Instructions For Form 8873 - Extraterritorial Income Exclusion

income exclusion provisions to certain

domestic corporation transferring, as of

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

transactions involving a FSC (see

the first day of the subsequent tax year to

supporting schedule that contains all

Eligible Transactions on page 1).

which the election no longer applies, all of

information that would be reported if a

its property to a foreign corporation in an

separate Form 8873 were filed for each

Note: The extraterritorial income

exchange under section 354.

transaction. The supporting schedule

exclusion provisions and the FSC

should not be filed with the Form 8873.

provisions may not be applied to the

Line 4. Before completing lines 4a and

same transaction.

4b, see Foreign Economic Process

Requirements on page 1.

transactions. Instead of aggregate

Attach a schedule listing those

reporting, you may choose to report

Line 5a. Enter the six-digit code that best

transactions. Once the election is made

transactions on a tabular schedule. File

with respect to a transaction, the election

describes the business activity for which

one Form 8873 entering only your name

the form is being filed from the list of

applies to the tax year for which it was

and identifying number at the top of the

made and all later tax years. The election

Principal Business Activity Codes

form. Also check box 1(c) of line 5c.

included in your tax return instructions.

may be revoked only with IRS consent.

Attach a tabular schedule to the partially

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

Line 5b. Enter your product or product

completed Form 8873 reporting all

1327.

line that meets one of the two standards

information as if a separate Form 8873

Line 3. Check the box if the taxpayer is

below.

were filed for each transaction. Also, see

•

The product or product line based on

an “applicable foreign corporation” that

Format of tabular schedules below.

elects to be treated as a domestic

the North American Industry Classification

2. Group of transactions. You may

System (NAICS) or

corporation under section 943(e). To be

•

elect to group transactions (other than

eligible, the foreign corporation must

A recognized industry or trade usage.

foreign sale and leasing income

waive the right to claim all benefits

Line 5c. Check the applicable box to

transactions) by product or product line.

granted to it by the United States under

indicate the basis on which the amounts

The grouping of transactions applies to all

any treaty. If the election is made, the

on Form 8873 are determined using

transactions completed during the tax

corporation will be treated as a domestic

either the transaction-by-transaction basis

year for that product or product line.

corporation for all purposes of the Internal

or an election to group transactions. Use

Revenue Code. However, the corporation

To make the election, complete one

one of the following formats.

may not elect to be an S corporation.

Form 8873 entering only your name and

1. Transaction-by-transaction. If

identifying number at the top of the form.

An “applicable foreign corporation” is a

your determination is based on each

Also check box (2) of line 5c. Attach a

foreign corporation that:

transaction rather than an election to

tabular schedule to the partially

1. Manufactures, produces, grows, or

group transactions, check box 1(a), 1(b),

completed Form 8873 reporting all

extracts property in the ordinary course of

or 1(c), depending on your preferred

information as if a separate Form 8873

the corporation’s trade or business or

reporting format.

were filed for each group of transactions.

2. Substantially all of its gross receipts

(a) Aggregate on Form 8873. If you

See Format of tabular schedules below.

are foreign trading gross receipts.

choose to aggregate your transactions on

Note: If a grouping basis is elected,

one or more Forms 8873, check box 1(a)

Once made, the election applies to the

aggregate reporting is not permitted.

of line 5c. Aggregate on one Form 8873

tax year made and remains in effect for all

Attach Form 8873 to your tax return.

those transactions for which the same

subsequent years unless revoked or

Once the election is made, grouping

method is applied, provided all the

terminated. Any revocation or termination

redeterminations are permitted until one

transactions (other than foreign sale and

applies to tax years beginning after the

year after the later of:

leasing income transactions) are included

tax year during which made. The election

in the same product or product line

1. The due date of your timely filed

will automatically terminate if the

indicated on line 5b. If a different method

corporation meets neither of the two

return (including extensions) or

is applied to some of the transactions in

2. In the event of an examination of

requirements above. If an election is

one or more of the separate product lines,

revoked by the corporation or is

your return by the IRS, notification by the

additional Forms 8873 must be filed.

IRS of such examination (provided you

automatically terminated, the corporation

(and any successor corporation) may not

agree to extend the statute of limitations

Example. If you have no foreign sale

for assessment by one year).

elect to be a domestic corporation again

and leasing income and you apply the

for 5 tax years beginning with the first tax

15% of foreign trade income method to all

Note: If your foreign trading gross

year after the revocation or termination.

transactions in three separate product

receipts are $5 million or less for the tax

See Rev. Proc. 2001-37.

lines, you would file three aggregate

year, you may file a separate Form 8873

Forms 8873. However, if you use the

Effect of election. For purposes of

for each group of transactions instead of

section 367, a foreign corporation that

1.2% of foreign trading gross receipts

filing a tabular schedule.

method for some of the transactions in

has elected to be a domestic corporation

Format of tabular schedules. If a

is generally treated as transferring, as of

one of the product lines, you would then

tabular schedule is attached to Form

file four aggregate Forms 8873.

the first day of the first tax year to which

8873, the schedule must:

the election applies, all of its assets to a

(b) Aggregate on tabular schedule.

•

Be in spreadsheet or similar format,

domestic corporation in an exchange

You may choose to aggregate your

•

List your name and identifying number

under section 354.

transactions on a tabular schedule rather

on each numbered page,

Exception for old earnings and profits

than on Form 8873. To do so, file one

•

Be formatted in columns that

of certain corporations. If the exception

Form 8873 entering only your name and

correspond to each line item of Form

described in section 5(c)(3) of the FSC

identifying number at the top of the form.

8873, and

Repeal and Extraterritorial Income

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

•

Show totals in each column.

tabular schedule to the partially

Exclusion Act of 2000 applies, attach a

statement indicating the basis for your

completed Form 8873 reporting all

Part II–Foreign Trade

information as if a separate form were

entitlement, if any, to that exception.

Income and Foreign Sale

filed for each aggregate of transactions

Effect of revocation or termination.

described in 1(a) above. Also see Format

If a foreign corporation has elected to be

and Leasing Income

of tabular schedules below.

a domestic corporation and the election

ceases to apply for any subsequent tax

Note: To be eligible for either of the

Lines 6 through 14. Enter your foreign

year, the corporation is treated as a

aggregate reporting formats described in

trading gross receipts identified on lines 6

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Instructions For Form 8873 - Extraterritorial Income Exclusion - 2002 Page 3

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