Instructions For Form 1118 - 2004 (Page 7 of 12) in pdf

Column 2. Enter the year and month in

Column 6(a). Enter the foreign income

which the foreign corporation’s pre-1987

which the corporation’s pre-1987 tax year

taxes paid or accrued by the second-tier

tax year ended.

ended. If the deemed inclusion is from the

foreign corporation for the tax year

accumulated E&P of more than 1 tax

indicated, translated from foreign

Column 4. For each line, enter the

year, figure and show the tax deemed

currency into U.S. dollars using the

pre-1987 accumulated profits for the tax

paid on a separate line for each year.

exchange rate specified in section 986(a).

year indicated in column 2, computed in

Column 4. For each line, enter the E&P

functional currency under section 902.

Column 6(b). Enter the foreign income

calculated in U.S. dollars under

See Regulations section 1.902-1(a)(10)(i)

taxes deemed paid (under section 902(b))

Regulations sections 1.964-1(a) through

and (ii).

by the second-tier foreign corporation for

(e), translated into functional currency

the tax year indicated (from Schedule D,

Column 5. Enter the foreign taxes paid

under Notice 88-70 for the tax year

Part II, Section A, column 10, and Part II,

and deemed paid (in functional currency)

indicated in column 2.

Section B, column 8(b).

with respect to the pre-1987 accumulated

Column 5. Enter foreign taxes paid and

profits entered in column 4 for the tax

Column 8(a). Report the sum (in the

deemed paid (in U.S. dollars) with respect

year indicated in column 2. See the

second-tier foreign corporation’s

to the E&P entered in column 4. See the

instructions for Schedule G on page 8 for

functional currency) of all dividends paid

instructions for Schedule G on page 8 for

information on reduction of foreign taxes

out of its post-1986 undistributed earnings

information on reduction of foreign taxes

for failure to furnish information required

for the tax year indicated.

for failure to furnish information required

under section 6038.

Column 8(b). Report the sum of the

under section 6038.

Column 6(a). Enter the amount of each

column 8(a) amounts translated into the

Column 6(b). Enter the amount from

dividend paid by the first-tier foreign

functional currency of the first-tier foreign

column 6(a) translated into U.S. dollars at

corporation (or DISC or former DISC) to

corporation at the spot rate in effect on

the appropriate exchange rate specified in

the domestic corporation (in functional

the date of each distribution.

section 989(b).

currency) out of the accumulated profits

Section B —Dividends Paid Out of

of the pre-1987 tax year indicated in

Pre-1987 Accumulated Profits

column 2.

Schedule D

Use a separate line for each dividend

Column 6(b). Enter the amount from

paid. If a dividend is paid out of the

column 6(a) translated into U.S. dollars

Part I—Tax Deemed Paid by

accumulated profits of more than one

using the spot exchange rate in effect on

First-Tier Foreign Corporations

pre-1987 tax year, figure and show the

the date of distribution. See Regulations

tax deemed paid on a separate line for

sections 1.902-1(a)(10)(ii) and

Section A —Dividends Paid Out of

each tax year. In applying section 902,

1.902-3(g)(1).

Post-1986 Undistributed Earnings

the IRS may determine from which tax

Column 8(a). Multiply column 5 by

year’s accumulated profits the dividends

Column 1. Enter the name of the

column 7. Enter this amount in column

were paid. See Regulations section

second-tier foreign corporation and the

8(a) in functional currency.

1.902-3(g)(4).

name of the first-tier foreign corporation to

Column 8(b). Enter the amount from

which it paid a dividend out of post-1986

Important: The formula for calculating

column 8(a) translated into U.S. dollars at

undistributed earnings.

foreign taxes deemed paid by a first-tier

the spot exchange rate in effect on the

Example. The U.S. corporation filing

foreign corporation under section 902(b)

date of distribution. See Regulations

the return owns all of the stock of CFC1

with respect to dividends paid by a

section 1.902-1(a)(10)(iii).

and CFC2. CFC1 and CFC2 each own

second-tier foreign corporation in a

50% of the stock of CFC3. In 2004, CFC3

post-1986 year out of pre-1987

Part III—Deemed Inclusions

pays a dividend to CFC1 and CFC2. Use

accumulated profits requires that all

From Pre-1987 Earnings and

one line to report dividends from CFC3 to

components (dividends, accumulated

Profits

CFC1 and another line to report dividends

profits, and taxes) be maintained in the

Important: The formula for calculating

from CFC3 to CFC2.

second-tier foreign corporation’s

foreign taxes deemed paid under section

functional currency. Dividends are

Column 2. Enter the year and month in

960 with respect to deemed inclusions

translated into the first-tier foreign

which the distributing second-tier foreign

(e.g., under section 956 or 1248) in a

corporation’s functional currency and

corporation’s tax year ended.

post-1986 year out of pre-1987 E&P

added to its post-1986 undistributed

Example. If a first-tier foreign

requires that earnings and profits and

earnings at the exchange rate in effect on

corporation that uses the calendar year

foreign taxes be calculated in U.S. dollars

the date of the dividend distribution. See

2004 as its tax year receives dividends

under the rules of Regulations section

Regulations section 1.902-1(a)(9)(ii).

out of post-1986 undistributed earnings of

1.964-1(a) through (e), and then

Foreign taxes are translated into U.S.

a second-tier foreign corporation for a tax

translated into the foreign corporation’s

dollars, and added to the first-tier foreign

year that ended June 30, 2004, enter

functional currency at the exchange rate

corporation’s post-1986 foreign income

“0406.”

in effect on the first day of the foreign

taxes, at the exchange rate in effect on

Column 3. Enter the second-tier foreign

corporation’s first post-1986 tax year. See

the date of the dividend distribution. See

corporation’s applicable two-digit foreign

Notice 88-70, 1988-2 C.B. 369. The

Regulations section 1.902-1(a)(8)(ii).

country or U.S. possession code from the

deemed inclusion is then translated into

Column 1. Enter the name of the

list beginning on page 11.

U.S. dollars at the appropriate exchange

second-tier foreign corporation and the

rate specified in section 989(b). Foreign

Column 4. Enter the second-tier foreign

name of the first-tier foreign corporation to

income taxes paid in pre-1987 tax years

corporation’s post-1986 undistributed

which it paid a dividend out of pre-1987

are translated into U.S. dollars for

earnings pool (in functional currency) for

accumulated profits.

purposes of section 960 at the exchange

the separate category for which the

Column 2. For each pre-1987 tax year,

rate in effect when the foreign taxes were

schedule is being completed. See the

enter the year and month in which the

paid. See Regulations section 1.964-1(d)

instructions for Schedule C, Part I,

second-tier foreign corporation’s tax year

and Temporary Regulations section

column 4.

ended.

1.905-5T(b)(1).

Column 5. Enter the opening balance in

Column 1. Enter the name of the first- or

the second-tier foreign corporation’s

Column 4. For each line, enter the

lower-tier foreign corporation whose

post-1986 foreign income taxes pool for

pre-1987 accumulated profits for the tax

earnings were deemed included in the

the tax year indicated. See the

year indicated in column 2, computed in

income of the domestic corporation filing

instructions for Schedule C, Part I,

the second-tier corporation’s functional

the return.

column 5.

currency under section 902. See

-7-

Instructions For Form 1118 - 2004 Page 7

Related Articles

Related forms

Related Categories