Instructions For Form 8873 - Extraterritorial Income Exclusion

foreign trading gross receipts amounts

enter on line 45 the amount from any of

“Extraterritorial income exclusion from

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

those five lines (33, 36, 38, 42, or 44). For

Form 8873” on a line in Part V of

(a).

example, although line 42 may produce

Schedule C. For filers of Form 1120,

the greatest exclusion for you, use of that

include the amount on Form 1120, page

Line 17. For lines 17a through 17h,

line could eliminate or reduce the

1, line 26. If you are filing multiple Forms

compute your cost of goods sold

exclusion for a related person because of

8873, combine all amounts from lines 52

allocated to your foreign trading gross

the limitation under section 941(a)(3) on

and include the sum on the applicable line

receipts. See the instructions for the tax

the use of the 1.2% of foreign trading

of your tax return.

return to which this form is attached for

gross receipts method. Therefore, to

basic rules for determining cost of goods

maximize the combined exclusion for you

sold.

Paperwork Reduction Act Notice. We

and that related person, you may prefer to

Line 19. Enter on line 19, column (a), the

ask for the information on this form to

enter on line 45 the greatest of lines 33,

deductions, other than those you included

carry out the Internal Revenue laws of the

36, 38, or 44 (instead of the amount on

in figuring your cost of goods sold, that

United States. You are required to give us

line 42).

are allocable to the amount reported on

the information. We need it to ensure that

Line 50. If you had any operations in or

line 15.

you are complying with these laws and to

related to a country associated with

allow us to figure and collect the right

Enter on line 19, column (b), the

carrying out an international boycott or

amount of tax.

deductions, other than those you included

you participated in or cooperated with an

in figuring your cost of goods sold, that

You are not required to provide the

international boycott, your extraterritorial

are directly allocable to the amount

information requested on a form that is

income exclusion may be reduced. See

reported on line 16.

subject to the Paperwork Reduction Act

the separate instructions for Form 5713,

unless the form displays a valid OMB

Note: Do not include your allocable

International Boycott Report, for

control number. Books or records relating

portion of general and administrative

definitions and other details and to find

to a form or its instructions must be

expenses on line 19, column (b).

out if you are required to file Form 5713. If

retained as long as their contents may

For both column (a) and column (b),

you are required to file Form 5713, also

become material in the administration of

attach to Form 8873 a schedule listing

complete Schedule A (Form 5713),

any Internal Revenue law. Generally, tax

these amounts. See the instructions for

International Boycott Factor (Section

returns and return information are

the tax return to which this form is

999(c)(1)), and Schedule C (Form 5713),

confidential, as required by section 6103.

attached for basic rules for determining

Tax Effect of the International Boycott

The time needed to complete and file

expenses.

Provisions. Enter the amount from

this form will vary depending on individual

Schedule C (Form 5713), line 6c, on

Part III–Marginal Costing

circumstances. The estimated average

Form 8873, line 50.

time is:

Marginal costing is a method under which

The exception from filing Form

only direct production costs of producing

5713 that generally applies to

Recordkeeping . . . . . . .

21 hr., 3 min.

a particular product or product line are

foreign persons does not apply to

CAUTION

Learning about the law

taken into account for purposes of

a foreign person that is claiming the

or the form . . . . . . . . . .

1 hr., 59 min.

computing your qualifying foreign trade

extraterritorial income exclusion.

Preparing the form,

income. Complete this section to see if

Also include on line 50 the total of any

copying, assembling,

you will benefit by using marginal costing.

illegal bribes, kickbacks, or other

and sending the form to

If you do not wish to use this method, skip

payments (within the meaning of section

Part III and complete Part IV using the

the IRS . . . . . . . . . . . . .

2 hr., 25 min.

162(c)) paid by or on behalf of the

instructions below.

taxpayer directly or indirectly to

If you have comments concerning the

government officials, employees, or

Part IV–Extraterritorial

accuracy of these time estimates or

agents.

suggestions for making this form simpler,

Income Exclusion

Line 52. Although the amount on line 52

we would be happy to hear from you. See

is an exclusion from income and not a

the instructions for the tax return with

Line 45. Generally, your qualifying

deduction, include it on the “Other

which this form is filed.

foreign trade income is based on the

deductions” or “Other expenses” line of

greatest of lines 33, 36, 38, 42, or 44.

your tax return or schedule. If you are

Under the alternative computation,

filing Schedule C (Form 1040), enter

however, you may instead choose to

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Instructions For Form 8873 - Extraterritorial Income Exclusion - 2003 Page 4

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