Instructions For Form 8873 - Extraterritorial Income Exclusion

corporation (and any successor

is applied, provided all the transactions

Specific Instructions

corporation) may not elect to be a

(other than foreign sale and leasing

domestic corporation again for 5 tax

income transactions) are included in the

years beginning with the first tax year

same product or product line indicated

Part I–Elections and

after the revocation or termination. See

on line 5b. If a different method is

Rev. Proc. 2001-37.

applied to some of the transactions in

Other Information

one or more of the separate product

Effect of election. For purposes of

lines, additional Forms 8873 must be

section 367, a foreign corporation that

Line 1. Check the box if the taxpayer is

filed.

has elected to be a domestic

electing, under section 942(a)(3), to

corporation is generally treated as

Example. If you have no foreign sale

exclude a portion of its gross receipts

transferring, as of the first day of the

and leasing income and you apply the

from treatment under the extraterritorial

first tax year to which the election

15% of foreign trade income method to

income exclusion provisions. Attach a

applies, all of its assets to a domestic

all transactions in three separate

schedule that lists the transactions

corporation in an exchange under

product lines, you would file three

being omitted.

section 354.

aggregate Forms 8873. However, if you

use the 1.2% of foreign trading gross

Exception for old earnings and

Note: A foreign tax credit may be

receipts method for some of the

profits of certain corporations. If the

available for foreign taxes paid on the

transactions in one of the product lines,

exception described in section 5(c)(3)

receipts the taxpayer excludes from

you would then file four aggregate

of the FSC Repeal and Extraterritorial

treatment under the extraterritorial

Forms 8873.

Income Exclusion Act of 2000 applies,

income exclusion provisions.

attach a statement indicating the basis

(b) Aggregate on tabular

for your entitlement, if any, to that

Line 2. Check the box if the taxpayer is

schedule. You may choose to

exception.

electing, with respect to certain

aggregate your transactions on a

transactions, to have the extraterritorial

tabular schedule rather than on Form

Effect of revocation or

income exclusion provisions apply in

8873. To do so, file one Form 8873

termination. If a foreign corporation

lieu of the FSC provisions. Attach a

entering only your name and identifying

has elected to be a domestic

schedule listing those transactions.

number at the top of the form. Also

corporation and the election ceases to

Once the election is made with respect

check box 1(b) of line 5c. Attach a

apply for any subsequent tax year, the

to a transaction, the election applies to

tabular schedule to the partially

corporation is treated as a domestic

the tax year for which it was made and

completed Form 8873 reporting all

corporation transferring, as of the first

all later tax years. The election may be

information as if a separate form were

day of the subsequent tax year to which

revoked only with IRS consent. See

filed for each aggregate of transactions

the election no longer applies, all of its

Rev. Proc. 2001-37, 2001-23 I.R.B.

described in 1(a) above. Also see

property to a foreign corporation in an

1327.

Format of tabular schedules on page

exchange under section 354.

Line 3. Check the box if the taxpayer

Line 4. Before completing lines 4a and

is an “applicable foreign corporation”

4b, see Foreign Economic Process

that elects to be treated as a domestic

Requirements on page 1.

Note: To be eligible for either of the

corporation under section 943(e). To be

Line 5a. Enter the six-digit code that

aggregate reporting formats described

eligible, the foreign corporation must

best describes the business activity for

in 1(a) or (b) above, you must maintain

waive the right to claim all benefits

which the form is being filed from the

a supporting schedule that contains all

granted to it by the United States under

list of Principal Business Activity Codes

information that would be reported if a

any treaty. If the election is made, the

included in your tax return instructions.

separate Form 8873 were filed for each

corporation will be treated as a

transaction. The supporting schedule

Line 5b. Enter your product or product

domestic corporation for all purposes of

should not be filed with the Form 8873.

line that meets one of the two

the Internal Revenue Code. However,

standards below.

•

the corporation may not elect to be an

The product or product line based on

transactions. Instead of aggregate

S corporation.

the North American Industry

reporting, you may choose to report

An “applicable foreign corporation” is

Classification System (NAICS) or

transactions on a tabular schedule. File

•

a corporation that:

A recognized industry or trade usage.

one Form 8873 entering only your

name and identifying number at the top

1. Manufactures, produces, grows,

Line 5c. Check the applicable box to

of the form. Also check box 1(c) of line

or extracts property in the ordinary

indicate the basis on which the

5c. Attach a tabular schedule to the

course of the corporation’s trade or

amounts on Form 8873 are determined

business or

using either the

partially completed Form 8873 reporting

all information as if a separate Form

2. Substantially all of its gross

transaction-by-transaction basis or an

8873 were filed for each transaction.

receipts are foreign trading gross

election to group transactions. Use one

Also, see Format of tabular

receipts.

of the following formats.

schedules on page 4.

1. Transaction-by-transaction. If

Once made, the election applies to

2. Group of transactions. You may

your determination is based on each

the tax year made and remains in effect

transaction rather than an election to

elect to group transactions (other than

for all subsequent years unless revoked

group transactions, check box 1(a),

foreign sale and leasing income

or terminated. Any revocation or

1(b), or 1(c), depending on your

transactions) by product or product line.

termination applies to tax years

The grouping of transactions applies to

preferred reporting format.

beginning after the tax year during

all transactions completed during the

which made. However, the election will

(a) Aggregate on Form 8873. If

tax year for that product or product line.

automatically terminate if the

you choose to aggregate your

corporation meets neither of the two

transactions on one or more Forms

To make the election, complete one

requirements above. If an election is

8873, check box 1(a) of line 5c.

Form 8873 entering only your name

revoked by the corporation or is

Aggregate on one Form 8873 those

and identifying number at the top of the

automatically terminated, the

transactions for which the same method

form. Also check box (2) of line 5c.

-3-

Instructions For Form 8873 - Extraterritorial Income Exclusion - 2001 Page 3

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