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For more details on the uniform

year. See section 470 for more details

Taxes not imposed on the corporation.

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capitalization rules, see Regulations

and exceptions.

Taxes, including state or local sales

sections 1.263A-1 through 1.263A-3.

taxes, that are paid or incurred in

Contributions. See the Instructions for

connection with an acquisition or

Transactions between related

Form 1120 and Pub. 542 for limitations

disposition of property (these taxes must

taxpayers. Generally, an accrual basis

that apply to contributions.

be treated as part of the cost of the

taxpayer may only deduct business

Line 1. Export Promotion

acquired property or, in the case of a

expenses and interest owed to a related

Expenses

disposition, as a reduction in the amount

party in the year the payment is included

realized on the disposition).

Enter export promotion expenses on lines

in the income of the related party. See

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Taxes assessed against local benefits

1a through 1m. Export promotion

sections 163(e)(3), 163(j), and 267 for

that increase the value of the property

expenses are an IC-DISC’s ordinary and

limitations on deductions for unpaid

assessed (such as for paving, etc.).

necessary expenses paid or incurred to

interest and expenses.

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Taxes deducted elsewhere on the

obtain qualified export receipts. Do not

Corporations use Form 8926,

return, such as those reflected in cost of

include income taxes. Enter on lines 2a

Disqualified Corporate Interest Expense

goods sold.

through 2g any part of an expense not

Under Section 163(j) and Related

incurred to obtain qualified export

See section 164(d) for apportionment

Information, to figure the amount of any

receipts.

of taxes on real property between seller

corporate interest disallowed by section

and purchaser.

Line 1d. Salaries and Wages.

163(j).

Line 2c. Interest

Enter the total salaries and wages paid

Golden parachute payments. A portion

for the tax year. Do not include salaries

of the payments made by a corporation to

Do not deduct the following interest:

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and wages deductible elsewhere on the

key personnel that exceeds their usual

Interest on indebtedness incurred or

return, such as amounts included in

compensation may not be deductible.

continued to purchase or carry obligations

officers’ compensation, cost of goods

This occurs when the corporation has an

if the interest is wholly exempt from

sold, elective contributions to a section

agreement (golden parachute) with these

income tax. For exceptions, see section

401(k) cash or deferred arrangement, or

key employees to pay them these excess

265(b).

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amounts contributed under a salary

amounts if control of the corporation

For cash basis taxpayers, prepaid

reduction SEP agreement or a SIMPLE

changes. See section 280G and

interest allocable to years following the

IRA plan.

Regulations section 1.280G-1. Also, see

current tax year (e.g., a cash basis

the instructions for line 1i.

calendar year taxpayer who in the current

If the corporation provided taxable

tax year prepaid interest allocable to any

Business start-up and organizational

fringe benefits to its employees,

period after the current tax year may

costs. Business start-up and

such as personal use of a car, do

CAUTION

deduct only the amount allocable to the

organizational costs must be capitalized

not deduct as wages the amount

current tax year).

unless an election is made to deduct or

allocated for depreciation and other

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Interest on debt allocable to the

amortize them. The following rules apply

expenses claimed on lines 1c and 1m.

production of designated property by a

separately to each category of costs.

Line 1h. Freight

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corporation for its own use. The

The IC-DISC may elect to deduct up to

corporation must capitalize this interest.

Enter 50% of the freight expenses (except

$5,000 of such costs for the year the

Also capitalize any interest on debt

insurance) for shipping export property

IC-DISC begins business operations.

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allocable to an asset used to produce the

aboard U.S. flagships and U.S.-owned

The $5,000 deduction is reduced (but

property. See section 263A(f) and

and U.S.-operated aircraft in those cases

not below zero) by the amount the total

Regulations sections 1.263A-8 through

where you are not required to use U.S.

costs exceed $50,000. If the total costs

1.263A-15 for definitions and more

ships or aircraft by law or regulations.

are $55,000 or more, the deduction is

information.

reduced to zero.

Line 1i. Compensation of Officers

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If the election is made, any costs that

Special rules apply to:

Enter deductible officers’ compensation

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are not deductible must be amortized

Disqualified interest on certain

on line 1i. Attach a schedule showing the

ratably over a 180-month period

indebtedness under section 163(j). See

name, social security number, and

beginning with the month the IC-DISC

Form 8926, Disqualified Corporate

amount of compensation paid to all

begins business operations.

Interest Expense Under Section 163(j)

officers. Do not include compensation

and Related Information, and the related

Attach any statement required by

deductible elsewhere on the return, such

instructions.

Regulations section 1.195-1(b) or

as amounts included in cost of goods

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Forgone interest on certain

1.248-1(c). Report the deductible amount

sold, elective contributions to a section

below-market-rate loans (see section

of these costs and any amortization on

401(k) cash or deferred arrangement, or

7872).

line 2g of Schedule E. For amortization

amounts contributed under a salary

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Original issue discount on certain

that begins during the current tax year,

reduction SEP agreement or a SIMPLE

high-yield discount obligations (See

complete and attach Form 4562.

IRA plan. See the Instructions for Form

section 163(e) to figure the disqualified

For more information, see Pub. 535,

1120 for more information on officers’

portion.).

Business Expenses, and the Instructions

compensation, including any special rules

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Interest which is allocable to

for Form 4562. For more details on the

and limitations that may apply.

unborrowed policy cash values of life

election for business start-up costs, see

The IC-DISC determines who is an

insurance, endowment, or annuity

section 195. For more details on the

officer under the laws of the state where it

contracts issued after June 8, 1997. See

election for organizational costs, see

is incorporated.

section 264(f). Attach a statement

section 248.

showing the computation of the

Line 1m. Other Export Promotion

Limitations on deductions related to

deduction.

Expenses

property leased to tax-exempt entities.

Line 2d. Charitable Contributions

Enter any other allowable export

If an IC-DISC leases property to a

promotion expenses not claimed

governmental or other tax-exempt entity,

For more information on charitable

elsewhere on the return.

it may not claim deductions related to the

contributions, including substantiation and

property to the extent that they exceed

recordkeeping requirements, see section

Note. Do not deduct fines or penalties

the IC-DISC’s income from the lease

170 and the related regulations and Pub.

imposed on the IC-DISC.

payments (tax exempt use loss). Amounts

526, Charitable Contributions. For

Line 2b. Taxes and Licenses

disallowed may be carried over to the

limitations on deduction and other special

next tax year and treated as a deduction

Enter taxes paid or accrued during the tax

rules that apply to corporations, see the

with respect to the property for that tax

year, but do not include the following:

Instructions for Form 1120 and Pub. 542.

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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 9

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