Instructions For Schedule I (Form 1120-F) - 2008 (Page 6 of 8) in pdf

directly allocable under Temporary

filed, see the instructions for making a

allocable to ECI under Temporary

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

protective 30-day LIBOR election on

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

including the corporation’s distributive

Schedule I filed with the protective return.

Hedging amounts. If the corporation

share of direct interest expense

has income, expense, gain, or loss from a

Lines 10a Through 10c. Excess

allocations from partnerships otherwise

hedging transaction of a U.S. booked

Interest – Average Actual U.S.

reportable in column (b). All direct interest

liability that gives rise to interest expense

Dollar Rate

expense allocations to ECI are reported

subject to the scale-down ratio, such

on line 22.

hedging income, expense, gain, or loss

Line 10a. Actual U.S. dollar interest. If

amount is also subject to reduction under

Line 9, column (b). U.S. booked

the corporation does not properly make or

the same scaling ratio reported on line

interest expense from partnerships.

is not eligible to make a 30-day LIBOR

14a. See Regulations section

Enter on line 9, column (b), the amount

election for the tax year, enter the interest

1.882-5(d)(4) and Proposed Regulations

from Schedule P (Form 1120-F), line 14c

expense paid or accrued by the

section 1.882-5(d)(2)(vi). Do not report

(“Total” column). Do not include interest

corporation for the tax year on its average

such scale-down reductions of

expense that is directly allocable under

worldwide U.S. dollar liabilities, excluding

hedging income, expense, gains or

Temporary Regulations section

U.S.-booked liabilities included on line 8,

losses on line 14b. The ratio reported on

1.882-5T(a)(1)(ii) from the corporation’s

column (c).

line 14a shall be applied to each type of

distributive share of a partnership’s direct

Line 10b. Enter on line 10b, the average

item in accordance with its

interest expense allocations. All direct

worldwide U.S. dollar denominated

characterization and the scaled down

interest expense allocations to ECI are

liabilities (whether or not interest bearing)

hedging income, expense, gain, or loss is

reported on line 22.

that are not U.S. booked liabilities

reported on Form 1120-F, Section II in the

included on line 8, column (c). See

Line 9, column (c). Total U.S. booked

appropriate category to which the hedging

Temporary Regulations section

interest expense. Add the amounts on

item is characterized. For instance,

1.882-5T(d)(5)(ii).

line 9, column (a), and line 9, column (b)

periodic expense from an interest rate

and enter the result on line 9, column (c).

Line 12. Excess interest. Multiply the

notional principal contract hedging

This result is also required to be reported

rate on line 10e by the amount of excess

transaction that is recorded on the sets of

on Form 1120-F, Section III, line 8. This

U.S.-connected liabilities on line 11 and

books reportable on Schedule L, and that

amount is the corporation’s tentative

enter the result on line 12. This amount is

is subject to the scaling ratio, is reported

branch interest for purposes of the

the corporation’s excess interest expense

on Form 1120-F, Section II, line 27. Such

branch-level interest tax under

portion of its overall Regulations section

amount is also subject to reporting on

Regulations section 1.884-4(b). See the

1.882-5 allocation that is allocable to

Schedule H (Form 1120-F), line 38a, as

instructions for Form 1120-F, Section III,

effectively connected income under the

allocable in part to ECI and in part to

Part II, line 8.

AUSBL method in Regulations section

non-ECI in accordance with the scaling

1.882-5(d)(5). The amount on line 12 also

ratio of this line 14b.

Lines 10 Through 15. Step

constitutes the corporation’s excess

interest under section 884(f)(1)(B). See

Lines 16 Through 20. Step

3: Adjusted U.S. Booked

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

3: Separate Currency

Liabilities Method

Line 13. Interest expense allocation.

Pools Method

Add the amount reported on line 12 and

If the amount on line 7c exceeds the

the amount of U.S. book interest expense

amount on line 8, column (c), the

Corporations that allocate interest

from line 9, column (c) and enter the

corporation has “excess interest” as

expense under a Separate Currency

result on line 13. This amount is the

defined in section 884(f)(1)(B). Complete

Pools election report the allocations under

corporation’s total amount of interest

lines 10 through 13, and skip lines 14a

a three-step method for each currency in

expense allocable under the three-step

and 14b. If the amount on line 7c is less

which the corporation has U.S. assets (as

formula when U.S.-connected liabilities

than or equal to the amount on line 8,

defined in Regulations section

exceed U.S. booked liabilities under the

column (c), skip lines 10 through 13, and

1.884-1(d)), on Schedule I, lines 16

AUSBL method. It does not include any

complete the determination of the scaling

through 20. The amount of the interest

amounts directly allocable to effectively

ratio on lines 14a and 14b.

expense allocation is the sum of the

connected income under Temporary

separate interest expense allocations in

Lines 10 Through 13.

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

each currency. If the corporation makes a

Computation of AUSBL Method

3% currency election under Regulations

Lines 14a Through 15.

Allocation with Excess Interest

section 1.882-5(e)(1)(i), check the box on

Computation of AUSBL Method

line 16b and include the U.S. dollar value

Line 10. 30-day LIBOR election for

Allocation Under the

of all currencies for which the 3%

banks. If the corporation is a foreign

Scale-Down Ratio

currency election applies in the U.S.

bank that elects to compute excess

If U.S.-connected liabilities on line 7c are

dollar denominated column on line 16a.

interest under the AUSBL method using

equal to or less than U.S.-booked

the 30-day published U.S. dollar LIBOR

Schedule I accommodates reporting of

liabilities on line 8, column (c), the AUSBL

rate for the tax year, check the box on line

the interest expense allocations in four

method allocation is subject to a

10 and skip lines 10a through 10c. Enter

currencies (including the U.S. dollar and

“scale-down” of the U.S. booked interest

the published 30-day U.S. dollar LIBOR

the foreign corporation’s functional

expense reported on line 9, column (c).

rate on line 10d. See Temporary

currency). If the foreign corporation has

Complete lines 14a and 14b in lieu of

Regulations section 1.882-5T(d)(5)(ii)(B)

U.S. assets in more than four currencies

lines 10 through 13. If line 7c exceeds line

for the requirements and separate

that are not subject to a 3% currency

8, column (c), leave lines 14a and 14b

statement required to be attached to a

election, attach separate sheets using the

blank.

timely filed Form 1120-F. The 30-day

same size and format as shown on the

LIBOR election does not apply to

Line 14b. Scaled-down U.S. book

schedule and provide the information

corporations other than foreign banks. For

interest. Multiply the amount of U.S.

requested on lines 16 through 19 on the

this purpose, the corporation is eligible to

booked interest on line 9, column (c), by

attached sheets for all such additional

make the 30-day U.S. dollar LIBOR

the scale-down ratio on line 14a, and

currencies. Report on Schedule I, line 20,

election under the same standard that

enter the result on line 14b. The allocated

column (d), the total results for all

qualifies the corporation as a bank eligible

amount is the total amount of the AUSBL

separate currency allocations shown on

to make the 95% fixed ratio election in

method allocation under Regulations

line 19 for columns (a) through (d), plus

Temporary Regulations section

section 1.882-5(d)(4). The amount on line

any additional line 19 amounts shown on

1.882-5T(c)(4). If a protective return is

14b does not include any amount directly

attached separate sheets (if any).

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Instructions For Schedule I (Form 1120-F) - 2008 Page 6

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