Instructions For Form 1120-Ic-Disc - 2005 (Page 8 of 15) in pdf

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Taxable distributions from an IC-DISC or

Line 6, Column (a)

9. Enter the smaller of line 7 or

former DISC that are designated as being

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

Enter the U.S.-source portion of dividends

eligible for the 70% deduction and certain

10. Dividends-received

that:

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dividends of Federal Home Loan Banks.

deduction after limitation.

Are received from less-than-20%-owned

See section 246(a)(2).

Add lines 4 and 9. (If this is less

foreign corporations and

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Dividends received (except those

than line 9 of Schedule C, enter

Qualify for the 70% deduction under

received on debt-financed stock acquired

the smaller amount on line 6b,

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

after July 18, 1984) from a regulated

page 1, Form 1120-IC-DISC,

deduction, the corporation must own at least

investment company (RIC). The amount of

and in the margin next to line 9

10% of the stock of the foreign corporation

dividends eligible for the dividends-received

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

by vote and value.

deduction under section 243 is limited by

section 854(b). The corporation should

Line 13, Column (a)

receive a notice from the RIC specifying the

Line 7, Column (a)

Include the following:

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amount of dividends that qualify for the

Enter the U.S.-source portion of dividends

Dividends (other than capital gain

deduction.

that are received from 20%-or-more-owned

distributions reported on Schedule D (Form

foreign corporations and that qualify for the

1120) and exempt-interest dividends) that

Report so-called dividends or earnings

80% deduction under section 245(a).

are received from RICs and that are not

received from mutual savings banks, etc., as

subject to the 70% deduction.

interest. Do not treat them as dividends.

•

Dividends from tax-exempt organizations.

Line 8, Column (a)

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Line 2, Column (a)

Dividends (other than capital gain

Enter dividends received from wholly owned

distributions) received from a real estate

Enter on line 2:

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foreign subsidiaries that are eligible for the

investment trust that, for the tax year of the

Dividends (except those received on

100% deduction under section 245(b).

trust in which the dividends are paid,

debt-financed stock acquired after July 18,

qualifies under sections 856 through 860.

1984) that are received from

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Dividends not eligible for a

20%-or-more-owned domestic corporations

In general, the deduction under section

dividends-received deduction, which include

subject to income tax and that are eligible

245(b) applies to dividends paid out of the

the following:

for the 80% deduction under section 243(c)

earnings and profits of a foreign corporation

and

1. Dividends received on any share of

for a tax year during which:

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Taxable distributions from an IC-DISC or

stock held for less than 46 days during the

All of its outstanding stock is owned

former DISC that are considered eligible for

91-day period beginning 45 days before the

(directly or indirectly) by the domestic

the 80% deduction.

ex-dividend date. When counting the

corporation receiving the dividends and

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number of days the corporation held the

All of its gross income from all sources is

Line 3, Column (a)

stock, you may not count certain days

effectively connected with the conduct of a

Enter dividends that are:

during which the corporation’s risk of loss

trade or business within the United States.

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Received on debt-financed stock acquired

was diminished. See section 246(c)(4) and

after July 18, 1984, from domestic and

Regulations section 1.246-5 for more

Line 9, Column (c)

foreign corporations subject to income tax

details.

and that would otherwise be subject to the

2. Dividends attributable to periods

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

dividends-received deduction under section

totaling more than 366 days that the

exceed the amount from the worksheet

243(a)(1), 243(c), or 245(a). Generally,

IC-DISC received on any share of preferred

below. However, in a year in which an NOL

debt-financed stock is stock that the

stock held for less than 91 days during the

occurs, this limitation does not apply even if

corporation acquired by incurring a debt

the loss is created by the dividends-received

181-day period that began 90 days before

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

deduction. See sections 172(d) and 246(b).

the ex-dividend date. When counting the

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Received from a RIC on debt-financed

number of days the IC-DISC held the stock,

stock. The amount of dividends eligible for

you may not count certain days during which

Line 9, Column (c) Worksheet

the dividends-received deduction is limited

the IC-DISC’s risk of loss was diminished.

by section 854(b). The corporation should

See section 246(c)(4) and Regulations

1. Refigure line 5, page 1, Form

receive a notice from the RIC specifying the

section 1.246-5 for more details. Preferred

1120-IC-DISC, without any

amount of dividends that qualify for the

dividends attributable to periods totaling less

adjustment under section 1059

deduction.

than 367 days are subject to the 46-day

and without any capital loss

holding period rule above.

Line 3, Columns (b) and (c)

carryback to the tax year under

3. Dividends on any share of stock to

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

Dividends received on debt-financed stock

the extent the IC-DISC is under an

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

acquired after July 18, 1984, are not entitled

obligation (including a short sale) to make

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

to the full 70% or 80% dividends-received

related payments with respect to positions in

(c), and the part of the

deduction. The 70% or 80% deduction is

substantially similar or related property.

•

deduction on line 3, column (c),

reduced by a percentage that is related to

Any other taxable dividend income not

that is attributable to dividends

the amount of debt incurred to acquire the

properly reported above (including

received from

stock. See section 246A. Also see section

distributions under section 936(h)(4)).

20%-or-more-owned

245(a) before making this computation for

Line 15, Column (a)

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

an additional limitation that applies to

4. Enter the smaller of line 2 or

dividends received from foreign

Qualified dividends are dividends that

line 3. If line 3 is larger than line

corporations. Attach a schedule to Form

qualify as qualified export receipts. They

2, do not complete the rest of

1120-IC-DISC showing how the amount on

include all dividends (or amounts) includible

this worksheet. Instead, enter

line 3, column (c), was figured.

in gross income (under section 951) that are

the amount from line 4 in the

attributable to stock of related foreign export

Line 4, Column (a)

margin next to line 9 of

corporations. See Qualified export receipts

Schedule C and on line 6b,

Enter dividends received on the preferred

and A related foreign export corporation on

page 1, Form 1120-IC-DISC . .

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

page 4 for more details.

that is subject to income tax and is allowed

5. Enter the total amount of

Schedule E

the deduction provided in section 247 for

dividends received from

dividends paid.

20%-or-more-owned

corporations that are included

Deductions

Line 5, Column (a)

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

Enter dividends received on preferred stock

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

Limitations on Deductions

of a 20%-or-more-owned public utility that is

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

subject to income tax and is allowed the

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

Section 263A uniform capitalization

deduction under section 247 for dividends

rules. The uniform capitalization rules of

8. Subtract line 3 above from

paid.

section 263A generally require corporations

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

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Instructions for Form 1120-IC-DISC

Instructions For Form 1120-Ic-Disc - 2005 Page 8

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