Instructions For Form 1120-Fsc -U.s. Income Tax Return Of A Foreign Sales Corporation

administrative pricing rules. See section

Instructions for Dividends

4. With respect to the commission

923(a)(2).

income reported on line 2 above,

and Dividends-Received

enter total gross receipts on the

Use lines 3a through 3d to figure the

Deduction Worksheet

sale, lease, or rental of property on

exemption percentage for foreign trade

For purposes of the 20% ownership test on

which the commission income

income that was determined by using the

arose (section 927(b)(2)) . . . . . . . 4.

lines 1 through 7, the percentage of stock

administrative pricing rules (see section

owned by the FSC is based on voting power

923(a)(3)). If a qualified cooperative is a

5. Add lines 3 and 4. Enter here and

and the value of the stock. Preferred stock

shareholder of the FSC, see section

on line 6f, Schedule B . . . . . . . . . 5.

described in section 1504(a)(4) is not taken

923(a)(4).

into account.

Line 6h. When making the line 6h

Schedule F

allocation, allocate only the commission

Line 1, Column (a)

income from the gross receipts on line 4

Enter dividends (except those received on

Net Income From Nonexempt

above. If the small FSC’s foreign trading

debt-financed stock acquired after July 18,

gross receipts for the tax year (line 6f,

Foreign Trade Income and

1984 — see section 246A) that:

Schedule B) exceed its allowable limitation

•

Taxable Nonforeign Trade

Are received from less-than-20%-owned

(line 6e, Schedule B), the small FSC may

domestic corporations subject to income tax

Income

select the gross receipts to which the

and

limitation is allocated. In such a case,

•

Qualify for the 70% deduction under

allocate the amount on line 6g between

Part I

section 243(a)(1).

columns (a) and (b) on line 6h based on

Enter net income from nonexempt foreign

whether the administrative pricing rules

Also include on line 1 dividends (except

trade income and related expenses in Part I.

were used for the gross receipts selected.

those received on debt-financed stock

Line 2. Enter FSC income that resulted

See Regulations section 1.921-2(b), Q&A-4.

acquired after July 18, 1984) from a

from the FSC’s cooperation with an

regulated investment company (RIC). The

Part II

international boycott. See section 927(e)(2)

amount of dividends eligible for the

and Form 5713 and related schedules and

dividends-received deduction under section

Line 19a. Net operating loss deduction.

instructions.

243 is limited by section 854(b). The FSC

A FSC may use the NOL incurred in one tax

should receive a notice from the RIC

Line 3. Enter the amount, if any, of illegal

year to reduce its taxable income in another

specifying the amount of dividends that

payments, bribes, or kickbacks that the FSC

tax year. Enter on line 19a the total NOL

qualify for the deduction.

paid, directly or indirectly, to government

carryovers from other tax years, but do not

officials, employees, or agents. See section

Report so-called dividends or earnings

enter more than the FSC’s taxable income

927(e)(2).

received from mutual savings banks, etc., as

(after the dividends-received deduction).

interest. Do not treat them as dividends.

Line 5. See the instructions for Schedule A

Attach a schedule showing the computation

before completing this line.

of the NOL deduction. Also complete line 7

Line 2, Column (a)

in Additional Information on page 2 of the

Part II

Enter dividends (except those received on

form.

debt-financed stock acquired after July 18,

Enter the taxable portion of gross income of

For details on the NOL deduction, see

1984) that are received from

the FSC that was not derived from foreign

Pub. 542, section 172, and Form 1139.

20%-or-more-owned domestic corporations

trading gross receipts. This type of income

subject to income tax and that are subject to

Line 19b. Dividends-received deduction.

includes:

•

the 80% deduction under section 243(c).

A FSC may be entitled to a deduction for

Small FSCs only. Amounts specifically

dividends it receives from other

excluded from foreign trade income because

Line 3, Column (a)

corporations. Complete the worksheet on

of the small FSC limitation (the amount by

Enter dividends that are:

page 10 using the instructions that begin

which line 6f of Schedule B exceeds line 6e

•

Received on debt-financed stock acquired

below. Attach the completed worksheet to

of Schedule B). (Enter the excess, if any, on

after July 18, 1984, from domestic and

Form 1120-FSC.

line 7 of Schedule F.)

•

foreign corporations subject to income tax

Investment type income. (Enter on lines 8

Line 20. Taxable income or (loss). If line

that would otherwise be subject to the

through 12 of Schedule F.)

20 is zero or less, the FSC may have an

•

dividends-received deduction under section

Income from property that is subsidized,

NOL that may be carried back or forward as

243(a)(1), 243(c), or 245(a). Generally,

deemed in short supply, or destined for use

a deduction to other tax years. Generally, a

debt-financed stock is stock that the FSC

in the United States. (Enter on lines 13 and

FSC first carries back an NOL 2 tax years.

acquired by incurring a debt (for example, it

14 of Schedule F.)

However, the FSC may elect to waive the

•

borrowed money to buy the stock).

Amounts from transactions that did not

•

carryback period and instead carry the NOL

Received from a RIC on debt-financed

meet the foreign economic process

forward to future tax years. To make the

stock. The amount of dividends eligible for

requirements. (Enter on line 15 of Schedule

election, see the instructions for Additional

the dividends-received deduction is limited

F.)

Information, line 6 on page 8.

•

by section 854(b). The FSC should receive

Other nonforeign trade income. (Enter on

a notice from the RIC specifying the amount

See Form 1139 for details, including

line 16 of Schedule F.)

of dividends that qualify for the deduction.

other elections that may be available, which

For more details, see sections 924(f)

must be made no later than 6 months after

Line 3, Columns (b) and (c)

and 927(a)(2) and (3).

the due date (excluding extensions) of the

Dividends received on debt-financed stock

Line 9. Complete the worksheet on page 10

FSC’s tax return.

acquired after July 18, 1984, are not entitled

to figure the total dividends to report on line

to the full 70% or 80% dividends-received

9. Attach the completed worksheet to Form

Schedule E

deduction. The 70% or 80% deduction is

1120-FSC.

reduced by a percentage that is related to

Exemption Percentages Used in

Line 18. Enter the deductions allocated or

the amount of debt incurred to acquire the

apportioned to line 17 income. Attach to

Figuring Exempt Foreign Trade

stock. See section 246A. Also, see section

Form 1120-FSC a schedule listing each type

Income

245(a) before making this computation for

of deduction. Show deductions related to

an additional limitation that applies to

For purposes of the Note at the top of

cost of goods sold separately. See the

dividends received from foreign

Schedule E, a C corporation is a corporation

instructions for Schedule A on page 7 before

corporations. Attach a schedule to Form

other than an S corporation. Shareholders,

completing this line.

1120-FSC showing how the amount on line

other than C corporations, are individuals,

Passive activity limitations. Section 469

3, column (c), was figured.

partnerships, S corporations, trusts, and

generally limits the deduction of passive

estates.

Line 4, Column (a)

activity losses for closely held FSCs and

Use lines 2a through 2d to figure the

FSCs that are personal service

Enter dividends received on the preferred

exemption percentage for foreign trade

corporations. See section 469 and the

stock of a less-than-20%-owned public utility

income determined by not using the

Instructions for Form 8810 for details.

that is subject to income tax and is allowed

-9-

Instructions For Form 1120-Fsc -U.s. Income Tax Return Of A Foreign Sales Corporation - 2005 Page 9

Related Articles

Related forms

Related Categories