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For more information on inventory

Line 3. Column (a)

Line 7. Column (a)

valuation methods, see Pub. 538.

Enter dividends that are:

Enter the U.S.-source portion of

•

Received on debt-financed stock

dividends that:

•

acquired after July 18, 1984, that are

Are received from

Schedule C

received from domestic and foreign

20%-or-more-owned foreign

corporations subject to income tax that

corporations, and

•

Dividends and Special

would otherwise be subject to the

Qualify for the 80% deduction under

dividends-received deduction under

section 245(a).

Deductions

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

Also include dividends received from a

For purposes of the 20% ownership

•

Received from a RIC on

20%-or-more-owned FSC that:

test on lines 1 through 7, the

•

debt-financed stock. The amount of

Are attributable to income treated as

percentage of stock owned by the

dividends eligible for the

effectively connected with the conduct

cooperative is based on voting power

dividends-received deduction is limited

of a trade or business within the United

and value of the common stock.

by section 854(b). The cooperative

States (excluding foreign trade income),

Preferred stock described in section

should receive a notice from the RIC

and

1504(a)(4) is not taken into account.

•

specifying the amount of dividends that

Qualify for the 80% deduction under

Cooperatives filing a consolidated

qualify for the deduction.

section 245(c)(1)(B).

return should see Regulations sections

1.1502-13, 1.1502-26, and 1.1502-27

Line 8. Column (a)

Line 3. Columns (b) and (c)

before completing Schedule C.

Enter dividends received from wholly

Dividends received on debt-financed

owned foreign subsidiaries that are

stock acquired after July 18, 1984, are

Line 1. Column (a)

eligible for the 100% deduction under

not entitled to the full 70% or 80%

Enter dividends (except those received

section 245(b).

dividends-received deduction. The 70%

on debt-financed stock acquired after

or 80% deduction is reduced by a

In general, the deduction under

July 18, 1984 – see section 246A) that

percentage that is related to the

section 245(b) applies to dividends paid

are:

amount of debt incurred to acquire the

•

out of the earnings and profits of a

Received from less-than-20%-owned

stock. See section 246A. Also see

foreign corporation for a tax year during

domestic corporations subject to

section 245(a) before making this

which:

income tax, and

•

computation for an additional limitation

•

All of its outstanding stock is directly

Qualified for the 70% deduction

that applies to dividends received from

or indirectly owned by the domestic

under section 243(a)(1).

foreign corporations. Attach a schedule

cooperative receiving the dividends,

to Form 990-C showing how the

Also include on line 1:

and

•

amount on line 3, column (c), was

Taxable distributions from an

All of its gross income from all

figured.

IC-DISC or former DISC that are

sources is effectively connected with

designated as eligible for the 70%

the conduct of a trade or business

Line 4. Column (a)

deduction, and certain dividends of

within the United States.

Federal Home Loan Banks. See section

Enter dividends received on preferred

Line 9. Column (c)

246(a)(2).

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

•

Dividends (except those received on

utility that is subject to income tax and

Generally, line 9, column (c), cannot

debt-financed stock acquired after July

is allowed the deduction provided in

exceed the amount from the worksheet

18, 1984) from a regulated investment

section 247 for dividends paid.

below. However, in a year in which an

company (RIC). The amount of

NOL occurs, this limitation does not

Line 5. Column (a)

dividends eligible for the

apply even if the loss is created by the

dividends-received deduction under

dividends-received deduction. See

Enter dividends received on preferred

section 243 is limited by section 854(b).

sections 172(d) and 246(b).

stock of a 20%-or-more-owned public

The cooperative should receive a notice

utility that is subject to income tax and

from the RIC specifying the amount of

Worksheet for Schedule C, line 9

is allowed the deduction provided in

dividends that qualify for the deduction.

(keep for your records)

section 247 for dividends paid.

Generally, debt-financed stock is stock

Line 6. Column (a)

that the cooperative acquired by

1. Refigure line 28, page 1, Form

990-C, without any domestic

incurring a debt (e.g., it borrowed

Enter the U.S.-source portion of

production activities deduction,

money to buy the stock).

dividends that:

any adjustment under section

•

Are received from

Report so-called dividends or

1059, and without any capital

less-than-20%-owned foreign

earnings received from mutual savings

loss carryback to the tax year

corporations, and

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

banks, etc., as interest income. Do not

•

Qualify for the 70% deduction under

2. Enter the amount from line 10,

treat them as dividends.

column (c) . . . . . . . . . . . . . .

section 245(a).

3. Subtract line 2 from line 1 . . . .

Line 2. Column (a)

To qualify for the 70% deduction, the

4. Multiply line 3 by 80% . . . . . . .

cooperative must own at least 10% of

Enter:

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

•

the stock of the foreign corporation by

Dividends (except those received on

vote and value.

debt-financed stock acquired after July

on line 3, column (c) that is

18, 1984) that are received from

Also include dividends received

attributable to dividends

received from

20%-or-more-owned domestic

from a less-than-20%-owned FSC that:

•

20%-or-more-owned

corporations subject to income tax and

Are attributable to income treated as

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

that are subject to the 80% deduction

effectively connected with the conduct

6. Enter the smaller of line 4 or line

under section 243(c), and

of a trade or business within the United

5. If line 5 is greater than line 4,

•

Taxable distributions from an

States (excluding foreign trade income),

stop here; enter the amount

IC-DISC or former DISC that are

and

from line 6 on line 9, column (c).

•

considered eligible for the 80%

Qualify for the 70% deduction

Do not complete the rest of this

deduction.

provided in section 245(c)(1)(B).

worksheet . . . . . . . . . . . . . .

-14-

Instructions For Form 990-C - Farmers' Cooperative Association Income Tax Return - Internal Revenue Service - 2005 Page 14

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