Instructions For Schedule I (Form 1120-F) - 2009 (Page 4 of 8) in pdf

in partnerships (whether recorded as an

(a), include such increase as a negative

under section 864(c)(6) or section

investment in the partnership interest or in

number on line 3f, column (a). Similarly, if

864(c)(7). However, not all assets that

the partnership assets) included on line 2,

the mark to market amount decreases the

give rise to ECI, including ECI recognized

column (a).

basis of the assets included on line 2,

under section 864(c)(7), constitute U.S.

column (a), include such decrease as a

assets under Regulations section

Note. Partnership interests are reported

positive number on line 3f, column (a).

1.884-1(d). See Regulations section

in Step 1 as follows: The ECI portion of

Other adjustments for book tax

1.884-1(d)(2)(xi), example 5, and

the corporation’s adjusted outside basis in

differences with respect to asset values

Regulations section 1.884-1(d)(5).

a partnership (from Schedule P (Form

on line 2, column (a), such as

1120-F), line 19, “Total” column) is

Line 5, column (d). Total average value

depreciation and amortization for

entered on Schedule I (Form 1120-F), line

of U.S. assets included in Step 1.

taxpayers using the adjusted basis

5, column (b).

Combine the amounts on line 5, columns

method for valuing U.S. assets, are also

(a), (b), and (c) and enter the amount on

With respect to amounts from

reportable on line 3f, column (a). Enter an

line 5, column (d). This amount is the total

disregarded entities included on line 2,

aggregate net increase as a negative

average value of the corporation’s U.S.

column (a), enter on line 3d, column (a)

number. Enter an aggregate net decrease

assets included in Step 1 of the

any adjustment needed to reflect the

as a positive number.

Regulations section 1.882-5 formula. If

following: Investments in disregarded

Line 4, column (a). Combine lines 3a

the corporation uses the Separate

entities should not be included on line 2,

through 3f and enter the result on line 4,

Currency Pools method to allocate

column (a) if the set(s) of books are

column (a). The result on line 4, column

interest expense in Step 3 of the

reportable on Schedule L. Instead, the

(a) constitutes the total net adjustment to

Regulations section 1.882-5 formula, see

total assets of such disregarded entity’s

the average book assets from the

the instructions for line 16a on page 7.

Schedule L books should be combined on

Schedule L set(s) of books reported on

The amount on line 5, column (d) is also

line 2, column (a) with all other set(s) of

line 2, column (a).

reportable on Schedule H (Form 1120-F),

books reportable on Schedule L. If

line 22a.

another Schedule L book reflects an

Line 5. Total Value of U.S. Assets

investment in a disregarded entity whose

for the Tax Year

Lines 6 Through 7c. Step 2:

books are not reportable on Schedule L,

Determination of

Line 5, column (a). Average U.S. assets

then the assets of the disregarded entity

U.S.-Connected Liabilities -

on set(s) of Schedule L books.

are not reported on line 2, column (a).

Regulations Section 1.882-5(c)

Subtract the amount on line 4, column (a)

The amount of the investment in the

from line 2, column (a) and enter the

disregarded entity that is included in the

Line 6. Actual ratio or fixed ratio

amount on line 5, column (a). The

total assets reported on line 2, column (a)

method. Check the applicable box to

resulting amount is the total average

must be reversed on line 3d, column (a)

specify whether the corporation uses the

value of U.S. assets under Regulations

to reflect its disregarded treatment in

actual ratio or the fixed ratio method for

section 1.884-1(d) included on the

Regulations section 1.882-5.

the tax year to determine its

Schedule L set(s) of books, excluding any

Line 3e, column (a). Adjustments for

U.S.-connected liabilities in Step 2 of the

partnership interests included on line 2.

assets that give rise to direct interest

allocation formula. The amount of

Line 5, column (b). ECI portion of the

expense allocations under Regulations

U.S.-connected liabilities is the total value

average value of partnership interests.

section 1.882-5(a)(1)(ii). Enter on line

of U.S. assets for the tax year (line 5,

Enter on line 5, column (b), the amount

3e, column (a), the average value of the

column (d)) multiplied by the actual ratio

from Schedule P (Form 1120-F), line 19

portion of all assets included on line 2 that

or the applicable fixed ratio the

(“Total” column). This amount is the sum

give rise to direct interest expense

corporation has timely elected and is

of all ECI portions of the corporation’s

allocations under Regulations section

eligible to use for the tax year. The actual

outside basis in partnership interests as

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

ratio or fixed ratio election must be made

adjusted under Regulations section

requirements of Temporary Regulations

on a timely tax return for the first year the

1.884-1(d)(3). The amount entered from

section 1.861-10T(b) or (c), and

corporation is subject to Regulations

Schedule P, line 19 may include the ECI

Temporary Regulations section

section 1.882-5 and is subject to the

portion of the corporation’s outside basis

1.861-10T(d). A foreign corporation that

minimum five-year period under

in partnerships whose book value is

allocates its interest expense under the

Regulations section 1.882-5(a)(7). An

included on line 2, column (a) as well as

direct allocation rules shall reduce the

election to change the method after such

the ECI portion of partnership interests

basis of the asset that meets the

minimum five-year period is also subject

whose book value is not recorded on the

requirements of Temporary Regulations

to the minimum five-year period.

Schedule L books and is not included on

section 1.861-10T (b) or (c) by the

Actual ratio information. If the

line 2, column (a).

principal amount of the indebtedness that

corporation uses the actual ratio,

meets the requirements of Temporary

Line 5, column (c). Average U.S. assets

complete lines 6a through 6c and skip line

Regulations section 1.861-10T (b) or (c).

not includible in set(s) of Schedule L

6d.

The amount of directly allocable interest

books reported on line 5, column (a),

under Regulations section

Fixed ratio information. If the

or from partnerships reported on line

1.882-5(a)(1)(ii) is reported on line 22.

corporation uses the fixed ratio, skip lines

5, column (b). Enter on line 5, column

6a through 6c and enter the applicable

Line 3f, column (a). Other adjustments

(c), the average value of U.S. assets

fixed ratio on line 6d. For foreign banks

to average assets included on line 2.

(other than the ECI portion of the

(described in Regulations section

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

corporation’s outside basis in partnership

1.882-5(c)(4)), the fixed ratio is 95%. For

asset balances for any other amounts

interests) from set(s) of books that are not

corporations other than foreign banks and

included on line 2, column (a) that do not

reportable on Schedule L. Such assets

insurance companies, the fixed ratio is

constitute U.S. assets as defined in

may generally include certain securities

50%.

Regulations section 1.884-1(d). Assets

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

includible on this line may include, for

financing, or similar business under

Actual Ratio Filers — Regulations

example, amounts with respect to

Regulations section 1.864-4(c)(5)(iii) that

Section 1.882-5(c)

securities that are marked to market for

are booked in a foreign bank’s home

tax purposes under section 475 that are

office or other foreign location. Other

Line 6a. Average worldwide liabilities.

not marked to market on the set(s) of

assets reportable on line 5, column (c),

Enter on line 6a the average worldwide

books reported on line 2, column (a). If

may generally also include assets that are

liabilities as adjusted for U.S. tax

the mark-to-market amount includible for

no longer held in connection with a trade

principles for the year. The corporation’s

tax purposes is an increase to the basis

or business within the United States that

worldwide liabilities include the liabilities

of the assets included on line 2, column

give rise to effectively connected income

of only the corporation filing the Form

-4-

Instructions For Schedule I (Form 1120-F) - 2009 Page 4

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