Instructions For Schedule I (Form 1120-F) - 2009 (Page 7 of 8) in pdf

Line 16a. U.S. Assets — U.S. dollar

interest paid or accrued. For all other

Lines 21 Through 25.

value denominated in currency. Enter

separate currency pools, enter the

the U.S. dollar value of the average

Summary – Interest

worldwide interest expense in the

amount of U.S. assets in the appropriate

functional currency of the currency pool.

Expense Allocation and

column (a) through (d) (or on the attached

Do not enter the U.S. dollar value of the

separate sheets for additional currencies).

Deduction Under

functional currency pool in column (b) or

Enter in column (a) the U.S. dollar

for any other non-U.S. dollar currencies

Regulations Section

denominated U.S. assets, plus the U.S.

for which a separate currency pool

dollar value of any U.S. assets for which a

allocation is made in additional columns.

1.882-5

3% currency election is applicable for the

See Regulations section 1.882-5(e)(2).

tax year. In column (b), enter the average

Line 22. Interest expense directly

The worldwide interest expense in each

U.S. dollar value of U.S. assets

allocable under Regulations section

currency pool includes interest expense in

denominated in the corporation’s home

1.882-5(a)(1)(ii). Enter the amount of

each currency that is recorded on the

country functional currency. Enter the

interest expense directly allocable to ECI

Schedule L books and reportable on

average U.S. assets of all other currency

under Regulations section

Schedule I, line 9, column (c).

pools beginning with column (c).

1.882-5(a)(1)(ii). A foreign corporation

that has a U.S. asset and indebtedness

Note. The sum of all U.S. assets in

Line 18b. Worldwide average liabilities

that meet the requirements of Temporary

columns (a) through (d) (and in any

in each separate currency pool. Enter

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

columns shown on any attached separate

on line 18b, the average liabilities

as limited by Temporary Regulations

sheets) must equal the total average U.S.

(whether or not interest bearing)

section 1.861-10T(d)(1), shall directly

assets entered on line 5, column (d).

allocate interest expense from such

denominated in each separate currency

A transaction that hedges a U.S. asset

indebtedness to income from such asset

pool. In column (a), enter the average

is taken into account for purposes of

in the manner and to the extent provided

worldwide liabilities (whether or not

determining the currency denomination

in Temporary Regulations section

interest bearing) denominated in U.S.

and the value of the U.S. asset. See

1.861-10T.

dollars. For all other separate currency

Regulations section 1.882-5(e)(1)(i).

pools, enter the average amount of

Note. See Temporary Regulations

Line 17b. U.S.-connected liabilities per

liabilities (whether or not interest bearing)

section 1.861-10T(d) for rules requiring

currency. Complete line 17b as follows:

denominated in the currency of the

reductions in basis to assets required by

Determination of U.S.-connected

currency pool. Do not enter the U.S.

the direct interest allocation rules in

liabilities if no U.S. liability reduction

dollar value of the currency pool for any

Temporary Regulations section

election is made. For each applicable

column other than column (a). In

1.861-10T(b) or (c). The rules of

column, multiply the U.S. assets on line

determining the average worldwide

Temporary Regulations section

16a by the U.S.-connected liability ratio

1.861-10T(c) apply only to non-financial

borrowing rate, the liabilities in each

on line 17a and enter the amount on line

institutions. Financial institutions are

currency pool include the amounts

17b. The resulting amount constitutes the

permitted to directly allocate interest

recorded on the sets of books reportable

U.S.-connected liabilities for each

expense only under the non-recourse

on Schedule L and included on Schedule

currency pool when the corporation does

indebtedness rules described in

I, line 8, column (c). Determine the

not make a U.S. liability reduction election

Temporary Regulations section

average third-party liabilities using the

under Regulations section 1.884-1(e)(3).

1.861-10T(b).

most frequent averaging period for which

Determination of U.S.-connected

data is reasonably available in

Line 23. Total interest expense

liabilities if a U.S. liability reduction

accordance with the principles of

allocable to ECI under Regulations

election is made. If the corporation

Regulations sections 1.882-5(b)(3) and

section 1.882-5. Add lines 21 and 22

makes one or more U.S. liability reduction

(c)(2)(iv).

and enter the result on line 23. This result

elections for the tax year under

is the total amount of interest expense

Regulations section 1.884-1(e)(3), the

allocable to ECI, including directly

Line 18c. Borrowing rate. Divide line

total amount of the liability reduction

allocated interest. This allocable amount

18a by line 18b. The result is the average

shown on line 7b must be allocated to

may not exceed the total interest expense

each of the separate currency pools in

worldwide borrowing rate for each

paid or accrued by the corporation. See

proportion to the U.S. assets in each pool.

separate currency pool.

Regulations section 1.882-5(a)(3). If the

The amount entered on line 17b for each

corporation’s total interest expense paid

column is computed as:

Line 19. Interest expense allocation by

or accrued is less than the amount of

1. The amount on line 16a multiplied

separate currency pool. For each

allocation that would result by adding

by the ratio on line 17a, less

column, multiply the amount on line 17b

lines 21 and 22, enter such lesser amount

2. The amount of the liability reduction

by the borrowing rate on line 18c and

on line 23. The amount entered on line 23

election entered on line 7b multiplied by

enter the result on line 19. The amount on

is the amount of interest expense taken

the proportion that the average U.S.

line 19 is the amount of interest expense

into account for branch-level interest tax

assets in the separate currency pool

allocable to ECI in each separate

purposes under section 884(f)(1)(B) and

bears to all of the U.S. assets in all

currency pool.

Regulations section 1.884-4(a),

separate currencies (i.e., the total

regardless of whether the deductibility of

average U.S. assets entered on line 5,

such amount is temporarily deferred or

Line 20. Total interest expense

column (d)).

disallowed for allocation to tax-exempt

allocable to ECI under the separate

income (including treaty exempt income).

currency pools method. On line 20,

Attach a schedule showing the

The amount reportable on line 23 is

enter the sum of the amounts in each

computation and the allocation of the

reconciled and reported on Form 1120-F,

column on line 19 (including amounts

liability reduction election to each

Section III, line 7c, and on Schedule M-3

from line 19 of attached schedule, if any).

separate currency pool.

(Form 1120-F), Part III, line 26b, columns

The amount on line 20 is the total amount

Line 18a. Worldwide book interest

(d) and (e).

of interest expense allocable to ECI under

expense for each separate currency

the Separate Currency Pools method.

pool. Enter for each column on line 18a,

Line 24. Tax-exempt allocations,

The amount on line 20 does not include

the corporation’s worldwide interest

deferrals and capitalization of interest

any amount of interest expense directly

expense paid or accrued for the tax year

expense allocation from line 23. The

allocable under Regulations section

in the separate currency pool. In column

amount of interest expense allocable to

1.882-5(a)(1)(ii).

(a), enter the worldwide U.S. dollar

ECI entered on line 23 is subject to

-7-

Instructions For Schedule I (Form 1120-F) - 2009 Page 7

Related Articles

Related forms

Related Categories