Instructions For Schedule I (Form 1120-F) - 2008 (Page 4 of 8) in pdf

is treated as partially ECI and partially

allocation rules shall reduce the basis of

included on line 2, column (a) as well as

non-ECI under Regulations section

the asset that meets the requirements of

the ECI portion of partnership interests

1.864-4(c)(5)(ii), enter the amount of the

Temporary Regulations section

whose book value is not recorded on the

asset on line 3c, column (c) in the

1.861-10T (b) or (c) by the principal

Schedule L books and is not included on

proportion that the income, gain, or loss

amount of the indebtedness that meets

line 2, column (a).

from such asset that is treated as

the requirements of Temporary

Line 5, column (c). Average U.S. assets

non-ECI bears to the total income, gain,

Regulations section 1.861-10T (b) or (c).

not includible in set(s) of Schedule L

or loss from such asset. Do the same for

The amount of directly allocable interest

books reported on line 5, column (a),

the non-ECI portion of any asset whose

under Temporary Regulations section

or from partnerships reported on line

income is allocated under the proposed

1.882-5T(a)(1)(ii) is reported on line 22.

5, column (b). Enter on line 5, column

global dealing regulations or under an

(c), the average value of U.S. assets

Line 3f, column (a). Other adjustments

Advance Pricing Agreement pursuant to a

(other than the ECI portion of the

to average assets included on line 2.

competent authority agreement. See

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

corporation’s outside basis in partnership

Proposed Regulations sections

interests) from set(s) of books that are not

asset balances for any other amounts

1.884-1(d)(2)(vii) and 1.884-1(d)(2)(xi),

included on line 2, column (a) that do not

reportable on Schedule L. Such assets

Example 8.

may generally include certain securities

constitute U.S. assets as defined in

Line 3d, column (a). Adjustments for

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

Regulations section 1.884-1(d). Assets

amounts from partnerships and certain

includible on this line may include, for

financing, or similar business under

disregarded entities included on line 2,

Regulations section 1.864-4(c)(5)(iii) that

example, amounts with respect to

column (a). With respect to amounts

are booked in a foreign bank’s home

securities that are marked to market for

from partnerships included on line 2,

tax purposes under section 475 that are

office or other foreign location. Other

column (a), all such amounts must be

assets reportable on line 5, column (c),

not marked to market on the set(s) of

“backed out” on this line 3d, column (a).

books reported on line 2, column (a). If

may generally also include assets that are

Enter on line 3d, column (a), all amounts

no longer held in connection with a trade

the mark-to-market amount includible for

on the Schedule L books for investments

or business within the United States that

tax purposes is an increase to the basis

in partnerships (whether recorded as an

of the assets included on line 2, column

give rise to effectively connected income

investment in the partnership interest or in

under section 864(c)(6) or section

(a), include such increase as a negative

the partnership assets) included on line 2,

number on line 3f, column (a). Similarly, if

864(c)(7). However, not all assets that

column (a).

give rise to ECI, including ECI recognized

the mark to market amount decreases the

under section 864(c)(7), constitute U.S.

basis of the assets included on line 2,

Note. Partnership interests are reported

column (a), include such decrease as a

assets under Regulations section

in Step 1 as follows: The ECI portion of

1.884-1(d). See Regulations section

positive number on line 3f, column (a).

the corporation’s adjusted outside basis in

1.884-1(d)(2)(xi), example 5, and

Other adjustments for book tax

a partnership (from Schedule P (Form

differences with respect to asset values

Regulations section 1.884-1(d)(5).

1120-F), line 19, “Total” column) is

on line 2, column (a), such as

entered on Schedule I (Form 1120-F), line

Line 5, column (d). Total average value

depreciation and amortization for

5, column (b).

of U.S. assets included in Step 1.

taxpayers using the adjusted basis

Combine the amounts on line 5, columns

With respect to amounts from

method for valuing U.S. assets, are also

(a), (b), and (c) and enter the amount on

disregarded entities included on line 2,

reportable on line 3f, column (a). Enter an

line 5, column (d). This amount is the total

column (a), enter on line 3d, column (a)

aggregate net increase as a negative

average value of the corporation’s U.S.

any adjustment needed to reflect the

number. Enter an aggregate net decrease

assets included in Step 1 of the

following: Investments in disregarded

as a positive number.

Regulations section 1.882-5 formula. If

entities should not be included on line 2,

the corporation uses the Separate

Line 4, column (a). Combine lines 3a

column (a) if the set(s) of books are

Currency Pools method to allocate

through 3f and enter the result on line 4,

reportable on Schedule L. Instead, the

interest expense in Step 3 of the

column (a). The result on line 4, column

total assets of such disregarded entity’s

Regulations section 1.882-5 formula, see

(a) constitutes the total net adjustment to

Schedule L books should be combined on

the instructions for line 16a on page 7.

the average book assets from the

line 2, column (a) with all other set(s) of

The amount on line 5, column (d) is also

Schedule L set(s) of books reported on

books reportable on Schedule L. If

reportable on Schedule H (Form 1120-F),

line 2, column (a).

another Schedule L book reflects an

line 22a.

investment in a disregarded entity whose

Line 5. Total Value of U.S. Assets

books are not reportable on Schedule L,

Lines 6 Through 7c. Step 2:

for the Tax Year

then the assets of the disregarded entity

Determination of

Line 5, column (a). Average U.S. assets

are not reported on line 2, column (a).

U.S.-Connected Liabilities -

on set(s) of Schedule L books.

The amount of the investment in the

Regulations Section 1.882-5(c)

Subtract the amount on line 4, column (a)

disregarded entity that is included in the

from line 2, column (a) and enter the

total assets reported on line 2, column (a)

Line 6. Actual ratio or fixed ratio

amount on line 5, column (a). The

must be reversed on line 3d, column (a)

method. Check the applicable box to

resulting amount is the total average

to reflect its disregarded treatment in

specify whether the corporation uses the

value of U.S. assets under Regulations

section 1.882-5.

actual ratio or the fixed ratio method for

section 1.884-1(d) included on the

Line 3e, column (a). Adjustments for

the tax year to determine its

Schedule L set(s) of books, excluding any

assets that give rise to direct interest

U.S.-connected liabilities in Step 2 of the

partnership interests included on line 2.

expense allocations under Temporary

allocation formula. The amount of

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

Line 5, column (b). ECI portion of the

U.S.-connected liabilities is the total value

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

average value of partnership interests.

of U.S. assets for the tax year (line 5,

value of the portion of all assets included

Enter on line 5, column (b), the amount

column (d)) multiplied by the actual ratio

on line 2 that give rise to direct interest

from Schedule P (Form 1120-F), line 19

or the applicable fixed ratio the

expense allocations under Temporary

(“Total” column). This amount is the sum

corporation has timely elected and is

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

of all ECI portions of the corporation’s

eligible to use for the tax year. The actual

accordance with the requirements of

outside basis in partnership interests as

ratio or fixed ratio election must be made

Temporary Regulations section

adjusted under Regulations section

on a timely tax return for the first year the

1.861-10T(b) or (c), and Temporary

1.884-1(d)(3). The amount entered from

corporation is subject to Regulations

Regulations section 1.861-10T(d). A

Schedule P, line 19 may include the ECI

section 1.882-5 and is subject to the

foreign corporation that allocates its

portion of the corporation’s outside basis

minimum five-year period under

interest expense under the direct

in partnerships whose book value is

Temporary Regulations section

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

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