Instructions For Schedule I (Form 1120-F) -2010 (Page 3 of 8) in pdf

Lines 1 Through 9: All

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

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

rules of Temporary Regulations section

other non-ECI assets).

Foreign Corporations

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

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

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

Line 23. Summary of Regulations

Lines 1 Through 5. Step 1:

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

section 1.882-5 allocation. The amount

Determination of Total Value of

assets included on line 2, column (a) that

of interest expense allocable to effectively

U.S. Assets

give rise to non-ECI received from

connected income under Regulations

Assets includible on lines 1 through 5 are

foreign-related corporations under section

section 1.882-5 is the sum of the amount

the U.S. assets of the corporation as

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

allocated under either the AUSBL or

defined in Regulations sections

assets from transactions with

Separate Currency Pools method on line

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

foreign-related corporations that give rise

15 or 20, and the amount directly

assets are valued on an average basis for

to foreign source dividends, interest, rents

allocated to ECI and reportable on line

interest expense allocation purposes.

or royalties, whether or not such amounts

22. The resulting amount allocable and

are attributable to a U.S. office of the

reported on line 23 is also reconciled and

Frequency of averaging. The average

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

reported on Form 1120-F, Section III, Part

value of assets for this step is to be

foreign related corporation is a foreign

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

computed at the most frequent, regular

corporation the taxpayer owns (under

intervals for which data is reasonably

Line 24. Deferrals and

section 958(a)) or is treated as owning

available. For foreign banks, the minimum

disallowances under other Code

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

averaging period is monthly (beginning of

sections. The interest expense

the total combined voting power of all

tax year and monthly thereafter). For

allocation reportable on line 23 is

classes of stock entitled to vote. Enter the

corporations other than a bank, the

determined under Regulations section

average asset number for assets

minimum averaging period is

1.882-5 before application of other Code

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

semi-annually (beginning, middle, and

sections that defer or disallow the interest

3b, column (a), regardless of whether

end of the tax year). See Regulations

deduction in whole or in part. See

such assets give rise to non-ECI under

section 1.882-5(b)(3).

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

another Code section or regulation. For

example, report income that is non-ECI

Line 1. Indicate whether the corporation

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

values its U.S. assets on the adjusted

Specific Instructions

column (a) even if such income is also not

basis method (see Regulations section

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

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

financing, or similar business under

Item A. Foreign banks. Check the box

the fair market value method (see

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

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

in item A if the foreign corporation is a

and the principles of Regulations section

adjusted basis method election is subject

bank as defined in Regulations section

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

to the minimum five-year period described

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

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

in the regulation as a bank that meets the

Line 3c, column (a). Total other

fair market value method cannot be

statutory definition applicable to domestic

non-ECI assets. Enter on line 3c,

changed to the adjusted basis method

banks (except for the fact that the

column (a), all other assets (or portion

without advance consent from the

corporation is foreign) and without regard

thereof) included on line 2, column (a)

Commissioner or his delegate.

to whether the corporation’s required

that give rise to domestic or foreign

banking activities are effectively

source non-ECI. If income from a security

Line 2, column (a). Total assets per

connected with its trade or business

is treated as partially ECI and partially

books. Enter the total average assets

within the United States. The required

non-ECI under Regulations section

derived from the combined set or set(s) of

banking activities need only be conducted

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

books that are reportable on Schedule L.

on a worldwide basis. To qualify as a

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

The total average assets includes

bank for interest expense allocation

proportion that the income, gain, or loss

interbranch balances with other set(s) of

purposes, the foreign corporation must be

from such asset that is treated as

books of the corporation that are not

subject to bank regulatory supervision

non-ECI bears to the total income, gain,

reportable on Schedule L.

and examination in its home country of a

or loss from such asset. Do the same for

type similar to that required of domestic

Line 3a, column (a). Total interbranch

the non-ECI portion of any asset whose

banks by a State or Federal authority

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

income is allocated under the proposed

having supervision over banking

total of the corporation’s average

global dealing regulations or under an

institutions, and a substantial amount of

interbranch assets included on line 2,

Advance Pricing Agreement pursuant to a

the corporation’s business must consist of

column (a). The average interbranch

competent authority agreement. See

receiving deposits and making loans and

assets recorded on the set(s) of Schedule

Proposed Regulations sections

discounts, or of exercising fiduciary

L books do not create U.S. assets under

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

powers similar to those permitted to

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

Example 8.

national banks under authority of the

are disregarded for purposes of the

Line 3d, column (a). Adjustments for

Comptroller of the Currency. See sections

interest expense allocation rules.

amounts from partnerships and certain

581 and 585(a)(2).

disregarded entities included on line 2,

Note. If under the global dealing

column (a). With respect to amounts

Note. The reference to the definition of

proposed regulations (Proposed

from partnerships included on line 2,

the term “bank” for purposes of

Regulations section 1.863-3(h), which

column (a), all such amounts must be

determining the U.S.-booked liabilities of

references the Proposed Regulations

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

banks under Regulations section

section 1.482-8 principles), the

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

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

corporation recognizes an amount

on the Schedule L books for investments

corporation meet the section 585(a)(2)

recorded as an interbranch asset, such

in partnerships (whether recorded as an

regulated banking requirements in its

amount is treated as the allocation and

investment in the partnership interest or in

trade or business within the United

source of third-party securities dealing

the partnership assets) included on line 2,

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

income and is not eliminated from U.S.

column (a).

must also be satisfied at the corporation’s

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

U.S. trade or business level for purposes

interbranch assets are eliminated only to

Note. Partnership interests are reported

of electing the deposit liability safe harbor

the extent they are allocated under

in Step 1 as follows: The ECI portion of

applicable to the reduction of excess

Proposed Regulations section 1.863-3(h)

the corporation’s adjusted outside basis in

interest under Regulations section

to foreign source non-ECI. The allocable

a partnership (from Schedule P (Form

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

amount to non-ECI is eliminated from

1120-F), line 19, “Total” column) is

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Instructions For Schedule I (Form 1120-F) -2010 Page 3

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