Instructions For Schedule S (Form 1120-F) - 2012 (Page 2 of 4) in pdf

Certain types of exemptions provided

derived from the activities (specified on

tax year multiplied by the number of days

to corporations organized in the United

these lines) that are incidental to the

in the short tax year, divided by 365).

States by foreign countries do not satisfy

international operation of ships or aircraft

A class of stock that is traded during

the equivalent exemption requirements of

(as defined in Regulations section

the tax year on an established securities

Regulations section 1.883-1(h). Examples

1.883-1(g)(1)). For types of activities that

market located in the United States shall

of types of exemptions that do not qualify

are not considered incidental to the

be considered to meet the trading

as equivalent exemptions include:

international operation of ships or aircraft,

requirement described in item 2 above if

see Regulations section 1.883-1(g)(2).

Reduced tax rate or time limited

the stock is regularly quoted by dealers

exemption,

making a market in the stock.

Part II — Stock Ownership

Inbound or outbound freight tax,

Test for Publicly-Traded

Exemptions for limited types of cargo,

A dealer makes a market in a stock

Territorial tax systems,

only if the dealer regularly and actively

Corporations

Countries that tax U.S. corporations that

offers to, and in fact does, purchase the

A foreign corporation satisfies the stock

are not managed and controlled in that

stock from, and sell the stock to,

ownership test of Regulations section

country on a residence basis, and

customers who are not related persons

1.883-1(c)(2) if it is considered a

(as defined in section 954(d)(3)) with

Exemptions within categories of

publicly-traded corporation and satisfies

respect to the dealer in the ordinary

income. See Regulations section

the substantiation and reporting

course of a trade or business.

1.883-1(h)(4) for additional information.

requirements of Regulations sections

In general, a class of stock of a foreign

1.883-2(e) and (f). To be considered a

Specific Instructions

corporation that otherwise meets the

publicly traded corporation, the stock of

requirements of the “regularly traded”

the foreign corporation must be primarily

rules described above shall not be treated

and regularly traded (as defined below) on

Part I – Qualified Foreign

as meeting such requirements for a tax

one or more established securities

Corporation

year if, for more than half the number of

markets (as defined in Regulations section

days during the tax year, one or more 5%

1.883-2(b)) in either the United States or

shareholders (defined below) own in the

Line 1a. Enter the name of the qualified

any qualified foreign country.

aggregate, 50% or more of the vote and

foreign country (defined earlier) in which

Primarily traded. Stock of a

value of the outstanding shares of the

the foreign corporation was organized.

corporation is primarily traded in a country

class of stock.

Line 1b. Type of Equivalent

on one or more established securities

Exemption. Check one (and only one) of

markets (as defined in Regulations section

Note. If the general rule described in the

the boxes on line 1b to indicate the type of

1.883-2(b)) if, with respect to each class of

previous paragraph applies, the

equivalent exemption granted by the

stock described in item 1 under Regularly

corporation must check the “Yes” box on

foreign country listed in line 1a. For a

traded below, the number of shares in

line 9, and must complete lines 10a and

non-inclusive list of countries that grant

each such class that are traded during the

10b, to substantiate that the exception to

equivalent exemptions, see Rev. Rul.

tax year on all established securities

this general rule (described next) applies.

2008-17, 2008-12 I.R.B. 626, as modified

markets in that country exceeds the

If the general rule described in the

by Announcement 2008-57, 2008-26

number of shares in each such class that

previous paragraph does not apply, the

I.R.B. 1192.

are traded during that year on established

corporation checks the “No” box on line 9,

securities markets in any other single

and is not required to complete lines 10a

Line 1c. Applicable Authority. Enter the

country.

and 10b.

applicable authority of the equivalent

exemption. For example, enter a citation

Exception: The rules discussed in the

Regularly traded. The stock of a

of the statute in the country where the

previous paragraph shall not apply to a

corporation is regularly traded on one or

corporation is organized, a diplomatic note

class of stock if the foreign corporation

more established securities markets if:

between the United States and such

can establish that qualified shareholders

1. One or more classes of stock of the

country, or an income tax convention

(defined later), applying the attribution

corporation that, in the aggregate,

between the United States and such

rules of Regulations section 1.883-4(c),

represent more than 50% of the total

country.

own sufficient shares in the closely-held

combined voting power of all classes of

block of stock to preclude nonqualified

stock of such corporation entitled to vote

shareholders in the closely-held block of

Line 2. Gross Income from

and the total value of the stock of such

stock from owning 50% or more of the

Categories of Qualified Income

corporation are listed on such market or

total value of the class of stock of which

markets during the tax year, and

the closely-held block is a part for more

Line 2b. Enter the gross income the

2. With respect to each class relied on

than half the number of days during the

foreign corporation derived from time or

to meet the more than 50% requirement

tax year. Any shares that are owned, after

voyage (full) charter income of a ship or

above (a) trades in each such class are

application of the attribution rules in

wet lease income of an aircraft. See

effected, other than in de minimis

Regulations section 1.883-4(c), by a

Regulations section 1.883-1(e)(5) for

quantities, on such market or markets on

qualified shareholder shall not also be

definition of terms.

at least 60 days during the tax year

treated as owned by a nonqualified

Line 2c. Enter the gross income the

(or 1/6 of the number of days in a short tax

shareholder in the chain of ownership for

foreign corporation derived from the

year); and (b) the aggregate number of

purposes of the preceding sentence. A

bareboat charter of a ship or dry lease

shares in each such class that are traded

foreign corporation must obtain the

income of an aircraft. See Regulations

on such market or markets during the tax

documentation described in Regulations

section 1.883-1(e)(5) for definition of

year are at least 10% of the average

section 1.883-4(d) from the qualified

terms.

number of shares outstanding in that class

shareholders relied upon to satisfy this

during the tax year (or, in the case of a

exception. However, no person otherwise

short tax year, a percentage that equals at

treated as a qualified shareholder under

Lines 2d, 2e, and 2f. Enter on these

least 10% of the average number of

Regulations section 1.883-4(b) may be

lines the gross amount the corporation

shares outstanding in that class during the

treated for purposes of Regulations

-2-

Instructions For Schedule S (Form 1120-F) - 2012 Page 2

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