Instructions For Form 1118 - (Rev. December 2009) (Page 5 of 13) in pdf

reclassified to general category income.

Column 7. Include all other gross

Note that the reclassifications are being

income from sources outside the United

reported on a single line because it is not

States for the applicable separate

Separate Category of Income

necessary to report them on a per-country

category, including all other gross income

Boxes.

basis. Also note that tax reclassifications

of foreign branches and pass-through

The corporation must complete a

are needed on Schedule B. See those

entities and any exchange gain or loss

separate Form 1118 for each applicable

instructions for more information. Also

recognized under sections 986(c) or

category of income. See Categories of

see General Category Income on page 2

987(3) on a distribution or remittance of

Income beginning on page 1.

for general additional information about

previously taxed amounts. Attach a

high-taxed income.

schedule identifying the gross income by

type and by the foreign country or U.S.

Column 1. Enter the two-letter codes

Schedule A

possession from which it was sourced.

(from the list at

Report gross income or (loss) from

Column 9(d). Include all other

article/0,,id=175595,00.html) of all foreign

sources outside the United States for the

deductions definitely allocable to income

countries and U.S. possessions within

applicable separate category in columns

from sources outside the United States

which income is sourced and/or to which

2 through 7. Gross income equals gross

(dividends, interest, etc.) for the

taxes were paid, accrued, or deemed

receipts reduced by cost of goods sold.

applicable separate category. Include

paid.

Report the applicable deductions to this

deductions allocable to income of foreign

For section 863(b) income, enter

gross income in columns 9 and 10.

branches.

“863(b)” instead of a two-letter code.

Report any net operating loss carryover in

Include any reduction of foreign source

For income passed through from a

column 11. Be sure to include in all

capital gain net income. If foreign source

RIC, enter “RIC” instead of a two-letter

columns the gross income and

capital gain net income from all separate

code.

deductions that pertain to foreign

categories is more than the capital gain

branches.

For a net operating loss, enter “NOL”

net income reported on the corporation’s

instead of a two-letter code.

Section 863(b) gross income and

tax return, enter a pro rata portion of the

deductions. Aggregate all section

For income adjustments for high-taxed

excess as a negative number in each

863(b) gross income and deductions and

income, enter “HTKO” instead of a

separate category. See Capital Gains on

report the totals on a single line. It may be

two-letter code.

page 2.

necessary to enter amounts in multiple

Column 10. Enter only the apportioned

Column 2(a). If the corporation is a U.S.

columns on that single line, depending

share from Schedule H, Part II, column

shareholder in a CFC, report all income

upon the nature of the section 863(b)

(d) that relates to gross income reported

deemed received under section

gross income and deductions. For

in columns 2 through 7.

951(a)(1)(A) (before gross-up). See

example, enter “863(b)” in column 1 and

section 904(d)(3) and Look-Through

Note. If the corporation qualified as a

enter (as a positive number) all section

Rules on page 2 for more information. If

financial services entity because it treated

863(b) gross income (in columns 2

the corporation is a U.S. shareholder in a

certain amounts as active financing

through 8) and all section 863(b)

passive foreign investment company

income that are not listed in Regulations

deductions (in columns 9a through 12).

(PFIC) and receives distributions from

sections 1.904-4(e)(2)(i)(A) through (X),

Also enter the net amount in column 13.

stock in that PFIC, report all income

but that are described as similar items in

Note that the totals are being reported on

deemed received (before gross-up) under

Regulations section 1.904-4(e)(2)(i)(Y),

a single line because it is not necessary

section 1291.

attach a statement to Form 1118 showing

to report section 863(b) gross income and

the types and amounts of the similar

Column 3(a). Report all other dividends

deductions on a per-country basis.

items.

(before gross-up) not included in column

RIC pass-through amounts. Aggregate

2(a) from sources outside the United

Column 11. Enter the corporation’s net

all income passed through from regulated

States for the applicable separate

operating loss as defined in section 172

investment companies (RICs) and report

category. Other dividends include

that is attributable to foreign source

the total on a single line. Enter “RIC” in

amounts included in gross income under

income in the separate limitation

column 1 and report the total in column

section 951(a)(1)(B).

category. If the net operating loss is part

13. Note that the totals are being reported

Note. All dividends from a domestic

of an overall foreign loss, see Temporary

on a single line because it is not

corporation are of U.S. source, including

Regulations section 1.904(g)-3T for

necessary to report the RIC pass-through

dividends from a domestic corporation

allocation rules that apply in determining

amounts on a per-country basis.

which has 80% or more of its gross

the amount to enter in column 11.

Net operating losses. Report any net

income from sources outside the United

It is not necessary to report the NOL

operating loss carryover on a single line.

States.

adjustment on a per-country basis. See

Enter “NOL” in column 1 and report the

the instructions for Schedule A above.

Columns 2(b) and 3(b). Include taxes

total in column 11. Note that the totals are

deemed paid by a domestic corporation

being reported on a single line because it

under section 902 or section 960 on

is not necessary to report the NOL on a

Schedule B

distributions by a foreign corporation in

per-country basis.

income as dividend gross-up. See

Reclassifications of high-taxed

Part I—Foreign Taxes Paid,

Regulations section 1.960-3(b) for

income. Aggregate all reclassifications

Accrued, and Deemed Paid

exceptions.

of high-taxed income and report the total

Column 4. Enter all interest received

Report only foreign taxes paid, accrued,

on a single line. With respect to passive

from foreign sources. See section 861(c)

or deemed paid for the separate category

category income, for items of income that

for the treatment of interest from a

for which this Form 1118 is being

have been included on Schedule A and

domestic corporation that meets the

completed. Report all amounts in U.S.

that must be reclassified under the rules

foreign business requirement.

dollars. If the corporation must convert

of Regulations section 1.904-4(c), enter

from foreign currency, attach a schedule

“HTKO” in column 1 and enter (as a

Column 6. Include gross income,

showing the amounts in foreign currency

negative number) in column 13 the net

including compensation, commissions,

and the exchange rate used.

amount of income that is being

fees, etc., for technical, managerial,

reclassified from passive category

engineering, construction, scientific, or

For corporations claiming the credit on

income. With respect to general category

similar services outside the United States.

the accrual basis, the exchange rate for

income, enter “HTKO” in column 1 and

Be sure to include gross income from

translating foreign taxes into U.S. dollars

enter (as a positive number) in column 13

services performed through a foreign

will generally be an average exchange

the net amount of income that is being

branch.

rate for the tax year to which the taxes

-5-

Instructions For Form 1118 - (Rev. December 2009) Page 5

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