8 of

•

under section 263A are not deductible

Any other taxable dividend income not

column (a) . . . . . . . . . . . . . .

until the property (to which the costs

properly reported elsewhere on Schedule

6. Subtract line 5 from line 1 . . . .

relate) is sold, used, or otherwise

7. Multiply line 6 by 70% (.70) . . .

disposed of by the corporation.

8. Subtract line 3 above from

Line 15, Column (a)

column (c) of line 9 . . . . . . . .

Exceptions. Section 263A does not

Qualified dividends are dividends that

apply to:

•

qualify as qualified export receipts. They

Personal property acquired for resale if

include all dividends (or amounts)

the IC-DISC’s average annual gross

includible in gross income (under section

receipts for the 3 prior tax years were $10

951) that are attributable to stock of

million or less.

•

related foreign export corporations. See

Inventoriable items accounted for in the

Qualified export receipts on page 4 and A

same manner as materials and supplies

related foreign export corporation on page

that are not incidental. See Cost of Goods

4 for more details.

Sold on page 6 for details.

-9-

Instructions for Form 1120-IC-DISC

Instructions For Form 1120-Ic-Disc - 2007 Page 9

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