Instructions For Form 1120-Ic-Disc - 2005 (Page 5 of 15) in pdf

Trust fund recovery penalty. This penalty

“Applied for” in the space for the EIN. For

Section 994, Intercompany

may apply if certain excise, income, social

more details, see Pub. 583, Starting a

Pricing Rules

security, and Medicare taxes that must be

Business and Keeping Records.

If a related person described in section 482

collected or withheld are not collected or

Item E — Total Assets

sells export property to the IC-DISC, use the

withheld, or these taxes are not paid. These

intercompany pricing rules to figure taxable

Enter the IC-DISC’s total assets (as

taxes are generally reported on:

•

income for the IC-DISC and the seller.

determined by the accounting method

Form 720, Quarterly Federal Excise Tax

These rules generally do not permit the

Return;

regularly used in keeping the IC-DISC’s

•

related person to price at a loss. Under

Form 941, Employer’s Quarterly Federal

books and records) at the end of the tax

intercompany pricing, the IC-DISC’s taxable

year. If there are no assets at the end of the

Tax Return; or

•

income from the sale (regardless of the

tax year, enter -0-.

Form 945, Annual Return of Withheld

price actually charged) may not exceed the

Federal Income Tax.

Item F —Initial Return, Final

greatest of:

The trust fund recovery penalty may be

Return, Name Change, Address

1. 4% of qualified export receipts on the

imposed on all persons who are determined

Change, or Amended Return

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

by the IRS to have been responsible for

•

the IC-DISC’s export promotion expenses

If this is the IC-DISC’s initial or final

collecting, accounting for, and paying over

attributable to the receipts,

return, check the applicable box in item F at

these taxes, and who acted willfully in not

2. 50% of the IC-DISC’s and the seller’s

the top of the form.

doing so. The penalty is equal to the unpaid

•

combined taxable income from qualified

If the IC-DISC has changed its address

trust fund tax. See the instructions for Form

export receipts on the property, derived from

since it last filed a return, check the box for

720 or Pub. 15 (Circular E), Employer’s Tax

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

“Address change.”

Guide, for details, including the definition of

of the IC-DISC’s export promotion expenses

responsible persons.

Note. If a change in address occurs after

attributable to the receipts, or

the return is filed, use Form 8822, Change

Other penalties. Other penalties may be

3. Taxable income based on the sale

of Address, to notify the IRS of the new

imposed for negligence, substantial

price actually charged, provided that under

address.

understatement of tax, reportable

section 482 the price actually charged

•

transaction understatements, and fraud. See

If the IC-DISC changed its name since it

clearly reflects the taxable income of the

sections 6662, 6662A, and 6663.

last filed a return, check the box for “Name

IC-DISC and the related person.

change.” Generally, an IC-DISC also must

have amended its articles of incorporation

Schedule P (Form 1120-IC-DISC),

and filed the amendment with the state in

Intercompany Transfer Price or

Specific Instructions

which it was incorporated.

Commission, explains the intercompany

•

To correct an error on a Form

pricing rules in more detail.

1120-IC-DISC already filed, file an amended

Period Covered

Form 1120-IC-DISC and check the

Section 994(c), Export

“Amended return” box. If the amended

File the 2005 return for calendar year 2005

Promotion Expenses

return changes the income or distributions of

and fiscal years that begin in 2005 and end

These are expenses incurred to help

income to shareholders, an amended

in 2006. For a fiscal or short tax year return,

distribute or sell export property for use or

Schedule K (Form 1120-IC-DISC) must be

fill in the tax year space at the top of the

distribution outside the United States. These

filed with the amended Form 1120-IC-DISC

form.

expenses do not include income tax, but do

and given to each shareholder. Write

Note. The 2005 Form 1120-IC-DISC may

include 50% of the cost of shipping the

“AMENDED” across the top of the corrected

also be used if:

export property on U.S.-owned and

Schedule K you give to each shareholder.

•

The corporation has a tax year of less

U.S.-operated aircraft or ships in those

Question G(1)

than 12 months that begins and ends in

cases where U.S. law or regulations do not

2006 and

require that the export property be shipped

For rules of stock attribution, see section

•

The 2006 Form 1120-IC-DISC is not

on such aircraft or ships.

267(c). If the owner of the voting stock of the

available at the time the corporation is

IC-DISC was an alien individual or a foreign

Deficits in Earnings and Profits

required to file its return.

corporation, partnership, trust, or estate,

A deficit in earnings and profits is

check the “Yes” box in the “Foreign owner”

The corporation must show its 2006 tax

chargeable in the following order:

column and enter the name of the owner’s

year on the 2005 Form 1120-IC-DISC and

country, in parentheses, in the address

take into account any tax law changes that

1. First, to any earnings and profits other

column. “Owner’s country” for individuals is

are effective for tax years beginning after

than accumulated IC-DISC income or

December 31, 2005.

their country of residence; for other foreign

previously taxed income.

entities, it is the country in which organized

2. Second, to any accumulated IC-DISC

Address

or otherwise created, or in which

income.

administered.

Include the suite, room, or other unit number

3. Third, to previously taxed income.

after the street address. If the Post Office

Taxable Income

Do not apply any deficit in earnings and

does not deliver mail to the street address

profits against accumulated IC-DISC income

An IC-DISC must figure its taxable income

and the corporation has a P.O. box, show

that, as a result of the corporation’s revoking

although it does not pay most taxes. An

the box number instead.

its election to be treated as an IC-DISC (or

IC-DISC is exempt from the corporate

other disqualification), is deemed distributed

Item C — Employer Identification

income tax, alternative minimum tax, and

to the shareholders. See section

Number (EIN)

accumulated earnings tax.

995(b)(2)(A).

Enter the corporation’s EIN. If the

An IC-DISC and its shareholders are not

corporation does not have an EIN, it must

entitled to the possessions corporation tax

Penalties

apply for one. An EIN may be applied for:

credit (section 936). An IC-DISC may not

•

The IC-DISC may have to pay the following

Online — Click on the EIN link at

claim the general business credit or the

penalties unless it can show that it had

The EIN is

credit for fuel produced from a

reasonable cause for not providing

issued immediately once the application

nonconventional source. In addition, these

information or not filing a return:

information is validated.

credits may not be passed through to

•

$100 for each instance of not providing

By telephone at 1-800-829-4933 from

shareholders of the corporation.

required information, up to $25,000 during

8:00 a.m. to 8:00 p.m. in the corporation’s

Line 6a. Net Operating Loss

the calendar year.

local time zone.

•

$1,000 for not filing a return.

By mailing or faxing Form SS-4,

Deduction

Application for Employer Identification

If the return is filed late and the failure to

The net operating loss deduction is the

Number.

file timely is due to reasonable cause,

amount of the net operating loss carryover

please explain. See section 6686 for other

If the corporation has not received its

and carryback that may be deducted in the

details.

EIN by the time the return is due, enter

tax year. See section 172 for details.

-5-

Instructions for Form 1120-IC-DISC

Instructions For Form 1120-Ic-Disc - 2005 Page 5

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