Instructions For Schedule I (Form 1120-F) - 2009 (Page 3 of 8) in pdf

Separate currency pools method

1.882-5(d)(2)(iii) requires that the

amount is treated as the allocation and

filers. Separate Currency Pools method

corporation meet the section 585(a)(2)

source of third-party securities dealing

filers complete all columns on lines 1

regulated banking requirements in its

income and is not eliminated from U.S.

through 9 and lines 16 through 25. Do not

trade or business within the United

assets on line 3a, column (a). Such

complete lines 10 through 15.

States. The section 585(a)(2) standard

interbranch assets are eliminated only to

must also be satisfied at the corporation’s

the extent they are allocated under

Lines 21 through 25. Summary –

U.S. trade or business level for purposes

Proposed Regulations section 1.863-3(h)

Interest expense allocation and

of electing the deposit liability safe harbor

to foreign source non-ECI. The allocable

deduction under Regulations section

applicable to the reduction of excess

amount to non-ECI is eliminated from

1.882-5

interest under Regulations section

U.S. assets on line 3c, column (a) (total

Line 22. Direct interest allocations.

1.884-4(a)(2)(iii).

other non-ECI assets).

Interest expense that is directly allocable

under Regulations section

Line 3b, column (a). Total non-ECI

Lines 1 Through 9: All

1.882-5(a)(1)(ii) in accordance with the

assets under section 864(c)(4)(D).

rules of Temporary Regulations section

Foreign Corporations

Enter on line 3b, column (a), the average

1.861-10T(b) or (c) is reported on line 22.

assets included on line 2, column (a) that

give rise to non-ECI received from

Lines 1 Through 5. Step 1:

Line 23. Summary of Regulations

foreign-related corporations under section

section 1.882-5 allocation. The amount

Determination of U.S. Assets

864(c)(4)(D). Such amounts include

of interest expense allocable to effectively

Assets includible on lines 1 through 5 are

assets from transactions with

connected income under Regulations

the U.S. assets of the corporation as

foreign-related corporations that give rise

section 1.882-5 is the sum of the amount

defined in Regulations sections

to foreign source dividends, interest, rents

allocated under either the AUSBL or

1.882-5(b) and 1.884-1(d). The U.S.

or royalties, whether or not such amounts

Separate Currency Pools method on line

assets are valued on an average basis for

are attributable to a U.S. office of the

15 or 20, and the amount directly

interest expense allocation purposes.

corporation under section 864(c)(5). A

allocated to ECI and reportable on line

Frequency of averaging. The average

foreign related corporation is a foreign

22. The resulting amount allocable and

value of assets for this step is to be

corporation the taxpayer owns (under

reported on line 23 is also reconciled and

computed at the most frequent, regular

section 958(a)) or is treated as owning

reported on Form 1120-F, Section III, Part

intervals for which data is reasonably

(under section 958(b)) more than 50% of

II, line 7c (branch-level interest tax).

available. See Regulations section

the total combined voting power of all

Line 24. Deferrals and

1.882-5(b)(3). For foreign banks, the

classes of stock entitled to vote. Enter the

disallowances under other Code

minimum averaging period is monthly

average asset number for assets

sections. The interest expense

(beginning of tax year and monthly

described in section 864(c)(4)(D) on line

allocation reportable on line 23 is

thereafter). For corporations other than a

3b, column (a), regardless of whether

determined under Regulations section

bank, the minimum averaging period is

such assets give rise to non-ECI under

1.882-5 before application of other Code

semi-annually (beginning, middle, and

another Code section or regulation. For

sections that defer or disallow the interest

end of the tax year).

example, report income that is non-ECI

deduction in whole or in part. See

under section 864(c)(4)(D) on line 3b,

Line 1. Indicate whether the corporation

Regulations section 1.882-5(a)(5).

column (a) even if such income is also not

values its U.S. assets on the adjusted

attributable to a U.S. office of a banking,

basis method (see Regulations section

financing, or similar business under

1.882-5(b)(2)(i)) or whether it has elected

Specific Instructions

Regulations section 1.864-6(b)(2)(ii)(b)

the fair market value method (see

and the principles of Regulations section

Regulations section 1.882-5(b)(2)(ii)). The

Item A. Foreign banks. Check the box

1.864-4(c)(5)(ii).

adjusted basis method election is subject

in item A if the foreign corporation is a

to the minimum five-year period described

Line 3c, column (a). Total other

bank as defined in Regulations section

in Regulations section 1.882-5(a)(7). The

non-ECI assets. Enter on line 3c,

1.882-5(c)(4). The term “bank” is defined

fair market value method cannot be

column (a), all other assets (or portion

in the regulation as a bank that meets the

changed to the adjusted basis method

thereof) included on line 2, column (a)

statutory definition applicable to domestic

without advance consent from the

that give rise to domestic or foreign

banks (except for the fact that the

Commissioner or his delegate.

source non-ECI. If income from a security

corporation is foreign) and without regard

Line 2, column (a). Total assets per

is treated as partially ECI and partially

to whether the corporation’s required

books. Enter the total average assets

non-ECI under Regulations section

banking activities are effectively

derived from the combined set or set(s) of

1.864-4(c)(5)(ii), enter the amount of the

connected with its trade or business

books that are reportable on Schedule L.

asset on line 3c, column (c) in the

within the United States. The required

The total average assets includes

proportion that the income, gain, or loss

banking activities need only be conducted

interbranch balances with other set(s) of

from such asset that is treated as

on a worldwide basis. To qualify as a

books of the corporation that are not

non-ECI bears to the total income, gain,

bank for interest expense allocation

reportable on Schedule L.

or loss from such asset. Do the same for

purposes, the foreign corporation must be

the non-ECI portion of any asset whose

subject to bank regulatory supervision

Line 3a, column (a). Total interbranch

income is allocated under the proposed

and examination in its home country of a

assets. Enter on line 3a, column (a), the

global dealing regulations or under an

type similar to that required of domestic

total of the corporation’s average

Advance Pricing Agreement pursuant to a

banks by a State or Federal authority

interbranch assets included on line 2,

competent authority agreement. See

having supervision over banking

column (a). The average interbranch

Proposed Regulations sections

institutions, and a substantial amount of

assets recorded on the set(s) of Schedule

1.884-1(d)(2)(vii) and 1.884-1(d)(2)(xi),

the corporation’s business must consist of

L books do not create U.S. assets under

Example 8.

receiving deposits and making loans and

Regulations section 1.882-5(b)(1)(iv) and

discounts, or of exercising fiduciary

are disregarded for purposes of the

Line 3d, column (a). Adjustments for

powers similar to those permitted to

interest expense allocation rules.

amounts from partnerships and certain

national banks under authority of the

Note. If under the global dealing

disregarded entities included on line 2,

Comptroller of the Currency. See sections

proposed regulations (Proposed

column (a). With respect to amounts

581 and 585(a).

Regulations section 1.863-3(h), which

from partnerships included on line 2,

Note. The reference to the definition of

references the Proposed Regulations

column (a), all such amounts must be

the term “bank” for purposes of

section 1.482-8 principles), the

“backed out” on this line 3d, column (a).

determining the U.S. booked liabilities of

corporation recognizes an amount

Enter on line 3d, column (a), all amounts

banks under Regulations section

recorded as an interbranch asset, such

on the Schedule L books for investments

-3-

Instructions For Schedule I (Form 1120-F) - 2009 Page 3

Related Articles

Related forms

Related Categories