Instructions For Schedule I (Form 1120-F) - 2008 printable pdf download

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Department of the Treasury

Internal Revenue Service

Instructions for Schedule I

(Form 1120-F)

Interest Expense Allocation Under Regulations Section 1.882-5

Regulations section 1.882-5T(a)(1)(ii).

Treaty-based return positions. If the

Section references are to the Internal

corporation reports its interest expense

The interest allocation rules of

Revenue Code unless otherwise noted.

Regulations section 1.882-5 and

attributable to its business profits of a

U.S. permanent establishment pursuant

Temporary Regulations section 1.882-5T

What’s New

to the express provisions and

are the exclusive rules for allocating

accompanying documents of an

interest expense under section 882(c) to

applicable treaty instead of under

New Form 8926. In some cases, new

effectively connected income and for

Regulations section 1.882-5, then

Form 8926, Disqualified Corporate

attributing interest expense to business

Schedule I, lines 1 through 9 must be

Interest Expense Disallowed Under

profits of a U.S. permanent establishment

Section 163(j) and Related Information,

completed applying the rules of

under all income tax treaties other than

must be attached to Schedule I (Form

Regulations section 1.882-5 and attached

treaties that expressly permit attribution of

1120-F). See the instructions for line 24b

to Form 1120-F.

business profits to a U.S. permanent

for more details.

establishment under application of the

OECD Transfer Pricing Guidelines

Exceptions from Filing

principles by analogy. For treaties that

General Instructions

Schedule I

expressly provide for such attribution, see

Article 7 and the accompanying

A foreign corporation is not required to file

Exchange of Notes to the 2001 United

Purpose of Schedule

Schedule I if it (a) does not have a trade

States-United Kingdom and 2003 United

or business within the United States, (b)

Schedule I (Form 1120-F) is used to

States-Japan Income Tax Treaties. If the

has no worldwide interest expense for the

report the amount of interest expense

foreign corporation files its tax return

tax year to allocate under Regulations

allocable to effectively connected income

using a treaty-based method of the type

section 1.882-5, or (c) conducts limited

(“ECI”) and the deductible amount of such

provided in these treaties, complete Form

activities in the United States for the tax

allocation for the tax year under section

8833 (and attach it to Form 1120-F) to

year that it determines do not give rise to

882(c), Regulations section 1.882-5, and

disclose the treaty position taken.

effectively connected income, or do not

Temporary Regulations section 1.882-5T.

give rise to a U.S. permanent

The schedule also identifies the various

Who Must File

establishment to which business profits

elections the taxpayer uses, and

are attributable, and the corporation files

discloses the basic calculations for the

All foreign corporations that have interest

a protective income tax return under

year under Temporary Regulations

expense allocable to ECI under section

Regulations section 1.882-4(a)(3)(vi).

sections 1.882-5T(a)(7) and

882(c) must complete Schedule I to report

1.882-5T(d)(5), and under the branch

this allocation, regardless of whether the

Protective elections on protective

profits tax rules of Temporary Regulations

amount allocable under Regulations

returns. A corporation that files a

section 1.884-1T(e)(3).

section 1.882-5 is deductible in the

protective tax return on Form 1120-F

current year, or is otherwise deferred or

Note. The tax elections under

under Regulations section

permanently disallowed under other

Temporary Regulations sections 1.882-5T

1.882-4(a)(3)(vi) may voluntarily file

sections of the Internal Revenue Code

and 1.884-1T(e)(3) are not effected under

Schedule I with the protective return to

(e.g., sections 163(e), 163(j), 263A,

the regulations by their identification on

preserve timely elections under

265(a), 267(a)(3)). The information

Schedule I (Form 1120-F). See the

Temporary Regulations section

reported on Schedule I is also needed to

requirements for the time, place and

1.882-5T(a)(7) if the return is filed by the

complete Form 1120-F, Section III (the

manner for making the interest expense

original due date (including extensions) of

determination of the branch-level interest

allocation and branch profits tax liability

the corporation’s Form 1120-F. The

tax under section 884(f)). Interest

reduction elections for Temporary

protective elections are not effective if

expense that is treated as “branch

Regulations sections 1.882-5T(a)(7) and

filed during the additional extended period

interest” under Regulations section

1.884-1T(e)(3).

described under Regulations section

1.884-4(b) may be subject to information

1.882-4(a)(3). The foreign corporation

reporting under section 1461 or section

Under Regulations section 1.882-5

need only complete the relevant portions

6049 and potential withholding under

and Temporary Regulations section

of Schedule I that identify its right to use

sections 1441 and 1442. A foreign

1.882-5T, the amount of interest expense

the following elections:

of a foreign corporation that is allocable

corporation that is a reporting corporation

•

The Adjusted U.S. Booked Liability

under section 882(c) to income which is

and required to file Form 1120-F must

method (“AUSBL”) or Separate Currency

effectively connected (or treated as

complete Schedule I and attach it to Form

Pools (“SCP”) method (item B check

effectively connected) with the conduct of

1120-F.

boxes);

a trade or business within the United

•

The adjusted basis or fair market value

Reporting corporation. A reporting

States is the sum of the interest allocable

method for valuing its average assets in

corporation is any foreign corporation that

by the foreign corporation under the

steps 1 and 2 of the computation (line 1

is engaged in a trade or business or

three-step process set forth in paragraphs

check boxes);

treated as engaged in a trade or business

(b), (c), and (d) or (e) of the regulation

•

within the United States directly or

The fixed or actual ratio in step 2 (line 6

and the directly allocated interest

expense determined under Temporary

indirectly at any time during the tax year.

check boxes);

Cat. No. 50606A

Instructions For Schedule I (Form 1120-F) - 2008

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