Instructions For Schedule H (Form 1120-F) - 2008 (Page 5 of 6) in pdf

determine the number of personnel

U.S. GAAP. The Schedule L books

Attach a schedule detailing the

ratio and enter the percentage on line

items adjusted and amounts of each

may include more than one set of

23c. If line 23b is blank, leave line

adjustment.

books, including the set(s) of books of

23c blank.

disregarded entities. See the

Line 32a. Enter on line 32a the

instructions for Schedule M-3 (Form

amount of third-party interest

Line 24. If the corporation used any

1120-F), Part I, lines 4 and 5, for the

expense (whether owed to unrelated

other ratio-based method to allocate

Schedule L treatment of disregarded

or related parties) that is included in

and apportion deductions to ECI and

entities and the combined reporting of

the amount reported on line 31.

non-ECI on line 8, 9, 10, 11, or 19 of

multiple sets of books. These rules

Interest expense is allocated to ECI

Schedule H, attach a schedule

apply to both banks and non-banks

under Regulations section 1.882-5

describing the ratio used on each

for purposes of determining the

and Temporary Regulations section

line. Include the numerator and

expenses reportable on Schedule H,

1.882-5T and reported on Schedule I

denominator of the ratio used for

line 29. Interbranch income and

(Form 1120-F).

each applicable line.

expenses recorded between separate

Line 32b. Enter on line 32b any

Line 25. If the corporation used a

sets of books must be eliminated in

interbranch interest expense that is

non-ratio-based method to allocate

the combined reports.

included in the amount reported on

and apportion deductions to ECI and

line 31.

non-ECI on line 8, 9, 10, 11, or 19 of

Line 30. Enter on line 30 the total of

Schedule H, attach a schedule

Line 33. Enter on line 33 any bad

the adjustments necessary to

describing each such method and the

debt expense that is included in the

conform the amounts on line 29 to the

percentage used, if any, for each

amount reported on line 31. Any

amounts that are deductible for U.S.

applicable line. These may include

portion of the amount eliminated on

tax purposes. See the instructions for

methods for which percentage

line 33 that is allocated and

Part I, line 2, for a general description

allocations to ECI or non-ECI are

apportioned to ECI is reported directly

of the types of temporary and

estimated and documented by

on Form 1120-F, Section II, line 15.

permanent differences that are

questionnaires or home office

Line 34. Enter on line 34 other

reportable as adjustments to the book

department interviews (e.g.,

third-party expenses that are included

expenses in determining current year

estimated percent of time spent by

in the amount reported on line 31 and

tax deductions under U.S. tax

employees of particular home office

that are not allocated and

principles. However, do not include

departments or sub-departments on

apportioned between ECI and

on line 30 any adjustments that are

U.S. trade or business activities).

non-ECI under Regulations sections

otherwise reportable on lines 32a

1.861-8 and 1.861-17 and Temporary

Lines 26 Through 28.

through 35. Specifically, interest

Regulations section 1.861-8T.

Identification of Financial

expense (including interbranch

Periodic expense from a notional

Records Used

interest expense) included on line 29

principal contract is not allocated and

is adjusted instead on lines 32a and

Check the “Yes” or “No” box to

apportioned under Regulations

32b. Bad debt expense included on

indicate whether the types of financial

section 1.861-8 and Temporary

books and records indicated were

line 29 is adjusted instead on line 33.

Regulations section 1.861-8T if the

used to complete Parts I and II of

Other third-party deductible expenses

amount is includible in the profits and

Schedule H.

not allocated or apportioned to ECI

losses of a global dealing operation

and non-ECI under Regulations

Line 28. If the “Yes” box is checked,

and the corporation allocates and

section 1.861-8 are adjusted instead

attach a list of other documentation

apportions such amounts under

on line 34. Interbranch expenses

Proposed Regulations section

used to complete Parts I and II of

(other than interest expense) included

Schedule H (e.g., home country

1.863-3(h). Such periodic expense is

on line 29 (including interbranch book

regulatory reports).

subject to allocation and

charges for home office services

apportionment under Proposed

Part IV – Allocation and

provided to the U.S. trade or

Regulations section 1.863-3(h) in

business) are adjusted instead on line

accordance with the principles of

Apportionment of

35. However, if the corporation is a

Proposed Regulations section

Expenses on Books and

foreign bank that charges its U.S.

1.482-8. If such periodic expense is

branch office cost reimbursements for

included in line 29, it should be

Records Used to Prepare

services and overhead which are

included on line 34 and reported

separately on Form 1120-F, Section

booked by the branch in the third

Form 1120-F, Schedule L

II, as either part of the global dealing

party category of expense actually

Use Part IV of Schedule H to report

income reported on Form 1120-F,

incurred rather than as a lump sum

the allocation and apportionment of

Section II, line 10, or as a separately

interbranch amount, the interbranch

deductions recorded on the

identified deduction under Form

amounts charged and recorded by

corporation’s Schedule L books, other

1120-F, Section II, line 27.

the U.S. branch Schedule L book

than interest and bad debt expense,

should not be reported on line 35 as

Line 35. Enter on line 35 all

to ECI and non-ECI under

interbranch expenses, but should be

interbranch expenses, other than

Regulations sections 1.861-8 and

left in the third party categories to

interbranch interest expense, that are

1.861-17 and Temporary Regulations

which they are assigned on the U.S.

included in the amount reported on

section 1.861-8T.

books and records. If any such

line 31. The interbranch amounts

Line 29. Enter on line 29 the total

amounts require adjustment for U.S.

reportable on line 35 include home

expenses recorded on the Schedule

tax principles (e.g., meals and

office charges reflected on the

L books.

entertainment at 50%), then such

Schedule L books for home office

Note. The Schedule L books may be

adjustment should be shown on line

management services provided to the

maintained using GAAP other than

30.

U.S. trade or business.

-5-

Instructions for Schedule H (Form 1120-F)

Instructions For Schedule H (Form 1120-F) - 2008 Page 5

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