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Line 2e. Freight

attributable to military property for the

Net increase in foreign assets and

year and the deductions properly

actual foreign investment are defined in

Enter freight expense not deducted on

allocated to that income. See Regulations

sections 995(d)(2) and (3).

line 1h as export promotion expense.

section 1.995-6.

See Regulations section 1.995-5 for

Line 2g. Other Expenses

additional information on computing

Line 9. Deemed Distributions to C

Enter any other allowable deduction not

foreign investment attributable to

Corporations

claimed on line 1 or lines 2a through 2f.

producer’s loans.

Line 9 provides for the computation of the

The IC-DISC may have to report a

Lines 20 and 21. The percentages on

one-seventeenth deemed distribution of

negative section 481(a) adjustment on

lines 20 and 21 must add up to 100%.

section 995(b)(1)(F)(i). Line 9 only applies

line 2g. See Section 481(a) adjustment on

Line 22. Allocate the line 22 amount to

to shareholders of the IC-DISC that are C

page 7 for additional information.

shareholders that are individuals,

corporations.

Generally, a deduction may not be

partnerships, S corporations, trusts, and

taken for any amount that is allocable to a

Line 10. International Boycott

estates.

class of exempt income. See section

Income

Part II—Section 995(b)(1)(E)

265(b) for exceptions.

An IC-DISC is deemed to distribute any

Taxable Income

Note. Do not deduct fines or penalties

income that resulted from cooperating

paid to a government for violating any

Generally, any taxable income of the

with an international boycott (section

law.

IC-DISC attributable to qualified export

995(b)(1)(F)(ii)). See Form 5713 to figure

receipts that exceed $10 million will be

For more information on other

this deemed distribution and for reporting

deemed distributed.

deductions that may apply to

requirements for any IC-DISC with

corporations, see Pub. 535.

operations related to a boycotting country.

Line 1. Export Receipts

Line 11. Illegal Bribes, etc.

If there were no commission sales,

Schedule J

leases, rentals, or services for the tax

An IC-DISC is deemed to distribute the

Deemed and Actual Distributions

year, enter on line 1, Part II, the total of

and Deferred DISC Income for the

amount of any illegal payments, such as

lines 1c and 2k, column (e), Schedule B.

Tax Year

bribes or kickbacks, that it pays, directly

or indirectly, to government officials,

If there were commission sales,

Part I—Deemed Distributions

employees, or agents (section

leases, rentals, or services for the tax

Under Section 995(b)(1)

995(b)(1)(F)(iii)).

year, the total qualified export receipts to

be entered on line 1, Part II, are figured

Line 14. Earnings and Profits

Line 2. Recognized Gain on

as follows (section 993(f)):

Attach a computation showing the

Section 995(b)(1)(B) Property

earnings and profits for the tax year. See

Enter gain recognized during the tax year

section 312 for rules on figuring earnings

1. Add lines 1c and 2k, column (b),

on the sale or exchange of property, other

and profits for the purpose of the section

Schedule B . . . . . . . . . . . . . . .

than property which in the hands of the

995(b)(1) limitation.

2. Add lines 1c and 2k, column (d),

IC-DISC was a qualified export asset,

Schedule B . . . . . . . . . . . . . . .

previously transferred to the IC-DISC in a

Line 17. Foreign Investment

3. Add lines 1 and 2. Enter on line

transaction in which the transferor

Attributable to Producer Loans

1, Part II, Schedule J . . . . . . . .

realized gain but did not recognize the

Line 17a. For shareholders other than

gain in whole or in part. See section

Line 3. Controlled Group

C corporations. To figure the amount

995(b)(1)(B). Show the computation of

Allocation

for line 17a, attach a computation

the gain on a separate schedule. Include

If the IC-DISC is a member of a controlled

showing (1) the IC-DISC’s foreign

no more of the IC-DISC’s gain than the

group (as defined in section 993(a)(3))

investment in producer’s loans during the

amount of gain the transferor did not

that includes more than one IC-DISC,

tax year; (2) accumulated earnings and

recognize on the earlier transfer.

only one $10 million limit is allowed to the

profits (including earnings and profits for

Line 3. Recognized Gain on

group. If an allocation is required, a

the current tax year) minus the amount on

Section 995(b)(1)(C) Property

statement showing each member’s

line 15, Part I; and (3) accumulated

portion of the $10 million limit must be

IC-DISC income. Enter the smallest of

Enter gain recognized on the sale or

attached to Form 1120-IC-DISC. See

these amounts (but not less than zero) on

exchange of property described in section

Proposed Regulations section 1.995-8(f)

line 17a.

995(b)(1)(C). Show the computation of

for details.

the gain on a separate schedule. Do not

Line 17b. For C corporation

include any gain included in the

Lines 4 and 5. Proration of $10

shareholders. To figure the amount for

computation of line 2. Include only the

line 17b, attach a computation showing

Million Limit

amount of the IC-DISC’s gain that the

(1) the IC-DISC’s foreign investment in

The $10 million limit (or the controlled

transferor did not recognize on the earlier

producer’s loans during the tax year; (2)

group member’s share) is prorated on a

transfer and that would have been treated

accumulated earnings and profits

daily basis. Thus, for example, if, for its

as ordinary income if the property had

(including earnings and profits for the

2011 calendar tax year, an IC-DISC has a

been sold or exchanged rather than

current tax year) minus the amount on

short tax year of 73 days, and it is not a

transferred to the IC-DISC. Do not include

line 16, Part I; and (3) accumulated

member of a controlled group, the limit

gain on the sale or exchange of IC-DISC

IC-DISC income. Enter the smallest of

that would be entered on line 5 of Part II

stock-in-trade or other property that either

these amounts (but not less than zero) on

is $2,000,000 (73/365 times $10 million).

would be included in inventory if on hand

line 17b.

at the end of the tax year or is held

Line 7. Taxable Income

For purposes of lines 17a and 17b,

primarily for sale in the normal course of

Enter the taxable income attributable to

foreign investment in producer’s loans is

business.

line 6, qualified export receipts. The

the smallest of (1) the net increase in

Line 4. Income Attributable to

IC-DISC may select the qualified export

foreign assets by members of the

Military Property

receipts to which the line 5 limitation is

controlled group (defined in section

allocated.

Enter 50% of taxable income attributable

993(a)(3)) to which the IC-DISC belongs;

to military property (section 995(b)(1)(D)).

(2) the actual foreign investment by the

See Proposed Regulations section

Show the computation of this income. To

group’s domestic members; or (3) the

1.995-8 for details on determining the

figure taxable income attributable to

IC-DISC’s outstanding producer’s loans to

IC-DISC’s taxable income attributable to

military property, use the gross income

members of the controlled group.

qualified export receipts in excess of the

-10-

Instructions for Form 1120-IC-DISC (Rev. 12-2011)

Instructions For Form 1120-Ic Disc - Interest Charge Domestic International Sales Corporation Return - 2011 Page 10

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