Instructions For Schedule H (Form 1120-F) - 2008 (Page 4 of 6) in pdf

22b, only the numerators of each

If the corporation does not have any

Part III – Allocation and

method must be reported on lines 22

interest expense for the year and

Apportionment Methods

and 23. See the instructions for line

does not file Schedule I (Form

22b for disclosure of the gross asset

1120-F), enter the average assets

and Financial Records

ratio by corporations that used the

derived from the beginning and

actual ratio to allocate interest

ending U.S. assets included in the

Used to Complete Parts I

expense under Regulations section

computation of U.S. net equity on

and II

1.882-5 and Temporary Regulations

Form 1120-F, Section III, lines 4a and

section 1.882-5T.

4b. If the corporation is exempt from

Part III is used to identify the income,

the branch profits tax under an

asset, and personnel attributes of the

Line 21a. Enter on line 21a the

applicable income tax treaty and is

U.S. trade or business and to report

corporation’s gross ECI reportable on

not required to complete Form

the methodologies and financial

Schedule M-3 (Form 1120-F), Part II,

1120-F, Section III, Part I, the

records used to determine the

line 25, column (e), plus any

average U.S. assets should be

amount of the deductions that are

additional gross income amounts

derived from the beginning and

allocated and apportioned to ECI in

reportable on line 27, column (e). If

ending U.S. assets included on Form

Parts I and II of Schedule H. The

the corporation is not required to and

1120-F, Schedule L.

corporation’s ratios of effectively

does not file Schedule M-3 (Form

Line 22b. If the corporation used the

connected gross income, U.S. assets,

1120-F) for the tax year, enter the

worldwide actual ratio under

and U.S. personnel to worldwide

amount of gross income from Form

Regulations section 1.882-5(c)(2) to

gross income, gross assets, and

1120-F, Section II, line 11.

allocate interest expense to ECI,

personnel are reported on lines 21

Line 21b. Enter on line 21b the

enter the amount from Schedule I

through 23. Other ratio-based

corporation’s worldwide gross income

(Form 1120-F), line 6b. If the

methods and any non-ratio-based

stated in U.S. dollars. Corporations

corporation did not use the actual

methods the corporation used for the

other than banks enter the worldwide

ratio, but used a worldwide asset ratio

tax year to allocate and apportion

gross income amount from Schedule

to apportion deductions to ECI for

deductions to non-ECI on lines 8

M-3 (Form 1120-F), Part II, line 25,

purposes of Schedule H, Part II, line

through 10 and to ECI on lines 11

column (a), plus any additional gross

16 or 19, enter the worldwide assets

and 19 are identified in attachments

income amounts included on line 27,

used in that ratio. If a worldwide asset

required by the instructions for lines

column (a). However, if the

ratio is not available from either

24 and 25.

corporation’s worldwide income is

Schedule I (Form 1120-F), line 6b or

effectively connected to its trade or

Schedule H, Part II, line 16 or 19,

Check Boxes Above Line 21

business within the United States, the

leave line 22b blank.

corporation should instead enter the

New methods. Check the box to

Line 22c. If an amount is entered on

gross income amount from Schedule

indicate if the corporation used a

line 22b, divide line 22a by line 22b to

M-3, Part II, line 25, column (e) (plus

method to allocate and apportion

determine the gross asset ratio and

any additional gross income amounts

deductions for the current tax year

enter the percentage on line 22c. If

included on line 27, column (a)), but

that was not used in the prior year.

line 22b is blank, leave line 22c blank.

only if there are no permanent

Line 23a. Enter on line 23a the

Interbranch amounts in Part IV.

differences for tax-exempt income

number of personnel who worked in

under section 103 or under a treaty

Check the box to indicate if an

the corporation’s U.S. trade or

(e.g., force of attraction income not

expense in respect of any amount

business during the tax year. The

included in Part II, line 20, in the

attributable to a U.S. permanent

corporation may use any reasonable

home office allocation and

establishment) that would otherwise

method to determine the number of

be removed in column (c). If the

apportionment was recorded on the

personnel, including data that is

corporation is not required to and

Schedule L books that are used to

already prepared and used by the

complete Part IV of Schedule H.

does not report worldwide gross

corporation for a non-tax business

income in column (a) of Schedule

Include the full amount of the

purpose. For example, if the

M-3 (Form 1120-F), enter the

interbranch charge in Part IV, line 35.

corporation maintains headcount data

worldwide gross income from any

Lines 21 Through 23. Gross

(such as weighted average

other reasonable source. Reasonable

Income, Gross Asset, and

headcount data) in its personnel

sources include worldwide income

records or for other purposes such as

Number of Personnel Ratios

statements used to report allocations

budgeting, planning, and control,

of income or capital to other

The corporation must complete the

such numbers may be used in the

regulatory or non-Federal tax

gross income ratio for line 21 whether

numerator.

authorities or the worldwide income

or not it used such method to allocate

statements that would be used if the

Line 23b. If the corporation used a

and apportion deductions in Parts I

corporation was required to report

ratio based on number of personnel

and II. If the corporation used a gross

worldwide gross income in column (a)

to apportion deductions in Part II, line

asset or number of personnel method

of Schedule M-3 (Form 1120-F).

16 or 19 of Schedule H, enter the

(whether separately or as

worldwide personnel count used in

components of a multi-factor

Line 22a. Enter on line 22a the

the denominator of such ratio on line

method), it must report the attributes

average assets reported on Schedule

23b. If the corporation does not

on lines 22 and 23. If the corporation

I (Form 1120-F), line 5, column (d).

apportion deductions using a number

did not use either the gross asset or

These are the average U.S. assets

of personnel ratio, leave line 23b

the personnel method to allocate and

included in the corporation’s

blank.

apportion deductions for the year,

Regulations section 1.882-5 and

then, except as provided for

Temporary Regulations section

Line 23c. If an amount is entered on

worldwide assets reported on line

1.882-5T interest expense allocation.

line 23b, divide line 23a by line 23b to

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Instructions for Schedule H (Form 1120-F)

Instructions For Schedule H (Form 1120-F) - 2008 Page 4

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