Instructions For Schedule I (Form 1120-F) - 2011 (Page 4 of 8) in pdf

column (a). With respect to amounts

securities that are marked-to-market for

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

from partnerships included on line 2,

tax purposes under section 475 that are

are booked in a foreign bank’s home

column (a), all such amounts must be

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

office or other foreign location. Other

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

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

assets reportable on line 5, column (c),

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

the mark-to-market amount includible for

may generally also include assets that are

on the Schedule L books for investments

tax purposes is an increase to the basis

no longer held in connection with a trade

in partnerships (whether recorded as an

of the assets included on line 2, column

or business within the United States that

investment in the partnership interest or in

(a), include such increase as a negative

give rise to effectively connected income

the partnership assets) included on line 2,

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

under section 864(c)(6) or section

column (a).

the mark-to-market amount decreases the

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

basis of the assets included on line 2,

give rise to ECI, including ECI recognized

Note. Partnership interests are reported

column (a), include such decrease as a

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

in Step 1 as follows: The ECI portion of

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

assets under Regulations section

the corporation’s adjusted outside basis in

Other adjustments for book-to-tax

1.884-1(d). See Regulations section

a partnership (from Schedule P (Form

differences with respect to asset values

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

1120-F), line 19, “Total” column) is

on line 2, column (a), such as

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

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

depreciation and amortization for

5, column (b).

Line 5, column (d). Total average value

taxpayers using the adjusted basis

of U.S. assets included in Step 1.

method for valuing U.S. assets, are also

With respect to amounts from

Combine the amounts on line 5, columns

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

disregarded entities included on line 2,

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

aggregate net increase as a negative

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

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

number. Enter an aggregate net decrease

any adjustment needed to reflect the

average value of the corporation’s U.S.

as a positive number.

following: Investments in disregarded

assets included in Step 1 of the

entities should not be included on line 2,

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

Regulations section 1.882-5 formula. If

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

through 3f and enter the result on line 4,

the corporation uses the Separate

reportable on Schedule L. Instead, the

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

Currency Pools method to allocate

total assets of such disregarded entity’s

(a) constitutes the total net adjustment to

interest expense in Step 3 of the

Schedule L books should be combined on

the average book assets from the

Regulations section 1.882-5 formula, see

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

Schedule L set(s) of books reported on

the instructions for line 16a on page 6.

books reportable on Schedule L. If

line 2, column (a).

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

another Schedule L book reflects an

reportable on Schedule H (Form 1120-F),

investment in a disregarded entity whose

Line 5. Total Value of U.S. Assets

line 22a.

books are not reportable on Schedule L,

for the Tax Year

then the assets of the disregarded entity

Lines 6 Through 7c. Step 2:

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

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

Determination of

on set(s) of Schedule L books.

The amount of the investment in the

U.S.-Connected Liabilities -

Subtract the amount on line 4, column (a)

disregarded entity that is included in the

from line 2, column (a) and enter the

Regulations Section 1.882-5(c)

total assets reported on line 2, column (a)

amount on line 5, column (a). The

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

Line 6. Actual ratio or fixed ratio

resulting amount is the total average

to reflect its disregarded treatment in

method. Check the applicable box to

value of U.S. assets under Regulations

Regulations section 1.882-5.

specify whether the corporation uses the

section 1.884-1(d) included on the

Line 3e, column (a). Adjustments for

actual ratio or the fixed ratio method for

Schedule L set(s) of books, excluding any

assets that give rise to direct interest

the tax year to determine its

partnership interests included on line 2.

expense allocations under Regulations

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

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

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

allocation formula. The amount of

average value of partnership interests.

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

U.S.-connected liabilities is the total value

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

portion of all assets included on line 2 that

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

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

give rise to direct interest expense

column (d)) multiplied by the actual ratio

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

allocations under Regulations section

or the applicable fixed ratio the

of all ECI portions of the corporation’s

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

corporation has timely elected and is

outside basis in partnership interests as

requirements of Temporary Regulations

eligible to use for the tax year. The actual

adjusted under Regulations section

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

ratio or fixed ratio election must be made

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

Temporary Regulations section

on a timely filed tax return for the first

Schedule P, line 19 may include the ECI

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

year the corporation is subject to

portion of the corporation’s outside basis

allocates its interest expense under the

Regulations section 1.882-5 and is

in partnerships whose book value is

direct allocation rules shall reduce the

subject to the minimum five-year period

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

basis of the asset that meets the

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

the ECI portion of partnership interests

requirements of Temporary Regulations

An election to change the method after

whose book value is not recorded on the

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

such minimum five-year period is also

Schedule L books and is not included on

principal amount of the indebtedness that

subject to the minimum five-year period.

line 2, column (a).

meets the requirements of Temporary

Actual ratio information. If the

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

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

corporation uses the actual ratio,

The amount of directly allocable interest

not includible in set(s) of Schedule L

complete lines 6a through 6c and skip line

under Regulations section

books reported on line 5, column (a),

6d.

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

or from partnerships reported on line

Fixed ratio information. If the

Line 3f, column (a). Other adjustments

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

corporation uses the fixed ratio, skip lines

to average assets included on line 2.

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

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

(other than the ECI portion of the

6a through 6c and enter the applicable

fixed ratio on line 6d. For foreign banks

asset balances for any other amounts

corporation’s outside basis in partnership

(described in Regulations section

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

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

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

constitute U.S. assets as defined in

reportable on Schedule L. Such assets

corporations other than foreign banks and

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,

insurance companies, the fixed ratio is

50%.

example, amounts with respect to

financing, or similar business under

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Instructions For Schedule I (Form 1120-F) - 2011 Page 4

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