Instructions For Form 8873 - Extraterritorial Income Exclusion

Attach a tabular schedule to the

the tax return to which this form is

Also include on line 50 the total of

partially completed Form 8873 reporting

attached for basic rules for determining

any illegal bribes, kickbacks, or other

all information as if a separate Form

expenses.

payments (within the meaning of

8873 were filed for each group of

section 162(c)) paid by or on behalf of

Part III–Marginal Costing

transactions. See Format of tabular

the taxpayer directly or indirectly to

schedules below.

government officials, employees, or

Marginal costing is a method under

agents.

Once the election is made, it cannot

which only direct production costs of

be changed. If a grouping basis is

Line 55. Although the amount on line

producing a particular product or

55 is an exclusion from income and not

elected, aggregate reporting is not

product line are taken into account for

a deduction, include it on the “Other

permitted.

purposes of computing your qualifying

deductions” or “Other expenses” line of

foreign trade income. Complete this

your tax return. If you are filing

section to see if you will benefit by

Note: If your foreign trading gross

Schedule C (Form 1040), enter

using marginal costing. If you do not

receipts are $5 million or less for the

“Extraterritorial income exclusion from

wish to use this method, skip Part III

tax year, you may file a separate Form

Form 8873” on a line in Part V of

and complete Part IV using the

8873 for each group of transactions

Schedule C. For filers of Form 1120,

instructions below.

instead of filing a tabular schedule.

include the amount on Form 1120,

Format of tabular schedules. If a

Part IV–Extraterritorial

page 1, line 26. If you are filing multiple

tabular schedule is attached to Form

Forms 8873, combine all amounts from

Income Exclusion

8873, the schedule must:

lines 55 and include the sum on the

•

Be in spreadsheet or similar format,

applicable line of your tax return.

•

Line 45. Generally, your qualifying

List your name and identifying

foreign trade income is based on the

number on each numbered page,

•

greatest of lines 33, 36, 38, 42, or 44.

Paperwork Reduction Act Notice.

Be formatted in columns that

Under the alternative computation,

We ask for the information on this form

correspond to each line item of Form

however, you may instead choose to

to carry out the Internal Revenue laws

8873, and

•

enter on line 45 the amount from any of

of the United States. You are required

Show totals in each column.

those five lines (33, 36, 38, 42, or 44).

to give us the information. We need it to

For example, although line 42 may

ensure that you are complying with

Part II–Foreign Trade

produce the greatest exclusion for you,

these laws and to allow us to figure and

Income and Foreign Sale

use of that line could eliminate or

collect the right amount of tax.

reduce the exclusion for a related

You are not required to provide the

and Leasing Income

person because of the limitation under

information requested on a form that is

section 941(a)(3) on the use of the

Lines 6 through 14. Enter your foreign

subject to the Paperwork Reduction Act

1.2% of foreign trading gross receipts

trading gross receipts identified on lines

unless the form displays a valid OMB

method. Therefore, to maximize the

6 through 14 using the rules outlined

control number. Books or records

combined exclusion for you and that

under Foreign Trading Gross

relating to a form or its instructions

related person, you may prefer to enter

Receipts on page 1.

must be retained as long as their

on line 45 the greatest of lines 33, 36,

contents may become material in the

Line 17. For lines 17a through 17h,

38, or 44 (instead of the amount on line

administration of any Internal Revenue

compute your cost of goods sold

42).

law. Generally, tax returns and return

allocated to your foreign trading gross

Line 50. If you had any operations in

information are confidential, as required

receipts. See the instructions for the tax

or related to a country associated with

by section 6103.

return to which this form is attached for

carrying out an international boycott or

basic rules for determining cost of

The time needed to complete and

you participated in or cooperated with

goods sold.

file this form will vary depending on

an international boycott, your

individual circumstances. The

Line 19. Enter on line 19, column (a),

extraterritorial income exclusion may be

estimated average time is:

the deductions, other than those you

reduced. See the separate instructions

included in figuring your cost of goods

for Form 5713, International Boycott

Recordkeeping . . . . . . . . 21 hr., 45 min.

sold, that are allocable to the amount

Report, for definitions and other details

Learning about the law or

reported on line 18, column (a).

and to find out if you are required to file

the form . . . . . . . . . . . . .

1 hr., 53 min.

Enter on line 19, column (b), the

Form 5713. If you are required to file

Preparing the form,

deductions, other than those you

Form 5713, also complete Schedule A

copying, assembling, and

included in figuring your cost of goods

(Form 5713), International Boycott

sending the form to the

sold, that are directly allocable to the

Factor (Section 999(c)(1)). Multiply

IRS . . . . . . . . . . . . . . . . .

2 hr., 19 min.

amount reported on line 18, column (b).

Form 8873, line 49, by line 3 of

If you have comments concerning

Schedule A (Form 5713). Include the

the accuracy of these time estimates or

result on Form 8873, line 50.

Note: Do not include your allocable

suggestions for making this form

portion of general and administrative

The exception from filing Form

simpler, we would be happy to hear

expenses on line 19, column (b).

5713 that generally applies to

from you. See the instructions for the

foreign persons does not apply

CAUTION

For both column (a) and column (b),

tax return with which this form is filed.

if that person is claiming the

attach to Form 8873 a schedule listing

extraterritorial income exclusion.

these amounts. See the instructions for

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Instructions For Form 8873 - Extraterritorial Income Exclusion - 2001 Page 4

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