Instructions For Form 1120-Fsc - 2007 (Page 9 of 13) in pdf

and Form 5713 and related schedules and

dividends-received deduction under section

Part II

instructions.

243 is limited by section 854(b). The FSC

Line 19a. Net operating loss deduction.

should receive a notice from the RIC

Line 3. Enter the amount, if any, of illegal

A FSC may use the NOL incurred in one tax

specifying the amount of dividends that

payments, bribes, or kickbacks that the FSC

year to reduce its taxable income in another

qualify for the deduction.

paid, directly or indirectly, to government

tax year. Enter on line 19a the total NOL

officials, employees, or agents. See section

Report so-called dividends or earnings

carryovers from other tax years, but do not

927(e)(2).

received from mutual savings banks, etc., as

enter more than the FSC’s taxable income

interest. Do not treat them as dividends.

Line 5. See the instructions for Schedule A

(after the dividends-received deduction).

before completing this line.

Attach a schedule showing the computation

Line 2, Column (a)

of the NOL deduction. Also complete line 7

Part II

Enter dividends (except those received on

in Additional Information on page 2 of the

debt-financed stock acquired after July 18,

Enter the taxable portion of gross income of

form.

1984) that are received from

the FSC that was not derived from foreign

For details on the NOL deduction, see

20%-or-more-owned domestic corporations

trading gross receipts. This type of income

Pub. 542, section 172, and Form 1139.

subject to income tax and that are subject to

includes:

•

the 80% deduction under section 243(c).

Line 19b. Dividends-received deduction.

Small FSCs only. Amounts specifically

A FSC may be entitled to a deduction for

excluded from foreign trade income because

Line 3, Column (a)

dividends it receives from other

of the small FSC limitation (the amount by

Enter dividends that are:

corporations. Complete the worksheet on

which line 6f of Schedule B exceeds line 6e

•

Received on debt-financed stock acquired

page 10 using the instructions that begin

of Schedule B). (Enter the excess, if any, on

after July 18, 1984, from domestic and

below. Attach the completed worksheet to

line 7 of Schedule F.)

foreign corporations subject to income tax

•

Form 1120-FSC.

Investment type income. (Enter on lines 8

that would otherwise be subject to the

through 12 of Schedule F.)

Line 20. Taxable income or (loss). If line

dividends-received deduction under section

•

Income from property that is subsidized,

20 is zero or less, the FSC may have an

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

deemed in short supply, or destined for use

NOL that may be carried back or forward as

debt-financed stock is stock that the FSC

in the United States. (Enter on lines 13 and

a deduction to other tax years. Generally, a

acquired by incurring a debt (for example, it

14 of Schedule F.)

FSC first carries back an NOL 2 tax years.

borrowed money to buy the stock).

•

Amounts from transactions that did not

•

However, the FSC may elect to waive the

Received from a RIC on debt-financed

meet the foreign economic process

carryback period and instead carry the NOL

stock. The amount of dividends eligible for

requirements. (Enter on line 15 of

forward to future tax years. To make the

the dividends-received deduction is limited

Schedule F.)

election, see the instructions for Additional

by section 854(b). The FSC should receive

•

Other nonforeign trade income. (Enter on

Information, line 6 on page 8.

a notice from the RIC specifying the amount

line 16 of Schedule F.)

See Form 1139 for details, including

of dividends that qualify for the deduction.

For more details, see sections 924(f)

other elections that may be available, which

Line 3, Columns (b) and (c)

and 927(a)(2) and (3).

must be made no later than 6 months after

Dividends received on debt-financed stock

the due date (excluding extensions) of the

Line 9. Complete the worksheet on page

acquired after July 18, 1984, are not entitled

FSC’s tax return.

10 to figure the total dividends to report on

to the full 70% or 80% dividends-received

line 9. Attach the completed worksheet to

Schedule E

deduction. The 70% or 80% deduction is

Form 1120-FSC.

reduced by a percentage that is related to

Line 18. Enter the deductions allocated or

Exemption Percentages Used in

the amount of debt incurred to acquire the

apportioned to line 17 income. Attach to

stock. See section 246A. Also, see section

Figuring Exempt Foreign Trade

Form 1120-FSC a schedule listing each type

245(a) before making this computation for

of deduction. Show deductions related to

Income

an additional limitation that applies to

cost of goods sold separately. See the

For purposes of the Note at the top of

dividends received from foreign

instructions for Schedule A on page 7 before

corporations. Attach a schedule to

Schedule E, a C corporation is a corporation

completing this line.

Form 1120-FSC showing how the amount

other than an S corporation. Shareholders,

Passive activity limitations. Section 469

other than C corporations, are individuals,

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

generally limits the deduction of passive

partnerships, S corporations, trusts, and

Line 4, Column (a)

activity losses for closely held FSCs and

estates.

FSCs that are personal service

Enter dividends received on the preferred

Use lines 2a through 2d to figure the

corporations. See section 469 and the

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

exemption percentage for foreign trade

Instructions for Form 8810 for details.

that is subject to income tax and is allowed

income determined by not using the

the deduction provided in section 247 for

Instructions for Dividends

administrative pricing rules. See section

dividends paid.

923(a)(2).

and Dividends-Received

Line 5, Column (a)

Use lines 3a through 3d to figure the

Deduction Worksheet

exemption percentage for foreign trade

Enter dividends received on preferred stock

For purposes of the 20% ownership test on

income that was determined by using the

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

lines 1 through 7, the percentage of stock

administrative pricing rules (see section

subject to income tax and is allowed the

owned by the FSC is based on voting power

923(a)(3)). If a qualified cooperative is a

deduction provided in section 247 for

and value of the stock. Preferred stock

shareholder of the FSC, see section

dividends paid.

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

923(a)(4).

Line 6, Column (a)

into account.

Schedule F

Enter the U.S.-source portion of dividends

Line 1, Column (a)

that:

Enter dividends (except those received on

•

Net Income From Nonexempt

Are received from less-than-20%-owned

debt-financed stock acquired after July 18,

foreign corporations and

Foreign Trade Income and

1984 – see section 246A) that:

•

Qualify for the 70% deduction under

•

Taxable Nonforeign Trade

Are received from less-than-20%-owned

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

domestic corporations subject to income tax

Income

deduction, the FSC must own at least 10%

and

of the stock of the foreign corporation by

•

Qualify for the 70% deduction under

vote and value.

Part I

section 243(a)(1).

Line 7, Column (a)

Enter net income from nonexempt foreign

Also include on line 1 dividends (except

trade income and related expenses in Part I.

those received on debt-financed stock

Enter the U.S.-source portion of dividends

Line 2. Enter FSC income that resulted

acquired after July 18, 1984) from a

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

from the FSC’s cooperation with an

regulated investment company (RIC). The

foreign corporations and that qualify for the

international boycott. See section 927(e)(2)

amount of dividends eligible for the

80% deduction under section 245(a).

-9-

Instructions For Form 1120-Fsc - 2007 Page 9

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