Instructions For Form 1120-Ic-Disc - 2005 (Page 7 of 15) in pdf

the amount or if there is any penalty for

from the United States and if the property is

In addition to Schedule D (Form 1120),

failure to timely pay the amount. For more

located outside the United States pursuant

attach a separate schedule computing gain

information, see section 448(d)(5) and

to a prior lease by the seller or lessor, and

from the sale of qualified export assets.

Temporary Regulations section 1.448-2T.

either (a) the prior lease terminated at the

Line 2i. Enter the net gain or loss from line

expiration of its term (or by the action of the

18, Part II, Form 4797, Sales of Business

Corporations that qualify to use the

prior lessee acting alone), (b) the sale

Property.

nonaccrual experience method should

occurred or the term of the subsequent

attach a schedule showing total gross

In addition to Form 4797, attach a

lease began after the time at which the term

receipts, the amount not accrued as a result

separate schedule computing gain from the

of the prior lease would have expired, or (c)

of the application of section 448(d)(5), and

sale of qualified export assets.

the lessee under the subsequent lease is

the net amount accrued. Enter the amount

Line 2j. Enter any other qualified export

not a related person (a member of the same

on the applicable line of Schedule B.

receipts for the tax year not reported on

controlled group as defined in section

Commissions: Special Rule

lines 2a through 2i.

993(a)(3) or a relationship that would result

in a disallowance of losses under section

Note. “United States,” as used in the

Section 481(a) adjustment. The

267 or section 707(b)) immediately before or

following instructions, includes Puerto Rico

IC-DISC may have to make an adjustment

after the lease with respect to the lessor,

and U.S. possessions, as well as the 50

under section 481(a) to prevent amounts of

and the prior lease was terminated by the

states and the District of Columbia.

income or expense from being duplicated or

action of the lessor (acting alone or together

omitted. This section 481(a) adjustment

If the IC-DISC received commissions on

with the lessee).

period is generally 1 year for a net negative

selling or renting property or furnishing

adjustment and 4 years for a net positive

services, list in column (b) the gross receipts

Line-by-Line Instructions

adjustment. However, an IC-DISC may elect

from the sales, rentals, or services on which

to use a 1-year adjustment period if the net

the commissions arose, and in column (c),

Line 1a. Enter the IC-DISC’s qualified

section 481(a) adjustment for the change is

list the commissions earned. In column (d)

export receipts from export property sold to

less than $25,000. The IC-DISC must

report receipts from noncommissioned sales

foreign, unrelated buyers for delivery outside

complete the appropriate lines of Form 3115

or rentals of property or furnishing of

the United States. Do not include amounts

to make the election.

services, as well as all other receipts.

entered on line 1b.

Include any net positive section 481(a)

For purposes of completing line 1a and

Line 1b. Enter the IC-DISC’s qualified

adjustment on page 2, Schedule B, line 2j or

line 1b, related purchasers are members of

export receipts from export property sold for

3f (depending on whether the inventory,

the same controlled group (as defined in

delivery outside the United States to a

when sold, will generate qualified export

section 993(a)(3)) as the IC-DISC. All other

related foreign entity for resale to a foreign,

receipts). If the net section 481(a)

purchasers are unrelated.

unrelated buyer, or an unrelated buyer when

adjustment is negative, report it on page 3,

a related foreign entity acts as commission

A qualified export sale or lease must

Schedule E, line 2g.

agent.

meet a use test and a destination test in

Line 3b. Enter receipts from selling

order to qualify.

Line 2a. Enter the gross amount received

products subsidized under a U.S. program if

from leasing or subleasing export property

The use test applies at the time of the

they have been designated as excluded

to unrelated persons for use outside the

sale or lease. If the property is used

receipts.

United States.

predominantly outside the United States and

Line 3c. Enter receipts from selling or

the sale or lease is not for ultimate use in

Receipts from leasing export property

leasing property or services for use by any

the United States, it is a qualified export sale

may qualify in some years and not in others,

part of the U.S. Government if law or

or lease. Otherwise, if a reasonable person

depending on where the lessee uses the

regulations require U.S. products or services

would believe that the property will be used

property. Enter only receipts that qualify

to be used.

in the United States, the sale or lease is not

during the tax year. (Use Schedule E to

Line 3d. Enter receipts from any IC-DISC

a qualified export sale or lease. For

deduct expenses such as repairs, interest,

that belongs to the same controlled group

example, if property is sold to a foreign

taxes, and depreciation.)

(as defined in section 993(a)(3)).

wholesaler and it is known in trade circles

Line 2b. A service connected to a sale or

that the wholesaler, to a substantial extent,

Line 3f. Include in an attached schedule

lease is related to it if the service is usually

supplies the U.S. retail market, the sale

any nonqualifying gross receipts not

furnished with that type of sale or lease in

would not be a qualified export sale, and the

reported on lines 3a through 3e. Do not

the trade or business where it took place. A

receipts would not be qualified export

offset an income item against a similar

service is subsidiary if it is less important

receipts.

expense item.

than the sale or lease.

Regardless of where title or risk of loss

The IC-DISC may have to report a

Line 2c. Include receipts from engineering

shifts from the seller or lessor, the property

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

or architectural services on foreign

must be delivered under one of the following

Section 481(a) adjustment above for

construction projects abroad or proposed for

conditions to meet the destination test:

additional information.

location abroad. These services include

feasibility studies, design and engineering,

1. Within the United States to a carrier

Schedule C

and general supervision of construction, but

or freight forwarder for ultimate delivery

do not include services connected with

outside the United States to a buyer or

mineral exploration.

lessee.

Dividends and

2. Within the United States to a buyer or

Line 2d. Include receipts for export

Dividends-Received Deduction

lessee who, within 1 year of the sale or

management services provided to unrelated

For purposes of the 20% ownership test on

lease, delivers it outside the United States

IC-DISCs.

lines 1 through 7, the percentage of stock

or delivers it to another person for ultimate

Line 2f. Include interest received on any

owned by the corporation is based on voting

delivery outside the United States.

loan that qualifies as a producer’s loan.

power and value of the stock. Preferred

3. Within or outside the United States to

Line 2g. Enter interest on any qualified

stock described in section 1504(a)(4) is not

an IC-DISC that is not a member of the

export asset other than interest on

taken into account.

same controlled group (as defined in section

producer’s loans. For example, include

993(a)(3)) as the seller or lessor.

Line 1, Column (a)

interest on accounts receivable from sales in

4. Outside the United States by means

which the IC-DISC acted as a principal or

Enter dividends (except those received on

of the seller’s delivery vehicle (ship, plane,

agent and interest on certain obligations

debt-financed stock acquired after July 18,

etc.).

issued, guaranteed, or insured by the

1984 – see section 246A) that:

5. Outside the United States to a buyer

•

Export-Import Bank or the Foreign Credit

Are received from less-than-20%-owned

or lessee at a storage or assembly site if the

Insurance Association.

domestic corporations subject to income tax

property was previously shipped from the

and

United States by the seller or lessor.

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

•

Qualify for the 70% deduction under

6. Outside the United States to a

Capital Gains and Losses, report in detail

section 243(a)(1).

purchaser or lessee if the property was

every sale or exchange of a capital asset,

previously shipped by the seller or lessor

even if there is no gain or loss.

Also include on line 1:

-7-

Instructions for Form 1120-IC-DISC

Instructions For Form 1120-Ic-Disc - 2005 Page 7

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