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Line 1b. Enter the IC-DISC’s qualified

adjustment. However, an IC-DISC may

Report so-called dividends or earnings

export receipts from export property sold

elect to use a 1-year adjustment period if

received from mutual savings banks, etc.,

for delivery outside the United States to a

the net section 481(a) adjustment for the

as interest. Do not treat them as

related foreign entity for resale to a

change is less than $25,000. The

dividends.

foreign, unrelated buyer, or an unrelated

IC-DISC must complete the appropriate

Line 2, Column (a)

buyer when a related foreign entity acts

lines of Form 3115 to make the election.

as commission agent.

Enter on line 2:

Include any net positive section 481(a)

•

Dividends (except those received on

Line 2a. Enter the gross amount

adjustment on page 2, Schedule B, line 2j

debt-financed stock acquired after July

received from leasing or subleasing

or 3f (depending on whether the

18, 1984) that are received from

export property to unrelated persons for

inventory, when sold, will generate

20%-or-more-owned domestic

use outside the United States.

qualified export receipts). If the net

corporations subject to income tax and

section 481(a) adjustment is negative,

Receipts from leasing export property

that are eligible for the 80% deduction

report it on page 3, Schedule E, line 2g.

may qualify in some years and not in

under section 243(c) and

others, depending on where the lessee

•

Line 3b. Enter receipts from selling

Taxable distributions from an IC-DISC

uses the property. Enter only receipts that

products subsidized under a U.S.

or former DISC that are considered

qualify during the tax year. (Use Schedule

program if they have been designated as

eligible for the 80% deduction.

E to deduct expenses such as repairs,

excluded receipts.

interest, taxes, and depreciation.)

Line 3, Column (a)

Line 3c. Enter receipts from selling or

Line 2b. A service connected to a sale

Enter dividends that are:

leasing property or services for use by

or lease is related to it if the service is

•

Received on debt-financed stock

any part of the U.S. Government if law or

usually furnished with that type of sale or

acquired after July 18, 1984, from

regulations require U.S. products or

lease in the trade or business where it

domestic and foreign corporations subject

services to be used.

took place. A service is subsidiary if it is

to income tax and that would otherwise

Line 3d. Enter receipts from any

less important than the sale or lease.

be subject to the dividends-received

IC-DISC that belongs to the same

Line 2c. Include receipts from

deduction under section 243(a)(1),

controlled group (as defined in section

engineering or architectural services on

243(c), or 245(a). Generally,

993(a)(3)).

foreign construction projects abroad or

debt-financed stock is stock that the

proposed for location abroad. These

Line 3f. Include in an attached schedule

corporation acquired by incurring a debt

services include feasibility studies, design

any nonqualifying gross receipts not

(e.g., it borrowed money to buy the

and engineering, and general supervision

reported on lines 3a through 3e. Do not

stock).

•

of construction, but do not include

offset an income item against a similar

Received from a RIC on debt-financed

services connected with mineral

expense item.

stock. The amount of dividends eligible

exploration.

for the dividends-received deduction is

The IC-DISC may have to report a

limited by section 854(b). The corporation

Line 2d. Include receipts for export

section 481(a) adjustment on line 3f. See

should receive a notice from the RIC

management services provided to

Section 481(a) adjustment above for

specifying the amount of dividends that

unrelated IC-DISCs.

additional information.

qualify for the deduction.

Line 2f. Include interest received on any

Schedule C

loan that qualifies as a producer’s loan.

Line 3, Columns (b) and (c)

Line 2g. Enter interest on any qualified

Dividends received on debt-financed

Dividends and

export asset other than interest on

stock acquired after July 18, 1984, are not

Dividends-Received Deduction

producer’s loans. For example, include

entitled to the full 70% or 80%

interest on accounts receivable from

For purposes of the 20% ownership test

dividends-received deduction. The 70%

sales in which the IC-DISC acted as a

on lines 1 through 7, the percentage of

or 80% deduction is reduced by a

principal or agent and interest on certain

stock owned by the corporation is based

percentage that is related to the amount

obligations issued, guaranteed, or insured

on voting power and value of the stock.

of debt incurred to acquire the stock. See

by the Export-Import Bank or the Foreign

Preferred stock described in section

section 246A. Also see section 245(a)

Credit Insurance Association.

1504(a)(4) is not taken into account.

before making this computation for an

Line 2h. On Schedule D (Form 1120),

additional limitation that applies to

Line 1, Column (a)

Capital Gains and Losses, report in detail

dividends received from foreign

every sale or exchange of a capital asset,

Enter dividends (except those received on

corporations. Attach a schedule to Form

even if there is no gain or loss.

debt-financed stock acquired after July

1120-IC-DISC showing how the amount

18, 1984 — see section 246A) that:

on line 3, column (c), was figured.

In addition to Schedule D (Form 1120),

•

Are received from

attach a separate schedule computing

Line 4, Column (a)

less-than-20%-owned domestic

gain from the sale of qualified export

corporations subject to income tax and

Enter dividends received on the preferred

assets.

•

Qualify for the 70% deduction under

stock of a less-than-20%-owned public

Line 2i. Enter the net gain or loss from

section 243(a)(1).

utility that is subject to income tax and is

line 18, Part II, Form 4797, Sales of

allowed the deduction provided in section

Also include on line 1:

Business Property.

•

247 for dividends paid.

Taxable distributions from an IC-DISC

In addition to Form 4797, attach a

or former DISC that are designated as

separate schedule computing gain from

Line 5, Column (a)

being eligible for the 70% deduction and

the sale of qualified export assets.

certain dividends of Federal Home Loan

Enter dividends received on preferred

Line 2j. Enter any other qualified export

Banks. See section 246(a)(2).

stock of a 20%-or-more-owned public

receipts for the tax year not reported on

•

Dividends received (except those

utility that is subject to income tax and is

lines 2a through 2i.

received on debt-financed stock acquired

allowed the deduction under section 247

Section 481(a) adjustment. The

after July 18, 1984) from a regulated

for dividends paid.

IC-DISC may have to make an

investment company (RIC). The amount

Line 6, Column (a)

adjustment under section 481(a) to

of dividends eligible for the

prevent amounts of income or expense

dividends-received deduction under

Enter the U.S.-source portion of dividends

from being duplicated or omitted. This

section 243 is limited by section 854(b).

that:

•

section 481(a) adjustment period is

The corporation should receive a notice

Are received from

generally 1 year for a net negative

from the RIC specifying the amount of

less-than-20%-owned foreign

adjustment and 4 years for a net positive

dividends that qualify for the deduction.

corporations and

-7-

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

Instructions For Form 1120-Ic Disc - Interest Charge Domestic International Sales Corporation Return - 2011 Page 7

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