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Schedule E

Qualify for the 70% deduction under

9. Enter the smaller of line 7 or

section 245(a). To qualify for the 70%

line 8 . . . . . . . . . . . . . . . . .

10. Dividends-received

Deductions

deduction, the corporation must own at

deduction after limitation.

least 10% of the stock of the foreign

Add lines 4 and 9. (If this is less

Limitations on Deductions

corporation by vote and value.

than line 9 of Schedule C, enter

Section 263A uniform capitalization

the smaller amount on line 6b,

Line 7, Column (a)

rules. The uniform capitalization rules of

page 1, Form 1120-IC-DISC,

Enter the U.S.-source portion of dividends

and in the margin next to line 9

section 263A generally require

that are received from

of Schedule C.) . . . . . . . . . .

corporations to capitalize, or include in

20%-or-more-owned foreign corporations

inventory, certain costs incurred in

and that qualify for the 80% deduction

connection with:

Line 13, Column (a)

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Personal property (tangible and certain

under section 245(a).

Include the following:

intangible property) acquired for resale.

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Dividends (other than capital gain

The production of real property and

Line 8, Column (a)

distributions reported on Schedule D

tangible personal property by a

Enter dividends received from wholly

(Form 1120) and exempt-interest

corporation for use in its trade or business

owned foreign subsidiaries that are

dividends) that are received from RICs

or in an activity engaged in for profit.

eligible for the 100% deduction under

and that are not subject to the 70%

section 245(b).

Tangible personal property produced

deduction.

by a corporation includes a film, sound

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Dividends from tax-exempt

In general, the deduction under section

recording, videotape, book, or similar

organizations.

245(b) applies to dividends paid out of the

property.

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Dividends (other than capital gain

earnings and profits of a foreign

distributions) received from a real estate

IC-DISCs subject to the section 263A

corporation for a tax year during which:

investment trust that, for the tax year of

uniform capitalization rules are required to

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All of its outstanding stock is owned

the trust in which the dividends are paid,

capitalize:

(directly or indirectly) by the domestic

qualifies under sections 856 through 860.

1. Direct costs and

corporation receiving the dividends and

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Dividends not eligible for a

2. An allocable part of most indirect

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All of its gross income from all sources

dividends-received deduction, which

costs (including taxes) that (a) benefit the

is effectively connected with the conduct

include the following:

assets produced or acquired for resale or

of a trade or business within the United

(b) are incurred by reason of the

1. Dividends received on any share of

States.

performance of production or resale

stock held for less than 46 days during

activities.

the 91-day period beginning 45 days

Line 9, Column (c)

before the ex-dividend date. When

Generally, line 9, column (c), may not

counting the number of days the

For inventory, some of the indirect

exceed the amount from the worksheet

corporation held the stock, you may not

expenses that must be capitalized are:

below. However, in a year in which an

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count certain days during which the

Administration expenses,

NOL occurs, this limitation does not apply

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corporation’s risk of loss was diminished.

Taxes,

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even if the loss is created by the

See section 246(c)(4) and Regulations

Depreciation,

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dividends-received deduction. See

section 1.246-5 for more details.

Insurance,

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sections 172(d) and 246(b).

Compensation paid to officers

2. Dividends attributable to periods

attributable to services,

totaling more than 366 days that the

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Rework labor, and

IC-DISC received on any share of

Line 9, Column (c) Worksheet

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Contributions to pension, stock bonus,

preferred stock held for less than 91 days

and certain profit-sharing, annuity, or

during the 181-day period that began 90

1. Refigure line 5, page 1, Form

deferred compensation plans.

days before the ex-dividend date. When

1120-IC-DISC, without any

counting the number of days the IC-DISC

adjustment under section 1059

Regulations section 1.263A-1(e)(3)

held the stock, you may not count certain

and without any capital loss

specifies other indirect costs that relate to

days during which the IC-DISC’s risk of

carryback to the tax year under

production or resale activities that must

loss was diminished. See section

section 1212(a)(1) . . . . . . . . .

be capitalized and those that may be

2. Multiply line 1 by 80% (.80) . . .

246(c)(4) and Regulations section

currently deductible.

3. Add lines 2, 5, 7, and 8, column

1.246-5 for more details. Preferred

(c), and the part of the

dividends attributable to periods totaling

Interest expense paid or incurred

deduction on line 3, column (c),

less than 367 days are subject to the

during the production period of

that is attributable to dividends

46-day holding period rule above.

designated property must be capitalized

received from

3. Dividends on any share of stock to

and is governed by special rules. For

20%-or-more-owned

the extent the IC-DISC is under an

more details, see Regulations sections

corporations . . . . . . . . . . . . .

obligation (including a short sale) to make

1.263A-8 through 1.263A-15.

4. Enter the smaller of line 2 or

related payments with respect to positions

line 3. If line 3 is larger than line

The costs required to be capitalized

in substantially similar or related property.

2, do not complete the rest of

under section 263A are not deductible

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this worksheet. Instead, enter

Any other taxable dividend income not

until the property (to which the costs

the amount from line 4 in the

properly reported elsewhere on Schedule

relate) is sold, used, or otherwise

margin next to line 9 of

disposed of by the corporation.

Schedule C and on line 6b,

page 1, Form 1120-IC-DISC . .

Line 15, Column (a)

Exceptions. Section 263A does not

5. Enter the total amount of

Qualified dividends are dividends that

apply to:

dividends received from

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qualify as qualified export receipts. They

Personal property acquired for resale if

20%-or-more-owned

include all dividends (or amounts)

the IC-DISC’s average annual gross

corporations that are included

includible in gross income (under section

receipts for the 3 prior tax years were $10

on lines 2, 3, 5, 7, and 8 of

951) that are attributable to stock of

million or less.

column (a) . . . . . . . . . . . . . .

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related foreign export corporations. See

Inventoriable items accounted for in the

6. Subtract line 5 from line 1 . . . .

Qualified export receipts on page 3 and A

same manner as materials and supplies

7. Multiply line 6 by 70% (.70) . . .

related foreign export corporation on page

that are not incidental. See Cost of Goods

8. Subtract line 3 above from

3 for more details.

Sold on page 5 for details.

column (c) of line 9 . . . . . . . .

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

Instructions For Form 1120-Ic Disc - Interest Charge Domestic International Sales Corporation Return - 2011 Page 8

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