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Line 12. Accumulated Pre-1985

$10 million amount. Special rules are

Schedule E. Also include the amount on

provided for allocating the taxable income

line 1, Part IV of Schedule J and show the

DISC Income

attributable to any related and subsidiary

computation of the interest on an

If the corporation was a qualified DISC as

services, and for the ratable allocation of

attached schedule.

of December 31, 1984, the accumulated

the taxable income attributable to the first

pre-1985 DISC income will generally be

Line 4a. Previously Taxed Income

transaction selected by the IC-DISC that

treated as previously taxed income

exceeds the $10 million amount.

Report on line 4a all actual distributions of

(exempt from tax) when distributed to

Deductions must be allocated and

previously taxed income. Also, include

DISC shareholders after December 31,

apportioned according to the rules of

any distributions of pre-1985 accumulated

1984.

Regulations section 1.861-8. The

DISC income that are nontaxable (see the

Exception: The exemption does not

selection of the excess receipts by the

instructions for Schedule L, line 12,

apply to distributions of accumulated

IC-DISC is intended to permit the

below). Enter on the dotted line to the left

pre-1985 DISC income of an IC-DISC or

IC-DISC to allocate the $10 million

of the line 4a amount, the dollar amount

former DISC that was made taxable

limitation to the qualified export receipts

of the distribution that is nontaxable

under section 995(b)(2) because of a

of those transactions occurring during the

pre-1985 DISC income and identify it as

prior revocation of the DISC election or

tax year that permit the greatest amount

such. Do not include distributions of

disqualification of the DISC. For more

of taxable income to be allocated to the

pre-1985 DISC income that are made

details on these distributions, see

IC-DISC under the intercompany pricing

under section 995(b)(2) because of prior

Temporary Regulations section

rules of section 994.

year revocations or disqualifications.

1.921-1T(a)(7).

To avoid double counting of the

Part V—Deferred DISC Income

Line 13. Accumulated IC-DISC

deemed distribution, if an amount of

Under Section 995(f)(3)

Income

taxable income for the tax year

In general, deferred DISC income is:

attributable to excess qualified export

Accumulated IC-DISC income (for periods

receipts is also deemed distributed under

1. Accumulated IC-DISC income (for

after 1984) is accounted for on line 13 of

either line 1, 2, 3, or 4 of Part I, such

periods after 1984) of the IC-DISC as of

Schedule L. The balance of this account

amount of taxable income is only

the close of the computation year, over

is used in figuring deferred DISC income

includible on that line of Part I, and must

2. The amount of

in Part V of Schedule J.

be subtracted from the amount otherwise

distributions-in-excess-of-income for the

Schedule N

reportable on line 7 of Part II and carried

tax year of the IC-DISC following the

to line 5 of Part I. See Proposed

computation year.

Export Gross Receipts

Regulations section 1.995-8(d).

For purposes of item 2 above,

of the IC-DISC and Related U.S.

After filing the IC-DISC’s current year

distributions-in-excess-of-income means

Persons

tax return, the allocation of the $10 million

the excess (if any) of:

limitation and the computation of the line

•

Actual distributions to shareholders out

Line 1. Product Code and

7 deemed distribution may be changed by

of accumulated IC-DISC income, over

Percentage

filing an amended Form 1120-IC-DISC

•

The amount of IC-DISC income (as

only under the conditions specified in

Enter in line 1a the code number and

defined in section 996(f)(1)) for the tax

Proposed Regulations section

percentage of total export gross receipts

year following the computation year.

1.995-8(b)(1).

(defined below), for the product or service

For purposes of items 1 and 2 above,

that accounts for the largest portion of the

Part III—Deemed Distributions

see section 995(f) and Proposed

IC-DISC’s export gross receipts. The

Under Section 995(b)(2)

product codes are on page 14 of these

Regulations section 1.995(f)-1 for a

instructions. On line 1b enter the same

definition of computation year, examples,

If the corporation is a former DISC or a

information for the IC-DISC’s next largest

and other details on figuring deferred

former IC-DISC that revoked IC-DISC

product or service.

DISC income.

status or lost IC-DISC status for failure to

satisfy one or more of the conditions

Example: An IC-DISC has export

The amount on line 3, Part V, is

specified in section 992(a)(1) for the

gross receipts of $10 million. Selling

allocated to each shareholder on line 10,

agricultural chemicals accounts for $4.5

current tax year, each shareholder is

Part III, of Schedule K (Form

million (45%) of that amount, which is the

deemed to have received a distribution

1120-IC-DISC).

IC-DISC’s largest product or service. The

taxable as a dividend on the last day of

IC-DISC should enter “287” (the product

the current tax year. The deemed

Shareholders of an IC-DISC must file

code for agricultural chemicals) and

distribution equals the shareholder’s

Form 8404 if the IC-DISC reports

“45%” in line 1a.

prorated share of the DISC’s or IC-DISC’s

deferred DISC income on line 10, Part III

income accumulated during the years just

of Schedule K.

Selling industrial chemicals accounts

before DISC or IC-DISC status ended.

for $2 million (20% of the $10 million total)

Schedule K

The shareholder will be deemed to

and is the IC-DISC’s second largest

product or service. The IC-DISC should

receive the distribution in equal parts on

enter “281” (the product code for

the last day of each of the 10 tax years of

Shareholder’s Statement of

industrial inorganic and organic

the corporation following the year of the

IC-DISC Distributions

chemicals) and “20%” in line 1b.

termination or disqualification of the

Attach a separate Copy A, Schedule K

IC-DISC (but in no case over more than

Line 2. Definitions

(Form 1120-IC-DISC), to Form

twice the number of years the corporation

Export gross receipts are receipts from

1120-IC-DISC for each shareholder who

was a DISC or IC-DISC).

any of the following.

received an actual or deemed distribution

•

Providing engineering or architectural

Part IV—Actual Distributions

during the tax year or to whom the

services for construction projects located

corporation reported deferred DISC

outside the United States.

Line 1. Distributions To Meet

income for the tax year.

•

Selling for direct use, consumption, or

Qualification Requirements under

disposition outside the United States,

Schedule L

Section 992(c)

property (such as inventory) produced in

If the corporation is required to pay

the United States.

Balance Sheets per Books

•

interest under section 992(c)(2)(B) on the

Renting this property to unrelated

amount of a distribution to meet the

The balance sheet should agree with the

persons for use outside the United States.

•

qualification requirements of section

IC-DISC’s books and records. Include

Providing services involved in such a

992(c), report this interest on line 2c,

certificates of deposits as cash on line 1.

sale or rental.

-11-

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

Instructions For Form 1120-Ic Disc - Interest Charge Domestic International Sales Corporation Return - 2011 Page 11

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