Instructions For Form 1118 - Foreign Tax Credit - Corporations

the time for filing specified, the penalty

on a single line. With respect to passive

distributions by a foreign corporation in

provisions of section 6689 (and the

category income, for items of income that

income as dividend gross-up. See

related regulations) will apply.

have been included on Schedule A and

Regulations section 1.960-3(b) for

that must be reclassified under the rules

exceptions.

of Regulations section 1.904-4(c), enter

Column 4. Enter all interest received

Specific Instructions

“HTKO” in column 1 and enter (as a

from foreign sources. See section 861(c)

negative number) in column 13 the net

for the treatment of interest from a

Report all amounts in U.S. dollars unless

amount of income that is being

domestic corporation that meets the

otherwise specified. If it is necessary to

reclassified from passive category

foreign business requirement.

convert from a foreign currency, attach a

income. With respect to general category

Column 6. Include gross income,

statement explaining how the conversion

income, enter “HTKO” in column 1 and

including compensation, commissions,

rate was determined.

enter (as a positive number) in column 13

fees, etc., for technical, managerial,

the net amount of income that is being

engineering, construction, scientific, or

reclassified to general category income.

similar services outside the United States.

Note that the reclassifications are being

Separate Category of Income

Be sure to include gross income from

reported on a single line because it is not

services performed through a foreign

Boxes.

necessary to report them on a per-country

branch.

basis. Also note that tax reclassifications

The corporation must complete a

are needed on Schedule B. See those

separate Form 1118 for each applicable

Column 7. Include all other gross

instructions for more information. Also

category of income. See Categories of

income from sources outside the United

see General Category Income on page 2

Income beginning on page 1.

States for the applicable separate

for general additional information about

category, including all other gross income

high-taxed income.

of foreign branches and pass-through

Schedule A

Column 1. Enter the two-letter codes

entities and any exchange gain or loss

(from the list at

recognized under sections 986(c) or

Report gross income or (loss) from

of all foreign countries and U.S.

987(3) on a distribution or remittance of

sources outside the United States for the

possessions within which income is

previously taxed amounts. Attach a

applicable separate category in columns

sourced and/or to which taxes were paid,

schedule identifying the gross income by

2 through 7. Gross income equals gross

accrued, or deemed paid.

type and by the foreign country or U.S.

receipts reduced by cost of goods sold.

possession from which it was sourced.

For section 863(b) income, enter

Report the applicable deductions to this

“863(b)” instead of a two-letter code.

Column 9(d). Include all other

gross income in columns 9 and 10.

Report any net operating loss carryover in

deductions definitely allocable to income

For income passed through from a

column 11. Be sure to include in all

from sources outside the United States

RIC, enter “RIC” instead of a two-letter

columns the gross income and

(dividends, interest, etc.) for the

code.

deductions that pertain to foreign

applicable separate category. Include

For a net operating loss, enter “NOL”

branches.

deductions allocable to income of foreign

instead of a two-letter code.

branches.

Section 863(b) gross income and

For income adjustments for high-taxed

deductions. Aggregate all section

Include any reduction of foreign source

income, enter “HTKO” instead of a

863(b) gross income and deductions and

capital gain net income. If foreign source

two-letter code.

report the totals on a single line. It may be

capital gain net income from all separate

When you enter a country code in

necessary to enter amounts in multiple

categories is more than the capital gain

Schedule A, column 1, the

columns on that single line, depending

net income reported on the corporation’s

information entered on the

upon the nature of the section 863(b)

tax return, enter a pro rata portion of the

CAUTION

corresponding line of Schedule B, Part I,

gross income and deductions. For

excess as a negative number in each

must pertain to that country code.

example, enter “863(b)” in column 1 and

separate category. See Capital Gains on

enter (as a positive number) all section

Column 2(a). If the corporation is a U.S.

page 3.

863(b) gross income (in columns 2

shareholder in a CFC, report all income

Column 10. Enter only the apportioned

through 8) and all section 863(b)

deemed received under section

share from Schedule H, Part II, column

deductions (in columns 9a through 12).

951(a)(1)(A) (before gross-up). See

(d) that relates to gross income reported

Also enter the net amount in column 13.

section 904(d)(3) and Look-Through

in columns 2 through 7.

Note that the totals are being reported on

Rules on page 2 for more information. If

a single line because it is not necessary

Note. If the corporation qualified as a

the corporation is a U.S. shareholder in a

to report section 863(b) gross income and

financial services entity because it treated

passive foreign investment company

deductions on a per-country basis.

certain amounts as active financing

(PFIC) and receives distributions from

income that are not listed in Regulations

stock in that PFIC, report all income

RIC pass-through amounts. Aggregate

sections 1.904-4(e)(2)(i)(A) through (X),

deemed received (before gross-up) under

all income passed through from regulated

but that are described as similar items in

section 1291.

investment companies (RICs) and report

Regulations section 1.904-4(e)(2)(i)(Y),

the total on a single line. Enter “RIC” in

Column 3(a). Report all other dividends

attach a statement to Form 1118 showing

column 1 and report the total in column

(before gross-up) not included in column

the types and amounts of the similar

13. Note that the totals are being reported

2(a) from sources outside the United

items.

on a single line because it is not

States for the applicable separate

necessary to report the RIC pass-through

category. Other dividends include

Column 11. Enter the corporation’s net

amounts on a per-country basis.

amounts included in gross income under

operating loss as defined in section 172

section 951(a)(1)(B).

that is attributable to foreign source

Net operating losses. Report any net

income in the separate limitation

operating loss carryover on a single line.

Note. All dividends from a domestic

category. If the net operating loss is part

Enter “NOL” in column 1 and report the

corporation are of U.S. source, including

of an overall foreign loss, see Temporary

total in column 11. Note that the totals are

dividends from a domestic corporation

Regulations section 1.904(g)-3T for

being reported on a single line because it

which has 80% or more of its gross

allocation rules that apply in determining

income from sources outside the United

is not necessary to report the NOL on a

the amount to enter in column 11.

States.

per-country basis.

Reclassifications of high-taxed

Columns 2(b) and 3(b). Include taxes

It is not necessary to report the NOL

income. Aggregate all reclassifications

deemed paid by a domestic corporation

adjustment on a per-country basis. See

of high-taxed income and report the total

under section 902 or section 960 on

Net Operating Losses on page 5.

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Instructions For Form 1118 - Foreign Tax Credit - Corporations - 2011 Page 5

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