Instructions For Schedule I (Form 1120-F) - 2008 (Page 7 of 8) in pdf

Line 16a. U.S. Assets — U.S. dollar

pool. Enter for each column on line 18a,

Lines 21 Through 25.

value denominated in currency. Enter

the corporation’s worldwide interest

the U.S. dollar value of the average

expense paid or accrued for the tax year

Summary – Interest

amount of U.S. assets in the appropriate

in the separate currency pool. In column

Expense Allocation and

column (a) through (d) (or on the attached

(a), enter the worldwide U.S. dollar

separate sheets for additional currencies).

interest paid or accrued. For all other

Deduction Under

Enter in column (a) the U.S. dollar

separate currency pools, enter the

Regulations Section

denominated U.S. assets, plus the U.S.

worldwide interest expense in the

dollar value of any U.S. assets for which a

functional currency of the currency pool.

1.882-5

3% currency election is applicable for the

Do not enter the U.S. dollar value of the

tax year. In column (b), enter the average

functional currency pool in column (b) or

Line 22. Interest expense directly

U.S. dollar value of U.S. assets

for any other non-U.S. dollar currencies

allocable under Temporary

denominated in the corporation’s home

for which a separate currency pool

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

country functional currency. Enter the

allocation is made in additional columns.

Enter the amount of interest expense

average U.S. assets of all other currency

See Regulations section 1.882-5(e)(2).

directly allocable to ECI under Temporary

pools beginning with column (c).

The worldwide interest expense in each

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

currency pool includes interest expense in

foreign corporation that has a U.S. asset

Note. The sum of all U.S. assets in

each currency that is recorded on the

and indebtedness that meet the

columns (a) through (d) (and in any

Schedule L books and reportable on

requirements of Temporary Regulations

columns shown on any attached separate

Schedule I, line 9, column (c).

section 1.861-10T(b) or (c), as limited by

sheets) must equal the total average U.S.

Temporary Regulations section

assets entered on line 5, column (d).

Line 18b. Worldwide average liabilities

1.861-10T(d)(1), shall directly allocate

in each separate currency pool. Enter

A transaction that hedges a U.S. asset

interest expense from such indebtedness

on line 18b, the average liabilities

is taken into account for purposes of

to income from such asset in the manner

(whether or not interest bearing)

determining the currency denomination

and to the extent provided in Temporary

denominated in each separate currency

and the value of the U.S. asset. See

Regulations section 1.861-10T.

pool. In column (a), enter the average

Regulations section 1.882-5(e)(1)(i).

Note. See Temporary Regulations

worldwide liabilities (whether or not

Line 17b. U.S.-connected liabilities per

section 1.861-10T(d) for rules requiring

interest bearing) denominated in U.S.

currency. Complete line 17b as follows:

reductions in basis to assets required by

dollars. For all other separate currency

the direct interest allocation rules in

pools, enter the average amount of

Determination of U.S.-connected

Temporary Regulations section

liabilities (whether or not interest bearing)

liabilities if no U.S. liability reduction

1.861-10T(b) or (c). The rules of

denominated in the currency of the

election is made. For each applicable

Temporary Regulations section

currency pool. Do not enter the U.S.

column, multiply the U.S. assets on line

1.861-10T(c) apply only to non-financial

16a by the U.S.-connected liability ratio

dollar value of the currency pool for any

institutions. Financial institutions are

column other than column (a). In

on line 17a and enter the amount on line

permitted to directly allocate interest

17b. The resulting amount constitutes the

determining the average worldwide

expense only under the non-recourse

U.S.-connected liabilities for each

borrowing rate, the liabilities in each

indebtedness rules described in

currency pool when the corporation does

currency pool include the amounts

Temporary Regulations section

not make a U.S. liability reduction election

recorded on the sets of books reportable

1.861-10T(b).

under Regulations section 1.884-1(e)(3)

on Schedule L and included on Schedule

and Temporary Regulations section

I, line 8, column (c). Determine the

Line 23. Total interest expense

1.884-1T(e)(3).

average third-party liabilities using the

allocable to ECI under Regulations

most frequent averaging period for which

Determination of U.S.-connected

section 1.882-5. Add lines 21 and 22

data is reasonably available in

liabilities if a U.S. liability reduction

and enter the result on line 23. This result

accordance with the principles of

election is made. If the corporation

is the total amount of interest expense

Temporary Regulations sections

makes one or more U.S. liability reduction

allocable to ECI, including directly

1.882-5T(b)(3) and 1.882-5T(c)(2)(iv).

elections for the tax year under

allocated interest. This allocable amount

Regulations section 1.884-1(e)(3) and

may not exceed the total interest expense

Line 18c. Borrowing rate. Divide line

Temporary Regulations section

paid or accrued by the corporation. See

18a by line 18b. The result is the average

1.884-1T(e)(3), the total amount of the

Regulations section 1.882-5(a)(3). If the

worldwide borrowing rate for each

liability reduction shown on line 7b must

corporation’s total interest expense paid

separate currency pool.

be allocated to each of the separate

or accrued is less than the amount of

Line 19. Interest expense allocation by

currency pools in proportion to the U.S.

allocation that would result by adding

separate currency pool. For each

assets in each pool. The amount entered

lines 21 and 22, enter such lesser amount

column, multiply the amount on line 17b

on line 17b for each column is computed

on line 23. The amount entered on line 23

as:

by the borrowing rate on line 18c and

is the amount of interest expense taken

enter the result on line 19. The amount on

into account for branch-level interest tax

1. The amount on line 16a multiplied

line 19 is the amount of interest expense

purposes under section 884(f)(1)(B) and

by the ratio on line 17a, less

allocable to ECI in each separate

Regulations section 1.884-4(a),

2. The amount of the liability reduction

currency pool.

regardless of whether the deductibility of

election entered on line 7b multiplied by

such amount is temporarily deferred or

the proportion that the average U.S.

Line 20. Total interest expense

disallowed for allocation to tax-exempt

assets in the separate currency pool

allocable to ECI under the separate

income (including treaty exempt income).

bears to all of the U.S. assets in all

currency pools method. On line 20,

The amount reportable on line 23 is

separate currencies (i.e., the total

enter the sum of the amounts in each

reconciled and reported on Form 1120-F,

average U.S. assets entered on line 5,

column on line 19 (including amounts

Section III, line 7c, and on Schedule M-3

column (d)).

from line 19 of attached schedule, if any).

(Form 1120-F), Part III, line 26b, columns

The amount on line 20 is the total amount

(d) and (e).

Attach a schedule showing the

of interest expense allocable to ECI under

computation and the allocation of the

the Separate Currency Pools method.

Line 24. Tax-exempt allocations,

liability reduction election to each

The amount on line 20 does not include

deferrals and capitalization of interest

separate currency pool.

any amount of interest expense directly

expense allocation from line 23. The

allocable under Temporary Regulations

Line 18a. Worldwide book interest

amount of interest expense allocable to

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

expense for each separate currency

ECI entered on line 23 is subject to

-7-

Instructions For Schedule I (Form 1120-F) - 2008 Page 7

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