Instructions For Schedule I (Form 1120-F) - 2008 (Page 3 of 8) in pdf

Line 2, column (a). Total assets per

treaty and accompanying documents

conducted on a worldwide basis. To

books. Enter the total average assets

(such as an Exchange of Notes).

qualify as a bank for interest expense

derived from the combined set or set(s) of

allocation purposes, the foreign

Lines 10 through 20. Allocations,

books that are reportable on Schedule L.

corporation must be subject to bank

direct interest allocations, deferrals

The total average assets includes

regulatory supervision and examination in

and other disallowances. Step 3 of the

its home country of a type similar to that

interbranch balances with other set(s) of

AUSBL method is provided on lines 10

required of domestic banks by a State or

books of the corporation that are not

through 15. Step 3 of the Separate

Federal authority having supervision over

reportable on Schedule L.

Currency Pools method is provided on

banking institutions, and a substantial

Line 3a, column (a). Total interbranch

lines 16 through 20. These Step 3

amount of the corporation’s business

assets. Enter on line 3a, column (a), the

methods are mutually exclusive and

must consist of receiving deposits and

total of the corporation’s average

cannot both apply to the corporation in

making loans and discounts, or of

interbranch assets included on line 2,

the same year. The methods are subject

exercising fiduciary powers similar to

column (a). The average interbranch

to the general five-year minimum period

those permitted to national banks under

assets recorded on the set(s) of Schedule

election rules of Temporary Regulations

authority of the Comptroller of the

L books do not create U.S. assets under

section 1.882-5T(a)(7).

Currency. See sections 581 and 585(a).

Regulations section 1.882-5(b)(1)(iv) and

AUSBL method filers. AUSBL

are disregarded for purposes of the

method filers complete all columns on

Note. The reference to the definition of

interest expense allocation rules.

lines 1 through 15 and lines 21 through

the term “bank” for purposes of

Note. If under the global dealing

25. Do not complete lines 16 through 20.

determining the U.S. booked liabilities of

proposed regulations (Proposed

banks under Regulations section

Separate currency pools method

Regulations section 1.863-3(h), which

1.882-5(d)(2)(iii) and Temporary

filers. Separate Currency Pools method

references the Proposed Regulations

Regulations section 1.882-5T(d)(iii)(A)

filers complete all columns on lines 1

section 1.482-8 principles), the

requires that the corporation meet the

through 9 and lines 16 through 25. Do not

corporation recognizes an amount

section 585(a)(2) regulated banking

complete lines 10 through 15.

recorded as an interbranch asset, such

requirements in its trade or business

Lines 21 through 25. Summary –

amount is treated as the allocation and

within the United States. The section

Interest expense allocation and

source of third-party securities dealing

585(a)(2) standard must also be satisfied

deduction under Regulations section

income and is not eliminated from U.S.

at the corporation’s U.S. trade or

1.882-5

assets on line 3a, column (a). Such

business level for purposes of electing the

Line 22. Direct interest allocations.

interbranch assets are eliminated only to

deposit liability safe harbor applicable to

Interest expense that is directly allocable

the extent they are allocated under

the reduction of excess interest under

under Temporary Regulations section

Proposed Regulations section 1.863-3(h)

Regulations section 1.884-4(a)(2)(iii).

1.882-5T(a)(1)(ii) in accordance with the

to foreign source non-ECI. The allocable

rules of Temporary Regulations section

amount to non-ECI is eliminated from

Lines 1 Through 9: All

1.861-10T(b) or (c) is reported on line 22.

U.S. assets on line 3c, column (a) (total

Foreign Corporations

other non-ECI assets).

Line 23. Summary of Regulations

section 1.882-5 allocation. The amount

Line 3b, column (a). Total non-ECI

Lines 1 Through 5. Step 1:

of interest expense allocable to effectively

assets under section 864(c)(4)(D).

Determination of U.S. Assets

connected income under Regulations

Enter on line 3b, column (a), the average

section 1.882-5 is the sum of the amount

assets included on line 2, column (a) that

Assets includible on lines 1 through 5 are

allocated under either the AUSBL or

give rise to non-ECI received from

the U.S. assets of the corporation as

Separate Currency Pools method on line

foreign-related corporations under section

defined in Regulations sections

15 or 20, and the amount directly

864(c)(4)(D). Such amounts include

1.882-5(b) and 1.884-1(d), and

allocated to ECI and reportable on line

assets from transactions with

Temporary Regulations section

22. The resulting amount allocable and

foreign-related corporations that give rise

1.882-5T(b). The U.S. assets are valued

reported on line 23 is also reconciled and

to foreign source dividends, interest, rents

on an average basis for interest expense

reported on Form 1120-F, Section III, Part

or royalties, whether or not such amounts

allocation purposes.

II, line 7c (branch-level interest tax).

are attributable to a U.S. office of the

Frequency of averaging. The average

corporation under section 864(c)(5). A

Line 24. Deferrals and

value of assets for this step is to be

foreign related corporation is a foreign

disallowances under other Code

computed at the most frequent, regular

corporation the taxpayer owns (under

sections. The interest expense

intervals for which data is reasonably

section 958(a)) or is treated as owning

allocation reportable on line 23 is

available. See Temporary Regulations

(under section 958(b)) more than 50% of

determined under Regulations section

section 1.882-5T(b)(3). For foreign banks,

the total combined voting power of all

1.882-5 before application of other Code

the minimum averaging period is monthly

classes of stock entitled to vote. Enter the

sections that defer or disallow the interest

(beginning of tax year and monthly

average asset number for assets

deduction in whole or in part. See

thereafter). For corporations other than a

described in section 864(c)(4)(D) on line

Regulations section 1.882-5(a)(5).

bank, the minimum averaging period is

3b, column (a), regardless of whether

semi-annually (beginning, middle, and

such assets give rise to non-ECI under

end of the tax year).

another Code section or regulation. For

Specific Instructions

example, report income that is non-ECI

Line 1. Indicate whether the corporation

under section 864(c)(4)(D) on line 3b,

Item A. Foreign banks. Check the box

values its U.S. assets on the adjusted

column (a) even if such income is also not

in item A if the foreign corporation is a

basis method (see Regulations section

attributable to a U.S. office of a banking,

bank as defined in Temporary

1.882-5(b)(2)(i)) or whether it has elected

financing, or similar business under

Regulations section 1.882-5T(c)(4). The

the fair market value method (see

Regulations section 1.864-6(b)(2)(ii)(b)

term “bank” is defined in the regulation as

Temporary Regulations section

and the principles of Regulations section

a bank that meets the statutory definition

1.882-5T(b)(2)(ii)). The adjusted basis

1.864-4(c)(5)(ii).

applicable to domestic banks (except for

method election is subject to the minimum

the fact the corporation is foreign) and

five-year period described in Temporary

Line 3c, column (a). Total other

without regard to whether the

Regulations section 1.882-5T(a)(7). The

non-ECI assets. Enter on line 3c,

corporation’s required banking activities

fair market value method cannot be

column (a), all other assets (or portion

are effectively connected with its trade or

changed to the adjusted basis method

thereof) included on line 2, column (a)

business within the United States. The

without advance consent from the

that give rise to domestic or foreign

required banking activities need only be

Commissioner or his delegate.

source non-ECI. If income from a security

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Instructions For Schedule I (Form 1120-F) - 2008 Page 3

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