Instructions For Form 8873 - Extraterritorial Income Exclusion

See Rev. Proc. 2001-37, 2001-23 I.R.B.

Line 5b. Enter your product or product

completed Form 8873 reporting all

1327.

line that meets one of the two standards

information as if a separate Form 8873

below.

were filed for each transaction. Also, see

Line 3. Check the box if the taxpayer is

•

The product or product line based on

Format of tabular schedules below.

an “applicable foreign corporation” that

the North American Industry Classification

elects to be treated as a domestic

2. Group of transactions. You may

System (NAICS) or

corporation under section 943(e). To be

elect to group transactions (other than

•

A recognized industry or trade usage.

eligible, the foreign corporation must

foreign sale and leasing income

Line 5c. Check the applicable box to

waive the right to claim all benefits

transactions) by product or product line.

indicate the basis on which the amounts

granted to it by the United States under

The grouping of transactions applies to all

on Form 8873 are determined using

any treaty. If the election is made, the

transactions completed during the tax

either the transaction-by-transaction basis

corporation will be treated as a domestic

year for that product or product line.

or an election to group transactions. Use

corporation for all purposes of the Internal

To make the election, complete one

one of the following formats.

Revenue Code. However, the corporation

Form 8873 entering only your name and

may not elect to be an S corporation.

1. Transaction-by-transaction. If

identifying number at the top of the form.

your determination is based on each

An “applicable foreign corporation” is a

Also check box (2) of line 5c. Attach a

transaction rather than an election to

foreign corporation that:

tabular schedule to the partially

group transactions, check box 1(a), 1(b),

completed Form 8873 reporting all

1. Manufactures, produces, grows, or

or 1(c), depending on your preferred

information as if a separate Form 8873

extracts property in the ordinary course of

reporting format.

were filed for each group of transactions.

the corporation’s trade or business or

(a) Aggregate on Form 8873. If you

See Format of tabular schedules below.

2. Substantially all of its gross receipts

choose to aggregate your transactions on

are foreign trading gross receipts.

Note: If a grouping basis is elected,

one or more Forms 8873, check box 1(a)

aggregate reporting is not permitted.

Once made, the election applies to the

of line 5c. Aggregate on one Form 8873

tax year made and remains in effect for all

Attach Form 8873 to your tax return.

those transactions for which the same

subsequent years unless revoked or

Once the election is made, grouping

method is applied, provided all the

terminated. Any revocation or termination

redeterminations are permitted until one

transactions (other than foreign sale and

applies to tax years beginning after the

year after the later of:

leasing income transactions) are included

tax year during which made. The election

1. The due date of your timely filed

in the same product or product line

will automatically terminate if the

return (including extensions) or

indicated on line 5b. If a different method

corporation meets neither of the two

2. In the event of an examination of

is applied to some of the transactions in

requirements above. If an election is

your return by the IRS, notification by the

one or more of the separate product lines,

revoked by the corporation or is

IRS of such examination (provided you

additional Forms 8873 must be filed.

automatically terminated, the corporation

agree to extend the statute of limitations

Example. If you have no foreign sale

(and any successor corporation) may not

for assessment by one year).

and leasing income and you apply the

elect to be a domestic corporation again

15% of foreign trade income method to all

for 5 tax years beginning with the first tax

Note: If your foreign trading gross

transactions in three separate product

year after the revocation or termination.

receipts are $5 million or less for the tax

lines, you would file three aggregate

See Rev. Proc. 2001-37.

year, you may file a separate Form 8873

Forms 8873. However, if you use the

for each group of transactions instead of

Effect of election. For purposes of

1.2% of foreign trading gross receipts

filing a tabular schedule.

section 367, a foreign corporation that

method for some of the transactions in

has elected to be a domestic corporation

Format of tabular schedules. If a

one of the product lines, you would then

is generally treated as transferring, as of

tabular schedule is attached to Form

file four aggregate Forms 8873.

the first day of the first tax year to which

8873, the schedule must:

(b) Aggregate on tabular schedule.

•

the election applies, all of its assets to a

Be in spreadsheet or similar format,

You may choose to aggregate your

•

domestic corporation in an exchange

List your name and identifying number

transactions on a tabular schedule rather

under section 354.

on each numbered page,

than on Form 8873. To do so, file one

•

Be formatted in columns that

Exception for old earnings and

Form 8873 entering only your name and

correspond to each line item of Form

profits of certain corporations. If the

identifying number at the top of the form.

8873, and

exception described in section 5(c)(3) of

Also check box 1(b) of line 5c. Attach a

•

Show totals in each column.

the FSC Repeal and Extraterritorial

tabular schedule to the partially

Income Exclusion Act of 2000 applies,

completed Form 8873 reporting all

Part II–Foreign Trade

attach a statement indicating the basis for

information as if a separate form were

your entitlement, if any, to that exception.

Income and Foreign Sale

filed for each aggregate of transactions

Effect of revocation or termination.

described in 1(a) above. Also see Format

and Leasing Income

If a foreign corporation has elected to be

of tabular schedules below.

a domestic corporation and the election

Note: To be eligible for either of the

Lines 6 through 14. Enter your foreign

ceases to apply for any subsequent tax

aggregate reporting formats described in

trading gross receipts identified on lines 6

year, the corporation is treated as a

1(a) or (b) above, you must maintain a

through 14 using the rules outlined under

domestic corporation transferring, as of

supporting schedule that contains all

Foreign Trading Gross Receipts on

the first day of the subsequent tax year to

information that would be reported if a

page 1.

which the election no longer applies, all of

separate Form 8873 were filed for each

Line 14, column (b). Enter on this line

its property to a foreign corporation in an

transaction. The supporting schedule

only the sum of those portions of the

exchange under section 354.

should not be filed with the Form 8873.

amounts on lines 6, 9, 12, and 13, column

Line 4. Before completing lines 4a and

(a), that are attributable to foreign

4b, see Foreign Economic Process

transactions. Instead of aggregate

economic processes (see definition

Requirements on page 1.

reporting, you may choose to report

beginning on page 1). Because only

Line 5a. Enter the six-digit code that best

transactions on a tabular schedule. File

foreign trading gross receipts attributable

describes the business activity for which

one Form 8873 entering only your name

to foreign economic processes are

the form is being filed from the list of

and identifying number at the top of the

included in line 14, column (b), the

Principal Business Activity Codes

form. Also check box 1(c) of line 5c.

amount entered on line 14, column (b),

included in your tax return instructions.

Attach a tabular schedule to the partially

will not necessarily equal the total of the

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Instructions For Form 8873 - Extraterritorial Income Exclusion - 2003 Page 3

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