Instructions For Schedule I (Form 1120-F) -2010 (Page 4 of 8) in pdf

Line 5, column (d). Total average value

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

depreciation and amortization for

of U.S. assets included in Step 1.

5, column (b).

taxpayers using the adjusted basis

method for valuing U.S. assets, are also

Combine the amounts on line 5, columns

With respect to amounts from

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

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

disregarded entities included on line 2,

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

aggregate net increase as a negative

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

average value of the corporation’s U.S.

number. Enter an aggregate net decrease

any adjustment needed to reflect the

assets included in Step 1 of the

as a positive number.

following: Investments in disregarded

Regulations section 1.882-5 formula. If

entities should not be included on line 2,

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

the corporation uses the Separate

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

through 3f and enter the result on line 4,

Currency Pools method to allocate

reportable on Schedule L. Instead, the

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

interest expense in Step 3 of the

total assets of such disregarded entity’s

(a) constitutes the total net adjustment to

Regulations section 1.882-5 formula, see

Schedule L books should be combined on

the average book assets from the

the instructions for line 16a on page 6.

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

Schedule L set(s) of books reported on

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

books reportable on Schedule L. If

line 2, column (a).

reportable on Schedule H (Form 1120-F),

another Schedule L book reflects an

line 22a.

Line 5. Total Value of U.S. Assets

investment in a disregarded entity whose

Lines 6 Through 7c. Step 2:

for the Tax Year

books are not reportable on Schedule L,

then the assets of the disregarded entity

Determination of

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

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

U.S.-Connected Liabilities -

on set(s) of Schedule L books.

The amount of the investment in the

Regulations Section 1.882-5(c)

Subtract the amount on line 4, column (a)

disregarded entity that is included in the

from line 2, column (a) and enter the

total assets reported on line 2, column (a)

Line 6. Actual ratio or fixed ratio

amount on line 5, column (a). The

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

method. Check the applicable box to

resulting amount is the total average

to reflect its disregarded treatment in

specify whether the corporation uses the

value of U.S. assets under Regulations

Regulations section 1.882-5.

actual ratio or the fixed ratio method for

section 1.884-1(d) included on the

the tax year to determine its

Line 3e, column (a). Adjustments for

Schedule L set(s) of books, excluding any

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

assets that give rise to direct interest

partnership interests included on line 2.

allocation formula. The amount of

expense allocations under Regulations

U.S.-connected liabilities is the total value

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

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

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

average value of partnership interests.

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

column (d)) multiplied by the actual ratio

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

portion of all assets included on line 2 that

or the applicable fixed ratio the

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

give rise to direct interest expense

corporation has timely elected and is

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

allocations under Regulations section

eligible to use for the tax year. The actual

of all ECI portions of the corporation’s

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

ratio or fixed ratio election must be made

outside basis in partnership interests as

requirements of Temporary Regulations

on a timely filed tax return for the first

adjusted under Regulations section

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

year the corporation is subject to

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

Temporary Regulations section

Regulations section 1.882-5 and is

Schedule P, line 19 may include the ECI

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

subject to the minimum five-year period

portion of the corporation’s outside basis

allocates its interest expense under the

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

in partnerships whose book value is

direct allocation rules shall reduce the

An election to change the method after

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

basis of the asset that meets the

such minimum five-year period is also

the ECI portion of partnership interests

requirements of Temporary Regulations

subject to the minimum five-year period.

whose book value is not recorded on the

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

Schedule L books and is not included on

Actual ratio information. If the

principal amount of the indebtedness that

line 2, column (a).

corporation uses the actual ratio,

meets the requirements of Temporary

complete lines 6a through 6c and skip line

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

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

6d.

The amount of directly allocable interest

not includible in set(s) of Schedule L

under Regulations section

Fixed ratio information. If the

books reported on line 5, column (a),

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

corporation uses the fixed ratio, skip lines

or from partnerships reported on line

6a through 6c and enter the applicable

Line 3f, column (a). Other adjustments

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

fixed ratio on line 6d. For foreign banks

to average assets included on line 2.

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

(described in Regulations section

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

(other than the ECI portion of the

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

asset balances for any other amounts

corporation’s outside basis in partnership

corporations other than foreign banks and

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

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

insurance companies, the fixed ratio is

constitute U.S. assets as defined in

reportable on Schedule L. Such assets

50%.

Regulations section 1.884-1(d). Assets

may generally include certain securities

includible on this line may include, for

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

Actual Ratio Filers — Regulations

example, amounts with respect to

financing, or similar business under

Section 1.882-5(c)

securities that are marked-to-market for

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

tax purposes under section 475 that are

are booked in a foreign bank’s home

Line 6a. Average worldwide liabilities.

not marked-to-market on the set(s) of

office or other foreign location. Other

Enter on line 6a the average worldwide

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

assets reportable on line 5, column (c),

liabilities as adjusted for U.S. tax

the mark-to-market amount includible for

may generally also include assets that are

principles for the year. The corporation’s

tax purposes is an increase to the basis

no longer held in connection with a trade

worldwide liabilities include the liabilities

of the assets included on line 2, column

or business within the United States that

of only the corporation filing the Form

(a), include such increase as a negative

give rise to effectively connected income

1120-F, plus the corporation’s share of

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

under section 864(c)(6) or section

partnership liabilities and any liabilities of

the mark-to-market amount decreases the

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

any disregarded entities that are treated

basis of the assets included on line 2,

give rise to ECI, including ECI recognized

as liabilities of the foreign corporation

column (a), include such decrease as a

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

under U.S. tax principles. The books of

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

assets under Regulations section

the foreign corporation and any such

Other adjustments for book-to-tax

1.884-1(d). See Regulations section

disregarded entities must be combined,

differences with respect to asset values

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

with applicable eliminating entries for

on line 2, column (a), such as

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

transactions between them. See

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Instructions For Schedule I (Form 1120-F) -2010 Page 4

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